Moneylife Events
‘Financial literacy and inclusion go hand-in-hand’

S Aftab, general manager-corporate communications at Union Bank talks about investor education at Moneylife’s seminar at Pune

“Financial inclusion is the buzzword today, but investors continue to be frustrated by lack of clarity on financial products, regulations, laws and schemes. This is why we need to focus on investor-education and financial literacy,” said S Aftab, general manager, corporate communications, support services & branch expansion departments, Union Bank of India, speaking at Moneylife Foundation’s seminar titled ‘Investor, Empower Yourself’ in Pune.
This was the fourth Moneylife seminar supported by Union Bank. Mr Aftab said, “People need to be aware of financial issues, and we hope we continue to promote financial literacy. Money is everything, and you must know how to be financially secure and how to invest it properly so that it gives you a good interest or return so that your future is free of worry.”

Ms Sucheta Dalal, trustee of Moneylife Foundation, spoke on the schemes to avoid while investing—like pyramid and multi-level marketing schemes, internet fraud mails and unregulated products. “It is better to invest with a scheme/product that is overseen by regulators like the Reserve Bank of India (RBI), Insurance Regulatory and Development Authority (IRDA) or Securities and Exchange Board of India (SEBI). There is no guarantee that you will not lose money if you invest in mutual funds or insurance products, but you can approach the regulator in case anything goes bad,” she said.
She also spoke on the importance of making a will and getting adequate insurance coverage. “Always bargain and negotiate with service providers and try to get the best deal. Also, if you get a better deal from someone who is not your traditional banker or insurer, move on,” she said.

She also talked about the many hidden charges for credit card transactions, especially cash withdrawals for which the interest gets compounded very fast. “People run up lakhs in unpaid credit bills, and they think everything is dissolved if they tear up the credit card. Even if the company can’t catch you, uncleared transactions will get registered with credit rating agencies. It will bring down your credit score, and later, you will not get loans,” she said. Ms Dalal also talked about checking one’s credit score from agencies. Often, a person doesn’t know if he is a credit defaulter—and sometimes, the transactions show ‘uncleared’ due to mistake of the banks.
Mr Debashis Basu, trustee of Moneylife Foundation, spoke on the importance of choosing the correct mutual funds. He also spoke on investing in gold, which is a speculative asset. “If we track gold prices through 30 years, we will see that it is dependent on the value of the dollar. Unless you are really good at decoding currency movements, avoid investing in gold,” he said.

Mr Basu also talked about planning retirement expenses and saving accordingly. “Erosion will eat away your savings. One must start investing in mutual funds and stocks for wealth creation—but invest only that which you can spare,” he said.

Following a lively question-answer session, the seminar ended in applause.


Downslide to continue: Weekly Market Report

Nifty may see the level of 4,400

The gloomy outlook of the domestic economy as portrayed by private analysts and the Reserve Bank of India (RBI), in its mid-quarter monetary policy review, was seen as the main reason for the market ending 4% lower for the week and down for the second week in succession.

The 5.1% contraction in industrial output for October saw the market falling sharply on Monday. Short covering towards the end of trade helped the indices close higher on Tuesday recouping nearly half the losses accrued the previous day. Ignoring the decline in headline inflation for November, the choppy market settled lower on bleak global cues on Wednesday.

Nervousness ahead of the RBI quarterly policy review induced a high degree of volatility in the market, but a recovery in the second half of trade ensured a flat close on Thursday. A dim outlook for the economy outlined by RBI in its policy review resulted in the market closing at its lowest in two years on Friday.

The Sensex tumbled 722 points to close the week at 15,491 and the Nifty declined 215 points to settle at 4,652. The market is likely to see a further downtrend with the Nifty touching 4,400.

All sectoral indices settled lower with the BSE Capital Goods index (down 10%) and BSE Consumer Durables index (down 8%) as the top losers.

Cipla and Hindustan Unilever (up 2% each) were the only gainers on the Sensex this week. The losers were led by Larsen & Toubro, Sterlite Industries (down 12% each), State Bank of India (down 10%), DLF and BHEL (down 9% each).

The top performers on the Nifty were Dr Reddy’s Laboratories, Cipla, HUL  (up 2% each), HCL Technologies and Infosys (up 1% each). The major losers on the index were L&T (down 13%), Reliance Communications, Sterlite Ind, Reliance Power (down 12% each) and Punjab National Bank (down 11%).

After 13 increases in key interest rates in the last 20 months, the RBI, this time kept the repo and reverse repo rates unchanged at 8.5% and 7.5%, respectively. The central bank also decided to retain the cash reserve ratio at 6%. The industry was expecting a minor cut in CRR to induce liquidity in the system and promote investments. The pause in rate hikes comes at a time when inflation has started showing signs of moderation.

In a double whammy, negative industrial output and sliding rupee against the dollar have added to the woes of already slowing Indian economy with finance minister Pranab Mukherjee saying that it would be a challenge to maintain the fiscal deficit at 4.6% of the gross domestic product (GDP).

Industrial output registered a negative growth of 5.1% in October, lowest in over two years, mainly due to rising interest rate, high prices and global uncertainties. The decline in industrial production has mainly been on account of poor performance of the manufacturing and mining sectors, resulting from the twin impact of high interest rate and global slowdown.

Moderating prices of essential food items like onions, potatoes and milk pulled down the headline inflation marginally to 9.11% in November, from 9.73% in October and 8.2% in November 2010. However, the figure has stubbornly remained above the 9% mark since December 2010.

Also, food inflation for the week ended 3rd December fell to a nearly four-year low of 4.35%. The latest weekly food inflation number is the lowest since the week ended 23 February 2008, when it was 4.28%. Expressing hope, chief economic advisor Kaushik Basu said food inflation may go down below 3% in a month’s time.

On the global front, Italy’s prime minister on Friday cautioned European policymakers of dividing the continent in an attempt to resolve the debt crisis. After the European markets closed for the week, Fitch said it may downgrade France, Italy, and five other Eurozone countries, on account of a lack of a “comprehensive solution” to the region's debt crisis. Last week, S&P warned that it would downgrade the ratings of many Eurozone sovereigns, including France and Germany.

Meanwhile, key Senate leaders in the US reached a tentative agreement late Friday on a two-month extension of a payroll tax cut for almost every American worker, while the House passed the $1 trillion spending bill which averted a government shutdown that otherwise would have begun Friday at midnight. The Senate is expected to pass the bill on Saturday, keeping the government funded till the end of the fiscal year that ends on 30th September.


Bounce short-lived so next couple of days crucial

S&P Nifty close: 4651.60

Market Trend

Short Term Down        Medium Term Down        Long Term Down

The Nifty opened flat this week and drifted lower thereafter to hit an intraday low on the 15th from where a smart bounce which was, however, short-lived took place. The resultant sharp decline on the last day of the week saw the Nifty close 215 points (-4.42%) in the red. All the sectoral Indices closed in the negative with the major underperformers being BSE Capital Goods (-12.62%), BSE Realty (-9.42%), BSE Consumer Durables (-8.24%), BSE Bankex (-8.24%) and BSE Auto (-7.02%) and the significant outperformers were BSE IT (-1.20%), BSE Healthcare (-1.86%) and BSE Fast Moving Consumer Goods (-1.91%).   
The weekly histogram MACD remains below the median line confirming that the bears are in control. Last week’s decline was on higher volumes implying that the bulls will require a lot of efforts in the next couple of sessions to pull things back. If we hold the 4,550-4,580 area in this dip then another bout of short-covering is likely to take place.

 Here are some key levels to watch out for this week

  • As long as the S&P Nifty stays below 4,730 points (pivot) the bears will have an edge as the trend remains down.
  • Support levels in declines are pegged at 4,549 and 4,448 points.
  •  Resistance levels on the upside are pegged at 4,832 (crucial) and 5,012 points.

Some Observations
The bulls tried to make a come back on the 15th but were halted in their tracks on the last day of the week which resulted in a sharp fall.
1.    Resistance in rallies is pegged at 4,992, 5,014 and 5,104 points (38.2%, 50% and 61.8% retracement levels of the fall from 5,399-4,628 points.
2.    The volumes in last week’s decline have more implying that the bears are still strong and rallies if any will be of corrective nature only.
3.    If the Nifty holds the 4,550-4,580 points range in this decline expect another corrective rise till around the latter half of this week.

The bulls did make a small comeback as suspected on the 15th but could not hold on to the gains in the next session. We saw some panic selling on the last day of the week which has raised doubts as to whether a corrective rise can begin from around these levels. If we don’t fall much from here one can expect a small corrective bounce which could peter out during the coming weekend. However, there is no change in the overall trend which continues to be down. It’s likely to be a roller coaster market in the weeks ahead with opportunities provided for both way traders.

(Vidur Pendharkar works as a consultant technical analyst & chief strategist,


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