Investors learn how to be safe with their money along with the rules of smart investing
After successful seminars at Gurgaon and Bengaluru, Moneylife Foundation together with Indiabulls, held its first seminar in Chennai on Saturday. The day-long programme, "Investor, Empower Yourself", was addressed by Sucheta Dalal, trustee of the Foundation, and Debashis Basu, editor & publisher, Moneylife magazine. Both focused on the dos and don'ts for savings and investments that most people either don't know too well, or unfortunately don't care about too much these days.
Ms Dalal began the session with a word of caution for investors to stay away from scams and fraudulent schemes like Speak Asia, and not to be lured by deceptive e-mails. She explained about the hidden costs and interest payments associated with credit cards and such other products. "Saving money is as good as earning. Stay away of these fraudulent schemes and companies, do your homework," Ms Dalal said.
Ms Dalal said that it is always best to check the credentials of a company or the broker, or product on offer, before investing one's hard-earned money. This involves verifying the registration with regulators like the Reserve Bank of India, the Securities and Exchange Board of India or the Insurance Regulatory and Development Authority. "I don't say that having their authentication is a guarantee against losing money, but it is safer," Ms Dalal said. She also talked about the importance of wills and nominations, and explained the process of working this out.
Mr Basu described the rules for smart investment, like choosing the correct mutual funds and such other financial products. He also gave a brief presentation on the subject of gold, explaining how the value of the yellow metal was related to the movement of the dollar, and he asked investors to understand this co-relation properly before deciding to invest. "This is because gold is not a company which automatically gives returns. You have to buy and sell gold to get money," he said.
Mr Basu also explained the importance of choosing the correct portfolio, instead of going for hyped-up products or big names. "If we look at their track record, we will see that most of these fancy schemes and products have failed to outperform the market. It is better to be wary of them," he said.
During the discussion, one participant suggested that the deposit insurance should be raised to Rs5 lakh. Another participant wanted to know why structured products should not be banned. There was a lively discussion on the mis-selling of products.
Sachin Chaudhary, director and head of Indiabulls Housing Finance, made a presentation on the housing market and critical aspects to consider when buying property. "Whether you are a home buyer or an investor, it is better to understand how mortgage works, and what you should and shouldn't do about it," Mr Chaudhary said.
He pointed out that with developers under financial pressure these days; buyers have an opportunity to strike good deals. Like if, about 20 prospective buyers could get together, they could bargain for as much as 20% discount.
Mr Chaudhary advised home seekers not to be attracted by freebies such as modular kitchens, as builders get these items in bulk at low rates and add this to the cost. But these do not add to the value of the flat. "Lavish complexes attract high maintenance charges. Many of those who have gone into lavish complexes are regretting it after discovering these hidden charges," he said.
He also advised investors on how to deal with rising interest rates. He suggested that one should keep the tenor of the loan the same and increase the EMI. Most borrowers make the mistake of keeping the EMI amount the same and increasing the repayment payment and end up paying more money.
Events over the next few days will influence the indices
Concern over another possible rate hike by the Reserve Bank of India at its monetary policy review on 16th September and the indecisiveness of the US Federal Reserve to detail a new package to stimulate growth in the US led to a flat closing of the market this week. However, the positive bias ensured a green close for the second straight week.
The dismal US jobs data published last weekend pulled the market lower on the first trading day of the week. Positive economic news on the domestic front pushed the indices higher on Tuesday. Institutional buying support helped the market close in the green for yet another day. Gains in the European markets saw the domestic market close higher on Thursday. However, traders turned cautious on Friday on account of US worries and the market closed down. The Sensex closed at 16,867, a gain of 46 points for the week, and the Nifty settled at 5,059 with an overall gain of 19 points.
The Nifty is at a position where the direction of the market will likely be determined by the happenings over the next few days.
In the sectoral space, the BSE Consumer Durables surged 5% and BSE Capital Goods gained 3%, while the BSE TECk and BSE Metal both lost 1%.
The key Sensex gainers during the week were Jaiprakash Associates (up 9%), Hero MotoCorp (up 7%), Larsen & Toubro (up 5%), Hindustan Unilever (up 4%) and Mahindra & Mahindra (up 3%). The main losers were Sun Pharma, DLF (down 4% each), ITC, Hindalco Industries (down 3% each) and Tata Steel (down 2%).
The top performers on the Nifty were JP Associates (up 9%), Hero MotoCorp (up 7%), Punjab National Bank (up 6%), L&T and Ranbaxy (up 5% each). Sun Pharma (down 5%), DLF (down 4%), Reliance Power, Power Grid Corporation and Hindalco (down 3% each) were the major losers.
According to the Society of Indian Automobile Manufacturers (SIAM), domestic passenger car sales declined by 10.08% in August 2011 to 144,516 units, from 160,713 units in the corresponding month a year ago. Motorcycle sales grew by 15.43% in the month to 839,772 units from 727,542 units in the corresponding month last year. Total sales of vehicles across categories registered a growth of 11.85% to 1,412,945 units in August, as against 1,263,239 units in the month last year.
Food inflation fell to 9.55% for the week ended 27th August, down from 10.05% in the previous week. The finance minister has expressed the hope that the rise in food prices would moderate further after the end of the festive season.
India's exports grew by annual 44.2% to $24.3 billion in August, showing an impressive year-on-year expansion, but the commerce ministry clearly sees "difficulties down the road", making out a case for stimulus to exporters.
Disclosing the monthly trade trends, commerce secretary Rahul Khullar said merchandise shipments for August looked quite good, compared to August last year. But the correct way, he said, would be to compare the August performance with that of July when exports grew by a whopping 82%. Mr Khullar said, month-on-month, the consignments were down 17% in August from July. The good annualised showing was on the back of the low base of comparison, he pointed out.
Global ratings agency Moody's has pegged India's growth at 7.5%-8% for the current fiscal, saying that higher interest rates and global economic uncertainties could affect economic expansion in the near term. In its annual sovereign credit update on India, Moody's, however, added that the 'cyclical slowdown' is unlikely to change its credit outlook for the country.
On the international front, top German official at the European Central Bank Juergen Stark resigned unexpectedly on Friday, in a conflict over the bank's policy of buying government bonds to combat the euro zone's debt crisis. While Mr Stark gave no public explanation for his resignation, he sent an article to the German financial daily Handelsblatt, for publication on Monday, in which he has said that the only solution to the debt crisis was for governments to cut spending.
Meanwhile, US Federal Reserve chairman Ben Bernanke has asserted the central bank's commitment to provide stimulus for the sagging US economy, but he offered no specific promises or details about what action could be taken. He also repeated his call for Congress and the White House to implement proper fiscal measures to control the national debt and the budget deficit.
Consolidation is necessary before we can see any significant recovery, like the one we witnessed in the last couple of weeks. It’s better to be stock specific then
S&P Nifty close: 5059.45
SHORT term: Down MEDIUM term: Down LONG term: Sideways
The Nifty opened weak and declined further, but made a higher bottom on the daily chart as was envisaged. Buying at lower levels, coupled with short covering, saw the Nifty gain sharply and hit a high of 5169.25 points. Then profit-booking, together with speculative selling, saw the gains evaporate. Volumes were significantly higher and trading was volatile. The Nifty closed with a meagre 19-points gain (+0.39%) this week. The sectoral indices that led the advance were BSE CDS (+5.01%), BSE Auto (+2.12%) and BSE Bankex (+1.35%), whereas BSE Teck (-1.06%), BSE Metal (-0.99%) and BSE IT (+2.83%) underperformed the benchmark.
The histogram MACD continues to be below the median line, implying that the medium-term trend is firmly down and what we are witnessing is a corrective rise. Those who have paid heed to our opinion to cover shorts, as well as go long, over the past couple of weeks, would have benefited handsomely as the Nifty has rallied nearly 10% from the lows.
Here are some key levels to watch out for in the week ahead.
The bulls have succeeded in putting a foot in the door of the bear juggernaut, but they will have to ensure that the recent low holds in any corrections that may happen from here on. On the support levels,
1. The Fibonacci retracement levels of the recent rise from 4,720 to 5,169 points are 4,997 (38.2%), 4,944 (50%) and 4,891 (61.8%). These should act as supports in dips.
2. Resistance in any further rise will be provided by the "gap area" between 5,229 and 5,323 points.
3. Only a close of the "gap area" could lead to the foundation of a retracement of the entire fall from 6,338 to 4,720 points, though no confirmation is available as yet despite last week's recovery.
The bulls succeeded in defending the 50% retracement level (4,916 points) of the rise from 4,720 to 5,113 points which resulted in speculative buying as well as short covering, taking the Nifty up to 5,169 points. If the Nifty holds the above stated retracement levels in the declines, then further upside is likely in the weeks ahead which could take the Nifty to 5,230 (50%) and 5,350 (61.8%) retracement of the decline from 5,740 to 4,720 points.
The bulls have to wait for the Nifty to venture into oversold territory on the daily charts before venturing back in, but keeping in mind that we are in a corrective rise only. Some consolidation is required before we can see any significant recovery, like the one we witnessed in the last couple of weeks. It's better to be stock specific then. We will likely see high volatility on the next weekend too.
(Vidur Pendharkar is a consultant technical analyst and chief strategist at www.trend4casting.com.)