Sunday, August 31, 2008

Market to move in a narrow range - Money & You (The Sunday ET)

Entire South East Asia is currently evaluating and emulating relevant lessons from “Thaksinomics” made famous by the ex-Prime Minister of Thailand, Thaksin Shinawatra. His bottom-up approach to economics has gathered widespread appeal across the developing world. Thaksin’s approach — that access to capital, employment opportunities and basic social services can transform disadvantaged regions into growth engines — is now an accepted wisdom.

Chinese President Hu Jintao called for “harmonious growth” when the Chinese National People’s Congress met last March. This week, the Chinese and the Hong Kong press have been speculating that Beijing would soon declare a massive fiscal stimulus package targeting disadvantaged sectors of the economy.

The income disparities and structural flaws are particularly apparent in the fast developing BRIC nations. India, China, Russia and Brazil all suffer from these flaws. A massive oil discovery and investment grade credit ratings fuelled expectations that prosperity for Brazil’s 185 million people was only a matter of time. But a historic neglect of education is a major roadblock in Brazil’s quest to join the big leagues of developed economies.

Many critical structural reforms are still awaited in India and need to be carried out without any further delay to ensure political, economic and social harmony. The proposed pension, commodity market, banking and other financial sector reforms, rural education and development initiatives need to be put on an accelerated growth trajectory. The real task of balanced nation building needs to start without any further delay.

The Indian capital markets last week witnessed sharp movements during the week and ended in positive territory in spite of negative headwinds again coming in from the crude oil basket. On the positive side, headline Inflation numbers during the week turned out to be moderately lower at 12.40 per cent from 12.64 per cent in the previous week. The decline in inflationary levels was primarily driven down by lower prices of non-administered fuel products but Inflation is yet to peak off convincingly which could take another three-six weeks.

Meanwhile, the GDP growth during Q1 2008-09 (Apr-Jun) stood at 7.90 per cent slightly below the consensus expectation of 8.02 per cent; (Q4 2007-08: 8.8 per cent; Q1 2007-08: 9.2 per cent). This is the first time that the GDP growth has slipped below 8 per cent after nine quarters. More importantly high oil prices, and a whopping fertiliser subsidy bill are likely to ensure that the government exceed the fiscal deficit target of 2.5 per cent of the GDP for 2008-09 by a significantly higher margin.

In case oil prices continue to remain high for a much longer period, it would be no surprise that the government would have to take some hard decisions. Also, with the monsoons being only moderately positive till date and not excellent as compared to last year, there is a growing belief that agriculture growth for the coming year may well disappoint and offer little support to the GDP growth this year. Incidentally Q1FY09 farm sector growth stood at 3 per cent versus 4.4 per cent (YoY).

On the global markets front, stronger exports and higher consumer spending supported by the government saw GDP growth in the US growing robustly by 3.3 per cent in Q2 after recording a 0.9% growth in Q1 of current year. Consumer spending, which fuels two-thirds of the US economy, grew at 1.7 per cent with exports growing at 13.2 per cent in this period. In the domestic capital market, expiry of Aug Series in F&O had usual jitters and the series closed indecisively.

However, the start to the Sept series was with a bang on the back of very positive global cues and moderating domestic inflation. Unlike last month, this series has started off on little heavier side with more rollovers on stock futures side.(83 per cent), indicating more action outside index. FIIs continued to remain net sellers through the month of August to the tune of Rs 3,088 crore, thereby indicating cautious approach on the Indian markets.

Volumes still continue to remain low and are clearly indicative of lesser participation from institutional players.
In view of a truncated week and no build-ups on positive or negative side either, the coming week may see a ‘ranged’ and indecisive movement in the index. Action may get shifted to stock-specific trading.

(The writer is CEO, Reliance Money)

Friday, August 29, 2008

Reliance Money enters Eurozone

29 Aug 2008, 0021 hrs IST, Partha Sinha,TNN

MUMBAI: While a host of brokerages in India are shrinking to tide over the current rough patch, Reliance Money, the largest broking house in the country in terms of customers, expanded its operations to the Eurozone, aiming to tap nearly 2 million non-resident Indians (NRIs) and people of Indian origin (PIOs) residing there.

The ADA Group firm has already set up a company in Ireland, Reliance Money Ireland, and is awaiting regulatory nod from UK's Financial Services Authority (FSA) to start operations in the London market, Sudip Bandyopadhyay, CEO, Reliance Money told TOI.

"Initially we will target NRIs and PIOs in the English-speaking areas within the Eurozone. Once we reach a critical scale, other areas within the Eurozone will follow," Bandyopadhyay said. As per estimates, nearly 1.5 million NRIs and PIOs live in the English-speaking Euro area.

With its office in Dublin (Ireland), Reliance Money now enjoys what is called 'passport facility,' allowing it to operate in the whole of Eurozone with minimal regulatory clearance. In the last one year, it had started its operations across Asia and also entered Africa, setting up operations in Dubai, Muscat, Nigeria, Hong Kong and Riyadh.

The company is also planning to set up offices in Kuwait, Qatar, Bahrain and Malaysia. Although some of the Indian broking houses are present in the UK, these firms mainly cater to the FII clients.

Monday, August 11, 2008

BSE calls off NMCE stake buy plan, Rel Money may move in

MUMBAI : The deepening internal crisis at the Bombay Stock Exchange (BSE) appears to have had an impact on exchange’s plans to foray into the commodities market.

Asia’s oldest stock exchange has reversed its decision to buy a 26% stake in Ahmedabad-based National Multi-Commodity Exchange (NMCE), according to officials familiar with the development.

The Rs 35-crore deal could not be operationalised even after five months of signing the agreement between the two exchanges.

An official with knowledge of the deal said that the transaction had been kept on hold for a long time, primarily due to serious differences among BSE board members over functioning and decision-making in the management.

These differences have led to the resignations of non-executive chairman Shekhar Dutta, managing director Rajnikant Patel and director Jamshyd Godrej.

“The deal has been in limbo because of some legal compliances which could not be followed. Its failure is nothing to do with the current crisis in the BSE management,” said a BSE board member.

After the completion of the process of corporatisation and demutualisation, the going has not been smooth for BSE, which has caused concern among broker-shareholders and strategic investors. The BSE management has not been able to address key areas of concern, particularly the dormant F&O segment.

This has dampened exchange’s growth and reduced competitiveness, according to stock brokers. While confirming that BSE has dropped its plans to acquire a stake of 26% in NMCE, its managing director Kailash Gupta declined to elaborate on the reasons for this development. However, he said, “They may have some internal problems.”

Reliance Money, a securities brokerage and distribution company of the Anil Dhirubhai Ambani Group, had showed an interest in acquiring a 26% stake in NMCE last month.

Mr Gupta said that with the BSE calling off the deal, there is a possibility that Reliance Money could acquire a 26% stake in NMCE subject to regulatory approvals.

He said that the issue was still being discussed with other shareholders regarding the shareholding pattern.

Sunday, August 10, 2008

Now, Indians can trade on a dozen global stock exchanges-India ...

10 Aug 2008, 1801 hrs IST,PTI

NEW DELHI: Dalal Street is no more the single avenue for Indians looking to invest in stocks, with leading retail brokerage firm Anagram becoming third major domestic player to offer the investors here an opportunity to invest in overseas equity markets.

Indian investors will be able to directly trade on a real time basis in stocks listed on as many as 12 bourses in the US, Europe, Asia and Middle East from next month through a new e-trading initiative being launched by Anagram.

When contacted, Anagram's retail business CEO Mayank Shah confirmed the development saying the company has signed an agreement with a Dubai-based firm to offer real-time online trading for Indian investors in multiple markets and international exchanges.
"We have signed an agreement with Mubasher Financial Services, a Dubai-based leading market information and e-trading platform provider, to offer real time online trading for Indian investors," Shah said.

Anagram plans to target High Networth Individuals (HNIs) and Super HNIs for its new offering and these investors could become a key driver for this platform, he added.

The new offering would provide investors an opportunity to diversify their risk and assets in a bid to leverage on newer opportunities and help maximise their gains, the industry experts believe.

While Shah declined to divulge further details, industry experts believe this Internet-based online real time platform would enable Indian clients to buy or sell equity shares on premium International Exchanges like NYSE, NASDAQ, American Stock Exchange, London Stock Exchange among others.

It is understood Anagram also plans to offer equity trading on other stock exchanges including those in Hong Kong, Luxembourg, Korea, Brazil, Russia, Indonesia, China, Malaysia, Mexico, Argentina, Vietnam and Taiwan in the next 6-9 months.

"This unique offering is a part of Anagram's constant endeavour to offer value-added services to out increasing customer base, globally, including Dubai where we intend to open our office," Anagram Chairman Munesh Khanna said.

The offering would provide round-the-clock access to stock markets in different time zones, according to their trading timings, Shah added.

Anagram would be the first entity to offer real time, secure e-trading platform across multiple exchanges in more than one continent to its over 1.50 lakh strong retail investor base.

Asked whether investors would be interested in looking at other market amid concerns of global slowdown, Shah said, with the platform investors can invest in other emerging markets like China, which have performed relatively better than other developed markets.

"This is giving investors to choose from stocks from various markets across the world and seek the most attractive valuations," Shah said.

Last year, leading online domestic brokerage firm ICICI Direct launched delivery-based trading in shares listed on the US stock exchanges, while Anil Ambani group's brokerage and financial services distribution arm Reliance Money also offers overseas trading facility through a tie-up with CMC Markets.

Trading in overseas stocks has become possible after the Reserve Bank of India (RBI) allowed individuals to remit up to 2,00,000 dollars annually in current and capital account including equities.

Sunday, August 3, 2008

Looking for right impetus - Money & You (The Sunday ET)

Morgan Stanley Asset Management recently highlighted interesting facts about Brazil and Turkey’s economic growth during the past few years. For much of the past decade, the emerging markets of Brazil and Turkey were considered identical twins.

Following their long history of high indebtedness and hyperinflation, which led them to the edge of the abyss in 2002, both economies embarked on a path of structural reforms and staged remarkable recoveries. They appeared to share a common destiny, with their stock markets and currencies trading in sync.

Till oil did them part. The commodity price explosion led by oil since late 2007 separated the fate of resource-rich Brazil, and resource-poor Turkey. Their divergent paths are symptomatic of the way the world has been operating this year. The only axis around which the global economy revolves is oil. In the first half of 2008, stock markets of most oil-exporting countries soared to new highs, while those of oil importers plunged 15% on average.

One, however, needs to notice the remarkable efficiency with which Brazil’s economic administration has handled the current scenario. Brazil pre-empted the global food and energy spike by raising the benchmark lending rate three times this year to 13%, one of the highest in the world. Caging the inflation threat has also won Brazil a new standing in the financial markets.

It is also interesting to note that in spite of such a sharp currency appreciation, Brazil is the world’s leading exporter not just of coffee but soybeans, beef, sugar cane, ethanol and frozen chicken. In India, we are scared of currency appreciation as we feel exports will get hurt!

But oil could sow the seeds of its own destruction. The oil price surge is causing widespread inflation problems, even in oil-exporting countries. It’s telling that the markets of Brazil and Russia have over the past several days joined the global bear run.

In the United States, shares of energy companies are declining despite forecasts of ever-rising oil prices. But today’s global economic structure doesn’t allow the stagflationary impulses of the 1970s to build for long. To put the current situation in a long-term perspective, average inflation in emerging markets is currently running at 8%, up from a record low of 4% in 2005 but still well below the 20-30% levels of the 1970s and 80s.

The main risk to the world economy in the months ahead is a substantial slowdown in global growth rather than any further significant rise in price pressures. The Indian capital markets displayed a sharp volatile trend with a negative bias after the RBI credit policy was announced last week.

The RBI has further cautioned that economic growth is likely to moderate further in FY09 (has revised GDP growth target down for FY09 from 8.5% to 8%) and most interest sensitive sectors such as auto, real estate, construction are likely to take a hit on the profitability front in the coming quarters.

Most banks have already reacted to the latest RBI move by raising their prime lending rates by around 50-75 bps which is bound to make home, personal and auto loans far more expensive. Importantly, it seems the RBI will continue to have a hawkish view on inflation, which could see GDP growth moderating further, with both consumption and investment growth showing further decline.

Nevertheless, some key positives during last week were the continued softening in crude oil prices, now ranging around $123-124 barrel, which now clearly looks set for a further downtrend amidst reports that US oil consumption has recently shown a negative growth.

Also, headline inflation numbers have continued to rise to 11.98% week on week but the pace of growth has slowed down which is comforting. However, despite all the fiscal measures taken by the RBI, inflation still continues to remain high and is unlikely to ease-off soon. RBI is targeting to bring down inflation from the current level of 11-12% to about 7% by March ’09, with long-term inflation target pegged at 5%.

Going ahead, the markets are expected to hold the recent lows , although there could be further global shocks since most of the negatives in the domestic arena have been fully discounted in market prices. Also, the recent F&O data suggests that the August ’08 series is starting on a lighter note which is the lowest since December ’07 series.

This leaves less room for any further downside. The recent lows on Nifty of 3,800 is likely to hold the for near term and in the short term, the markets may see further extension of gains. Any positive move from the government on PSU disinvestment or FDI liberalisation may provide the market with necessary impetus for a rally.

(The writer is CEO, Reliance Money ,