The recent hike in fuel prices, along with the RBI’s tightening measures, has led to concerns about a slowdown across all sectors
The local bourses are likely to see a listless opening as investor sentiment is being weighed down by higher inflation, which is pushing manufacturing costs higher. The government will release the weekly food inflation numbers today, which will give some direction to the market later in the day.
On the global front, markets in the US closed higher overnight, snapping their three-day losing streak on assertions from the Federal Reserve that it would continue with its easy monetary policy for some more time. The ones in Asia were mostly in the positive in early trade as gains in commodities gave signals that the economic recovery is still on. The SGX Nifty was just one point higher than its previous close of 5,427.
The market opened with small gains on Wednesday taking cues from the Asian bourses which were up in morning trade. The Sensex opened 40 points higher at 18,177 and the Nifty added nine points to its previous close to resume trade at 5,448. The indices rose to their intra-day highs in initial trade, with the Sensex at 18,218 and the Nifty at 5,461. The market could not retain the gains and hovered near the neutral line in the absence of any triggers. A bout of selling in frontline stocks around noon pushed the indices lower.
The oil & gas sector was the top loser, following reports of a directive from the oil ministry asking Reliance Industries to drill two wells in the KG-D6 block by next month and another nine by the end of the fiscal, to raise gas output. Higher crude prices also weighed on the sector.
The market touched the day's low in noon trade, with the Sensex losing 116 points to 18,021 and the Nifty dropping 38 points to 5,401. Recovery attempts in the post-noon session were shot down by institutional sellers, which ensured that the indices stayed range-bound in the negative. The market restricted its losses, but still ended in the red for the third straight day. The Sensex closed 51 points down at 18,086 and the Nifty shed 18 points to settle at 5,421.
Yesterday the Nifty fell below its first support of 5,450. The fall is acquiring strength now and the next support to watch is 5,340.
The US markets finished higher on Wednesday as the minutes of the Federal Reserve meeting revealed that it would continue with its easy monetary policy for some more time. Higher commodity prices supported energy stocks as Chevron gained 2.4% and Exxon Mobil rose 1.7%. Dell, which announced its first quarter numbers late Tuesday, jumped 5.4%.
Oil prices rebounded after an unexpected fall in crude supplies. US light, sweet crude gained 3.29% to settle at $100.10 a barrel, while in London, Brent crude rose 2.1% to close at $112.30.
The Dow surged 80.60 points (0.65%) to 12,560.18. The S&P 500 added 11.70 points (0.88%) to 1,340.68 and the Nasdaq gained 31.79 points (1.14%) to 2,815.
Markets in Asia were mostly in the green in early trade on Thursday, supported by gains in commodities. The gains came even as Japan’s GDP growth declined 3.7% in the March quarter following the devastating earthquake and ensuing tsunami. The economy fell a revised 3% in the previous quarter, sending the nation to its third recession, defined by economists as two consecutive quarters of contraction, in a decade.
The Shanghai Composite gained 0.27%, the Hang Seng surged 0.97%, the Jakarta Composite rose 0.40%, the KLSE Composite advanced 0.19%, the Straits Times climbed 1.03% and the Taiwan Weighted was up 0.82%. On the other hand, the Nikkei 225 fell by 0.11% and the Seoul Composite declined 0.40% in early trade.
Back home, the Reserve Bank of India (RBI) on Wednesday tightened the prudential norms for banks and raised provisioning requirement for bad loans by up to 10%, a development that would impact bottomlines of banks.
Advances classified as sub-standard will attract a provision of 15% against the existing 10%, RBI said in a notification. An asset would be classified as sub-standard asset, if it remains non-performing for a period of 12 months.
This is one more in a long list of foreign funds that are tapping Indian investors’ savings when Indian mutual funds have been unable to sell Indian funds
Deutsche Mutual Fund has announced the launch of DWS Gold and Precious Metal Offshore fund. The investment objective is to generate capital appreciation by investing predominantly in units of DWS Invest Gold & Precious Metals Equities Fund. The scheme would allocate 90-100% of assets in DWS Invest Gold & Precious Metals Equities Fund or other similar overseas mutual fund schemes with medium- to high-risk profile. It would further invest up to 10% of assets in money market instruments with low- to medium- risk profile.
In recent weeks, there has been a rush of foreign funds queuing up to tap Indian savings for foreign products. (Read, 'Another overseas fund from DSP BlackRock, this time it's Chinese'.) DWS is cashing in on the high interest in gold. DSP BlackRock launched DSP Black Rock World Gold fund in August 2007. The fund predominantly invests in units of BlackRock Funds- World Gold Fund. Similarly, AIG launched AIG World Gold fund, in May 2008, which invests in companies engaged in the extraction, processing and marketing of gold through an international fund.
Global funds offer diversification benefits, investing in stocks (biotech, technology, energy, agriculture and mining, etc.) that an Indian investor may not be able to buy through investing in domestic schemes. However, funds that put money in foreign stocks don't necessarily offer diversification. For, markets around the world have been moving in sync over the last five years and non-correlated assets are not easy to find.
As with other kinds of products, foreign funds are not about returns alone. There are risks too. In the case of DWS, there is a risk of concentration in a single volatile sector. The top five holdings of DWS Invest Gold and Precious Metal Equities fund as on 29 April 2011 are Goldcorp, Newcrest Mining, Agnico- Eagle Mines, Newmont Mining and Yamana Gold.
The fund will be benchmarked against S&P BMI Global Gold and Precious Metals index. The scheme will charge a 1% exit load if units are redeemed within 12 months from the date of allotment.
Unfortunately, the S&P BMI Global Gold and Precious Metals index has not performed that well. From 1 May 2006 to 30 April 2011 the Sensex gave an annualised return of 11%, while the S&P BMI Global Index gave an annualised return of 4.01% in the last five years.
Moneylife Foundation urges the PM and others to completely ban MLM companies in India or bring these companies under the regulation of either RBI or SEBI. Moneylife was the first to expose the Speak Asia online survey scam on 8 October 2010
Moneylife Foundation has been writing against multi-level marketing schemes for some time now. Following the exposé by Moneylife on Speak Asia Online Pte Ltd and its multi-level marketing schemes, Moneylife Foundation has sent a representation to prime minister Dr Manmohan Singh, finance minister Pranab Mukherjee, finance secretary Sushama Nath and Reserve Bank of India (RBI) governor D Subbarao urging them to ban all MLM companies and their schemes in the country, or to bring all MLM companies under the regulation of either the RBI or the Securities and Exchange Board of India (SEBI), to stop them ensnaring gullible people.
According to Moneylife Foundation trustees, while the investor population in the country has fallen to 80 lakh, Speak Asia has managed to lure nearly 19 lakh people into its get-rich-quick scheme. The number accounts for a sizeable portion of India's investor population as well as internet users.
Speak Asia requires its members or 'panellists' to deposit Rs11,000 (though the rates vary, as we have seen in the countless posts by agents of Speak Asia on various sites) and then conduct surveys for which the company pays Rs500 per panellist per survey. A panellist gets an added commission if he recruits new members. There is no guarantee as to who will return the money if the company collapses.
It claimed to have conducted surveys for companies like ICICI Bank, Bharti Airtel, Nestle and Bata, but all these institutions have denied their association with Speak Asia. At a press conference held in Mumbai on 16th May, Speak Asia formally apologised for using the names of these companies. But it also refused to name a single client.
Singapore-based Speak Asia was previously known as Haren Technology Pte Ltd and is owned by one Ms Harinder Kaur. The Accounting and Corporate Regulatory Authority (ACRA) of Singapore has given it a non-compliant rating on the ACRA website for not submitting details of its AGM (annual general meeting), annual returns report and other documents.
Haren Technology itself has frequently changed its garb. The company doesn't have a registered address in India. Despite its claims of being the biggest online survey company in Asia, Speak Asia's reach is limited only to India and Bangladesh. It claims to be in existence since 2006, but the website was actually launched only on 21 January 2010.
Speak Asia's tall claims have been busted by Moneylife, and also exposed by The Economic Times, Star News and Aaj Tak. SpeakAsia's panellists have been arrested in Bangladesh. Lot of articles are available online on the fraudulent nature of the company.
Unlike several other countries, MLM schemes are not banned in India. Hence, schemes like City Limousine, Stockguru and GoldQuest could escape with millions. None of the financial watchdogs in India are responsible for monitoring such schemes, so there is every chance that Speak Asia and its clones like Ram Survey and FLC Online can get away after cheating millions of their savings.
Moneylife Foundation hopes that the government recognises the danger such schemes pose and bans them outright, and also put a regulator in charge to monitor such companies and their activities.