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No beating about the bush.
Indian markets came under huge selling pressure after industrial production growth—though robust at 10.3%—fell below market expectation of a growth of 13%-14% for the month. The Sensex declined 70 points from the previous day’s close, ending the day at 17,119 while the Nifty closed at 5,117, down 17 points.
During the day, Reliance Industries Limited (RIL) remained flat. As per reports, RIL is in talks with IL&FS and a couple of other players for part-sale of its stake in its Haryana SEZ. New York-based hedge fund DE Shaw sold 36% stake in DLF Asset (DAL) to the promoters of DLF for $500 million, retaining only a 4% stake which it intends to sell as and when the firm lists in Singapore. DLF was down 1%. Chambal Fertilizers & Chemicals said that one of its promoter group companies revoked a portion of the shares which it had pledged earlier. The stock was down 1%.
Jubilant Organosys gained 2% after foreign brokerage houses initiated coverage on the stock with ‘outperform’ rating.
Cox and Kings (India) Ltd made an impressive stock market debut. The stock closed at Rs426, up 29% over its issue price of Rs330 per share.
As per reports, Shree Renuka Sugars has initiated talks to buy stake in Balrampur Chini. Shree Renuka was down 3% while Balrampur Chini was up 1%.
According to the latest data from global fund tracker EPFR Global, emerging market equity funds received $2.3 billion in inflows for the week ended 9 December 2009, bringing 2009 inflows to $75.4 billion. Emerging-market funds are heading for record annual inflows in 2009. The previous record was $54 billion in 2007. Among the largest developing nations, Russian stock funds saw inflows rise to a seven-week high of $181 million while Indian equity funds absorbed $128 million, EPFR said.
As per the data released by the government, industrial output jumped 10.3% in October 2009 from a year earlier, helped by stimulus measures and robust domestic demand. Manufacturing production rose 11.1% in October 2009 from a decline of 0.6% a year earlier. September’s annual industrial growth rate was revised upward to 9.6% from 9.1% previously.
During trading hours, commerce minister Anand Sharma said that the current trend in industrial output is likely to continue in the coming months. The deputy chairman of the planning commission Montek Singh Ahluwalia said that he hoped the momentum in the country’s industrial output would be sustained in the coming months.
Meanwhile Andimuthu Raja, communications minister, said that the government would conduct the auction for 3G wireless spectrum as scheduled. The auctions are slated to be conducted on 14 January 2010.
During the day, Asia’s key benchmark indices in Hong Kong, Indonesia, Japan, South Korea, Singapore and Taiwan rose between 0.25%-2.48%. But China's Shanghai Composite fell 0.21%. A larger-than-expected surge in China’s industrial production and a drop in US jobless claims (to a one-year low) boosted confidence in a global economic recovery.
China’s industrial production grew more than economists estimated in November 2009, signalling a strengthening recovery in the world’s third-biggest economy. According to the statistics bureau in Beijing, factory output climbed 19.2% in November 2009 from a year earlier, the biggest increase since June 2007.
International Monetary Fund’s first deputy managing director John Lipsky warned on Thursday that economic recovery around the world remains tentative and the return to growth is still vulnerable to new shocks. He said that financial conditions have improved but are far from normal and mounting credit losses, especially in commercial real estate, could dampen the recovery in business investment and inventories. He said that the fiscal challenges in rich countries were “formidable” and changes to taxes and spending would not be easy to design or implement. He further added that reducing the debt levels would require fiscal adjustments to the order of 8% of gross domestic product figures in advanced economies.
According to Mr Lipsky, the recent surge in capital flows into emerging markets could be a “catch-up” from the previous sudden withdrawal from risk, and capital controls may be appropriate if the surge is temporary. But temporary capital controls should not be used to paper over real problems, or to avoid needed policy adjustment, Mr Lipsky added.
On Thursday, 10 December 2009, the Dow Jones Industrial Average was up 69 points while the S&P 500 and the Nasdaq Composite were up 6 points and 7 points respectively. Signs of improving trends in the job market and a decline in the US October 2009 trade deficit reassured investors that the economy was on a steady growth path.
The US initial jobless claims for the week ending 5 December 2009 came in worse than expected at 474,000. However, the continuing claims made a sharp move down to 5.16 million from 5.46 million. The consensus had called for 5.45 million continuing claims.
The trade deficit for October 2009 totalled $32.90 billion which is lesser than the $36.80 billion deficit that had been widely expected. It is also an improvement from the September numbers.
In premarket trading, the Dow was trading 53 points higher.
Attributing the double digit industrial growth rate to stimulus packages, the Planning Commission on Friday said that the growth momentum would be maintained in the coming months, reports PTI.
A fool and his money are soon parted, the saying goes. Obviously, pathetic returns come in when an ’art’ fund is managed by an Investment Banker type. And valuation is so iffy that the winding-down realisation is at huge odds with the so-called ‘declared’ asset value.
What is interesting is that there is no regulatory oversight for any aspect of this kind of business. Brokers and investment bankers have milked this lacuna by selling such funds to people only because they get commissions which could be in the range of 6%-10% of the amount mobilised. And, of course, these ‘selling expenses’ are charged to the fund.
The interesting thing is that the products were actually sold to smaller guys also in lots of as low as Rs1 lakh. In their greed to grab the commission, the intermediaries left no one alone, big or small. Intermediaries approved by Securities and exchange Board of India (SEBI) selling non-regulated products should be probed and preferably banned. As it is, today many brokers are selling so many ’structured’ products, including ‘guaranteed’ products which can cause serious damage to any investor. SEBI has to wake up and impose a blanket ban on anyone selling any financial product that is not approved. Maybe the RBI could also step in. It is these kind of art funds, plantation schemes, time-share schemes, etc that cause financial bloodshed.
The main reason is that these products can be sold by anyone to anyone. Or take another interesting example. I saw an ad of a jewellery company called ’KFJ’ which offers a scheme whereby you contribute a fixed amount each month, for 30 months. At the end of 30 months, KFJ guarantees you gold for your money ‘at the lowest price which existed during the 30 months’. The arithmetic is not workable. Either KFJ is very certain that gold prices are going to keep crashing (in which case, the 30th month price would be the lowest and it can use the money for the period of 30 months) or it uses the money to speculate in other assets which offer returns that can make good the difference. I have a feeling that this is going to turn into a mega scam. If this is not deposit-taking or a collective investment scheme, I wonder what is. The Reserve Bank of India (RBI) is, of course, the ‘Big Sleeper’; one has to ‘bring to attention’ any wrongdoing and then RBI asks for its morning cup of coffee before getting to work.
Clearly, KFJ’s scheme is a Ponzi scheme in the making. It does not need any regulatory approvals, so KFJ can merrily trap the greed for gold in its main catchment areas in south India, where the craze for gold is legendary. Housewives will be eager victims.
Our regulators will not wake up. Teak plantation schemes, time-share schemes, chit funds, fixed deposits, land scams et al will thrive and smart conmen will vanish with the money. The investors have no protection at all from financial rogues who come disguised as brokers and insurance salesmen. I also feel that the investors who lose their money deserve it, simply because they are so greedy and gullible.
(Read Moneylife news breaks on Osian at http://www.moneylife.in/section/81/44584.html)