Only if Nifty strengthens above any previous day’s high can we be ready for an upmove
A plunge in the Chinese market and a pullout by foreign investors from Indian stocks led the market lower today. Only if Nifty strengthens above any previous day’s high can we be ready for an upmove. The National Stock Exchange (NSE) reported a volume of 60.69 crore shares and a dismal advance-decline ratio of 256:1135.
The market opened on a weak note on concerns of a pull-out by foreign investors and China’s growth concerns, which led the Asian markets lower in morning trade. The Chinese market was the worst performer in the Asian pack as Goldman Sachs Group cut its growth forecast for China amid concern a cash crunch at banks in the world’s second-largest economy.
Back home, the Nifty opened 30 points lower at 5,638 and the Sensex started the day at 18,714, a loss of 60 points from its previous close. While the opening figure of the Sensex was also its intraday high, the Nifty touched its high a short while later with the index at 5,640.
Selling pressure from banking, IT and oil & gas sectors led kept the market lower in early trade. The benchmarks witnessed a great deal of volatility even as the losses expanded as trade progressed.
The losses in the Chinese market rattled investors all over the world, and India was no exception. The domestic market moved further southward in noon trade on selling in realty, consumer durables, capital goods, PSU and metal stocks.
The market fell to its lows in post-noon trade as continued selling pushed all sectoral gauges into the red. The Nifty touched 5,566 and the Sensex went back to 18,467 at their respective lows.
The benchmarks settled near the lows of the day on the pull-out by foreign investors and weak global cues. The Nifty declined 77 points (1.37%) to 5,590 and the Sensex dropped 233 points (1.24%) to close at 18,541.
The broader indices were punished in today’s trade, as the BSE Mid-cap index tumbled 2.56% and the BSE Small-cap index tanked 2.16%.
The rout in the market led all sectoral gauges lower. The main losers were BSE Realty (down 4.79%); BSE Consumer Durables (down 3.38%); BSE Capital Goods (down 2.91%); BSE PSU (down 2.42%) and BSE Fast Moving Consumer Goods (down 2.10%).
Out of the 30 stocks on the Sensex, five stocks settled higher. The gainers were Jindal Steel & Power (up 1.44%); Hindalco Industries (up .64%); Tata Power (up 0.61%); ICICI Bank (up 60%) and HDFC (up 0.46%). The major losers were Sterlite Industries (down 3.91%); Bharti Airtel (down 3.23%); BHEL (down 3.02%); ONGC (down 2.97%) and Larsen & Toubro (down 2.80%).
The top two A Group gainers on the BSE were—South Indian Bank (up 5.13%) and CESC (up 2.30%).
The top two A Group losers on the BSE were—Gitanjali Gems (down 19.99%) and Jaiprakash Power Ventures (down 3.48%).
The top two B Group gainers on the BSE were—Ankur Drugs and Pharmaceuticals (up 19.88%) and Rajvir Industries (up 18.53%).
The top two B Group losers on the BSE were—Future Retail (down 19.98) and Techtran Polylenses (down 19.81%).
Of the 50 stocks on the Nifty, 11 ended in the in the green. The major gainers were JSPL (up 1.61%); Lupin (up 1.14%); ACC (up 0.79%); ICICI Bank (up 0.64%) and HDFC (up 0.51%). The key losers were Jaiprakash Associates (down 11.45%); Ranbaxy Laboratories (down 6.99%); DLF (down 6.14%); Kotak Mahindra Bank (down 4.50%) and Asian Paints (down 3.68%).
Markets in Asia closed lower on concerns about China’s slowing growth. Goldman Sachs lowered its estimate for 2013 Chinese gross domestic product growth to 7.4% from 7.8%, on weaker economic indicators and tightening of financial conditions. Besides, China International Capital Corp also cut its GDP growth forecast, to 7.4% from 7.7%.
Meanwhile, the People's Bank of China has put a brake on infusing funds into money markets in a bid to rein in excessive credit growth, which has seen interbank rates surge over the past two weeks.
The Shanghai Composite plunged 5.30%; the Hang Seng tumbled 2.22%; the Jakarta Composite tanked 1.90%; the KLSE Composite declined 1.01%; the Nikkei 225 contracted 1.26%; the Straits Times dropped 1.60%; the Seoul Composite lost 1.31% and the Taiwan Weighted fell 0.45%.
At the time of writing, the CAC 40 of France was down 1.57%; the DAX of Germany declined 0.92% and UK’s FTSE was trading 1.47% lower. At the same time, US stock futures were in the negative, indicating a lower opening for US stocks later in the day.
Back home, foreign institutional investors were net sellers of equities totalling Rs1,768.60 crore on Friday while domestic institutional investors were net buyers of shares amounting to Rs1,196.65 crore.
Edelweiss Financial Services today said its board of directors has approved a proposal to apply to Reserve Bank of India for setting a new private bank. It will transfer its existing merchant banking business to subsidiary as a step to comply with norms prescribed by RBI for new banking license, the company said in a release. The stock rose 0.50% to Rs30.10 on the NSE.
Cairn India plans to invest $3 billion over the next three years in finding more oil and raising output from its showpiece Rajasthan oilfields, the company’s chief executive P Elango said. Cairn will raise crude oil production from Rajasthan fields by as much as 23% to 215,000 barrels per day by March 2014. The stock declined 3.36% to close at Rs283.65 on the NSE.
Pipavav Defence and Offshore Engineering Company has bagged a Rs255-crore contract for maintaining and dry docking of deep water draft oil rigs. Pipavav Defence declined 4.97% to settle at Rs65.05 on the NSE.
SEBI opines that a single SRO for the mutual fund distributors would help remove complexity and duplication and also lower the costs while it would also help in a better oversight by the various regulatory authorities
The mutual fund industry is set for a slew of regulatory changes, including setting up of a single SRO (Self Regulatory Organisation) for all distributors, which would also be allowed to access the stock exchange platforms.
Besides, fund houses may also be allowed to conduct proprietary trades on the debt segments of stock exchanges, while separate changes are also in works to further strengthen the newly launched independent debt platforms of the bourses.
The proposed measures are expected to be discussed by the Securities and Exchange Board of India (SEBI) at its board meeting on Tuesday, sources said.
SEBI is of the view that a single SRO for the mutual fund distributors would help remove complexity and duplication and also lower the costs while it would also help in a better oversight by the various regulatory authorities.
Some entities have already evinced interest in setting up SROs for distributors of mutual fund products and a single applicant would be selected from amongst them by SEBI after getting formal applications from them.
SEBI may soon finalise the deadline for accepting such applications and the same would be communicated to the interested parties, sources said.
Regarding the separate debt segment of stock exchanges, SEBI would also consider various steps for their growth and the proposals being considered include mutual funds being allowed to trade on them as “proprietary trading members”.
Besides, the mutual fund distributors may also get access to infrastructure at the stock exchanges by getting their memberships, a senior official said.
However, according to stock exchanges—BSE, NSE and MCX—the distributors are not keen to take membership due to the financial and compliance burden of being a member.
Keeping in mind these views, SEBI is likely to deliberate on alternatives such as admitting subsidiary floated by mutual funds as member with the stock exchange with distributors effectively being authorised persons of these subsidiaries.
These subsidiaries would be responsible towards the investors and for complying with the regulatory norms.
The regulator might also suggest distributors to take “limited purpose membership” of the stock exchanges that would involve lesser financial and compliance burden.
Under this category the distributors may be allowed to use the infrastructure at the bourses to deal in mutual funds but may not be permitted to handle payout and pay-in of funds on behalf of the investors.
For enabling mutual funds to directly trade on the debt platform, SEBI plans to permit an Asset Management Company (AMC) appointed by these fund houses to take the membership under the “proprietary trading members”.
Further, SEBI is likely to bring in some changes to the broker norms related to the debt segment such as a deposit of Rs10 lakh for the new clearing members and an annual fee of Rs50,000, among others.
Monthly income plans have failed to perform in the past. Is the new scheme from JP Morgan worth considering?
JPMorgan Mutual Fund plans to launch an open-ended monthly income scheme—JPMorgan India Monthly Income Fund. Such schemes are commonly known as Monthly Income Plans (MIPs) as they offer a regular stream of income every month in the form of dividends. A typical MIP invests almost 85% of its assets under management (AUMs) in debt and keeps a small equity exposure for the upside. The scheme from JPMorgan Mutual Fund would invest 75%-100% of its assets in debt instruments and the remaining portion of the portfolio would be invested in equity.
In an analysis conducted a few months back, we found that MIPs have delivered a lacklustre performance (Read: Monthly Income Plans: Are MIPs worth considering?). In a period when the Reserve Bank of India (RBI) had cut interest rates and when the Sensex went up by nearly 15%, MIPs delivered a below par performance. In a period where MIPs got a chance to prove their mettle, even large fund houses struggled.
Over a year or so back, we compared the performance of MIPs with bank fixed deposits (FDs) (Read: Bank fixed deposits Vs MIPs: Neither monthly, nor income). Even after adjusting for taxes, FDs have proved to be better than the average MIP, over some periods. But the returns on an FD are assured. There are a few MIPs that have done well, but many have been terrible performers.
MIPs are riskier than pure debt funds because of their equity component. While they offer the opportunity to earn higher returns than those from pure debt funds, these may be lower, if the equity component performs poorly, as MIPs usually invest in blue-chip stocks only. There are only a handful of MIPs which have understood what serious asset management is all about.
How has the fund management company performed in the past? JP Morgan currently manages two schemes—JPMorgan India Equity Fund and JPMorgan India Smaller Companies Fund. Both the schemes have performed better than their benchmarks taking a three-year period. Even though the schemes have aged more than five years, they have been able to accumulate a total corpus of just over Rs300 crore. The fund management does not have a long track record of consistent performance.
Here again the fund house has chosen four managers to look over the scheme. The equity portion of the scheme would be managed by Harshad Patwardhan and Amit Gadgil who have 19 year and 11 years of experience, respectively. The debt segment of the scheme would be managed by Namdev Chougule and Ravi Ratanpal, who have 11 years and nine years of experience, respectively. Whether having four fund managers would ensure benchmark beating returns would be left to be seen.
Other details of the scheme
Minimum Initial Application: Rs5,000 per application and in multiples of Re1 thereafter.
Additional Application: Rs1,000 per application and in multiples of Re1 thereafter.
Maximum total expense ratio (TER) permissible under Regulation 52(6)(c)(i) and (6)(a) Up to 2.25%
Additional expenses under regulation 52(6A)(c) Up to 0.20%
Additional expenses for gross new inflows from specified cities# Up to 0.30%
Within and including 18 (eighteen) months from the date of allotment in respect of Purchases made other than through SIP—1%.