Stock market snaps 4-day rally

Sensex ends below 16,500 and Nifty closes at 4,881 after profit-taking trims early gains

The Indian stock market opened on a firm note on Tuesday on the back of a solid overnight rally on Wall Street, but the early gains were trimmed on profit-taking after a sharp surge over the past four days. The Sensex closed at 16,441, declining 58 points, while the Nifty closed 17 points lower at 4,881.

Reliance Industries (RIL) gained 1% after the company announced its first oil discovery in its exploration block in the Cambay Basin off the Gujarat coast. Reliance holds 100% participating interest in the block which was awarded  under the fifth round of the New Exploration Licensing Policy.

Carlos Ghosn, chief executive of French car maker Renault and Japan’s Nissan Motor Co announced that an agreement had been signed with Bajaj Auto for a low-cost car which would hit the road in 2012. However the Bajaj Auto stock declined 1%.

JSW Steel shot up 4% after group company JSW Energy received approval for an initial public offer from the Securities and Exchange Board of India (SEBI).
Edserv Softsystems zoomed 6% after announcing the launch of Vidhyadhana, an academy for imparting school education.

Unichem Laboratories gained 3% after the company received approval from the US Food and Drug Administration for its bulk drug facilities at Pithampur (Madhya Pradesh) and Roha (Maharashtra).

Kavveri Telecom Products rose 3% on reports that a wholly owned subsidiary had signed a pact with one of the major cellular operators.

Allaying concerns about an upturn in inflation, RBI deputy governor Shyamala Gopinath said the central bank would ensure adequate liquidity in the banking system and pointed out that capital inflows had picked up on improving growth prospects.

Among other Asian markets, benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan rose by between 0.1%-0.75%. According to Ma Delun, vice-governor, People’s Bank of China, China will grow at 8% in 2009.

Meanwhile, top forecasters are growing more confident that the US economy has embarked on a sustainable recovery. The Blue Chip Economic Indicators newsletter for November 2009 reported that forecasters had raised their 2010 projections for US gross domestic product for a fourth straight month. However, they still expect the pace of growth to fall short of the typical post-recession bounce. The newsletter said the US economy should expand 2.7% next year, marking an upward revision from the 2.5% pace the survey panel had expected a month ago.

On Monday, the Dow Jones Industrial Average closed 204 points higher, after the G20 nations pledged to keep aid flowing to the global economy. The S&P 500 index rose 24 points while the Nasdaq Composite Index gained 42 points.
European Central Bank (ECB) President Jean-Claude Trichet commented that risks to both global growth and inflation were currently balanced. He said global economic growth was a bit better than earlier expected, with emerging economies taking the lead. Some central banks, such as Norway and Australia, have already raised interest rates amid growing signs of economic recovery, while the ECB has signalled it will start rolling back some of its extra liquidity supplies.
Swapnil Suvarna [email protected]


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Undeterred by poor returns and liquidity, Osian Art plans another art fund
Osian Art Fund made an exit with a mere 5% return per annum for the thirty-six month close-ended scheme. This surely has disappointed investors, but definitely not Osian. It plans another art fund, this time for a time period of five years.
“The next art fund will be launched once there are clear guidelines from the Securities and Exchange Board of India on various key operational matters. It is now important that the system matures to a new level of financial due diligence and transparency but at the same time recognises the unique structure and logic of the art asset,” Neville Tuli, chief advisor, Osian’s Art Fund, told Moneylife.
When questioned about what would be the attraction for investors in the second fund, given the poor performance in the first one, Mr Tuli expects to bank on the goodwill the first fund has garnered. “The transparency and public accountability which the Osian Art Fund has shown has brought immense goodwill. That the investor had higher expectations in 2006, is obvious, as did we, but the whole world has had to recalibrate expectations, post October 2008.”
He also expects the fund period to last for five years the next time which will help the investor earn better returns. “A longer lock-in period such as five years would be desirable for an art fund, though early partial exit options should be built in at intervals,” he added. Officials from Osian Art Fund blame the sudden fall in art markets all over the world for the poor exit of the first art fund.
“The 5% per annum return must be seen in the context of the significant falls in the art markets across the world and in India. The significant declines in price, liquidity and confidence regarding the Indian art market would have impacted any investment. If say, Rs100 was invested in Indian art in July 2006 the return would be between Rs65 to Rs70 today. However, because of our sourcing/trading expertise and investment policy of focusing only on the top quality works of the modern masters, and less than 5% exposure to contemporary artists the Osian Art Fund could withstand the onslaught better than others,” added Mr Tuli. Even among the contemporary artists, the Fund had only the very best early works of artists such as Rekha Rodwittiya, Sudhir Patwardhan, Surendran Nair, Nataraj Sharma and Ravinder Reddy, claims Mr Tuli.
At a broader level, Mr Tuli adds that the present art market lacks the various support systems which any mature financial market should have such as liquid exchange options, underwriting facilities and relatively perfect and open flows of information. Despite the poor record of the first art fund, Mr Tuli believes that it has a legitimate position in portfolios. “It is clear that the future is very bright for this class of asset, especially once clear regulatory guidelines are in place. In my view India is ideally placed to become a leader in art funds and related platforms on a global level, once the domestic-international markets are more integrated,” said Mr Tuli.
 - Amritha Pillay [email protected]


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