For the uptrend to continue, the Nifty has to consistently close above 5,550. Trading has become dull and range-bound which may be broken violently
The market snapped its two-day winning streak and ended on a weak note today as global issues continued to take centre-stage. After trading sideways through the entire morning, index heavyweights like Hero Honda, ONGC, Hindalco, HDFC and Maruti Suzuki led the market lower in noon trade.
A weakening trend on the Asian bourses in the morning, saw the Indian market open lower. The Sensex opened at 18,448, down 48 points from yesterday's close and the Nifty started 21 points lower at 5,535.
The lack of any triggers resulted in the benchmarks trading flat subsequently. Fast moving consumer goods, banking, IT and capital goods were on the sellers' radar. However, the broader indices were better off and traded with marginal gains in the morning session.
The market touched its intra-day high in mid-morning trade, with the Sensex at 18,505 and the Nifty at 5,557. The indices were range-bound through the entire morning session after which a sell-off in index heavyweights dragged the indices into the red.
The weak opening on the European markets and US stock futures trading lower weighed on sentiments. The market fell to the day's low in the post-noon session, with the Sensex at 18,366 and the Nifty touching 5,515. The indices closed a tad above those levels, with the Sensex at 18,395, a loss of 101 points and the Nifty at 5,527, down 30 points.
The market has become very sensitive to price information and slightly heavy buying and selling. This is leading to random 100-200 point moves in the Sensex. Overall the market is trading in a narrow band, but this cannot continue for long. The low volatility and narrow range invariably leads to high volatility and a much larger move. Since the market is not able to move much higher and is not cheap, given the current headwinds, we should brace ourselves for a large downward move. For the uptrend to continue, the Nifty has to consistently close above 5,550 in sequence.
The advance-decline ratio on the National Stock Exchange was 622:752.
The broader markets settled mixed with the BSE Mid-cap index down by 0.03% and the BSE Small-cap index gaining 0.16%.
In the sectoral space, two of the 13 gauges closed lower. BSE Healthcare (down 1.01%) was the top loser, followed by BSE Bankex (down 0.71%), BSE Auto, BSE Metal (down 0.70% each) and BSE Oil & Gas (down 0.68%). BSE Fast Moving Consumer Goods (up 0.92%) and BSE Consumer Durables (up 0.57%) were the gainers.
Reliance Communications (up 2.45%), Hindustan Unilever (up 1.69%), NTPC (up 1.04%), ITC (up 0.83%) and BHEL (up 0.31%) were the top gainers on the Sensex. Hero Honda (down 3.60%), ONGC (down 2.33%), Hindalco Industries (1.92%), HDFC (down 1.63%) and Bajaj Auto (down 1.50%) were the major losers.
On the Nifty, the top gainers were Reliance Communications (up 2.39%), GAIL (up 1.94%), HUL (up 1.91%), NTPC (up 1.70%) and BPCL (up 1.64%). The losers were Hero Honda (down 3.71%), ONGC (down 2.50%), Sun Pharma (down 2.36%), Hindalco (down 2.18% and Siemens (down 1.92%).
The Haryana government has said that it is closely monitoring the strike at Maruti Suzuki India's Manesar plant and will ensure that it does not take the shape of an industrial dispute. The strike entered its fifth day today and there was no production at the plant. The company is maintaining a tough posture, saying that there is no question of accepting the demands of the workers.
Markets in Asia settled mostly lower, on worries over the slowdown in global growth that were enhanced by comments by US Federal Reserve chief Ben Bernanke that the country's economy was slowing down. Even though the Chinese central bank deferred a hike in interest rates on the holiday weekend, investors fear that the hike may not be far off.
The Hang Seng tanked 0.91%, Jakarta Composite declined 0.45%, the KLSE Composite shed 0.01%, the Straits Times fell 0.42%, the Seoul Composite was down 0.78% and the Taiwan Weighted settled 0.55% lower. On the other hand, the Shanghai Composite gained 0.22% and the Nikkei 225 added 0.07%.
Back home, institutional investors-both foreign as well as domestic-were net buyers in the equities segment on Tuesday. Foreign institutional investors pumped in Rs112.70 crore and domestic institutional investors bought stocks worth Rs31.29 crore.
The price of gold in India has been on a bull run for the last 13 years. Are gold prices nearing a bubble?
Big investors and researchers predict that gold is headed towards a bubble. In January last year, George Soros, the famous Hungarian-American billionaire investor and stakeholder in the Bombay Stock Exchange, cautioned: "When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment. The ultimate asset bubble is gold." He was speaking at the World Economic Forum in Davos.
Was Soros just talking through his hat, as he deliberately does many times? Apparently, from the middle of last month, the billionaire investor sold off 99% of his holdings in gold for $800 million, including whatever profit he made during the gold climb. Soros is one of the world's finest speculators and his action should worry some investors who might do well to ask: 'Is it true that gold prices have reached their peak?' The question is even more important, given that there is tremendous interest in gold in India.
From a master speculator, let's turn our attention to academics immersed in arcane quantitative concepts. In December 2010, a team from the Research Institute of Mining Geomechanics and Mine Surveying (VNIMI) and the Russian Academy of Sciences started looking at whether gold is in a bubble and they published their findings in a paper titled "Log-Periodic Oscillation Analysis and Possible Burst of the 'Gold Bubble' in April- June 2011". The researchers Sergey V Tsirel, Askar Akaev, Alexey Fomin and Andrey V Korotayev, came to a simple conclusion that gold is in a bubble and it is about to burst.
The team applied the methodology used by Didier Sornette, professor of the Swiss Finance Institute who is well known for his work on the prediction of crises and extreme events in complex systems. Using this method, known as "the Log-Periodic Oscillation analysis", the researchers calculated the probable time of the crash between April and June 2011. To further reinforce their prediction, the result was further verified by two other methods.
First, they compared the pattern of the gold price to the pattern portrayed by the oil bubble crash of July 2008, which gave them the timing around May-June 2011. Second, they estimated the critical time for the hyperbolic trend in the socio-economic processes (like population growth before the demographic transition, global GDP growth and energy production per capita, and so on). This also led them to May-June 2011 as the most probable time for the gold crash. The calculations also estimated a price range of $1,500-$1,700 when gold could top out.
The team of four of course provided a disclaimer saying, "The calculations performed by Sornette's method and other estimates are based on the idea that all players will try to maximize profit just in this market, and will not believe in forecasts like the one we propose (otherwise we shall deal with a "non-self-fulfilling prophecy"). If a very large player, such as the Central Bank of China, intervenes with other goals (longer-term, depending on political calculations, etc.), then the foundation upon which all such forecasts are based disappears." Like all predictions, their calculations too are based on assumptions that could turn out to be wrong.
Regarding the overall economic impact, should the gold price actually crash, the researchers write that the crash would lead to huge losses and even bankruptcy of major players in the markets, including dependent firms and banks. This negative reaction will be amplified by the media, drawing similarities with the events of the early 1980s and other such similar events. "The burst of 'the golden bubble' will be followed by a short-term downswing, and the further developments will depend on the directions of investment at the moment, as well as on the reaction of the US Federal Reserve and the Central Bank of China to the events." On the positive side, if at the time of the collapse some promising areas of investment appear in the developed or developing countries, investment capital can be moved to those markets, which would contribute to the production of new goods and services and accelerate the way out of the crisis.
Coming back to the main question, "Is it safe to buy gold now?" We at Moneylife have always considered gold as a purely speculative asset (Read: "Are gold prices infallible?")
Benjamin Graham, the famous investor, referred to speculation as the "greater fool" theory by saying, "I know I am a fool to pay such a high price for a stock, but I know that a greater fool will come along and pay me an even higher price." Though Graham was speaking about stocks, the same could be said about speculative instruments such as gold, beyond a point. Therefore, before buying gold think again.(You may also want to read, "Gold: All told")
Singapore-based Speak Asia incorporated last year and promoted by Hariender Kaur, so far has operations only in India and plans to invest $21 million for its expansion, Speak Asia India CEO Manoj Kumar said
New Delhi: The controversial multi-level marketing company Speak Asia today refused to divulge the names of companies from which it earns revenue by conducting surveys even as it unveiled plans for expanding operations in India, reports PTI.
"We have been doing commissioned reports. However, it would not be possible to share names of the company due to non-disclosure agreement with clients," Speak Asia India CEO Manoj Kumar said.
When pressed further, he said, the company has done surveys for a Singapore-based firm Yug.
Besides commissioned reports, the company conducts internal surveys and questionnaire-based surveys, he said, adding, the company would do survey for Indian companies after it gets registered in India.
Speak Asia, which is yet to be incorporated as a company in India, claims that it has 19 lakh members or panellists in the country.
Singapore-based Speak Asia incorporated last year, promoted by Hariender Kaur, so far has got operations only in India and plans to invest $21 million for its expansion, he told reporters here.
The company plans to set up three subsidiaries mainly for content development, survey and marketing in India by the end of August, he added.
The company is in the process of seeking approval from Registrar of Companies, Reserve Bank of India and Foreign Investment Promotion Board, he said.
The company charges a membership fee is Rs11,000 for a year. It allows its members to conduct some surveys online for the firm.
Members are paid for conducting the surveys. The company said that it pays Rs500 for every survey to its member.
After controversy erupted last month about the company's operation, an investor protection group filed a public interest litigation (PIL) in Bombay High Court. The court issued summons to five top officials of Speak Asia.
The Singapore-based United Overseas Bank last month had closed bank accounts of the Speak Asia.