Easing of debt concerns in Greece helped global markets edge higher in trade
The domestic market is likely to open in the positive on good global cues. However, news that monsoon rains this year would be slightly below normal might make investors jittery. Markets in the US settled with gains for the fourth straight day after Greek government won a confidence vote renewing hopes that the debt-stricken government will avoid a default. The optimism in Greece also supported the Asian pack which was higher in early trade on Wednesday. The SGX Nifty was 38 points up at 5,314 compared to its previous close of 5,276.
Recovering from the steep losses of Monday, the market opened higher yesterday tracking a firming trend in the exchanges across Asia, on easing of the Greece debt situation. Investors resorted to bargain hunting, taking the indices higher, but news that state-owned explorer ONGC is looking to rope in a foreign partner in its eastern offshore gas block pulled the market lower. At the day's low, the Sensex fell below its previous close at 17,504 and the Nifty was at 5,257.
The market recouped its losses somewhat, as banking, oil & gas and metals helped the market climb to its intra-day high in noon trade. The Sensex gained 208 points at 17,715 and the Nifty added 64 points to 5,322. But selling took over again and the Sensex eventually closed up 54 points at 17,560 and the Nifty settled at 5,275, up 18 points.
We mentioned in Monday's closing report that the index should hold on to its Monday's low for some stability. The Nifty's intra-day high was close to its first support of 5,370. For a minor rally to happen, the Nifty has to remain above 5,320, from where it can target to reach 5,440.
Wall Street closed higher on Tuesday buoyed by the positive outcome of the confidence vote in Greece, which is expected to help the Eurozone zone member avoid a debt default. Investors will now be drawn towards the announcement from the Federal Reserve, which is holding its two-day meeting.
In economic news, sales of existing homes fell 3.8% in May, less than analysts’ expectations, to a seasonally adjusted annual rate of 4.81 million units. April’s figure was revised down to 5 million.
Among corporates, Walgreen slumped 4.2% after the largest US drugstore chain said negotiations to renew its contract to be part of the Express Scripts pharmacy provider network were unsuccessful. Best Buy’s buyback programme helped the stock rise 2.7%. Barnes & Noble dropped 6% after its fiscal fourth-quarter loss widened on higher expenses. Raytheon, which received a $1.7 billion contract to upgrade Saudi Arabia's missile-defence system, rose 1.1%.
The Dow gained 109.63 points (0.91%) to 12,190.01. The S&P 500 rose 17.16 points (1.34%) to 1,295.52 and the Nasdaq surged 57.60 points (2.19%) to 2,687.26. The Nasdaq saw its biggest percentage gain since October, while the S&P 500 marked its best day in two months.
Taking cues from the US following easing of debt issues in Greece, markets in Asia were higher in early trade on Wednesday. The development boosted export-oriented stocks across the region. However, the Chinese market was range-bound, fluctuating between green and red, on account of the slowdown in the economy.
The Hang Seng rose 0.69%, the Jakarta Composite advanced 0.59%, the KLSE Composite was up 0.16%, the Nikkei climbed 1.30%, the Straits Times gained 0.32%, the Seoul Composite rose 0.88% and the Taiwan Weighted was 0.69% higher. On the other hand, the Shanghai Composite was down 0.06%.
Back home, the introduction of big-ticket tax reforms through the Goods and Services Tax (GST) regime seems unlikely from next April with the BJP-ruled states stating that they would not like to be reduced to ‘municipality or corporations’. Among the objections raised by the BJP-ruled states is the proposal to bring the sales tax in ambit of the GST.
The implementation of GST, considered to be a major tax reform, has been stuck for years due to differences between the Centre and some states over the new structure.
There is a way to fight corruption. We must begin by saying, “We will not pay bribes to get what is rightfully ours”. We must say: “We are prepared to wait till the bribe-taker gets tired of waiting for us to come up with the bribes”. It will be a long, hard haul in which every individual can and must participate
When the price of onions rose to an extortionate hundred rupees a kilo, some social activists went around advising people not to eat onions. If everybody stopped buying onions, demand would plummet and the racketeers who had jacked up the prices would be left with mountains of unsalable onions. They would be forced to cut the price to a reasonable level.
The idea was based on simple economic logic. But it also illustrates the power that lies in the hands of you, me and the man in the street-people's power, which is the strongest weapon in the battle against injustice, extortion, racketeering, political chicanery and that leviathan called corruption in India.
A septuagenarian Gandhian, with a late-awakening conscience, and a cross-dressing yoga teacher, have, in recent months, dominated the headlines, challenging as they have done the government's sincerity in cracking down on corruption. People like Anna Hazare and yogi Ramdev are useful in their own way. They occasionally turn the spotlight on the government and there is a public outcry, this time over the Lokpal Bill.
One need not be a cynic to say that Anna Hazare's efforts will not get results. We have the example of the Bofors scandal and investigation which, to quote Shakespeare's Macbeth, was "a tale told by an idiot, full of sound and fury, signifying nothing".
To justify such a conclusion, one has to understand the nature of the beast. Corruption is the genus which has two main species.
The first, and bigger in terms of the money involved, is the bribe paid in order to obtain something to which a person is not legally entitled. Examples include the 2G spectrum scandal, the Harshad Mehta scam, Bofors, Narasimha Rao's bribery of JMM members of the Lok Sabha to get them to vote for the government. Only the rich and the powerful have the necessity and means to indulge in this species of corruption.
All of us are the victims of the second species of corruption which is graft paid to obtain something to which one is legally entitled.
Bribes paid to get a college or even a school seat; speed-money that we pay to hasten the process of renewing a driving licence and issuing a passport; the elbow-grease that smoothens the issue of a ration card, any type of permit and, horribly enough, even a death certificate; the fact bribes have to be paid to get anything from any bureaucrat and civil servant, from the panchayat office to central ministries in New Delhi-all are bribes paid to get things to which we are legally entitled.
Corruption touches every aspect of an Indian's life; it is like the mosquitoes; lorries belching lung-destroying exhaust on every road; the rains that do not come and the rains that flood thousands of acres; the flies that hover in their thousands over exposed food at roadside eateries-it is all-pervasive, encompasses all human activity in India and appears to be indestructible.
Will the war against graft ever begin? Are we totally helpless? It would seem so. But…
Hindu mythology has the concept of "shaapavimochanam". It means that every curse has an escape clause. We Indians are enduring the incredibly burdensome curse of corruption. Is there an escape clause?
There is, and it is the use of people's power. If we can bring down the price of onions by simply saying "No, we won't buy at this price", we can defeat the corrupt vampires sucking the nation's blood. But a warning. It will involve very patient, hard work over decades, maybe even half a century. All of us can and must participate. We begin by attempting to "terminate with extreme prejudice" (as the CIA puts it) the second species of corruption.
We begin by saying, "No, we will not pay bribes to get what is rightfully ours". We must say: "We are prepared to wait till the bribe-taker gets tired of waiting for us to come up with the bribes". It will be a long, hard haul in which every individual action will help.
The war against the first species of corruption requires an army of dedicated experts-financial experts, chartered accountants, cost accountants, lawyers, judges, trained investigators from the police and security services. They have to accept that their main goal in life is to expose and punish corruption wherever it is found.
They could begin, for instance, with hunting for over-invoicing and under-invoicing in import and export transactions where the biggest leakages of foreign exchange take place, with the connivance of government agencies. Later, they could turn their microscopes on every transaction into which every government, central and state, enters. (The Raja Chelliah committee report on black money in India, published in 1986, is a good introduction to the mechanics of black money and corruption).
Somebody has to start a movement to initiate the war against both species of corruption. Perhaps it could be called the "People's coalition against corruption".
'Will you start the movement', do you ask? No way. I am a journalist. I will sit back and give advice.
(R Vijayraghavan has been a professional journalist for more than four decades, specialising in finance, business and politics. He conceived and helped to launch Business Line, the financial daily of The Hindu group. He can be contacted at [email protected].)
A report on the 69th free seminar conducted by Moneylife Foundation in the past 14 months
Moneylife Foundation trustee, Debashis Basu today cautioned investors that they should study mutual funds properly before deciding to invest in any of them. Mr Basu said there were various pros and cons for these schemes and he dwelt on these aspects during an hour-long presentation at a workshop on "How to choose the right mutual fund scheme" at the Moneylife Knowledge Centre on Tuesday.
Mr Basu began by giving the participants an overview on mutual funds, explaining the different types of schemes available, like equity funds, ELSS (equity linked saving schemes), bond funds, liquid funds and SIP (systematic investment plan). He explained about the benefits and the risks associated with each of these plans and investment strategies.
ELSS is an investment option that is usually picked by investors for tax benefits in the last quarter of the financial year. In fact investors should invest in ELSS for the entire year to get its investment benefits too, Mr Basu pointed out.
While there are hundreds of bond funds, "bond funds are not for average savers", he said. They often give lower returns than bank fixed deposits (FDs) and have costs and volatility attached to them. Bonds usually come with the notion that they are risk free. But in fact they are not. Bonds come with an interest rate risk, whereby if the interest rate rises, the bond prices fall. No one can judge the rise and fall of interest rates, hence investing in bonds could be considered as speculative. Only those who have a thorough understanding of bonds should invest in these funds, else bank FDs would be better as there is no cost attached to it.
Hybrid funds, which invest certain portion of the portfolio in equity, debt and gold ETFs (exchange traded funds) are to be avoided too, as the performance of the fund is left to the mercy of the asset class in question and the fund manager's market-timing ability. These funds used to invest mostly in equity and debt and now they have added gold to the list. Mr Basu compared these funds to a ready cup of tea. But investors with some financial knowledge should do their own allocation and not opt for these funds.
SIPs (systematic investment plans) though a good option, are flawed if they are not adjusted for the growth option. Investors usually don't consider inflation and invest the same amount over the years. In fact, the value of money falls over the years, therefore, investors should incrementally increase their investment amount.
Mr Basu introduced the idea of value averaging, a better option compared to SIP. It is a strategy through which investors should buy more when the NAV is less and vice-versa, thus increasing returns.
Equity schemes help create long-term wealth. But care should be taken while choosing the right scheme, as less than half of the schemes outperform the benchmark and the difference between the best-performing fund and the worst is huge, Mr Basu pointed out.
On how to choose the best equity scheme, ideally returns over a five-year rolling period should be considered to analyse the performance of a fund. Moneylife regularly puts out such analysis. There are usually just four-five fund houses that register consistently good performance. A portfolio which is diversified across all sectors should be chosen; therefore sector funds should be avoided. Investors should avoid NFOs (new fund offerings) and funds with fancy names.
Investors, who don't have any experience about the markets and don't want to make any effort either, can still make money from the market through index funds.
This programme, hosted by Moneylife Foundation, is the latest in a series of programmes on real estate, credit cards, wills & nominations and a range of related subjects. This is the 69th such seminar conducted by Moneylife Foundation since March 2010. The programmes have been conducted at the Moneylife Knowledge Centre in Dadar, in central Mumbai, and in various cities across the country are free. Moneylife Foundation has more than 5,700 members. Membership is free. To register as a member click here.