Goldman Revises Rupee Forecast, Sees 3.2% Drop as Oil Rises

Goldman Sachs Group Inc. revised its forecasts for the Indian rupee, predicting a 3.2 percent drop in the next six months because rising oil costs will increase the import bill and double the nation’s current-account deficit.

The broad measure of trade that includes investment flows will widen to 3.5 percent of gross domestic product in the fiscal year ending in March, from 1.5 percent the previous year, Tushar Poddar and Pranjul Bhandari wrote in a note to clients. Goldman differs from all the other 21 economists surveyed by Bloomberg News who forecast a stronger rupee by year-end.

``The recent large move up in the dollar has caught us by surprise and appears to be driven by the run-up in oil prices,’’ wrote Mumbai-based Poddar and Bhandari, analysts at the world’s largest securities firm by market value. ``The rupee will continue to weaken.’’

The rupee traded at 42.73 per dollar as of 2:10 p.m. in Mumbai, according to data compiled by Bloomberg. Goldman changed its three-month, six-month and one-year forecasts for the rupee to 43.9, 44.1 and 42.2 from earlier estimates of 41, 40.3 and 38.9, respectively.

The median forecast of analysts and strategists surveyed by Bloomberg is for 40.5 at the end of June, 40.32 at the end of September and 39.5 at the end of 2008.

Current-Account

The rupee has declined 8 percent this year, making it the second-worst performer among the 10 most-traded Asian currencies excluding the yen. The rupee will also drop as overseas funds cut holdings of the nation’s assets, said the Goldman analysts.

India’s current-account shortfall widened to $5.4 billion in the three months ended Dec. 31 from $3.7 billion a year earlier and $4.7 billion in the preceding quarter, the central bank said on March 31. That was after the country imported oil worth $71.8 billion in the year through March 31, 23.5 percent more than a year earlier.

The share of oil imports out of the total ``will rise due to the forecasted oil price increases,’’ Poddar and Bhandari said. ``Looking at the sensitivities of import bill to oil prices suggests oil imports will grow by 85 percent in the fiscal year ending March.’’

Goldman forecasts oil to rise to as much as $141 a barrel in the second half of 2008. Crude for July delivery was at $131.79 a barrel on the New York Mercantile Exchange. It rose to an all-time high of $135.09 yesterday.

Inflation

Goldman has revised higher its estimate of annual inflation to 7.5 percent from 6.5 percent due to higher oil costs. India is Asia’s third-biggest energy consumer and imports 75 percent of its annual requirements.

``We expect monetary policy to remain on a tightening path,’’ Poddar and Bhandari said. The bias will be towards measures to absorb liquidity through reserve ratio increases rather than through rates.’’

India’s annual inflation rate held above the central bank’s 5.5 percent target for a third straight month, according to a government report today. Wholesale prices rose 7.82 percent in the week ended May 10 from a year earlier, after gaining 7.83 percent in the previous week.

The Reserve Bank of India last month twice asked lenders to set aside more funds, raising the so called cash reserve ratio to 8.25 percent, the highest since March 2001, from 7.5 percent.

MCX IPO gets Crisil’s highest rating

Rating agency Crisil on Thursday rated MCX initial public offering (IPO) at the highest grade of 5/5. The grade indicates that the fundamentals of the issue are strong, relative to other listed equity securities in India. However, the rating is not an opinion on whether the issue price is appropriate in relation to the issue fundamentals. It is neither a trading recommendation, nor a comment on the future market price or its suitability.

The exchange officials were not available for comment on when the IPO will hit the market. Mr Chetan Majithia, Head-Equities, Crisil Research, said apart from MCX, Acme Tele Power is the only company to receive the highest rating. Crisil has rated 24 IPOs till date, he added.
Return Indicators

According to the draft red herring prospectus (DRHP), the public issue is for 10 million equity shares of Rs 5 each. The IPO would comprise fresh issue of 6-million shares and another 4-million shares is to be sold by Financial Technologies (India) Ltd and Corporation Bank.

The company is expected to raise Rs 500 crore-Rs 600 crore with issue priced at Rs 500-600 per share. It was for the second time that MCX issue had been cleared by SEBI. Earlier, the company filed a DRHP way back in 2006, but the plans were later shelved.

MCX’s profitability and return indicators have been strong in the past 4 years. Growth is likely to moderate in the short-term due to the impact of the commodity transaction tax (CTT), Crisil said. However, in the medium term, MCX’s strong market position and continuous focus on product innovation would act as growth drivers.
Market leadership

Currently, MCX enjoys market leadership, with a share of 77 per cent in volumes traded on commodities exchanges in India. The company has consciously focused on commodities such as bullion, energy and metals, which are benchmarked to international prices, Crisil said. Of the company’s total turnover, bullion accounts for 53 per cent, metals for 28 per cent, energy for 16 per cent and agricultural commodities account for the rest.

For the year ended March 31, 2007, MCX reported a net profit of Rs 93 crore on a turnover of Rs 200 crore, compared with a net profit of Rs 37.50 crore and revenues of Rs 100 crore in the previous year.

Coke to focus more on non-traditional media

As an effort to get associated with the consumers, beverage giant CocaCola is planning to focus more non-traditional media such as Internet and outdoor activities in India.

"Non-traditional media which accounted for around 2 per cent of our promotional budget in 2004-05 has gone up to 12 per cent in 2007-08 and we would like to continue with this in the near future also," CocaCola India Vice President, Marketing Venkatesh Kini told reporters while announcing the national launch of its innovative 1.25 litre fridge pack.

CocaCola has launched the fridge pack in central and western India market in March 2008 and in a span of around two months the company has sold around five million bottles in the segment.

By seeing the success of the programme, it has now decided to launch it nationally, the company said.

As a part of the initiative to connect with the consumers the company wants its presence felt around all travel channels including highways, dhabas (fast-food joints) and on the back of trucks, in fact it has signed an agreement with the Truck Owners Welfare Society in this regard, Kinni said.

Although he refused to give details about the company’s plan in near future but said, "This would be an ongoing initiative of the firm which could extend to different forms of new media, other than print and TV".

India set to raise fuel price, inflation a worry

India is set to raise petrol and diesel prices to keep pace with crude oil’s record run but the move will fuel inflation, heaping more pressure on a government struggling to calm prices ahead of elections.

Crude oil’s surge has hurt consumers around the world and countries such as Indonesia are being forced to raise state-controlled prices. China said on Thursday it would retain controls on fuel prices, denying rumours about deregulation.

"A fuel price hike is inevitable," Indian Petroleum Secretary M.S. Srinivasan told reporters on Friday, adding that the oil ministry was also seeking tax changes to help Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp, which are forced to sell fuel below cost.

India sets the heavily discounted prices at which fuel is sold in order to help fight inflation and protect hundreds of millions of poor people from price shocks.

It partially compensates oil retailers by issuing oil bonds to them, which they can either hold as assets or sell in the market, while upstream companies share some of the burden.

The government, which faces a string of state elections this year and a national poll by May 2009, is worried that higher fuel prices will stoke inflation, already at its highest level in 3-½ years at nearly 8 percent.

It has strived to contain inflation with tough restrictions on exports of rice and duty cuts on some imports, while steel firms have been firmly told to freeze prices for three months.

But with oil above $130 a barrel and losses at state energy firms mounting, the government has little option but to raise retail fuel prices.

"We need to take immediate steps to save oil companies and I have discussed the issue with the prime minister last night," Oil Minister Murli Deora said. Later, though, he suggested that the government may take a week to act.

The cost of the crude oil India imports has doubled since June 2006 but, after a series of retail price revisions, fuel costs less now than it did two years ago. Prices were last raised in February when petrol was increased by 4.6 percent and diesel by 3.3 percent.

TOKEN REVISION "MEANINGLESS"

The chairman of the prime minister’s Economic Advisory Council, C. Rangarajan, said the government faced a big dilemma over raising fuel prices, but analysts said the government would not be able to skirt the issue.

"We expect a higher fuel price revision. A token revision will be meaningless. It’s completely getting out of hand," said Shubhada Rao, chief economist at Yes Bank in Mumbai.

"If you want fuel companies to survive, a certain amount of hike is difficult and unpalatable, but inevitable," she said.

HPCL’s director for finance, Bhaswar Mukherjee, said on Thursday that the company was in talks with bankers to raise its borrowing limit to bridge the gap between soaring input costs and frozen fuel prices.

Economists said oil firms faced liquidity problems as they had to keep paying their suppliers while government compensation in the form of bonds came with a lag.

"This practice of keeping domestic prices suppressed and not allowing the pass-through of global prices is basically becoming unsustainable," said A. Prasanna, an economist at ICICI Securities Primary Dealership.

The prospect of some relief for the state firms, which are suffering a combined revenue loss of 5.5 billion rupees ($128.5 million) a day, helped their battered shares rise on the Bombay Stock Exchange.

IOC was up 3.7 percent, HPCL was up 4.7 percent and BPCL was up 5.1 percent at 0641 GMT, while the benchmark index had risen only 0.35 percent. The refiners’ shares have fallen by a third to a half this year.

Revised inflation tops 8 pct, seen going higher

India’s annual inflation rate remained at 7.8 percent in early May, data showed on Friday, but analysts were more interested in a revision that took the figure above 8 percent in March for the first time in 3-½ years.

The government said it would take more fiscal steps if needed to calm price pressures and an adviser to the prime minister said inflation would ease in the next three to four months, but analysts said an imminent fuel price rise could push it closer to double digits.

Preliminary data for May 10 showed the wholesale price index rose an annual 7.82 percent, close to the previous week’s rise of 7.83 percent and market forecasts.

But the reading for March 15 was revised sharply upwards to 8.02 percent from 6.68 percent, making it the highest inflation rate since September 2004 and fuelling expectations the central bank would take more steps to contain prices. "It just says we are dangerously close to 10 percent," said Shubhada Rao, chief economist at Yes Bank in Mumbai.

Indian inflation figures are frequently revised upwards. But at the end of 2007 revisions were mostly just 0.1 to 0.2 percentage points, in January they had jumped to 0.5 percentage points and in early March data they hit 1.86 percentage points.

The central bank has not raised interest rates in over a year to avoid slowing the economy too rapidly. Instead it has tightened cash conditions to contain surplus inflation-stoking funds in the system, but surging prices, particularly in food and metals, are making its job difficult.

"Do we live with high inflation or see growth prospects jeopardised in the short and medium term?" Rao said.

The 10-year federal bond yield initially edged up on the data before retreating to its pre-data level of 8.02 percent, while the rupee gained to 42.84/85 per dollar from Thursday’s 42.96/97 close.

FUEL PRICES

Policy makers are debating whether to increase retail fuel prices to stem losses at state-run oil companies, which are selling petrol and diesel below market rates.

Oil prices have surged to record highs above $130 a barrel but the government sets heavily discounted retail prices to help fight inflation and protect the poor.

"With a fuel price hike in the offing, inflation is headed up and we may see inflation hit 8.5 percent by June," said A. Prasanna, am economist at ICICI Securities.

"We expect the central bank to take further liquidity tightening measures to control inflation."

The central bank left its key lending rate at 7.75 percent at a rate review in April but raised its cash reserve ratio, the proportion of funds banks must deposit with it, by 25 basis points to 8.25 percent.

That increase takes effect on Saturday, and many economists expect the central bank to tighten again in coming months.

Economists say there is little the central bank can do to tame rising prices, which stem in part from supply constraints and overseas price increases, although traders say it intervened on the currency market this week to stop the rupee from falling too far against the dollar and inflating import prices.

For its part, the government has curbed some exports, cut a series of import duties and put pressure on cement and steel companies to keep prices down.

"Please be patient. We are watching the situation carefully. More steps will be taken as and when needed," Finance Minister Palaniappan Chidambaram told reporters.

C. Rangarajan, chairman of the prime minister’s economic advisory council, said inflation would remain high for another three to four months but good rains in the June-September monsoon season, as well as grain purchases, would help dampen pressures.

"It may reach even 5.5 percent by the end of the fiscal year," Rangarajan said, referring to the year-end in March 2009.

The wholesale price index is more closely watched than the consumer price index, which is published monthly, because it covers a higher number of products and is published weekly.

India gold demand low, buyers await falls

Indian gold demand remained weak on Friday due to high prices and on absence of any festivals, dealers said.

"People are now very cautious when they come to buy gold jewellery," said Ashwin Choksi, partner, Jamnadas M. Choksi Jewellers.

Buyers are also waiting to see if the rupee, that had weakened against the dollar, would recover further, helping ease local gold prices, he said.

Most of India’s gold is imported and a weak rupee pushes prices of the metal higher.

Traders are also hoping for good monsoon rains to push up demand for gold, said a dealer with a large private bank.

India’s gold demand may remain sluggish for the next few months and is expected to revive in September, when festivals commence, he said.

Purchases for jewellery and investment fell 50 percent in the first quarter of 2008 in India due to high prices, the World Gold Council has said. India’s jewellery and investment demand stood at 71 tonnes and 31 tonnes, respectively.

Indian shares fall 1.5 pct on inflation worries

Indian shares fell 1.5 percent on Friday to their lowest close in five weeks as inflation worries mounted after a government official said an increase in retail fuel prices was inevitable.

Annual inflation topped 8 percent in March for the first time in 3-½ years, revised data showed on Friday, and analysts said the looming fuel price rise could push it closer to double digits.

"Inflation and crude are key deterrents," said Hitesh Agarwal, head of research at Angel Broking. "If the government raises fuel prices, it adds to inflation. If it does not the fiscal situation deteriorates."

India imports 70 percent of its oil consumption. The cost of the crude oil India imports has doubled since June 2006 but after a series of retail price revisions fuel costs less now than it did two years ago.

Petrochemical giant and refiner Reliance Industries led the decline, losing 2.4 percent to 2,554.80 rupees, its lowest close since May 14.

Tobacco maker ITC dropped 4.2 percent to 213.60 rupees, its worst close in more than three weeks, after its quarterly earnings missed market expectations.

The 30-share BSE index ended down 1.52 percent, or 257.47 points, at 16,649.64 points, its lowest close since April 17, with 25 components in the red. It had been up 0.9 percent in early deals.

The benchmark fell 4.5 percent in the week and is down nearly 18 percent in 2008.

In the broader market, losers overwhelmed gainers 1,925 to 790 on volume of 350 million shares.

Financial stocks were weighed down by concerns the central bank may again tighten monetary policy to rein in inflation.

Top lender State Bank of India fell 2.1 percent to 1,573.25 rupees and rival ICICI Bank fell 1.9 percent to 863.75 rupees.

Top telecoms firm Bharti Airtel, which is in talks with South Africa’s MTN, bucked the trend rising 2.4 percent to 836.30 rupees after smaller rival Idea Cellular sold a minority stake in a unit for $640 million.

Shares in state-run refiners Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp rose between 3.1 and 3.8 percent in anticipation of a fuel price increase.

The refiners have been under pressure because they are forced to sell fuel to retail users at state-set low prices while global oil prices have climbed to record highs.

The 50-share NSE index ended 1.6 percent lower at 4,946.55 points.

Elsewhere in the region, Karachi’s 100-Share index dropped 4.52 percent to 13,011.74 and Colombo’s All-Share index ended 0.51 percent lower at 2,585.78.

STOCKS THAT MOVED

* Explorer Cairn India, a unit of UK’s Cairn Energy, fell 4 percent to 306.45 rupees after several brokerages cut their rating saying the firm was unlikely to announce any large discovery in the next six months and high oil prices would drive up rig demand.

* Idea Cellular ended up 0.14 percent at 107.50 rupees after mobile operator said U.S.-based Providence Equity Partners would a buy a fifth in a unit for $640 million.

TOP 3 BY VOLUME

* Ispat Industries on 35.7 million shares

* IFCI on 16.8 million shares

* Aishwarya Telecom on 11.2 million shares

Indian Rupee Has Fifth Week of Losses on Rising Crude Oil Costs

India’s rupee declined for the fifth week, the worst run in almost two years, as record crude oil costs spurred demand for dollars needed to buy the commodity.

The local currency fell to the lowest since April 2007 this week as companies such as Indian Oil Corp., the nation’s largest refiner, paid more for raw materials. Higher oil costs may slow growth of Asia’s third-largest economy, which depends on imports to meet three-quarters of its annual energy needs.

``The pressure on the rupee continues because refiners are looking to cover dollar needs arising in the short term,’’ said Rohan Lasrado, a foreign-exchange trader at HDFC Bank Ltd. in Mumbai. ``Adding to the rupee’s worries will be the inconsistent dollar supply.’’

The rupee declined 0.5 percent this week to 42.705 versus the dollar at the 5 p.m. close in Mumbai, according to data compiled by Bloomberg. It may fall to 43.25 in next few days, Lasrado said.

The rupee is the second-worst performer this year among Asia’s 10 most-traded currencies, excluding the yen.

The local currency will rise by almost 9 percent through the end of the year as the central bank raises borrowing costs by July to fight inflation that’s at the fastest pace in 3 1/2 years, Fortis Bank SA said.

The currency will rebound from its lowest in 13 months as the Reserve Bank of India increases the repurchase rate to 8 percent from 7.75 percent before its next meeting on July 29, Joseph Tan, Fortis Bank’s Singapore-based strategist, said in an interview.

Tightening Policy

``Economic growth is pretty much intact, but inflation is a new threat and there is no scope for the central bank to have a neutral monetary policy approach,’’ Tan said. ``I am leaning toward believing that the central bank will tighten monetary policy further, despite what the economy is going through, and will also use the exchange rate.’’

Fortis predicts the rupee will rise to as high as 39.4 at the end of this year. It is among the 21 respondents in a Bloomberg News survey, all of whom predict that the currency will rise in 2008.

Goldman Sachs Group Inc. revised its forecasts for the Indian rupee, predicting a 3.2 percent drop in the next six months because rising oil costs will increase the import bill and double the nation’s current-account deficit. Goldman wasn’t part of Bloomberg’s survey.

The broad measure of trade that includes investment flows will widen to 3.5 percent of gross domestic product in the fiscal year ending in March from 1.5 percent the previous year, Goldman’s Tushar Poddar and Pranjul Bhandari wrote in a note.

Caught By Surprise

``The recent large move up in the dollar has caught us by surprise and appears to be driven by the run-up in oil prices,’’ wrote Mumbai-based Poddar and Bhandari, analysts at the world’s largest securities firm by market value. ``The rupee will continue to weaken.’’

Goldman changed its three-month, six-month and one-year forecasts for the rupee to 43.9, 44.1 and 42.2 from earlier estimates of 41, 40.3 and 38.9, respectively.

The current-account shortfall widened to $5.4 billion in the three months ended Dec. 31, from $3.7 billion a year earlier and $4.7 billion in the preceding quarter, the central bank said on March 31. That was after the country imported oil worth $71.8 billion in the year through March 31, 23.5 percent more than a year earlier.

Angel Broking launches mobile service

Angel Broking has launched ‘Mobile Connect’ service for cell phone users. Those who log on to the mobile connect service can get real time equity, F&O, commodities and mutual funds data on a single platform.

The clients of the broking firm can access their back office data, which can be even downloaded for use, on the cell phone any time of the day.

The mobile connect is available on all Java-enabled GSM handsets with GPRS connectivity.

Mobile connect will also provide market news, corporate developments, commodity news, top 10 local and global indices among other capital markets related news.

Petroleum ministry wants Rs 10 per litre hike in petrol price

The petroleum ministry has sought a Rs 10 per litre increase in petrol and Rs 5 a litre hike in diesel prices, along with a cut in customs and excise duties, to offset the impact of surge in crude oil prices that have touched $135 per barrel.

"The situation is getting to be alarming. We need to stem the rot at the beginning," petroleum secretary M S Srinivasan told reporters after a stock-taking meeting with the heads of public sector oil companies.

Srinivasan, however, said the Cabinet meeting scheduled for Friday will not consider raising fuel prices as the subject needed some more preparation and a note would be moved to the authorities in a day or two.

"We expect a decision in 3-4 days time," he said, adding that the ministry was suggesting a combination of price hike and duty cut to lower the projected Rs 2,00,000 crore (Rs 2,000 billion) under-realisation on sale of petrol, diesel, LPG and kerosene.

"The price hike is inevitable," he said, but refused to say what quantum of hike the ministry was seeking.

Srinivasan said the ministry was seeking a lowering of customs duty on crude from 5 per cent to zero and import duty on petrol and diesel from 7.5 per cent to 2.5 per cent.

Besides, the ministry was also seeking cut on excise duty on the two products.

Petroleum Minister Murli Deora said he had discussed the situation with the Prime Minister Manmohan Singh on Thursday evening and will raise the issue again on Friday to seek and early meeting of the Cabinet.

"We are trying to see that some action is taken immediately," Deora said

Choosing between insurance and investment products

If you have plans to invest in an insurance product, are you confused about whether to take a pure risk-cover (a term plan) or an investment (ULIP)-oriented one? Well, at the initial stages of career when your salary has just inched into to the taxable slab, you can’t take chances because every penny matters. Risk profile and investment objectives differ with each person. You have to do a bit of analysis to see if the ‘combo’ product offered by your insurance agent fits your profile.

Two options At the age of 25-35, if you’ve plans to acquire or have already acquired assets such as a home or a car, your financial commitments may be high. Yet you may want to invest for the future and set up a risk cover on your life so that your family is taken care of, in the event of your demise. With the monthly surplus oscillating, you can’t take up a high financial commitment every month or even every year. This makes it necessary for you to choose your investment/insurance option cautiously so that it doesn’t pinch your pocket later.You can achieve your objective through two means. You can take exposure to a ULIP (a unit linked insurance plan) that combines a life cover with investments in stocks and bonds. Or you can invest separately in a term policy and mutual funds of your choice to meet your two key needs. A cost-benefit analysis should help you decide on the right option.

Insurance

Insurance companies offer a multitude of variants to the basic life insurance product. A life insurance policy could be a term policy or endowment policy or an ULIP. A term policy is a basic policy that offers a risk cover based on the premium paid by the policy holder. In the event of death of the insured during the term, his family gets the sum assured on the policy. You stand to receive nothing if the risk (in this case, death) does not materialise. A term policy could be the cheapest insurance option for youngsters. An endowment policy differs from the above on grounds that if the insured survives the term, he would be given a sum assured plus a bonus for the investment he made over the years. But do note that the premium on endowment policies is much higher than on a pure term policy because of the savings element.

Mutual Funds

If you take the term policy route, you may like take care of your investments though mutual funds. Mutual fund houses offer a host of open-end funds which can be plain vanilla or focussing on specific themes and market cap segments. Low costs (annual charges of 2.5 per cent or less), transparency an good liquidity (you can sell units whenever you want) are the key advantages of mutual fund schemes.

ULIPs

An ULIP (Unit Linked Insurance Plan) is an option that combines the features of a mutual fund and an insurance scheme. The premium paid by you would entitle you for a life cover and for returns from a portfolio created with your premium payments. The insurer here pools the premium collected from the policy holders and invests it in the stock or debt markets. The investors are also given the option of choosing between debt, equity or a combination of both. Though ULIPs might look like an attractive option, the proportionally lower allocation for investment in the initial years of the policy due to expenses and the relatively high premia, are their key limitations.

The annual premium on an ULIP would typically be several times that on a pure term policy because of the investment component. Based on the specific product, a good portion of the first year premium could also be deducted towards charges — initial administration charge, regular administration charge, policy administration fee and fund management charge, which be as high as 25-30 per cent in the first year and fall from the second year. These reduce the corpus invested on your behalf and moderate the final returns. ULIPs usually have a lock-in period of a minimum three years. This limits your ability to redeem units for a financial emergency. Investors also need to compare features across products before zeroing down on a specific investment option.

So don’t just commit yourself to a hefty premium because your insurance agent pushed you. Sign on the dotted line, only after you do your homework.

Fuel price hike not on cabinet agenda - oil minister

The issue of whether to raise domestic fuel prices in the face of surging global crude prices is not on the agenda for Friday’s cabinet meeting, Oil Minister Murli Deora said.

"We need to take immediate steps to save oil companies and I have discussed the issue with the prime minister last night," Deora told reporters. "We are trying to see that some action is taken immediately."

Earlier, Petroleum Secretary M.S. Srinivasan said an increase in domestic fuel prices was inevitable and the government would work out the size of the rise by Friday evening.

Any rise in prices could be politically damaging to a government facing crucial state elections over the next few months.

The cost of the crude oil India imports has doubled since June 2006 but after a series of retail price revisions fuel costs less now than it did two years ago.

Nifty market Find crucial support @ 5000

• 
  
  As shown in the daily chart, the Nifty has just closed above the lower end of the Trend line (5010 – 5000).If it breaks 5010 – 5000 crucial support levels then it may test 4980 – 4940 levels. The immediate resistance remains at 5050 – 5060 levels. On closing basis, if Nifty closes below lowerside Trendline then we see 4800 in coming days.


• 
  
  At 9:56 am, the Sensex was up 125 points at 17,031 and the Nifty up 29 points at 5,054. The CNX Midcap rose 54 points at 6,893.


• 
  
  At 10:40 am, the Sensex was up 73 points at 16,984 and the Nifty up 17 points at 5,042.


• 
  
  5,000 is an important psychological level 5,049-5,050 is not a big deal or 4,900 is not a big deal. But somewhere around those zones you need to find support. So lets see over the next few days whether we can get away with holding those kind of levels because that will be very crucial in determining where the market could be headed from here. The next big move could be decided by the hold of 5,000 or not.


• 
  
  One another take is if 5,000 actually holds out in this kind of an environment it is a very bullish situation for the market because the environment is quite bad right now for equities. Even the bulls will admit that the kind of news flow we are getting is not good and conducive for out performance at all, so if with this kind of news flow you hold out 5,000 Nifty then the market is showing a lot of strength.


• 
  
  So the fact that we are at 17,000 with all that is happening around us or 5,000 with all that is going on is pretty bullish. So if we get away with 5,000 it would be great.

Indian Rupee to Climb 9%, Interest Rates to Rise, Fortis Says

India’s rupee will rise 9 percent through to the end of the year as the central bank raises borrowing costs by July to fight inflation at the fastest pace in 3 1/2 years, Fortis Bank SA said.

The currency will rebound from its lowest in 13 months as the Reserve Bank of India increases the repurchase rate to 8 percent from 7.75 percent before its next meeting on July 29, according to Fortis Bank’s Joseph Tan. The bank is among all 21 respondents in a Bloomberg News survey predicting the currency to rise in 2008. The rupee is the second-worst performer this year among the 10 most-traded currencies excluding the yen.

``Economic growth is pretty much intact but inflation is a new threat and there is no scope for the central bank to have a neutral monetary policy approach,’’ Fortis Bank’s Singapore- based strategist Tan said in an interview. ``I am leaning towards believing that the central bank will tighten monetary policy further, despite what the economy is going through, and will also use the exchange rate.’’

The rupee dropped to as low as 43.21 against the dollar yesterday, the lowest since April 3, 2007, before closing at 42.965 in Mumbai, according to data compiled by Bloomberg. It may rise to as high as 39.4 at the end of this year, Fortis predicts.

Inflation accelerated to 7.83 percent in the week ended May 3, the fastest pace since November 2004, as crude oil rose to a record. The central bank last month increased its inflation estimate to 5.5 percent for the year to March 31, from 5 percent.

India’s Growth

``Economic growth should be the main concern only for the U.S. and for the rest of Asia should be inflation,’’ Tan said.

Growth may decelerate to about 8 percent, the slowest since 2005, in the fiscal year that started April 1, according to Finance Minister Palaniappan Chidambaram. The economy expanded 8.7 percent in the 12 months through March, slower than the 9.6 percent growth in the previous year.

India expanded an average 8.7 percent a year since 2003, second only to China among the world’s 20 largest economies. The central bank forecast the $912 billion economy will grow as much as 8.5 percent in the 12 months through March 2009.

The Reserve Bank last month raised for a second time this year the percentage of cash banks must set aside to cover deposits to 8.25 percent, beginning tomorrow, the highest since March 2001. Tan expects the measure, known as the cash reserve ratio, to be raised again by July.

The rupee’s rise will be supported by the easing global credit market slump prompting investments in emerging-market economies, Tan said.

``We must understand that we had more of a crisis of confidence more than a liquidity problem,’’ Tan said.

The world’s largest banks and securities firms have reported more than $300 billion of writedowns and credit losses from defaults in U.S. subprime mortgages.

Oil inches back from profit-taking after $135-high

Oil rose on Friday, recovering from a strong bout of profit-taking in the previous session that pulled prices back more than 3 percent from the record high above $135 a barrel.

U.S. light crude for July delivery was up 44 cents at $131.25 a barrel by 0334 GMT. It surged to $135.09 on Thursday before slumping to settle at $130.81, the first time in five sessions that it settled lower.

London Brent crude was up 74 cents at $131.25.

"Supplies not growing is still the main thing. OPEC can turn the tap but they cannot do it forever, and non-OPEC growth is not enough," said Tony Nunan, risk management executive at Tokyo-based Mitsubishi Corp.

"But demand is important too, and it is not falling as much as expected," he added.

Oil production from countries outside OPEC is stagnating and forecast to remain below 50 million barrels per day this year, at 49.56 million bpd, lower than earlier forecast, a Reuters survey of 12 analysts showed on Thursday.

The failure by non-OPEC producers to increase output has helped drive oil prices up more than a third since the beginning of the year.

It has also sent long-term prices even higher at close to $150 a barrel, as concerns mount that supplies will not be enough to meet demand from developing countries in a few years’ time.

Weekly U.S. inventories data released this week also hiked short-term concerns, with crude oil stocks unexpectedly down by a large 5.4 million barrels, gasoline inventories also down by 800,000 barrels, and a lower-than-forecast 700,000-barrel rise in distillates stocks.

OPEC Secretary-General Abdullah al-Badri on Thursday repeated the group’s stance that it can do nothing to lower oil prices in a "crazy" market, blaming record prices on factors such as geopolitical tensions, speculation and the weak dollar.

The cartel’s view seemed shared by the chief executive of Royal Dutch Shell Plc, Jeroen van der Veer, who told Reuters Television that oil prices are rising due to market sentiment rather than a shortage of supply.

A stronger dollar on Thursday also contributed to lower oil prices as investors have increasingly been using oil as a hedge against the falling currency, setting off inverse trends in the dollar and oil.

The greenback steadied on Friday, but the currency stayed in sight of a one-month low against the euro on worries that inflation could lead to a deeper U.S. slowdown.

Rupee edges higher on firm Asian stock cues

The Indian rupee backed away from 13-month lows on Friday as gains in Asian shares raise hopes of capital inflows to the market, with traders also saying the central bank could step in to check the currency’s fall.

* At 9:10 a.m. the partially convertible Indian rupee was at 42.87/88 per dollar, below 42.96/97 on Thursday and backing further away from an intraday trough of 43.21, its lowest since early April 2007.

* Asian stocks edged higher on Friday, helped by a slight dip in oil prices from record highs, and government bond yields climbed on fears of rising inflation.

* The central bank was seen selling dollars around the rupee’s lows on Thursday, dealers said, estimating its sold $100 million to $150 million. If so, it would be the first time the central bank had sold dollars since March, according to data.

10 rules for a profitable investment portfolio

Asset allocation - the way you divide your capital among different investment options - accounts for more than 90 per cent of your portfolio’s overall return. Which is why it’s so very important to get the asset allocation right in your investment portfolio.

The portfolio’s the thing

Get used to the fact that, at any one time, a few parts of your portfolio will be doing terribly. Over a long enough time period, each and every component will have had a bad year or two. This is normal asset-class behaviour and cannot be avoided. So, focus on the performance of the portfolio as a whole, not the individual parts.

In asset allocation, job one is to pick an appropriate stock / bond mix

This is determined primarily by your risk tolerance. Do not bite off more risk than you can chew - a classic beginner’s mistake. Calmly and coolly planning for a market downturn is quite different from actually living through one, in the same way that crashing a flight simulator is different from crashing a real airplane. Time horizon is also important. Do not invest any money in stocks that you will need in less than five years, and do not invest more than half unless you will not need the money for at least a decade.

Allocate your stocks widely among many different asset classes

Your biggest exposure should be to the broad domestic stock market. Use small stocks, foreign stocks, and real estate investment trusts (REITs) in smaller amounts.

It makes a difference where you put things

Some asset classes, such as large foreign and domestic stocks, and domestic small stocks, are available in tax-efficient vehicles; put these in your taxable accounts. Other asset classes, particularly value stocks, REITs, and junk bonds, are highly tax-inefficient. Put these only in your tax-sheltered retirement accounts.

Don’t rebalance your portfolio too often

The benefit of rebalancing back to your policy allocation is that it forces you to sell high and buy low. Asset classes tend to trend up or down for up to a few years. Give this process a chance to work; you should not rebalance more often than once per year.

These rules apply to tax-sheltered accounts. In taxable accounts, rebalance only with outflows, inflows, and mandatory distributions; here, the rebalancing benefit is usually outweighed by the tax consequences.

The recent past is out to get you

Human beings tend to be most impressed with what has happened in the past several years and wrongly assume that it will continue forever. It never does. The fact that large U.S. growth stocks performed extremely well in the late 1990s does not make it more likely that this will continue; in fact, it makes it slightly less likely. The performance of different kinds of stocks and bonds is best evaluated only over the long haul.

If you want to be entertained, take up sky diving

Investors like to have fashionable portfolios, invested in the era’s most exciting technologies. Resist the temptation. There is an inverse correlation between an investment’s entertainment value and its expected return; IPOs, on average, have low returns, and boring stocks tend to reward the most.

An asset allocation that maximizes your chances of getting rich also maximizes your chances of becoming poor

Your best chance of making yourself fabulously wealthy through investing is to buy a few small stocks with good growth possibilities; you just might find the next Microsoft. Of course, it is far more likely that you will lose most of your money this way. On the other hand, although you cannot achieve extremely high returns with a diversified portfolio, it is the best way to avoid a retirement diet of cat food.

There is nothing new in investing

Knowledge of financial history is the most potent weapon in the investor’s armamentarium. Since the dawn of stock broking in the seventeenth century, every generation has experienced its own version of tech bust. The recent dot-com catastrophe was just one more act in finance’s longest running comedy. Be able to say to yourself, ’I’ve seen this movie before, and I think I know how it ends.’ The only thing that’s new is the history you haven’t read.

A portfolio of 15 to 30 stocks does not provide adequate diversification

The myth that it does results from a misinterpretation of modern financial theory. While it is true that a 30-stock portfolio has no more short-term volatility than the market, there is more to risk than day-to-day fluctuations. The real risk is not that short-term volatility will be too high, but that long-term return will be too low. The only way of minimizing this risk is to own thousands of stocks in many nations. Or a few index funds.