Economic factors

These include: (a)economic policy, disseminated by government agencies and central banks, (b)economic conditions, generally revealed through economic reports, and other economic indicators.

• Economic policy comprises government fiscal policy (budget/spending practices) and monetary policy (the means by which a government's central bank influences the supply and "cost" of money, which is reflected by the level of interest rates).
• Government budget deficits or surpluses: The market usually reacts negatively to widening government budget deficits, and positively to narrowing budget deficits. The impact is reflected in the value of a country's currency.
• Balance of trade levels and trends: The trade flow between countries illustrates the demand for goods and services, which in turn indicates demand for a country's currency to conduct trade. Surpluses and deficits in trade of goods and services reflect the competitiveness of a nation's economy. For example, trade deficits may have a negative impact on a nation's currency.
• Inflation levels and trends: Typically a currency will lose value if there is a high level of inflation in the country or if inflation levels are perceived to be rising. This is because inflation erodes purchasing power, thus demand, for that particular currency. However, a currency may sometimes strengthen when inflation rises because of expectations that the central bank will raise short-term interest rates to combat rising inflation.
• Economic growth and health: Reports such as GDP, employment levels, retail sales, capacity utilization and others, detail the levels of a country's economic growth and health. Generally, the more healthy and robust a country's economy, the better its currency will perform, and the more demand for it there will be.
• Productivity of an economy: Increasing productivity in an economy should positively influence the value of its currency. Its effects are more prominent if the increase is in the traded sector.

Central banks

National central banks play an important role in the foreign exchange markets. They try to control the money supply, inflation, and/or interest rates and often have official or unofficial target rates for their currencies. They can use their often substantial foreign exchange reserves to stabilize the market. Milton Friedman argued that the best stabilization strategy would be for central banks to buy when the exchange rate is too low, and to sell when the rate is too high—that is, to trade for a profit based on their more precise information. Nevertheless, the effectiveness of central bank "stabilizing speculation" is doubtful because central banks do not go bankrupt if they make large losses, like other traders would, and there is no convincing evidence that they do make a profit trading.

The mere expectation or rumor of central bank intervention might be enough to stabilize a currency, but aggressive intervention might be used several times each year in countries with a dirty float currency regime. Central banks do not always achieve their objectives. The combined resources of the market can easily overwhelm any central bank. Several scenarios of this nature were seen in the 1992–93 ERM collapse, and in more recent times in Southeast Asia.

Determinants of FX rates

The following theories explain the fluctuations in FX rates in a floating exchange rate regime (In a fixed exchange rate regime, FX rates are decided by its government):

(a) International parity conditions: Relative Purchasing Power Parity, interest rate parity, Domestic Fisher effect, International Fisher effect. Though to some extent the above theories provide logical explanation for the fluctuations in exchange rates, yet these theories falter as they are based on challengeable assumptions [e.g., free flow of goods, services and capital] which seldom hold true in the real world.

(b) Balance of payments model (see exchange rate): This model, however, focuses largely on tradable goods and services, ignoring the increasing role of global capital flows. It failed to provide any explanation for continuous appreciation of dollar during 1980s and most part of 1990s in face of soaring US current account deficit.

(c) Asset market model (see exchange rate): views currencies as an important asset class for constructing investment portfolios. Assets prices are influenced mostly by people’s willingness to hold the existing quantities of assets, which in turn depends on their expectations on the future worth of these assets. The asset market model of exchange rate determination states that “the exchange rate between two currencies represents the price that just balances the relative supplies of, and demand for, assets denominated in those currencies.”

None of the models developed so far succeed to explain FX rates levels and volatility in the longer time frames. For shorter time frames (less than a few days) algorithm can be devised to predict prices. Large and small institutions and professional individual traders have made consistent profits from it. It is understood from above models that many macroeconomic factors affect the exchange rates and in the end currency prices are a result of dual forces of demand and supply. The world's currency markets can be viewed as a huge melting pot: in a large and ever-changing mix of current events, supply and demand factors are constantly shifting, and the price of one currency in relation to another shifts accordingly. No other market encompasses (and distills) as much of what is going on in the world at any given time as foreign exchange.

Supply and demand for any given currency, and thus its value, are not influenced by any single element, but rather by several. These elements generally fall into three categories: economic factors, political conditions and market psychology.

Forex Automoney

FOREX (FOReign EXchange market) is the international foreign exchange market, where money is sold and bought freely. In its present condition FOREX was launched in the 1970s, when free floating currencies were adopted by most countries, and only the participants of the market determine the price of one currency against the other proceeding from supply and demand.
As far as the freedom from any external control and free competition are concerned, FOREX is a perfect market. It is also the financial market with the highest liquidity. According to various assessments, money turnover in the market constitute from 1 to 2 trillion US dollars a day. Transactions are conducted all over the world via internet 24 hours a day from 00:00 GMT on Monday to 10:00 pm GMT on Friday.
While other traders make complicated mathematical analysis or guess what to do, you don't have to be a financial expert to trade forex and achieve success like professionals do!
All you need is a Forex Automoney - the web service which will give you a detailed information about "what" and "how" to trade.
Now, all you have to do to make a trading profit, is to click one button (for example "Buy") and a moment later the other button ("Sell"). If the price of the chosen currency pair rises in meanwhile, you can have a trading profit of earn even 400 times more then the increase in the currency pair price.

Pro Trade of the Day

Live trade with Richard Regan from the Virtual Trading Room of www.protradingcourse.com. Past performance are not necessarily indicative of future results. As with all trading, there is significant risk of loss. 

Trading in the Foreign Exchange or Futures markets involves a significant and substantial risk of loss and may not be suitable for everyone. You should carefully consider whether trading is suitable for you in light of your age, income, personal circumstances, trading knowledge, and financial resources. 

You should only trade with money you can afford to lose. There is no guarantee that you will profit from your trading activity and it is possible that you may lose all or some of your investment.

Forex Day Trading System

has attracted a large number of people. Of all the various day trading methods in current use, the Forex day trading system is one of the fastest growing. The cornerstone to this method of trading is the fact that all currency trading takes place within a twenty-four hour time span. Any buying or selling you do must take place over the course of only a day when using this system.

Seasoned traders who understand the market’s fluctuation patterns and are knowledgeable in the Forex trading field are in the best position to take advantage of the day trading system. Their experience will help these traders anticipate the highs and lows of the currency values. If you are a trading beginner or amateur, you would be advised to bypass the day trading system to start with. Once you have learned more about the market and it’s temperamental nature, you will then have the confidence to attempt the Forex day trading system.

It is often the most savvy and seasoned traders who get the most financial benefit from the Forex day trading system. One of the most crucial ingredients to your success is your amount of experience. Another important factor lies in the amount of capital you have at your disposal. Be prepared to invest a substantial sum of money into your day trading venture. For the more money you contribute, the higher your returns will be.

Forex day trading systems are known to involve a higher amount of financial risk than other investment options. Therefore, only attempt to utilize this system if you have no question of your financial stability. Your future success in Forex day trading relies on a clear, well thought out plan of action.

Additionally, you should also be prepared with an equally solid secondary back-up plan. Should you have some difficulty with the Forex day trading system, your back-up plan will be absolutely essential to rescue yourself and your investment. While you may suffer some financial losses, your back-up plan may help you avoid absolute ruin. Without careful and proper planning on your side, you are destined for failure, and might as well not even take the risk.

Forex Signals

How exactly does the rebate program work?

When you sign up for a new forex trading account through the link on our site, we act as the referrer on your account, and get a small compensation from the broker for each trade you make. We, in turn, give you 50% of this commission each and every month, based on the volume that you traded that month.

How much cash-back can I receive?

This depends on how much volume you trade and there is no limit to how much you can receive. If you traded 100 standard lots in a one month period, on average you would receive $500 cash-back. If you trade 1000 standard lots, you would receive roughly $5,000 cash-back. Your rebate is directly correlated to the size of round-turn lots traded.

Can I get paid on micro lots?

No. We currently only pay rebates on a minimum trade size of 1 mini lot (0.1 lots) up to any amount of standard lots.

How will I receive the rebates?

We pay rebates on the 1st of every month. Once your rebate amount meets the minimum $100 threshold, you will qualify for a payout. Payments are made through PayPal, therefore you must have a PayPal account to receive a rebate payment. If you don’t have a PayPal account you can get.

Retail foreign exchange brokers

Retail traders (individuals) constitute a growing segment of this market, both in size and importance. Currently, they participate indirectly through brokers or banks. Retail brokers, while largely controlled and regulated in the USA by the CFTC and NFA have in the past been subjected to periodic foreign exchange scams.^[8][9] To deal with the issue, the NFA and CFTC began (as of 2009) imposing stricter requirements, particularly in relation to the amount of Net Capitalization required of its members. As a result many of the smaller, and perhaps questionable brokers are now gone.

There are two main types of retail FX brokers offering the opportunity for speculative currency trading: brokers and dealers or market makers. Brokers serve as an agent of the customer in the broader FX market, by seeking the best price in the market for a retail order and dealing on behalf of the retail customer. They charge a commission or mark-up in addition to the price obtained in the market. Dealers or market makers, by contrast, typically act as principal in the transaction versus the retail customer, and quote a price they are willing to deal at—the customer has the choice whether or not to trade at that price.

In assessing the suitability of a FX trading services, the customer should consider the ramifications of whether the service provider is acting as principal or agent. When the service provider acts as agent, the customer is generally assured of a known cost above the best inter-dealer FX rate. When the service provider acts as principal, no commission is paid, but the price offered may not be the best available in the market—since the service provider is taking the other side of the transaction, a conflict of interest may occur.

Market psychology

Market psychology and trader perceptions influence the foreign exchange market in a variety of ways:

§ Flights to quality: Unsettling international events can lead to a “flight to quality,” with investors seeking a “safe haven.” There will be a greater demand, thus a higher price, for currencies perceived as stronger over their relatively weaker counterparts. The Swiss franc and gold have been traditional safe havens during times of political or economic uncertainty.

§ Long-term trends: Currency markets often move in visible long-term trends. Although currencies do not have an annual growing season like physical commodities, business cycles do make themselves felt. Cycle analysis looks at longer-term price trends that may rise from economic or political trends.

§ "Buy the rumor, sell the fact": This market truism can apply to many currency situations. It is the tendency for the price of a currency to reflect the impact of a particular action before it occurs and, when the anticipated event comes to pass, react in exactly the opposite direction. This may also be referred to as a market being "oversold" or "overbought". To buy the rumor or sell the fact can also be an example of the congnitive bias known as anchoring, when investors focus too much on the relevance of outside events to currency prices.

§ Economic numbers: While economic numbers can certainly reflect economic policy, some reports and numbers take on a talisman-like effect: the number itself becomes important to market psychology and may have an immediate impact on short-term market moves. "What to watch" can change over time. In recent years, for example, money supply, employment trade balance figures and inflation numbers have all taken turns in the spotlight.

§ Technical Trading considerations: As in other markets, the accumulated price movements in a currency pair such as EUR/USD can form apparent patterns that traders may attempt to use. Many traders study price charts in order to identify such patterns.

Foreign currency mortgage

A foreign currency mortgage is a mortgage which is repayable in a currency other than the currency of the country in which the borrower is a resident. Foreign currency mortgages can be used to finance both personal mortgages and corporate mortgages.

The interest rate charged on a Foreign currency mortgage is based on the interest rates applicable to the currency in which the mortgage is denominated and not the interest rates applicable to the borrower's own domestic currency. Therefore, a Foreign currency mortgage should only be considered when the interest rate on the foreign currency is significantly lower than the borrower can obtain on a mortgage taken out in his or her domestic currency.

Borrowers should bear in mind that ultimately they have a liability to repay the mortgage in another currency and currency exchange rates constantly change. This means that if the borrower's domestic currency was to strengthen against the currency in which the mortgage is denominated, then it would cost the borrower less in domestic currency to fully repay the mortgage. Therefore, in effect, the borrower makes a capital saving.

Conversely, if the exchange rate of borrowers domestic currency were to weaken against the currency in which the mortgage is denominated, then it would cost the borrower more in their domestic currency to repay the mortgage. Therefore, the borrower makes a capital loss.

Foreign exchange controls

Foreign exchange controls are various forms of controls imposed by a government on the purchase/sale of foreign currencies by residents or on the purchase/sale of local currency by nonresidents.

Common foreign exchange controls include:

§ Banning the use of foreign currency within the country

§ Banning locals from possessing foreign currency

§ Restricting currency exchange to government-approved exchangers

§ Fixed exchange rates

§ Restrictions on the amount of currency that may be imported or exported

Countries with foreign exchange controls are also known as "Article 14 countries," after the provision in the International Monetary Fund agreement allowing exchange controls for transitional economies. Such controls used to be common in most countries, particularly poorer ones, until the 1990s when free trade and globalization started a trend towards economic liberalization. Today, countries which still impose exchange controls are the exception rather than the rule.

Non bank foreign exchange companies

Non-bank foreign exchange companies offer currency exchange and international payments to private individuals and companies. These are also known as foreign exchange brokers but are distinct in that they do not offer speculative trading but currency exchange with payments. I.e., there is usually a physical delivery of currency to a bank account. Send Money Home offer an in-depth comparison into the services offered by all the major non-bank foreign exchange companies.

It is estimated that in the UK, 14% of currency transfers/payments are made via Foreign Exchange Companies. These companies' selling point is usually that they will offer better exchange rates or cheaper payments than the customer's bank. These companies differ from Money Transfer/Remittance Companies in that they generally offer higher-value services.

Benefits of Forex Trading

1.LEVERAGE: In Forex trading, a small margin deposit can control a much larger total contract value. Leverage gives the trader the ability to make extraordinary profits and at the same time keep risk capital to a minimum. Some Foex firms offer 200 to 1 leverage, which means that a $50 dollar margin deposit would enable a trader to buy or sell $10,000 worth of currencies. Similarly, with $500 dollars, one could trade with $100,000 dollars and so on. 

2.LIQUIDITY: Because the Forex Market is so large, it is also extremely liquid. This means that with a click of a mouse you can instantaneously buy and sell at will. You are never ’stuck’ in a trade. You can even set the online trading platform to automatically close your position at your desired profit level (limit order), and/or close a trade if a trade is going against you (stop order).

  

3.PROFIT IN BOTH ‘RISING’ AND ‘FALLING’ MARKETS: On the stock markets, you can only make money if shares are rising, but in economic recession and falling ‘bear’ markets, there is little chance of making big money. Forex is different. One of the most exciting advantages of Fx Trading is the ability to generate profits whether a currency pair is ‘up’ or ‘down’. A trader can profit by taking a ‘long’ position, (buying the currency pair at one price and selling it later at a higher price), or a ’short’ position, (selling the currency pair and buying it back at a lower price). For example, if you think the US dollar will increase in value vs. the Japanese Yen then you will buy Dollars and sell Yen (go long). If you think the Yen will increase in value against the Dollar then you will sell Dollars and buy yen (go short). As long as the trader picks the right direction, a potential for profit always exists.

4. 24 HRS: From Sunday evening to Friday Afternoon EST the Forex market never sleeps. This is very desirable for those who want to trade on a part-time basis, because you can choose when you want to trade–morning, noon or night. 

5. FREE ‘DEMO’ ACCOUNTS, NEWS, CHARTS AND ANALYSIS: Most Online Forex firms offer free ‘Demo’ accounts to practice trading, along with breaking Forex News and charting services. These are very valuable resources for traders who would like to hone their trading skills with ‘virtual’ money before opening a live trading account.

6.’MINI’ TRADING: One might think that getting started as a currency trader would cost a lot of money. The fact is, it doesn’t. Online Forex Firms now offer ‘mini’ trading accounts with a minimum account deposit of only $200-$500 with no commission trading. This makes Forex much more accessible to the averageindividual, without large, start-up capital. 

Advantages of Trading FOREX over Stocks and Commodities

There are many advantages to Trading FOREX as your main income generator. We can start by something that may be worrying many already. "Do I need a Diploma or Certification to trade the FOREX?" The answer is NO: When attempting to make more profit than losses on the fluctuation of exchange rates between major currencies (i.e.,Trading the FOREX), nobody is going to ask you for a diploma, a formal license or verify the amount of hours you've spent studying the Foreign exchange market and banking industry. All you need is the proper training.

But this is not the only advantage you get when trading FOREX, compared to other ways of investment and speculation; i.e. Stocks and Commodities.

Instantaneous Order Execution and Market Transparency

Market transparency is highly desired in any trading environment. The greater the market transparency, the more efficient the market becomes. Unlike other markets where transparency is compromised (like in the Enron scandal), FOREX markets are highly transparent (i.e., analyzing countries, and having access to real-time research / news, is easier than companies).
Because of this transparency, as an FX trader, you will be able to exercise risk management strategies in accordance to the proper fundamental and technical indicators.
The Forex market offers the highest level of market transparency out of all the financial markets. Because of this, order execution and fill confirmation usually occur in just 1-2 seconds. Markets that do not offer executable prices and force traders to absorb slippage obviously compromise the trader's profit potential considerably.
In the forex world, order execution is all-electronic and because you'll be trading via an Internet-based platform, instantaneous execution is routine. There are no exchanges, no traditional open-outcry pits, no floor brokers, and consequently, no delays.

Price Movements Are Highly Predictable

Although currency prices in the FX market may be volatile, they generally repeat themselves in relatively predictable cycles, creating trends. The strong trends that foreign currencies develop are a significant advantage for traders who use the "technical" methods and strategies taught at a number of sources.

Unlike stocks, currencies rarely spend much time in tight trading ranges and have the tendency to develop strong trends. Over 80% of volume is speculative in nature and, as a result, the market frequently overshoots and then corrects itself. As a technically-trained trader, you can easily identify new trends and breakouts, which provide for multiple opportunities to enter and exit positions.

Disadvantages of Forex Trading

Foreign Exchange, Forex or FX is one of the world’s largest financial markets dealing in real-time exchange of currencies of different countries. This currency exchange market has a greater volume of buyers and sellers, than in any other financial market of the world.

With major trading centers at Sydney, London, Frankfurt, Tokyo and New York, Forex is the only financial market, which is open 24 hours a day, 5.5 days a week, across the globe.

One of the most popular speculation markets, Forex is a market well known for its huge volume, superior liquidity, as well as the steady trading prospects. Also attractive is high levels of Leverage, one of the unique features offered by the Forex market.

Advantage of Forex tradings

Starting from a minimum of 100:1, Forex markets offer its traders with huge amounts of leverage which means that fat profits can be produced by investing small amounts of deposits.
No commission

If dealing with a financial market on daily basis, the regular investors or traders are the ones who are really benefited by the “free of commission” trading. The currency trading market lets its traders keep a whole 100% of their trading profits.
Superior liquidity

With most of the currency transactions comprising of 7 main currency pairs, the huge volume and the global trading aspect helps these currencies exhibit price stability, little slippage, narrow spreads and high levels of liquidity.
Profitability

Being an over the counter market, the trading done at Forex can be known as “over the counter” trading, wherein, a trader always buys one currency and sells of the other one in real time. There is no organizational prejudice in the market and every investor has the equal prospects for profit in it.
24 hours trading

Forex currency trading market offers its traders with a 24 hour trading opening, wherein, a Forex investor can trade ant any time of the day, whatever suits him/her, as the market is open for trading 24 hours a day, from Sunday 5:00 pm (ET) to Friday 4:30 pm.

Disadvantages of Forex trading

While high leverage serves as an advantage to attract traders to the market, it can at times also act as a disadvantage for them. With such high levels of leverage available to traders in the Forex market, comes an equally high level of danger.

This can be true for the high stake positions which carry along with them, too much risk, leading to margin calls. This is where efficient money management comes into play for playing safe.
24 hours market

Although it is convenient for the trader to trade whenever it is suitable to him, it can be a rather tough job too. This is because, at times, it is not possible for an individual trader to keep track of the Forex market, 24 hours a day.

This is where a broker comes into the picture. Retail or individual investors should try taking help from a professional broker rather than doing all the dealings himself straight with the huge market.

The broker will be an experienced professional who will act as an equal in your transactions, keeping you informed and updated about minute to minute details and fluctuations, and even guide you about the conditions, when to and when not to trade in the market.

MUTUAL GAINS

DOMESTIC money managers are gradually warming up to ‘wrap-like’ portfolio structures that are popular in developed markets. Wealth managers and brokers have begun offering portfolio management services (PMS) with mutual fund units as the underlying.
Known as ‘mutual fund wraps’ or ‘PMS fund of funds’, this product works on the same principles of highly-customised PMS schemes and is meant exclusively for affluent investors. In developed markets, mutual fund wraps are ‘do-it-yourself’ products and are ‘non-discretionary’ in nature. In non-discretionary portfolios, investors have the freedom to select funds of their choice. That is, they can structure their own portfolios, using third-party wrap platforms, with the help of an external investment expert.
In India, MF wrap providers offer discretionary portfolios where the wealth manager or broking firm will decide on investment strategies. The ‘wrap structure’ is managed like a ‘fund of fund’ that invests in diverse schemes and sectoral themes run by different fund houses. Edelweiss Capital, Bonanza Portfolio, Emkay Global, Motilal Oswal Financial, Ifast Financial (through online) and NJ India Invest are among the top providers of ‘MF wraps’.
“Our portfolio has mutual fund units of 5-10 asset management companies, covering various sectors, themes and investment strategies. Our investment coverage is restricted to 25 top equity funds (plus some debt exposure). Single stock exposure will not exceed 6% in our portfolios,” said Hiren Dhakan, associate fund manager, Bonanza Portfolio.
Under ‘wrap’ portfolios, the broking firm accepts a sizeable investment, generally between Rs 5 lakh and Rs 25 lakh, from the investor, to be deployed in an array of equity schemes. The broking firm also takes a power of attorney from the investor, empowering the firm’s investment manager to manage the portfolio. The broker charges anywhere between 1% and 2% of net investment as annualised management charges. Some broking firms also stake claim to a small portion of profits derived from investments. Most ‘MF wrap’ providers declare portfolio NAV at the end of the day.
Wrap fund managers expect to generate 25-30% returns over a threeyear period. Investment tenure in ‘wrap MFs’ could be 3-5 years. If an investor withdraws his funds before one year, he will have to pay an exit load.
“We’re offering non-discretionary wrap schemes to our clients through the Ifast interface. Using our portal, investors can buy multiple units of any fund house by giving just one application and cheque. A non-discretionary model helps the investor have a portfolio to his liking and risk profile,” said Rajesh Krishnamoorthy, managing director, Ifast Financial.

Nifty has support at 5160-5200 range

NIFTY April futures opened the week on a negative note at 5200.30 levels and there was a selling pressure on Monday. Nifty April futures were low at 5180 levels.
However, good strength was seen from important support near 5200 levels and Nifty April futures made 52-week high at 5309.90 levels and closed the week at 5296.95 levels with 0.42% gains. Nifty March futures expired on Thursday and a long build-up was seen in Nifty April futures on Thursday and Friday, with an increase of 12.6% and 14.95% in open interest (OI), respectively. Also, April Nifty futures closed on premium for the past two trading days, indicating a long build-up in April Nifty futures.
As per international indices, Dow Jones, Nasdaq, S&P 500 and FTSE have been trading above their intermediate resistance levels, which may be positive for equity markets in Asia and Europe. Nifty PCR volume after making high at 1.13 on Tuesday, dropped down to 0.92 for Thursday and Friday trading sessions, which shows activity on the call side has been more aggressive, after Nifty March futures expiry.
Due to Nifty April futures expiry near month end on April 29 and positive global markets outlook, a long build-up was seen in 5300 and 5400 calls with 18% and 51% increase in OI & a short build-up was seen in the 5200 Put with a 12% increase in OI on Friday. India VIX also trading at 17.89 levels, indicating low fear level at current levels. Overall scenario represents bullish market with crucial support at 5200-5160 levels.
Increase in OI and positive price movement — a long build-up was seen in the IFCI stock from important support levels near 49 — and a long build-up was also seen in the APIL stock, which made 52-week high. A short build-up was seen in Unitech and DLF stocks. Healthcare, banking and FMCG have been the outperformers and the realty sector underperformed.
WHAT TO WATCH OUT FOR INDIA
The finance ministry meet: The Finance ministry and central bank officials will meet on Monday to decide on the borrowing schedule. Traders will be watching the frequency, maturity and size of auctions.
Lancor Holdings: Lancor Holdings to consider, adopt and take on record the placement document for QIP issue.
Vakrangee Softwares: Vakrangee Softwares to issue 11 lakh equity shares having face value of Rs 10 each at a premium of Rs 60 per share to NJD Holdings.

Cos turn generous, step up dividend

ABOUT 50 companies increased their dividend rates this financial year, even as Corporate India, in general, was focussed on cutting costs, because of a lowerthan-expected topline growth.
With the business environment looking up as the year progressed, these companies announced one or more interim dividends, and pushed up the total dividend beyond what they had paid out last year.
Crompton Greaves, Engineers India, India Infoline, TVS Srichakra, Educomp Solutions, Garware Offshore and Kirloskar Oil are among high-profile companies that offered higher dividends to their shareholders. The rates of dividend, in fact, are the highest in recent years, going by dividend history of these companies.
“Higher dividend is usually an indication of better profitability,” said KR Choksey Shares and Securities Chairman Kisan Choksey.
“A good dividend track record helps in many ways. The company will be in a better position to raise funds from investors than those with poor dividend history,” he said.
Some analysts feel higher dividend payout need not strain a company’s financial health. Such a move is justifiable if a company is cash-rich and doesn’t require funds immediately for implementation of any project.
“A company should distribute a large amount of dividend only if it is able to generate incremental amount of cash every year,” said Anagram Capital CEO Mayank Shah.
A good dividend payout highlights the management’s confidence in the company’s prospects and helps in keeping shareholders’ morale high. It gives the company an edge over its competitors in terms of accessibility to the capital market for raising funds, added Mr Shah.
Crompton Greaves has paid a 110% dividend so far in the current year, compared to 100% in ’08-09 and 80% for ’07-08. The company reported a net profit of Rs 386 crore on sales of Rs 3,666 crore for the nine-month period ended December 31, ’09, compared to Rs 397 crore and Rs 4,659 crore, respectively, for the year ended March 31, ’09. Broking firm Anand Rathi Financial Services, in its recent research report, said Crompton Greaves has an adequate revenue visibility on account of the order backlog of Rs 6,100 crore and is expected to maintain its operating profit margin, which stood at 13.2% in April-December ’09, in future.
Engineers India is another major example where the state-owned consulting services major has paid a whopping 1,060% dividend (interim dividend of 1,000% and 60%) in the current year, compared to 185% and 110% in the previous two years.
According to analysts, the large dividend payout has been announced to benefit the government, which is the single-largest shareholder, ahead of divestment of the company. The government holds 90.4% in Engineers India, while institutional investors, including FIIs, own a 6.4% equity. Retail shareholding is only 2.7%. Engineers India reported a net profit of Rs 311 crore on sales of Rs 1,353 crore for the nine-month period ended December 31, ’09, compared to Rs 345 crore and Rs 1,532 crore in ’08-09.

Sensex logs seventh straight weekly gain

THEbenchmark index of the Bombay Stock Exchange (BSE) logged its seventh straight weekly gains, rising 0.5% on Friday to its best close in more than 11 weeks, with financials and automakers leading the gainers, while top moble firm Bharti Airtel declined. Firm Asian markets supported the gains.
The main index Sensex rose 0.4% this week, registering its longest streak of consecutive weekly gains since last June, buoyed by continued liquidity inflow and earnings optimism. Bharti Airtel fell as much as 2.7% as the leading mobile operator moved closer to wrap up its $9 billion deal to buy most of Kuwaiti Zain’s African assets.
The deal could push up the Indian mobile operator by four notches to be the sixth largest mobile firm in the world by customers, but the management and finances will be stretched. The 30-share BSE index Sensex closed 0.49% or 85.91 points higher at 17,644.76 points, its best close since January 6. Eighteen of its components closed in the green. “There are expectations that we will see good March quarter results,” said Jigar Shah, vice-president of equity sales at Motilal Oswal, a Mumbai-based brokerage.
“Also, foreign institutional investors (FIIs) have been consistently pouring funds, which has led to a liquidity-driven rally,” said Shah. Foreign funds have pumped in around $3.5 billion in Indian equities so far in 2010, a portion of which was absorbed by offerings in the primary market. If March quarter earnings fell short of expectations, it would negatively impact the market, dealers said. Financials gained on optimistic prospects in an advancing economy.
Top lender SBI rose 1.1%, while ICICI Bank and HDFC Bank gained 1.9% and 1.2%, respectively. Mortgage lender HDFC rose nearly 1%. Automakers rallied on expectations of robust sales for the current month. Top vehicle maker Tata Motors raced 3.4%. The 50-share NSE index Nifty closed 0.4% higher at 5,282 points.

Let a PMS provider take your investment call

THE way to wealth lies not merely in earning more, but in ensuring that you make your money work as well. In their quest to get their money to work harder, investors scout for options that offer best returns. Those who have time on their side and are confident of their investment skills choose their own stocks. Others leave that to mutual funds. But those who do not want to invest on their own and yet want more customisation could opt for portfolio management services. However, it is possible to get the best of both — professional advice and customised service only if there is scale, ie investments in the range of Rs 10-25 lakh. With the Indian equity markets coming of age, there is a plethora of choices. Competition among service providers has resulted in PMS being segmented in terms of investment style. Here’s a look at some of them:
TRADITIONAL PMS
Here, the fund manager builds a portfolio by buying stocks on the basis of fundamental research. The ‘go-anywhere’ strategy gives the fund manager enough leeway to take the optimal route for increasing wealth. The portfolio built could be merely large-cap in nature or small-cap in nature or a mixture of both. However, as we move ahead, there are specialisations in the money management business. Let us see how the offerings work.
VALUE INVESTING
It is a philosophy founded and developed by Sir Benjamin Graham and followed by the likes of Warren Buffett. It involves buying stocks which quote at a discount to intrinsic value. It is generally long term in nature and stocks bought here have to be held for as long as 3-5 years. “Those who want to buy something worth Rs 100, at a price substantially less than Rs 100 should go for this style,” says IV Subramaniam, CIO, Quantum Advisors. There are service providers available in the market who strictly go with Grahamian value investing principles. One can also come across money managers giving a thought to special situations arising out of delisting, buyback of shares, restructuring and turnaround of businesses.
QUANTITATIVE INVESTING
In this method, the fund manager uses quantitative models which are based on company fundamentals, accounting and economic data to build a portfolio of stocks for you. Although fairly successful globally, this is a new concept offered in India. “Investors looking for consistent, stable returns from large-cap equities should use this approach,” says Radhika Gupta, founder and director, Forefront Capital, which offers quantitative PMS to its clients in India. Quantitative investing, however, works well only with large-cap stocks, and hence, those looking for multi-faceted returns should not go for this style of investing.
TECHNICAL PMS
Portfolio managers now adopt strategies based on technical parameters or arbitrage opportunities. Pro Tech PMS of Sharekhan is one such scheme that invests using technical analysis. The idea is to offer absolute returns to the investor, irrespective of the market going up or down. The product called Nifty Thrifty is an index-trading mathematical model and tries to capture the direction of the market and aims at giving absolute returns to investors.
MONEY MANAGEMENT
“When the market turns bearish, it goes through various phases namely those of euphoria, denial, fear, panic. Similarly, there is denial, overconfidence and greed when the market moves from bear to bull markets,” says Shrirang Joshi, MD, Maia Financial Services, which has recently started offering PMS services to clients, using this as a technique.
A point to note is a good understanding of behavioural aspects offers the investor or money manager good entry or exit points. However, there is a need to back this entry or exit with a good reasoning based on fundamental or technical analysis. Generally, service providers here club behavioural investing with the fundamental investing.
There are fund managers who look at statistical tools such as correlation between various markets and various asset classes before taking macro calls. Pair trading is also prominent when it comes to short-term trading ideas. “With the advent of new products such as interest rate futures and currency futures, we are approaching the dawn of new money management game in the near future,” says an investment strategist with a foreign bank.

Bangkok NRI set to offload 14.55% in Catholic Syrian

CORPORATES nursing hopes of floating a bank may make a mental note that almost 15% shares of Catholic Syrian Bank (CSB) are about to change hands.
Bangkok-based NRI businessman Sura Chansrichawla, who controls around 24% of CSB shares, has lined up a string of non-resident investors to offload 14.55% equity of the bank.
Under the arrangement, Chansrichawla and his associates will sell a shade below 1% to each of the overseas investors, some of whom are based in Hong Kong and Singapore. The proposed transaction, which would involve physical transfer of non-demat shares, will lower Chansrichawla’s holding in the bank to a little below 10%.
“The deal is being structured in a way to conform to an earlier court ruling that any transfer of more than 1% CSB equity will require RBI’s approval... The stock will be sold at Rs 375-400 a share,” said a source familiar with the development. For other private banks, RBI approval is needed if 5% or more shares are bought by a single entity or a group of entities acting in concert. Under the circumstances, neither Mr Chansrichawla nor CSB will have to approach the regulator.
Interestingly, it’s learnt that a Delhi-based financial services group which has serious ambitions to enter banking, has been in touch with many of the buyers for a possible deal at a later point. “These individuals or offshore entities can be bought out if the concerned corporate receives the RBI approval,” said the source.
When contacted by ET, Sura Chansrichawla as well CSB managing director VP Iswardas declined to comment.
The Thrissur-headquartered CSB hit the headlines last year after the Catholic Church in Kerala stalled its merger with another southern bank, Federal. CSB, with its Rs 8,000-crore balancesheet, has 360 branches, of which 80% are in rural and semi-urban areas. Chansrichawla, who earlier sold around 4% stake to Federal and was looking for an exit, had backed the merger proposal. Discussions on the present transactions began shortly after the CSB-Federal deal fell through.
For Chansrichawla, this would be a more profitable deal than Federal which was willing to pay less than Rs 300 crore. The NRI businessman had also given a commitment to RBI that he would lower his group’s stake in CSB to 10% by March 31, 2010.
The matter is expected to come up before the CSB board when it meets later this month. Since the shares are in physical form, a change in ownership has to be ratified by a board committee. There would be other procedures like opening bank accounts for new buyers and getting the deal registered.

Sebi fiat may not impact bankers

THE Sebi fiat mandating institutional investors to pay 100% of the application money upfront for public issues from May 1 (against 10%), is unlikely to have a major impact on the float money that bankers to the issue receive. Also, with the market regulator looking to cut short the time frame for issues from the current 15-21 to around seven days, banks will have fewer days to use the float money.
Some of the foreign and public sector banks, that have large institutional investor accounts, will benefit marginally, say bankers. Currently, only high net worth individuals and retail investors bring in 100% of the money upfront.
Some of the main bankers to capital market issues are SBI, Citi, Kotak Mahindra Bank, HDFC Bank, ICICI Bank, HSBC and Axis Bank.
However, the perception is that with the ASBA (application supported by blocked amount) route eventully to be opened to FIIs, investors subscribing to a public issue will continue to earn interest on the application money as it remains in their accounts. This is not the case with other modes ofpayment. ASBA is an application for subscribing to an issue, containing an authorisation to block the application money in a bank account.
Foreign banks like Citi, HSBC and StanChart have most of the foreign institutional investors’ accounts while public sector banks have the accounts of the PSU insurance companies like LIC. The accounts of the Indian mutual funds and insurances are distributed between the private sector banks and foreign banks. “The net impact would be very marginal. The amount of float which flows in for the banks even now is insignificant. The float was larger from the retail side,” says Deepak Gupta, ED, Kotak Mahindra Bank.
Banks have to maintain 5.75% of their savings and term deposits as CRR and 25% in statutory liquidity ratio (SLR) with the RBI. “There is also a lag impact on banks to maintain the CRR and SLR. Banks sometimes have to borrow money to maintain the CRR and SLR as it had to be maintained a week after the money flows out,” Mr Gupta told ET.
However, bankers feel most institutional investors will henceforth come in at the fag end of the issue. But they are unclear as to how the new guidelines will impact anchor investors who currently have to bring in around 25% of the application money, a day ahead of the issue, with the balance amount to be paid on allotment.
“Most QIB interest will be back-ended. However, investors will henceforth indicate their real interest. This will improve the overall quality of demand,” says Debasish Purohit, director & head, ECM, BoA Merrill Lynch.
Ravi Kapoor, MD and head of South Asia-capital markets origination, Citi, also agrees that the demand will be more back-ended and investors will bid at realistic levels. He adds, “The level of over-subscription will come down. It’s not the question of float money. Sebi has tried to create a level-playing field for all investors. Further, as a next logical step, Sebi will also look to reduce the timelines for listings so that investor money is not held up.” He adds, “Anchor investors will also have to bring in upfront money.Valuations will reduce to reasonable levels and oversubscription will be moderate. Also, the percentage of people using ASBA will be high as institutional investors are more likely to use it than retail investors.”

Trading characteristics

Most traded currencies
Currency distribution of reported FX market turnover Rank Currency ISO 4217 code
(Symbol) % daily share
(April 2007)
1 United States United States dollar USD ($) 86.3%
2 European Union Euro EUR (€) 37.0%
3 Japan Japanese yen JPY (¥) 17.0%
4 United Kingdom Pound sterling GBP (£) 15.0%
5 Switzerland Swiss franc CHF (Fr) 6.8%
6 Australia Australian dollar AUD ($) 6.7%
7 Canada Canadian dollar CAD ($) 4.2%
8-9 Sweden Swedish krona SEK (kr) 2.8%
8-9 Hong Kong Hong Kong dollar HKD ($) 2.8%
10 Norway Norwegian krone NOK (kr) 2.2%
11 New Zealand New Zealand dollar NZD ($) 1.9%
12 Mexico Mexican peso MXN ($) 1.3%
13 Singapore Singapore dollar SGD ($) 1.2%
14 South Korea South Korean won KRW (₩) 1.1%
Other 14.5%
Total 200%
There is no unified or centrally cleared market for the majority of FX trades, and there is very little cross-border regulation. Due to the over-the-counter (OTC) nature of currency markets, there are rather a number of interconnected marketplaces, where different currencies instruments are traded. This implies that there is not a single exchange rate but rather a number of different rates (prices), depending on what bank or market maker is trading, and where it is. In practice the rates are often very close, otherwise they could be exploited by arbitrageurs instantaneously. Due to London's dominance in the market, a particular currency's quoted price is usually the London market price. A joint venture of the Chicago Mercantile Exchange and Reuters, called Fxmarketspace opened in 2007 and aspired but failed to the role of a central market clearing mechanism.
The main trading center is London, but New York, Tokyo, Hong Kong and Singapore are all important centers as well. Banks throughout the world participate. Currency trading happens continuously throughout the day; as the Asian trading session ends, the European session begins, followed by the North American session and then back to the Asian session, excluding weekends.

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Gold Outlook 2010

Gold prices surged higher in 2009 as part of broad commodity rally and USD decline, culminating in a classic parabolic advance in October/November, followed by a 10+% collapse in December. Given ongoing concerns over sovereign and corporate debt burdens globally, we think gold prices are most likely to remain relatively elevated, and we do not expect gold prices to see much below the $850/900/oz. level. By the same token, we anticipate an extremely benign inflation environment in 2010 together with a broadly stable, though relatively weak, USD, which should work to limit gold's upside to the $1200/1250 zone.
Economic Analysis: The traditional drivers of gold prices are inflation, inflation expectations and the perceived value of the USD and other fiat currencies. Gold is also frequently viewed as a safe haven refuge in times of financial market turmoil, though that effect failed to materialize during the worst of the 2008 upheaval, but was apparent during the 1Q 2009 market relapse. Overall, on inflation we think a weak global recovery, undercut by consumer deleveraging and high and rising unemployment across most of the G-10, will restrain inflationary pressures throughout 2010. In the US, the December Univ. of Michigan consumer sentiment survey foresaw a 2.1% inflation rate over the next 12 months and a 2.6% inflation rate over the next five years. European and UK inflation forecasts are similarly benign while Japan has recently slipped back into deflation. Only in the event of an unexpectedly stronger global recovery would inflationary pressures come into play.

Fiscal and credit concerns are likely to be the most supportive factors for gold prices, but even here, we expect them to be less of a factor as 2010 wears on. In the second half of 2009, speculators focused on the high level of deficits and overall debt in major economies and began to question the inherent value of major currencies and gold appreciated steadily. However, recent events (credit rating downgrades to Greece, the Dubai debt standstill and the nationalization of a regional Austrian bank) coincided with a sharp drop in the price of gold. Rather than propelling gold to further heights, increased risk aversion had the opposite effect on gold, suggesting speculative forces were primarily behind the run-up in the yellow metal. Indeed, according to the COTR for Dec. 15, 2009, speculative gold net longs were only slightly below all-time highs of 262,000 contracts, despite a nearly 10% decline in price. As stimulus efforts wind down in early 2010 and governments move to more fiscally sustainable policies into the end of the 2010 and into 2011, the appeal of gold as an alternative to currencies will continue to diminish. As well, global central banks will move to withdraw extraordinary accommodation and eventually tighten lending rates later in the year, raising the relative cost of carry of gold vs. currencies (it costs to own gold, while FX investors can earn once rates begin to rise, eliminating gold's free ride vs. zero interest rate currencies.) As such, we think gold supportive factors will fade into the second half of the year, and so we would bias the risk to greater downside potential for gold prices.

In terms of supply and demand, high nominal gold prices continue to see scrap gold add to overall supply, in addition to mines and refineries working in overdrive. Conversely, demand for jewelry remains under pressure due to high relative prices and restrained consumer spending. Demand is still strong among speculative and physical investors, but the risks here are biased lower should the global economic recovery prove more resilient than expected. Finally, near-record high speculative long gold positioning also biases the risks to the downside, as there has been only minimal reduction in the face of an 11.4% price retreat in December, leaving open the potential for a larger position exodus.

Technical Analysis: Gold made a significant medium term high in early December just above $1225/oz and has since retreated over 10% from that high. Immediate resistance is in the 1125/30 area, followed by 1150. Initial support comes in at 1070/73 October market highs, which coincides with the base of the Ichimoku cloud at 1067 (but rises sharply in coming weeks). Below 1065/70 exposes the 1020/25 September highs, and then the 1000 psychological support level , which sees the 200-day sma just below at 988 currently. We think there is further downside corrective potential to the 1020/25 area early in 2010 as overstretched longs exit. From that level, we would look for some consolidation and perhaps for a new base to build, but we would not hold longs should price drop below the 975/980, as that would suggest a further decline to the lower end of our expected range at 850/900.

Silver Outlook

We think silver is uniquely positioned to continue its stellar rally in 2010. Valuations compared to gold remain extremely attractive, demand from the investment community is robust and the metal's industrial demand will rise as the global economy recovers. Our base case is that silver has potential to trade well above $20 in the year ahead.

Silver has markedly outperformed gold over the last year, turning in a stellar 53% year/year return through December compared to a 30% gain in the yellow metal. We do not expect this to change in 2010 and look for the value of silver relative to gold to continue to track higher. Gold is currently valued at 65 times that of silver. Next year we expect this ratio to revert back to levels that dominated between the better part of 2006-2008. In other words, a gold to silver ratio of about 50. Taking our expected range for gold into account, at $1050/1250, this would mean silver returning to a zone closer to $21/25.

The speculative position in silver is a net long 43,000 contracts as per December 11, a -20% decline from the nearby October highs. Thus unlike gold, silver is not at an extremely overbought level at the moment. And while gold has clearly staked out new all-time highs, silver remains well below its post-1980 record of $21.34 set back in 2008.

The industrial application of silver relative to gold is another factor that will lead to an outperformance of the former in the year-ahead. The latest data available show that 54% of total silver fabrication goes to industrial applications. The amount used for coin and metal production is a mere 8%. As such, even a flight away from silver as a safe haven asset would not necessarily dent prospects for higher prices. With the global economy conservatively expected to expand 3.1% in 2010 (IMF projections) and most of that growth coming from developing nations, silver is in a unique position to prosper.

The growing middle class in the developing world will have a budding appetite for things where silver is a critical component, with little possible substitutes. Most notable is silver's use in the electronics space. Including but not limited to silver membrane switches (used in buttons on televisions, telephones, appliances), printed circuit boards (used in phones, computers), and plasma display panels (computers, televisions). Thus it should not surprise anyone that silver and the S&P 500 Technology sector both enjoyed 50% gains in 2009 (compared to 22% for the overall market). Should the tech sector revisit even the recent 2007 highs, this should put silver prices comfortably back above the $20 zone.

To any view, there are of course downside risks. Thus we will provide some technical levels to keep in mind as 2010 kicks off. For support, we are focusing on a daily up-trendline and the 100-day moving average which converge in the $16.60/50 area as of this writing. A daily close below this zone would open up potential towards $15 on the follow. The upside is likely to be challenged first and foremost at the $18 level, which looks like a very good pivot on the daily charts (multiple highs/lows around there). Daily trendline resistance then comes in near $19.50 and above there would target the $21.34 high back to March 2008.

Oil Outlet 2010

OPEC latest forecast predicts that energy demand in 2010 will increase by 800,000 b/d. This is 70,000 barrels a day stronger than the forecast made by OPEC in November. We believe this news only lends modest support to what still is a weak fundamental position for oil. The fact that the USD is showing signs of a cyclical recovery also suggests that oil prices could be pressured lower in 2010.

Inventories in developed countries have been above the seasonal average for many months. Despite persistently high levels of inventories, oil rallied this year between February and late October in tune with the general upswing in risk appetite. We feel the rise in prices was out of step with the ample supply and suggests that optimism, with respect to the strength of the global recovery, is likely overstated by the price even in consideration of OPEC's latest upwards revision in demand. Unemployment in the US has risen to above 15 mln, this is more than double the 7.4 mln registered in the spring of 2008 while oil prices were only around 30% softer than they were in April 2008. As in many other countries, US unemployment is likely to rise further before recovering. Growth returned to the US in Q3 2009. However, this would have been almost non-existent if it were not for the government's fiscal support. In 2009, the US will be one of just a handful of countries in the G40 to suffer a double digit budget deficit/GDP ratio. Fiscal expenditure will have to be reined back not just in the US, but in the UK and in many Eurozone countries in the New Year. The combination of very high unemployment and the reined back of fiscal incentives is consistent with our view that growth in the US, Eurozone and the UK will remain below trend at least through 2010 and that prospects for a recovery in energy demand by OECD countries in general are low.

The USD index has strengthened by around 5% during December 2009. This coincides with a modest increase in expectations about Fed policy tightening but we believe it is also a response to a generous credit facility by the BoJ and a reaction to bad news related to budget deficits and creditworthiness in the EMU region. We feel there is still a huge amount of political will in the Eurozone and in Japan in favour of a stronger USD which is likely to affect policy decision of both the BoJ and the ECB during 2010 and beyond. It is possible that the USD index will steer away from its recent lows in the coming months 2010 and this should cap upside potential of oil prices and other USD denominated commodities and least through the early stages of 2010. Later in 2010, the likelihood that the Fed will precede the ECB and certainly the BoJ on the issue of interest rate hikes could reinforce the better tone of the USD index.

We think the prospect of a slow recovery in oil demand from OECD nations in 2010 and the prospect that the USD may have begun a cyclical recovery vs. the JPY and the EUR should cap the upside potential of oil prices into 2010 and opens the potential for a downwards correction back towards the USD60 /b.