Continuing tensions in the Middle East, which is set to impact crude prices, remains a cause for worry
The domestic market is likely to witness a positive opening today. The Asian markets were trading in the positive zone even though China, on Friday, increased its required reserve requirements for banks by 50 basis points. Continuing turmoil in the Middle East and North Africa, however, is expected to keep investors on their toes.
The US markets ended with gains on Friday amid news that the Libyan government forces have agreed to a ceasefire. Meanwhile, Britain and France were contemplating a no-fly zone over Libya to restrain Maommar Qaddafi’s forces from attacking civilians. The SGX Nifty was 43.50 points higher at 5,426.50, up from its previous close of 5,383 on Friday.
The local market is breaking down in a slow motion. For the entire February and March, market indices have been moving sideways. A short sell-off before the Union Budget was followed by a short rally thereafter. But last week it suddenly took a turn for the worse. The trigger was Reserve Bank of India’s (RBI) credit policy. The RBI has hiked the interest rates by 0.25% to control inflation. This follows a series of hikes RBI has been making over the past one year. The impact will be instant.
Loans for business and individuals will become costlier. In a rising inflation and a rising interest rate situation, it becomes difficult for stocks to maintain high valuations. While companies may be able to absorb a slightly higher cost of borrowing, the environment becomes uncertain and stock prices go down.
The next few weeks will be a testing time. If the Sensex goes below 17,700 in the next few days, more declines will happen.
Wall Street closed with gains on Friday on easing of political tensions in Libya following announcement of a cease fire by the government. Bank shares jumped as the Federal Reserve stated that it will allow some banks to boost or restart dividend payments. The collective efforts of the Bank of Japan and the G7 nations to intervene in the currency markets to curb the yen’s rise also boosted investors’ sentiments. However stocks came off their highs to close in the green.
The Dow gained 83.93 points (0.71%) at 11,858.52. The S&P 500 added 5.49 points (0.43%) at 1,279.21. The Nasdaq rose 7.62 points (0.29%) to close at 2,643.67.
Markets in Asia were trading in the green on optimism as factories are seen restarting operations after the devastating earthquake earlier this month, which brought industrial activity to a standstill in the world’s third largest economy.
Meanwhile, the Chinese central bank on Friday hiked the required reserve ratio for banks by 50 basis points, the third this year and the sixth since November 2010. The move is expected to curb liquidity in a bid to control rising prices. However, continuing tensions in the Middle East remains a cause for worry.
The Shanghai Composite gained 0.43%, the Hang Seng jumped 1.26%, the Jakarta Composite rose 0.45%, the KLSE Composite added 0.01%, the Straits Times advanced 0.86%, the Seoul Composite was up 0.88% and the Taiwan Weighted gained 0.98%. Markets in Japan are closed today for a local holiday.
Back home, total under recoveries for the oil marketing companies (OMCs) will go up to Rs98,000-crore in FY12 if average crude oil prices continue to remain at $100 per barrel in the coming months,, a report by a brokerage firm IIFL said.
With the crude oil prices touching $100 per barrel mark in February, the under recoveries for FY11 is expected to touch Rs72,000-crore, the report said. For the period April-December 2010, the gross under recoveries of OMCs were Rs47,000-crore based on average crude oil price of $80 per barrel.
Addressing a special Moneylife Foundation workshop, Mr Jayakar, who is a solicitor and renowned collector, advised collectors to follow their passion, with a shrewd eye on its potential value
"If you are a passionate collector, you can never be one to treat your collection as an investment. Because you will find it impossible to assign a price to your collection or part with it for money," said Rajan Jayakar, solicitor and renowned collector. But he admitted that with age and time, the investor in some matures, and that instinct balances passion with prudence. Mr Jayakar was speaking at a workshop hosted by the Moneylife Foundation on Friday.
Mr Jayakar, who is a huge collector of such regular items like stamps, coins and books, also has some special notable collections of vintage cars, Victorian furniture and Shammi Kapoor memorabilia.
He spoke about how to turn a hobby into investment and gave tips on how to start, how to source items, to assign correct prices while buying and selling items, and how to preserve collectibles. "The big four collectibles are paintings, sculptures, stamps and coins. But there are so many other options and the quirkier ones are often invaluable," said Mr Jayakar.
His advice to every collector is, 'Follow your passion', because that eventually may lead to great investments. "Collectors collect because they want to collect. It is the pleasure derived in accumulating these things that gives the collector a high, not the market value of what they hold," he said. So, he said, every parent and teacher should encourage the child collector.
There are certain things that a collector must do: study his collectible, read up about the field and aim for completion for his collection. He said, "Everything is collectible, but not everything is saleable, because if there is no easy and accessible market for the collectible, it cannot be sold."
He said a collector must be careful about preserving his collection, and insist on getting the items authenticated by the authorities concerned. Mr Jayakar also spoke on the hindrances that Indian collectors face with the Antiquities and Art Treasures Act of 1972. "The problem is that markets for collections are all abroad. And if you are forbidden to take anything out of the country, you cannot sell," he said.
He talked at length about philately, and gave a brief history on many stamps, including the most valuable stamps in the world. He said, "People have the misconception that everything becomes valuable with age. But this is not the case. There are many modern or later-day items which are more prized than ancient ones, because it is the rarity and the history of that item that makes it so special."
On the idea of investment, Mr Jayakar said, "Well, for an investor, the return brings happiness, but for a passionate collector, who builds up his collection brick by brick, happiness is the return."