Expect a correction by the middle of next week
The market ended last week on a strong note—even after the monetary tightening by the RBI. The market has been up for seven weeks in a row and the chances of a correction next week are high. We expect a correction by the middle of next week.
Although the market was down on the first trading day of the week on concerns of a hike in repo rates, it shrugged off such fears on Tuesday and was in positive territory for the rest of the week.
The government said it expects GDP growth of 7.2% for the current fiscal and 8.5% next year. The Reserve Bank of India said inflation would come down in the near future. However, it also cautioned that demand-side pressure could intensify again due to accelerating growth and that would need be addressed, possibly through rate hikes. In the mid-term appraisal of the government’s five-year plan, the poor performance of the power, road and port sectors was one of the major discussion points.
The prime minister said that infrastructure will remain the prime focus area over the next five years, with investments of $1 trillion, while the finance minister said that the government will allow private companies to issue infrastructure bonds. India's infrastructure sector grew 4.5% in February from a year earlier, lower than the upwardly revised annual growth of 9.5% in January, government data showed on Friday. During April-February, the first 11 months of the current fiscal, output rose 5.3% from 2.9% a year ago. The ongoing rally in the domestic market also brought fresh foreign capital, which helped the rupee hit a 11-week high against the dollar.
In the US, jobless claims for the week ended 20th March were 442,000, which was less than the expected total of 450,000 and down 14,000 from the prior week. The US Federal Reserve said that the stimulus will be wound down, possibly through asset sales, once the recovery picks up. On the last trading day of the week, US stocks were down on the news of sinking of a Korean ship. Although the South Korean government said that it was not clear whether North Korea was involved in this incident, it weighed heavily on investor sentiment.
The mood overseas was positive after European leaders decided to help Greece out of its debt crisis. The Euro nations and the IMF will together offer credit facilities to Greece. However, investors are still uncertain about the future of Greece and opted to stay away from the Euro and invest in the dollar. The dollar rose against the euro at the start of the week, but the euro strengthened after the decision to bail out Greece was announced.
Two other news developments are expected to boost investor confidence. A survey showed that private-sector business activity across the euro zone shot up in March, with the largest increase recorded since August 2007. The figures suggest that an improvement in unemployment figures could be in the offing. The purchasing managers' index (PMI) for the euro zone, compiled by data and research group Markit, jumped to 55.5 points from 53.7 in February. Any figure above 50 indicates economic growth. There has also been a rise in new orders, with exports growing at the fastest rate since April 2006.
Foreign institutional investors are still confident about the Indian market, which is reflected in their buying pattern. Foreign investors bought stocks worth of Rs1,906 crore while domestic institutional investors sold stocks worth of Rs213 crore during the week.
Moneylife Foundation held a second special financial literacy workshop for women. Speaking on the occasion was Ms Ketaki Jayakar, a well-known senior advocate who specialises in marital law
Mumbai, 26th March, 2010: Moneylife Foundation today held a second special financial literacy workshop for women. Speaking on the occasion was Ms Ketaki Jayakar, a well-known senior advocate who specialises in marital law.
Ms Jayakar structured her talk in the form of a number of real-life stories on the diverse travails faced by women and families, which inevitably boiled down to a failure of these individuals to ensure their financial independence with proper legal documentation.
For instance, there was a nurse, Sheela, who earned part of her income in cash, which she handed over to her husband, who in turn deposited it in his bank account. He was a part-time singer, who was often out of work. When they bought a house, it was in the husband's name and the repayment was through the same bank account. When the husband deserted her, Sheela discovered that she had no documentation to prove her right to the marital home.
While Sheela did manage to get some redress through the family court with Ms Jayakar's help, other stories did not necessarily end happily. For example, one story that led to a lot of discussion was that of the parents, who sold their house and pooled their retirement money with their son to buy a bigger house in his name. Soon after his marriage, the son absconded, and his wife left the home. He has since accused his parents of ill-treating his wife and stopped making his monthly loan repayments for the home, leaving his parents high and dry. The discussion led to the conclusion that the son could be declared a defaulter, which would force him to take responsibility, since the implications of a negative credit rating would be disastrous for him.
There was yet another instance of two elderly and infirm women, who were all alone and were systematically looted by their chartered accountant and a distant relative. Each of these tales held a lesson for better financial prudence, while some, like that of the older women, highlighted the lack of protection and infrastructure for senior citizens in India.
Ms Jayakar, who has always been associated with different social causes, was very keen that these stories should motivate women to take charge of their finances. With this objective, she has published the cases that especially moved her in a book titled “A Bunch of Flowers”. She said, “All of us as children have enjoyed stories and I will use that as a tool to impart wisdom. I meet several women who are in distress. Over the years, I realised that writing about their issues is the best tool to convey my message.” Ms Jayakar is a member of MAVA (Men Against Violence & Abuse), an NGO. She has also written the script for a television serial called ‘Adhikar’, which was the first serial on legal issues in India and won two RAPA awards in 1994.
Ms Jayakar's talk was followed by an interactive working session on finance, specifically designed for women, by Mr Debashis Basu, Editor of Moneylife and Ms Sucheta Dalal, consulting editor of Moneylife. Ms Dalal spoke on how to avoid losses by staying away from certain kinds of investments like chain marketing and pyramid schemes. She also spoke about the implications of credit card transactions and gave the audience some tips on choosing banking and insurance services sensibly.
Mr Basu told people that investment does not have to be difficult and complicated if one was clear about the basic objectives, avoided obvious potholes and followed a sensible and consistent investment policy. He explained at length the enormous power of compounding one's income, and quoted Albert Einstein, who had said, "Compounding is the most powerful force in the universe.”
A surprise visitor to the Moneylife Foundation office on this day was Mr K P Krishnan, Joint Secretary (Capital Markets), Ministry of Finance. He spoke at length about investor protection, financial literacy and awareness.
Although the event was primarily aimed at women, it saw the participation of several men as well. Moneylife will be holding a series of such workshops for all categories of investors. To be informed about these, please take advantage of the free membership and registration facility offered at www.moneylife.in.
Pictures of the event
Markets are approaching their highest level in two years
The market ended on a firm note today. The BSE Sensex closed at 17,644, up 86 points and the Nifty closed at 5,282, up 22 points. It is now once again reaching the highest level in two years, a level it had hit in January. The market has been up for seven weeks in a row and the chances of a correction next week are high. We expect a reaction by the middle of next week.
Asian stock markets were also higher today, despite a subdued overnight market in the US. Japanese exports were looking up due to the weak yen. The key benchmark indices in China, Hong Kong, Indonesia, Singapore, Taiwan, South Korea and Japan rose by 0.41%-1.55%. The Dow Jones rose 5.06 points (up 0.05%) to 10,841.21. The Nasdaq declined 1.35 points to 2,397.41 and the S&P 500 fell 1.99 points to 1,165.73.
Tata Motors (up 3.3%) is reportedly selling about 20% stake in its equipment and service unit Tata Construction Equipment Company (Telcon) to Japan’s Hitachi Construction Machinery Company for about $220 million. Bharti Airtel (down 1.1%) has set up two special purpose vehicles in the Netherlands and Singapore to facilitate the $9-billion Zain deal. ONGC (up 1.8%) is considering buying an asset in Canada that can produce around 10,000 barrels a day of heavy oil, worth at least $1 billion.
Patel Industries has received a $1-billion contract to develop a waterfront integrated township project in Mauritius. GMR Energy, a subsidiary of GMR Infrastructure (up 1.1%) plans to raise over Rs16,000 crore from a group of private equity players led by Singapore-based Temasek Holdings and banks to fund its expansion. Gitanjali Gems (ended flat) plans to divest 25% of its holding in each of its brands from September 2010. Videocon Industries (up 3.7%) launched its GSM mobile service. The company plans to invest Rs14,000 crore over the next three years to build up the wireless network and will cover 100 towns in the next 100 days.
Institutional investors are on a buying spree. Foreign and domestic institutional investors purchased Rs653 crore and Rs156 crore yesterday, respectively.
Initial jobless claims in the US for the week ended 20th March were 4,42,000 which was a bit less than the expected total of 4,50,000 and down 14,000 from the prior week. The US Federal Reserve said on Thursday that it would remove the economic stimulus once the economic recovery looks strong. It also hinted that asset sales would be the biggest part in the exit strategy. European leaders decided on Thursday to create a joint financial safety net with the IMF to help Greece. As per the agreement, eurozone nations and the IMF will give a loan to Greece to help it tide over its debt crisis.