Wednesday’s Market Preview: Positive opening likely

The local market is likely to open in the positive terrain, tracking the global equities markets. The US markets closed in the green overnight on better-than-expected earning forecasts and on signs of easing of the European debt crisis. In line with the US, markets in Asia were also upbeat in early trade on Wednesday. The SGX Nifty was unchanged at 5,808, its previous closing mark.

The key indices were sluggish in opening trade yesterday, on mixed global cues, fluctuating within positive territory. There was pressure on IT, realty and technology stocks. The choppiness continued in the post-noon session and the indices remained range-bound. However, the trend was reversed in the closing session and the market closed flat.

We had mentioned in Monday’s market report that for a day or two we may see a small rally. The Sensex opened with an upward gap of 55 points to hit 19,280 and after a volatile morning made an intra-day high of 19,431.56. This is the lowest intraday high since 29 November 2010. For a major part of the trading session, the Sensex traded just above the previous close of 19,224.21. However, massive selling in the closing session saw the Sensex crash to an intra-day low (19,003). Then a ferocious rally helped it recover as much as 350 points. The Sensex closed at 19,196.34, down 27.78 points, based on adjusted closing figures, and the Nifty fell 8.75 points to close at 5,754.10.

Wall Street ended in the positive zone on better-than-expected earnings forecasts and signs of easing of the debt crisis in Europe. The S&P 500 was near its highest level since September 2008 after Sears Holdings forecast profit that will exceed analysts’ expectations and Lennar Corporation, the Miami-based homebuilder, reported results that topped estimates.

The European Central Bank bought euro-area government bonds for the second day Also, Japanese finance minister Yoshihiko Noda said Tokyo may buy more than 20% of the securities issued by the European Financial Stability Facility in its initial round. The announcement follows reports that China is ready to buy 4 billion euros to 5 billion euros of Portuguese debt.

Sentiments were boosted after government data showed inventories at US wholesalers unexpectedly declined in November by the most in almost a year.

The Dow rose 34.43 points (0.30%) to 11,671.88. The S&P 500 added 4.73 points (0.37%) to 1,274.48 and the gained 9.03 points (0.33%) to 2,716.83.

Markets in Asia were higher in early trade on Wednesday tracking positive sentiments as the US markets closed in the green on Tuesday and signs of easing of the debt situation in Europe. The gains were also supported by a rise in crude and metal prices.

The Shanghai Composite was up 0.40%, the Hang Seng gained 0.83%, the Jakarta Composite jumped 1.22%, the KLSE Composite added 0.03%, the Nikkei 225 rose 0.50%, the Straits Times was up 0.08%, the Seoul Composite advanced 0.12% and the Taiwan Weighted was up 0.41% in early trade. The SGX Nifty was unchanged at 5,808, its previous closing mark.

Ahead of the budget 2011-12, finance minister Pranab Mukherjee on Tuesday said the government is conscious of concerns regarding infrastructure development and investment in research and development (R&D).

“The government is conscious of two major concerns relating to the pace of development of infrastructure and investments in R&D,” Mr Mukherjee said while addressing India Inc during the pre-budget deliberation.

Both these issues have a direct bearing on the productivity of Indian enterprise, he said, adding investment in the infrastructure sector is also a key to sustainable and inclusive growth.


Three top fund houses plan funds to invest in ASEAN, Indonesia, Nasdaq

JP Morgan, Motilal Oswal and Reliance file offer documents with SEBI to raise money to invest in overseas securities 

Mutual funds with investments in foreign stocks are back in fashion. A number of fund houses are planning to raise money domestically and invest in overseas securities. Three prominent names-JP Morgan, Motilal Oswal and Reliance-have filed offer documents with the Securities and Exchange Board of India (SEBI) to launch international funds.

JP Morgan has filed an offer document for two open-ended schemes. One is the ASEAN Equity offshore fund that will invest in ASEAN countries, which include Singapore, Indonesia, Malaysia, Thailand, Vietnam, Philippines, Cambodia, Brunei, Laos and Myanmar. This fund will be benchmarked against the MSCI South-East Asia Index. The other is the JP Morgan Global Natural Resources fund. This will invest primarily in natural resources companies globally, many of which are in the early stages of exploration. The scheme's performance will be benchmarked against the HSBC Gold, Mining & Energy Index.

Motilal Oswal Mutual Fund has decided to explore investment opportunities in the US. It proposes to launch an open-ended exchange traded fund called MOSt Shares NASDAQ-100 ETF. This fund will have an exposure to shares that are a part of the NASDAQ-100 index and will be benchmarked against the NASDAQ-100. It will give Indian investors an opportunity to take an exposure to American stocks like Microsoft, Google, Amazon, Yahoo, eBay. The NASDAQ-100 index does not have stocks of financial companies.

Reliance plans to launch Reliance Indonesia Opportunities Fund, just when Moody's has placed Indonesia's sovereign credit rating on review for a possible upgrade. Reliance's Indonesian fund will be benchmarked against Morgan Stanley Capital International's (MSCI) Indonesia index.

Are these funds worth taking a look at? As pointed out in Moneylife magazine, in March 2010, (Read, 'Global mission, local fission,) there are enough reasons to avoid investing in these funds. First, these are fads. When the commodity markets are shooting up, fund companies will launch commodity-focused equity funds. When the Chinese market is hot, they will launch a China fund. Indonesia has been one of the best-performing markets of the past decade and so there is an Indonesian fund. Emerging markets require huge amounts of infrastructure, so a global infrastructure fund has been very popular.

Foreign funds can help us in diversifying our portfolio but it is debatable whether actively managed funds of specific countries are worth it. It exposes our portfolio to some unusual risks. It amazes us that fund companies may not know much about the value and the price of the Indian stocks, but they surely don't lack confidence in exhorting you to invest in a fund that invests in foreign stocks.

Let's have a look at how these funds have performed till date. Eleven out of the 16 international funds have outperformed their benchmark since inception. However, many of the outperforming funds were launched in 2008, when stock prices worldwide had crashed and hence were able to ride the subsequent rally without having to do much.

The only fund worth considering out of these offerings is the Motilal Oswal NASDAQ-100 ETF, which offers Indian investors a genuine scope for diversification with the hundred diverse stocks that make up the Nasdaq universe. These companies also bear little correlation with the Indian stock markets.




6 years ago

So according to your research what you suggest people should diversify their portfolio with local funds and foreign funds or not and if yes what should be ratio for it.

venekat ram

6 years ago

best investment mutual funds in 2011 by monthly plan

India to grow by 8.7% in current fiscal: Fitch

New Delhi: Global rating agency Fitch expects the Indian economy to grow by 8.7% in 2010-11, which means that growth may slow down in the second half of this fiscal, reports PTI.

"Fitch expects economic growth of 8.7% in FY11," the rating agency said in a report.

Since the Indian economy grew by 8.9% in the first half, Fitch projections mean that it will expand by a slower growth rate in the second half.

The growth rate projected by Fitch is higher than that estimated by prime minister Manmohan Singh but lower than forecast by the finance ministry's Mid Year Review.

The PM expects the country's economy to grow by 8.5% in the current fiscal, while Mid Year Review forecast up to 9.1% growth in the current year, subject to improvement in the European economic conditions.

However, Fitch expects the country's economy to grow slightly less in the next fiscal, at 8.5%.


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