Posts Tagged ‘FII’

Weekly Update 19th – 23rd April 2010

After nine consecutive weeks of gains, domestic markets ended in the negative terrain in the week gone by on the concerns over interest rate tightening by the RBI in its monetary policy scheduled on 20th April coupled with weak cues from the Asian markets.

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Moreover increase in unemployment numbers in US and China’s measures to cool its real estate market raised the uncertainty over the global economic growth. Now, Investors are much wary over the signs of overheating in China as its economy grew almost 12%, the biggest expansion since 2007, Industrial production grew 18.1% in March & retail sales increased 18%. Closer home IIP numbers for the month of February grew by 15.1% as against an annual gain of 16.7% in January, and 17.6% in December. While India’s inflation, as measured by the wholesale price index (WPI), surprisingly stayed almost unchanged in March at 9.90% as compared to 9.89% in February. However, it is expected that after the strong Industrial numbers, improving trade, healthy credit off take in the last fortnight of last financial year & high Inflation, RBI may take steps to suck liquidity by increasing Cash Reserve Ratio & give signals of higher interest rates to the banking system & industry as well by increasing both policy rates. The other concern emerging for the manufacturing growth is appreciating rupee.

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As a major proportion of manufactured goods are meant for exports, the rise in domestic currency will arrest exporters’ margin & may result in lower export.

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FII’s also were a bit cautious to actively participate in the market ahead of RBI’s policy review. In the current CY, FIIs have so far pumped in more than $5.42 billion, while in the month of April; they have been net buyers at $ 1.05 billion in the Indian markets. Expectation of the good corporate results is likely to play a catalyst role for the next direction of the market. World stocks & commodity markets fell across the board after the revelation of SEC announcing civil fraud charges against Goldman Sach’s. This incident is likely to have its effect on the markets in the coming week.

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After 9 weeks of continuous rally in Indian stock markets, the rally ended last week after Nifty closed down 1.85% for the week. With world stock markets including the commodities taking a sharp correction on Friday, it seems that temporarily a top has been made in the market and one should be careful.

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Nifty has support between 5200-5100 levels and Sensex between 17400-17200 levels.

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On the commodity front, a range trading is expected in metals and energy.

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Since last few weeks, bullions and base metals have been trading in upper zone but are unable to break the resistance. Once they break their resistance then only, traders’ can see a new trading range. Back at home, sharp appreciation in rupee is also locking the movements. Data from European Union is important for the week apart from PPI and housing data of US. If improvement continues then only commodities will trade in upper trading range or vice a versa. Agro commodities could be more volatile ahead of expiry of April contract on NCDEX. In agro commodities, guar could see further rise on improved fundamentals as well as technical.

Single policy platform for FDI

Union Commerce and Industry Minister Anand Sharma released the final document of FDI Policy Framework.

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It would now comprise the single document on FDI policy and mark the inception of a whole new chapter on FDI policy.

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Meanwhile, he said that the current exercise had been started with the goal of incorporation of all prior regulations on FDI.

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That contained in Foreign Exchange Management Act (FEMA), RBI circulars, and various Press Notes into one consolidated document.

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This is so as to reflect the current regulatory framework.

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Moreover, having a single policy platform would also ease the regulatory burden for Government.

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The intention of this exercise is not to make changes in the extant guidelines, but to deal with them comprehensively.

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The government stated that it was considering permitting FDI in limited liability partnership (LLP) firms.

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It was also considering to clearly define whether shares and bonds issued to overseas investors could be treated as foreign direct investment.

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On the other hand, the government may also do away with Schedule IV of the FEMA that deals with sale and purchase of shares and debentures by NRIs and overseas corporate bodies on non-repatriable basis.

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Earlier, it was said that India”s Foreign Direct Investment (FDI) inflows reduced by 25 % to $2.04 bn in January 2010 as compared to the corresponding period of the previous year, breaking a trend of positive growth in the previous 3 consecutive months.

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An official said there is no specific reason why the inflows in January inched down. India”s total FDI by the end of the current financial year, will not be more than last financial year”s.

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However, last year in January 2009, FDI inflows were $2.73 bn. India attracted FDI of $2.33 bn in October 2009, about 56 % jump over the same period last year, while in November FDI surged by 60 % to $1.73 bn.

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Previously, as the response from investors did not warrant such a move, the government does not have any plan to increase the cap of foreign investments in bonds stated a top Finance Ministry official.

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The existing limit is not being used up for a long time while there is no proposal to raise the foreign institutional investment (FII) debt limit.

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Currently, the government allows foreign investments of up to $15-billion in corporate bonds and up to $5-billion in government bonds.

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India received $1.5 billion foreign direct investment (FDI) in December 2009 that is an increase of over 10% over that in the same month of previous year.

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FDI was $1.36 billion in December 2008.

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The overseas inflows decreased marginally to $20.9 billion in April-December compared to $21.15 billion in the corresponding period last year.

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In addition, Commerce and Industry Minister Anand Sharma stated that the government plans to introduce a single FDI document by end-fiscal, with a view to simplify foreign direct investment (FDI) process, and is currently discussing the various modalities.

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He said they have put this document for discussions with all stakeholders to invite their comment which is likely to close by January 31.

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By March 31, they will have single FDI document to ensure simplification, easy comprehension and predictability.

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Moreover, Commerce and Industry Minister Anand Sharma stated that India”s share in the global Foreign Direct Investment has almost doubled to 2.45% in 2008.

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India was fourth in 2008, in terms of FDI inflows, among developing countries with reference to UNCTAD World Investment Report (WIR) 2009.

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However, earlier, in order to attract $50 billion of foreign direct investment (FDI) annually by 2012, the Centre is creating an investor friendly environment, to keep up with the economic growth and build infrastructure.

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It is said that the government will aim at $50 billion annual FDI flows by 2012 and $100 billion by 2017 whereas last year the FDI inflows were $35 billion and in the H1 of 2009-10, the FDI inflows were around $15 billion.

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On the other hand, the government approved 17 foreign direct investment (FDI) proposals worth Rs 1,158.78 crore where among the major proposals are the FDI applications of ArcelorMittal and ductile iron pipe maker Electrosteel Castings.

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ArcelorMittal, with an FDI of Rs 503.37 crore, plans to infuse foreign equity into a company engaged in manufacturing cold-rolled semi-finished iron and steel products.

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Foreign direct investment (FDI) is a measure of foreign ownership of productive assets, such as factories, mines and land. Increasing foreign investment can be used as one measure of growing economic globalization.

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Savings accounts are accounts maintained by retail financial institutions that pay interest but can not be used directly as money ( for example, by writing a cheque).

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These accounts let customers set aside a portion of their liquid assets while earning a monetary return..

Weekly Update 29th March – 02nd April

The domestic markets had a mixed week; it started weak following RBI hiking the repo and reverse repo by 25 basis points each and growing concerns from the 16-nation Euro zone—first over conflicting signals from the currency bloc on resolving Greece’s debt problems and second over Fitch Ratings lowering Portugal’s sovereign credit outlook.

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But, concluded the week on green zone buoyed by continued liquidity inflow and earnings optimism; both the indices Sensex & Nifty, saw the highest closing levels in more than two years. FIIs bought stocks worth Rs 12125.81 crore this month till 25 March 2010.

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On the whole, over the last few months the confidence of global & domestic investors has resulted in an excellent run up in the domestic markets. Closer home, further rate hike together with hike in CRR is expected in order to anchor inflationary expectation in the next RBI meet which is scheduled on 20th April.

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Increasing capacity utilisation and rising commodity and energy prices are exerting pressure on overall inflation. Taken together, these factors heighten the risks of supply-side pressures translating into a generalised inflationary process. Food inflation in India dipped marginally falling to a five-month low.

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Inflation for the Food Articles group dropped to 16.22% in the week ended March 16, as compared to 16.3% in the previous week. While it is largely anticipated that this time around the increase in interest rates would not be a spoil sport for the markets as the signs of recovery in the growth are promising. Data on Industrial production & more specifically the acceleration in the growth of the capital goods sector points to the revival of investment activity.

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Expectations of the good corporate results as indicated by buoyant advance tax figures & the forecast for the southwest monsoon for 2010 is likely to play a catalyst role for the next direction of the market. On the global economic front; in a bid to restore confidence in their common currency, all 16 euro zone leaders have reportedly agreed to provide joint financial assistance to the debt-laden Greece in tandem with the IMF.

In the US front, Unemployment increased in 27 states in February and dropped in seven, a sign the labor market needs to pick up across more regions to spur consumer spending and sustain the economic recovery.

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Trend of world stock markets is up though China is showing some weakness along with some weakness in commodities. US dollar index rise above 81 has brought uncertainty in world markets and the Euro zone problem in Greece is giving uncertainty to Euro. One should trade carefully in such markets. Nifty has support between 5150-5050 and Sensex between 17200-16800 levels..

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Commodities are moving on their own fundamentals. Recent blow up in dollar index could not give much impact on the commodity prices as it was expected earlier in market. However, with the recent rise in dollar index, upside in commodities seems to be limited. Commodities are now expected to trade in a range after a volatile week. Expected improvement in employment data from US is likely to cap the downside. Agro commodities can perform mix. Spices, especially turmeric and pepper may trade in a range after an upside rally. Same trend may go with chana futures as well whereas guar may firm further.

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Stay Tuned for More Updates :)

FII investment, this year, is the highest ever inflow in India

FDI inflow India Last year Touched 80 Thousand crores

The FII investment of Rs 80,500 crore in 2009 is the highest ever inflow in the country in rupee terms in a single year and comes a year after they pulled out over Rs 50,000 crore.

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FII inflow so far this year has broken the previous high of Rs 71,486 crore parked by foreign fund houses in domestic equities in 2007.

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Market analysts believe that the FII inflow in India may continue in the next year as well, if the liquidity conditions remain strong.

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As per Market experts, FIIs are expected to continue to be positive on domestic markets and in general Indian markets seems to fare well in 2010.

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Delhi-based SMC Capitals Ltd’s Equity Head Jagannadham Thunuguntla has supported the view, saying,

“If liquidity conditions remain strong next year, one can expect FII inflow to remain strong into India even in 2010 as well.”

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The Bombay Stock Exchange’s benchmark sensex, comprising 30 bluechip stocks, has gained more than 70% so far in 2009, one of the best performers among leading global bourses.

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“However, if dollar-carrytrade-unwinding starts, then one can expect rush of FII outflow from the country, resulting in pressure on Indian markets,” he cautioned.

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Significantly, last year the FIIs had pulled out a net Rs 52,900 crore from the domestic bourses — a trend triggered with the collapse of global financial services icon Lehman Brothers in the middle of September 2008.

This selling trend continued till the first two months of the passing year.

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Global Market Outlook 2009 and 2010 :)

SMC Market Outlook

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With markets giving returns on investment more than 79% in 2009 and showing a strong sign of recovery from mid 2009 on the back of strong domestic demand, policy reforms and stimulus packages, 2009 calendar year emerged as the best year for investors since 2000.

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FII’s have once again proved to be the front runners in terms of the inflow, pumping more than Rs 82,000 crore in the Indian market this calendar.

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But 2010 promises to be another testing year as fiscal and monetary stimulus in many of the world’s major economies begins to wane.

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After being in consolidation for most of the month, in the week gone by the domestic markets suddenly jumped back to life and closed at their highest in 19 months as investors rushed to buy stocks on renewed optimism, after foreign direct investment into the nation jumped 60% in the first eight months of this fiscal year.

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The FM`s comments on GDP growth and encouraging cues from global markets also boosted the market.

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Both the indices, Sensex and Nifty made a new high for 2009 on the eve of Christmas, rekindling the festive spirit.

Bulls were in a mood of rejoice as Christmas took Nifty to a new high of 5,197.90.

The year ends with more than a spark of hope, and next year seems to be a stable and profitable one.

However, we believe that markets would continue to be volatile and hence it is important to manage risk in the coming year too.


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For the forthcoming week, markets may remain volatile as traders will roll their positions in the derivative segment from December 2009 series to January 2010 series ahead of the expiry of the near month December 2009 contracts on Thursday, 31 December 2009.

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On the flip side higher advance tax figures by India Inc which suggests better Q3 December 2009 results, may support the market.

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Corporate advance tax payments for the quarter were up 44% to Rs 48,300 crore against a 3.7% decline in April-June quarter and a 14.7% increase in July-September quarter.

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The global developments also need to be seen for any further directions.

Furthermore, food price index data for the year to 19 December 2009 will be closely watched which is going to release on Thursday, 31 December 2009.

The high food price inflation is a major worry for the policymakers as they contemplate a right approach to tame hike in inflation which seems to be more of a supply side issue.

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The next quarterly review of monetary policy is scheduled on 29 January 2010 which may also give some direction to the markets.

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On the global economic front, the US economy grew at a revised annual growth rate of 2.2% in the third quarter, much slower than initially projected.

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Japan’s unemployment rate rose to 5.2 percent from 5.1 percent in October, for the first time in four months in November, an indication job growth may not be strong enough to support the economy’s recovery from its deepest postwar recession.

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The world stock markets are not ready to react on the downside and after every consolidation they are moving up only.

4960 on nifty is strong support as was mentioned in last week magazine and the nifty touched there and moved up sharply.

Even the base metals and stocks are not reacting to the strong dollar.

Till the trend of stock markets is up, one should be playing from the long side of it.

Nifty has support between 5050-4970 and Sensex between 17100-16700 levels.

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New Year celebration may result in thin trading this week.It may impact domestic bourses as well.

Regarding outlook, dollar index will give next direction to precious metals. If it notices a pause in its rally then precious metals may trade in a range or vice a versa.

Base metals will remain volatile.

Gap between lead and zinc should shrink gradually.

Fresh buying in steel may keep nickel at higher side.

If US crude and other inventories continue to decline then fresh buying will stimulate in crude oil.

However, it already saw spiky moves hence upside is limited.

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Festivals and Trading Holidays Set to Keep Dalal Street Less Lively This Week :)

Despite bullish sentiment on hopes of strong quarterly results from firms, the Dalal Street is likely to less lively this week

Despite bullish sentiment on hopes of strong quarterly results from firms, the Dalal Street is likely to less lively this week

Despite bullish sentiment on hopes of strong quarterly results from firms, the Dalal Street is likely to less lively this week, as festive mood and fewer trading sessions would see investors withhold their positions and postpone buying, analysts said.

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Brokers believe the market sentiment will remain positive, even as investors will get only three trading sessions before the second quarter results of companies starts coming in.

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“The market is expected to remain in consolidation phase on the back of less trading sessions and festive season,” SMC Global Vice-President Rajesh Jain said.

The market would trade only for three days this week, as Monday and Friday will be trading holidays on the occasion of ‘Dussera‘ and ‘Gandhi Jayanti‘, respectively.

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Over the week, the BSE Sensex slid 193.43 points, or nearly 1.14 per cent and closed at 16,693 points.

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The under current in the market is bullish, there are not much expectations by investors for this week, while stocks may also look for global cues,experts observed.

The result season will kick start with IT major Infosys scheduled to announce its second quarter results on October 9.

During the last week, foreign institutional investors have put in over Rs 6,528.1 crore in Indian markets.

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