Time MFs put money into the market

The Indian stock markets should ideally reflect the strength of the domestic economy and corporate fundamentals rather than get totally swayed by the risk perception of foreign institutional investors (FII). FII net sales of about $6.1 billion (year to date), does not in any way mean that the economy has lost steam.

Spiralling inflation, partly due to the sharp surge in prices of crude oil and other commodities, and monetary tightening (in particular, the latest measures) will slow growth, but not enough to take the economy downhill. Nor does it warrant large-scale selling on the stock markets.

Almost all stocks have been hammered down by the bears, and many blue-chips are trading at prices close to their 52-week lows. Worst-affected sectors include realty, banking and capital goods. Power and oil stocks have also been battered.

But then, stock markets are not for the faint-hearted. In volatile conditions, investments made with short-term horizon are bound to give negative returns. Staying invested in the medium-to-long term will be rewarding; the sensex and Nifty have returned about 23-24% per annum over the past three years and about 30-31% a year over the past five years, even after erasing nearly all the gains made over the past one year.

Retail investors would do well to invest through mutual fund schemes, the best managed diversified equity scheme delivered 35% per annum over a three year period and about 52% a year over the past five years.

Asset management companies (AMCs) have overall been net buyers this year. But with uninvested funds and cash equivalent estimated at more than Rs 20,000 crore in hand, AMCs have the potential to change the sentiment in the market.

Retail investors in mutual fund schemes have not rushed to redeem their investment this time. Instead, many continue to make fresh investment in schemes. That should provide fund managers some comfort. And therefore, rather than wait for positive developments on policy making, fund managers must step up active buying.

Retail investors can also seize the current market conditions to strengthen their portfolio with blue chips, which are now available at reasonable valuation.

Investors should track market forces, say analysts

Last week was bad for the markets. Both the Nifty and Sensex lost more than five percent. The market breadth remained negative as the number of declining stocks was more than the number of advancing stocks in the market. Foreign institutional investors (FIIs) have been net sellers in the market. They have taken out more than $500 million from the markets.

Some value buying activity was seen by domestic funds but that was nowhere close to the selling by FIIs. The market sentiments were already quite negative and the unexpected hike in the repo rate by the Reserve Bank of India (RBI) surprised most analysts.

These are some of the major factors investors need to watch:

Heavy FII selling

FIIs are selling heavily in the domestic markets this year. We have already seen FIIs taking out six billion dollars from the markets. Last year, FIIs invested 18 billion dollars in the domestic markets. One major reason for FIIs selling is the urgent need for liquidity in their parent companies abroad. Also, the macroeconomic situation in India has changed quite a bit this year. FIIs will be hesitant to invest fresh money till they see improvement in the macroeconomic environment and global inflation rate.

Sharp rise in crude oil prices

Rising crude oil prices is one of the major sentiment-dampeners in the domestic stock markets. India imports more than 75 percent of its crude oil needs from the oil producing nations. In the last few months, the crude oil prices rose sharply and touched an all-time high mark of USD 140 per barrel last week. Since this sharp rise cannot be passed quickly to the consumers it is resulting in a surge of oil pool deficit.
High commodity prices

This is another large problem faced by emerging economies. The prices of some basic commodities have gone up quite significantly over the last few months. Hence the high inflation rate almost all over the world. Analysts believe that this high inflation rate will hamper the world economic growth rate.

The RBI increased both the repo rate as well as the cash reserve ratio (CRR) this week to get a control on the rising inflation rate. The repo rate was increased by 50 basis points (0.5 percent) to 8.5 percent with immediate effect while the CRR will be increased in two phases. A 25 basis point CRR hike will be effective from July 5th and another 25 basis points will be increased from July 25th.

Many analysts and market traders expected a hike in the CRR after the double digit inflation numbers were announced on June 20. However, a sharp increase in the repo rate came as a surprise to many. This hike in repo rate will result in a rise in banks’ lending rates, which in turn will have an adverse impact on the credit growth and capital expenditure. This will lead to a slowdown in growth. The RBI also signaled that the tightening of monetary policy may not stop here and it may take further steps if required.

Many analysts believe that the current RBI action had already been factored in by the market. The markets had fallen to the lowest levels of this year. Investors should keep a careful watch on the weekly inflation numbers. The RBI may take some tough monetary policy measures again (CRR or repo rate hike) if the inflation does not show signs of softening. This will further add to the negative sentiments in the markets. Many analysts feel that the market sentiments are quite weak, and unlike in the past, it may take considerably longer for things to improve

Good time to invest in gold: World Gold Council

With crude prices hitting the roof and the stock market nosediving, gold is emerging as a good hedge option against inflation. "It is the right time to invest in gold," says K Shivram, vice-president, World Gold Council.

There has also been a shift in the consumption of gold. According to Shivram, a lot of jewellers are now setting up shop in tier-II and tier-III towns.

"Small towns have definitely benefited from the influx of the large retail brands," he said. Moreover, when it comes to gold purchase, it’s not restricted to jewellery alone.

The sale of gold coins is on the rise especially during Diwali and Akshaya Tritiya. "Many jewel retail brands are catering to the requirements of working women by designing light pieces," he said.

Against the backdrop of this, the Gold Club of Chennai and the World Gold Council are partnering to host an India Gold Conclave (IGC) on 19th July. Around 250 delegates are expected to participate in this B2B event.

The IGC will bring together on a single platform key stockholders to discuss trends in the gold and the jewellery industry.

Sensex could slide to 12,000 level

The fact that stock futures of many Nifty stocks were trading at a huge discount to their spot prices an unusual phenomenon lends some credence to this theory. A spiralling inflation and interest rate has already cast a shadow on several sectors such as banking, auto and real estate. On Friday, there was more bad news in the property space, with a downgrade of the debt papers issued by Sobha Developers. This is one of the first downgrades in the sector.

Bears tightened their grip as inflation climbed further to 11.42% and the political situation at the Centre remained fluid. “A further rise in the oil price will, unfortunately, continue to be particularly bad news for India,” broking house CLSA said in a note to clients.

“This is both despite and because of the Reserve Bank of India’s increasingly pre-emptive monetary tightening stance,” the note said, adding that “a re-test of the 12,000 level on the Sensex cannot be ruled out in these circumstances and that will be accompanied by a further weakening in the rupee.” The broking house, however, said a decline to 12,000 level would be a “massive long-term buying opportunity.”

For all the uncertainty over UPA government’s future, brokers feel that politics is not as big a cause for worry as inflation. “Market has discounted politics, because the government’s immediate priority is its own survival, and not any major policy measures,” said a veteran BSE trader, adding that it would not make much of a difference to sentiment if the government lasted for a month or three.

Elsewhere in Asia, Chinese markets declined by over 5%, while markets in Japan, Singapore, Hong Kong, South Korea and Taiwan were down between 1% and 3%.

In the US, the Dow was trading marginally higher in early trade, though it was still close to its 21-month lows.
Even as stock prices are plunging rapidly, there is no talk of any brokering house or prominent market player facing a solvency crisis. This is because there are no major outstanding positions in derivatives as was there at the beginning of the year, just before the market went into a free-fall.

Bill Gates bids a teary farewell to Microsoft

Bill Gates said a teary goodbye on Friday to Microsoft Corp, the software maker he built into the world’s most valuable technology company based on the ambitious goal of placing a computer on every desk and in every home.

He leaves his full-time executive role at Microsoft, which he co-founded with childhood friend Paul Allen in 1975, to focus on his philanthropic organization, the Bill & Melinda Gates Foundation, the world’s largest charity, funded in part by his vast fortune.

At an event at Microsoft’s headquarters campus here, Gates, who will become a non-executive chairman and work part-time, joined Chief Executive Steve Ballmer on stage to deliver a short speech and field questions from employees.

"There won’t be a day in my life that I’m not thinking about Microsoft and the great things that it’s doing and wanting to help," said Gates, who wiped away tears as the group of employees rose to give him a standing ovation.

Ballmer, a Harvard University classmate who joined Microsoft at Gates’ behest, got choked up as he tried to describe Gates’ impact on the company and society at large.

"There’s no way to say thanks to Bill. Bill’s the founder. Bill’s the leader," said Ballmer. "We’ve been given an enormous, enormous opportunity and it was Bill that gave us this opportunity."

Gates will leave behind a life’s work developing software to devote energy to finding new vaccines or to microfinance projects in the developing world. He will still work on special technology projects at the company.

Once the world’s richest man, Gates’ personal fortune has been estimated at about $58 billion, according to Forbes Magazine. He has slipped to third place, behind investor and good friend Warren Buffett and Mexican telecoms tycoon Carlos Slim.

ONE BILLION AND COUNTING

Ballmer spoke about how he contemplated quitting Microsoft a month after joining the company and returning to Stanford University business school. Bill passionately implored him to stay and laid out the vision of the company.

"This is what Bill said to keep me. ’You don’t get it! You don’t get it! You don’t get it! We’re going to put a computer on every desk and in every home,’" said Ballmer.

There are currently more than one billion PCs worldwide, according to research firm IDC.

Gates and Ballmer recalled the many steps Microsoft took to evolve from a fledgling start-up to a company of more than 90,000 employees making everything from video game consoles to computer software.

The pair remembered the battles with computer industry titan International Business Machines Corp’s, an early partner turned rival when it rolled out a competing operating system to Microsoft’s flagship software, Windows.

"We went toe to toe with the biggest, most powerful computer company in the world and we beat them," said Ballmer.

The 52-year-old Gates said the company had made "a mistake" not recognizing earlier how Web search and online advertising -- businesses dominated by another start-up turned powerhouse, Google Inc -- could transform the software industry.

However, he cautioned skeptics not to count out Microsoft.

"I love that kind of thing where people are underestimating Microsoft," said Gates. "Yes, we make mistakes and we know it, but we come back and learn from those things. A lot of our best work is the result of that."

After 33 years, Gates said he sometimes finds himself lost in thought, driving to Microsoft without realizing it. He also said he will move out of his corner office -- making way for Ballmer -- into a smaller area one floor below.

"I am sure there will some day next month where I start thinking about software and I will start driving here to Microsoft, go up to the fifth floor and walk down to my office and they will be remodeling it," said Gates with a chuckle.

"In fact, they were wondering if I was leaving at four or five today, so they could get started on that."

Can't do without chai? Beware

After water,is the most commonly consumed beverage in the world. In India, it’s customary to offer a guest some tea before anything else; chai-naashta, cutting chai and masala chai are part of our everyday vocabulary. And yet, the ill-effects of tea are overlooked.

The most active alkaloid ingredient in tea is caffeine — an addictive drug that stimulates the central nervous system. Tannin, also found in tea, may increase the risk of nasal and oesophageal cancer.

The perk-up effects of tea are short-lived and followed by withdrawal symptoms such as lethargy, headaches and acute irritation.
Tea does not bode for your stomach either. It is known to slow down digestion and impedes the action of ptyalin, a digestive ferment of saliva which acts like cooked starch. Excessive tea consumption could also lead to stomach troubles like gas formation and diarrhoea.

Women beware, tea could aggravate symptoms of pre-menstrual syndrome. According to a research conducted under Dr Annette Rossignol, an associate professor of public health at Oregon University,
women in China who drank between one to four cups a day were twice as likely to have Pre-Menstrual Syndrome (PMS) than those who didn’t. Drinking eight cups of tea increased the PMS occurrence up to 10 times.

INCONTINENCE

Too much tea could also lead to incontinence or frequent or urgent impulse to urinate. According to a recent study by St George’s Hospital in London, caffeine could exert pressure on bladder by causing the muscles surrounding it to contract. Experiments show that five cups of tea increases urine by 400 to 500 per cent in people vulnerable to kidney related ailments. This continued stimulation of kidneys by caffeine found in tea might damage them.

Tea also contains oxalate, over consumption of which can cause kidney damage. It is known to soak up free calcium and other minerals found in the body. It could also promote kidney stone formation and effect other parts of body.

OTHER ILL-EFFECTS

The respiratory and cardiac muscles are stimulated by tea as coronary arteries get dilated resulting in the increase in the rate of blood flow. The quickening of respiration lowers levels of carbon dioxide and increases the heat production by 10 to 20 per cent. Caffeine too is found in teas — instant teas have 35 to 50 mg of caffeine, while iced tea contains about 65 to 80 mg; brewed tea has the highest amount of caffeine — 110 mg!

REPLACEMENTS

Have a cup of green tea instead, it has 50 per cent less caffeine (only 12 to 60 mg per 150 ml) and tannin. Flower teas such as jasmine also have very little caffeine content. Herbal infusions such as tulsi, ginger, peppermint, chamomile and cranberry are even better. They are no caffeine and multiple health benefits.

LEGENDS OF THE BREW

It is said that one night, sage Bodhirama found it difficult to stay awake during his meditations and kept falling asleep again and again.Angry with himself, he tore off his eyelashes and threw them near the tree
he was meditating under. Those eyelashes grew into the first tea bush. And this is why tea has become one of the most important things for those who meditate or want to stay awake.

Does Viagra give athletes an edge?

Viagra, a little blue pill more usually taken for its off-the-field benefits, is now being studied for its role in boosting athletes’ performance. Some sports authorities say the drug is now finding a following among athletes. The World Anti-Doping Agency is currently studying Viagra’s effects in athletes but hasn’t yet banned it. Experts are divided over whether it actually offers athletes an edge.

“It’s possible,”’ says Anthony Butch, director of the Olympic Analytical laboratory at the University of California Los Angeles, a WADA-accredited facility.

Viagra, also known as sildenafil, is manufactured by Pfizer Inc. It was originally developed as a heart drug; its use as a treatment for erectile dysfunction was only accidentally discovered.

The drug works by increasing the effects of nitric oxide which makes blood vessels expand. That should theoretically allow blood cells to travel to the lungs more efficiently and to also receive more oxygen. It may also improve heart function.

Viagra is also approved to treat pulmonary hypertension, a condition where the blood vessels of the lungs tighten. Doctors have used the drug experimentally to treat pregnant women with high blood pressure and to ward off jet-lag.

But whether Viagra makes athletes faster, higher or stronger is uncertain.

“Just because you have more nitric oxide doesn’t mean that you are going to be a better athlete,” says Butch. “If you have all the nitric oxide you need and if you generate more from Viagra, it’s not clear what effect that would have,” he says. Still, some preliminary studies have shown that cyclists who took Viagra improved their performance by up to 40 percent.

“If you have more oxygen going to your muscles, that’s more energy and that makes you a better athlete,” says Dr Andrew McCullough, a sexual health expert at New York University School of Medicine. “Even if it only gives you a 10 percent increase, in peak athletes, that is enough to win,” he says.

McCullough says Viagra is only likely to help athletes like runners, cyclists or skiers: sports where endurance and speed are the key. Viagra does not work directly on muscles so it will not make athletes physically stronger.

If Viagra does give athletes an unfair advantage, they will be able to take it at the upcoming Beijing Olympics without worry, since it is not on the prohibited list of medicines. McCullough said taking Viagra could theoretically help people breathe better in heavily polluted cities, like the Chinese capital.

Many scientists at laboratories that conduct drug testing say they haven’t noticed a suspicious spike in samples containing Viagra. “We see it as much as we see ibuprofen or aspirin or antibiotics that are not prohibited,” says Christiane Ayotte, director of a WADA-accredited laboratory in Canada. “Athletes may be taking it, but they may be taking it for non-doping purposes,” she says.

Ayotte said it would be unrealistic to ban Viagra. “Are athletes going to have to submit therapeutic-use exemptions for Viagra?” she says, “That would be quite humiliating.”

Still other doctors say that Viagra’s more well-known effects on sex lives may be the ultimate explanation for any enhanced athletic abilities. “It could be that athletes are taking Viagra and then having vigorous sexual activity,” says Dr Gerard Varlotta, director of sports rehabilitation at New York University’s Rusk Institute of Rehabilitation Medicine. Varlotta doubts that Viagra itself could improve an athlete’s performance.

“If athletes are euphoric after sex after taking Viagra, they may be euphoric about their athletic endeavours,” Varlotta says.