A surge in commodity prices boosted US markets overnight and resulted in the Asian pack trading higher in early trade today
Indian stocks are likely to open marginally higher on positive global cues. Weekly inflation figures for mid-May will be released by the government around noon, which will give further direction to the market. The country’s food inflation had slipped to 7.47% for the week ended 7th May, from 7.70% in the previous week, the lowest rate of price rise in food items in the last 18 months.
On the global front, markets in the US ended a three-day slide to close in the green overnight, supported by a rise in commodity prices. The rise in crude and metal prices also boosted most markets in Asia in early trade on Thursday. The SGX Nifty was 17.50 points higher at 5,365.50 against its previous close of 5,348 on Wednesday.
The market kept slipping as trade progressed on Wednesday, on dismal global cues and a decline in earnings by realty major DLF, which announced its results late Tuesday. The Sensex and the Nifty opened at 17,976 and 5,389 that turned out to be the intra-day highs. Volatility was seen ahead of the expiry of the May futures and options contract that takes place tomorrow.
Global worries, a lower opening in key European markets and US futures trading in the red, prompted a sell-off by institutional investors, leading the domestic market further downward in post-noon trade. Throughout the day, the market continued the downward trend, except for a small bounce, after hitting the intra-day low. The intra-day low of 17,786 on the Sensex and 5,329 on the Nifty were the lowest since 1 March 2011. Finally, the Sensex lost 165 points to close at 17,847 and the Nifty fell 46 points to end the day at 5,349.
Markets in the US snapped a three-day losing streak to close higher on Wednesday as energy and material stocks received a boost on higher commodity prices. Occidental Petroleum Corporation and Halliburton Company gained around 1.6% as crude rose on a report showing that US distillate fuel supplies dropped to a two-year low. Freeport-McMoRan Copper & Gold Incorporated surged 2.4% as copper rose after Deutsche Bank AG said prices are likely to rebound.
US light, sweet crude gained 1.74% to settle at $101.32 a barrel, while in London, Brent crude advanced 2.13% to settle at $114.93. Copper futures for July delivery jumped 2.3% in New York yesterday, the biggest gain since 18th May.
In economic news, a 3.6% fall in durable goods orders in April, was the largest drop in six months, due largely to a fall in aircraft and motor vehicle orders. March durable goods orders were revised up to a 4.4% gain from a rise of 4.1%
The Dow advanced 38.45 points (0.31%) to end at 12,394.66. The S&P 500 added 4.19 points (0.32%) to 1,320.47 and the Nasdaq rose 15.22 points (0.55%) to 2,761.38.
Markets in Asia were mostly in the green as investors went bargain-hunting after the recent decline. The gains were also supported by higher commodity prices. An improvement in the global economic sentiment helped export-oriented companies like Canon and Ricoh. However, lingering debt concerns in Europe still played on investors’ minds.
The Shanghai Composite gained 0.75%, the Hang Seng rose 0.36%, the Jakarta Composite climbed 0.66%, the KLSE Composite advanced 0.60%, the Nikkei 225 surged 1.29%, the Straits Times added 0.02%, the Seoul Composite jumped 1.25% and the Taiwan Weighted was 0.47% higher in early trade.
Back home, the government plans to set up a new class of investor, Qualified Foreign Investors (QFIs), to encourage the flow of foreign capital into the mutual fund segment. Under the proposed norms, overseas individual investors that are registered with depositories either in India or abroad can take the mutual fund route to invest in the Indian stock market.
The government is exploring the idea of allowing QFIs registered with depository participants to invest in mutual funds directly and also through a mechanism—Unit Confirmation Receipt (UCR) system.
Finally, the Nifty traded near its support of 5,300. A rally is possible on a close above 5,400
The market kept slipping as trade progressed on Wednesday, on dismal global cues and a decline in earnings by realty major DLF, which announced its results late yesterday. The Sensex and the Nifty opened at 17,976 and 5,389 that turned out to be the intra-day highs. Volatility was seen ahead of the expiry of the May futures and options contract that takes place tomorrow.
Global worries, a lower opening in key European markets and US futures trading in the red, prompted a sell-off by institutional investors, leading the domestic market further downward in post-noon trade. Throughout the day, the market continued the downward trend, except for a small bounce, after hitting the intra-day low. The intra-day low of 17,786 on the Sensex and 5,329 on the Nifty were the lowest since 1 March 2011.
The Sensex lost 165 points to close at 17,847 and the Nifty fell 46 points to end the day at 5,349. The advance-decline ratio on the National Stock Exchange was 494:896.
While the Sensex closed trade with a loss of nearly 1%, the BSE Mid-cap index declined 0.57% and the BSE Small-cap index fell by 0.65%.
The BSE Consumer Goods index tumbled 1.53% to emerge as the biggest sectoral loser. Other major losers were BSE IT (down 1.52%), BSE Realty (down 1.31%), BSE TECk (down 1.20%) and BSE Oil & Gas (down 0.98%). BSE Consumer Durables (up 1.23%) and BSE Fast Moving Consumer Goods (up 0.01%) were the only gainers in the sectoral space.
Jindal Steel (up 1.13%), Tata Motors (up 1%), ITC (up 0.91%), NTPC (up 0.33%) and Maruti Suzuki (up 0.12%) were the top gainers on the Sensex. The laggards were led by DLF (down 4.04%), Reliance Communications (down 2.48%), Larsen & Toubro (down 2.24%), TCS (down 2.09%) and State Bank of India (down 2.06%).
In a setback to the Cairn-Vedanta deal, solicitor-general of India (SGI) Gopal Subramanium has re-affirmed that the government can impose pre-conditions like equitable sharing of royalty in the all-important Rajasthan block, for clearing Vedanta Resources' takeover of Cairn India.
In his initial opinion on 24th March, the solicitor-general had said that the transfer of Cairn India shares to Vedanta should be allowed only if mining conglomerate agreed to treating royalty paid by ONGC as cost-recoverable from its revenues.
Markets in Asia settled mostly lower on worries that price pressures in China will force the government to continue with its hawkish stance. News of a 12.5% fall in Japanese exports in April, pushing the country into its first trade deficit, and concerns about sovereign debt issues in Europe also weighed on investor sentiment.
The Shanghai Composite declined 0.90%, the Jakarta Composite fell 0.15%, the Nikkei 225 skid 0.57%, the Seoul Composite tanked 1.26% and the Taiwan Weighted lost 0.34%. On the other hand, the Hang Seng added 0.07%, the KLSE Composite rose 0.09% and the Straits Times gained 0.18%.
Back home, institutional investors-both foreign and domestic-were net buyers of equities on Tuesday. Foreign institutional investors pumped in Rs188.16 crore into stocks and domestic institutional investors bought shares worth Rs32.95 crore.
By investing in these two foreign funds, you may or may not get greater diversification, but would you get higher returns?
More and more fund companies are furiously bringing foreign funds to India. It has almost become a fad. In March 2011, Franklin Templeton filed offer documents with the regulator to launch its FT India Feeder-Templeton Asian Growth Fund and FT India Feeder-Franklin US Opportunities Fund. As the names suggest, one invests in Asian securities and the other in US securities.
Feeder funds allow Indian investors to put their money in international mutual funds that would give them an exposure to companies in other regions.
The asset allocation plan is to invest 80%-100% in units/securities of overseas mutual funds/unit trusts with a medium- to high-risk profile. The scheme will also invest up to 20% in debt securities and money market instruments with a low- to medium-risk profile.
The US feeder fund will be benchmarked against the Russell 3000 Growth Index and the Asia Growth Fund will be benchmarked against the MSCI All Country Asia (ex-Japan) Index. The Russell 3000 Growth Index measures the performance of the broad growth segment of the US equity universe, with Exxon Mobil, Apple, IBM, Google, Microsoft, Oracle and Coca Cola among its top ten stocks.
The MSCI All Country Asia (ex-Japan) Index is a free float-adjusted market capitalisation weighted index that is designed to measure the equity market performance of Asia, excluding Japan. As of 31 December 2010, the MSCI All Country Asia (ex-Japan) Index covered the indices of 10 developed and emerging market countries, namely China, Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan, and Thailand.
These funds will charge an exit load of 1% on units that are redeemed/switched out within one year of allotment. The minimum application amount is Rs5,000.
It is not clear what extra advantage investors would get by investing in these funds. Global funds offer diversification benefits by investing in stocks like bio-tech, technology, energy, agriculture and mining, which an Indian investor may not be able to buy by just investing in domestic schemes. But funds that put your money in other countries don’t necessarily offer higher returns or diversification.
In the period April 2009-March 2010, the Sensex was up 77%, while the MSCI All Country Asia (ex-Japan) Index was up 68%. Non-correlated market movement is not easy to find. As for returns, the Russell 3000 gave an annualised five-year return of 5.05% against the Sensex which gave an annualised return of 9% over five years ending 30 April 2011.