Change On The Cards

The markets have indeed performed quite well since the beginning of this year. The government has kept up with the pace of reforms it had initiated a couple of months ago. Its latest move of allowing free pricing of diesel by OMCs will go a long way in controlling the fiscal deficit. The corporate results too have been very encouraging, with companies managing to beat or at least perform in sync with market expectations during the December 2012 quarter. So, as far as the markets are concerned, there does not seem to be any short-term trigger that could put them under pressure. This is evident from the way the frontline indices have been moving up and are now poised at kissing distance from their lifetime highs.

The Sensex has breached the 20000 mark for the first time since September 2010, while the Nifty has been trading within a range, not coming off much from the 6000 level. We expect the good times to continue and the markets to breach their all-time highs soon. While all this is happening, there is one very important set of developments that have gone unnoticed so far – the upheaval in the capital market scenario.

For over 117 years, the Bombay Stock Exchange had functioned as the nerve centre of India’s capital markets. In came the NSE in 1992, and the first wave of change swept across the ecosystem. 21 years later, we are once again at a juncture which could well be yet another turning point in this marvellous history of capital markets in India. After a very long time, stock exchanges as an important intermediary are the focal point of discussions in the financial circles.

Two of our premiere exchanges, which together have served the interest of investors and capital seekers for well over a century, are witnessing a change of guard. While all eyes are fixed on what the new leaders can and will do to take these institutions up the value chain, there is now a new challenger in the fray. MCX, after having proved its ‘metal’ in commodity trading, is poised to enter the equity space very soon. A whole lot of churning is expected to happen following these developments. We take you through the present state of the markets and suggest what we expect should happen in order to further strengthen the edifice of our capital markets.

Over the past month or so, I have personally read at least a dozen news reports of the UAE-based Etihad Airways planning to buy a stake in any of the Indian airline companies – at times, there is talk of Kingfisher and at others it is Jet. Etihad hasn’t yet made up its mind and on whom to go with. Will it, won’t it? Read our special report on the state of the Indian aviation industry.

As usual, we also bring to you two scrips to meet your fundamental investment needs. We have selected Bank of Maharashtra as our Low Price Scrip for this fortnight, while Amara Raja Batteries is our Choice Scrip recommendation. Both these companies have done well to maintain a strong position in their respective industries and have sound growth prospects. Read why, and invest now to benefit later.

The time to plan your taxes is nearing. We bring to you a special report on how insurance can be used to save taxes along with how much of insurance you should ideally buy. Both would certainly help you in planning year end insurance buying in the proper manner.

I must draw your attention to a very important initiative that we have kicked off from this issue onwards. There is a window allowed by the RBI through which Indians can invest upto USD 200000 in markets abroad. I am sure many of our readers would want to benefit from this but have not had the wherewithal to do it. We begin with providing you insights on the Asia Pacific markets through our new ‘Invest Abroad’ column, which will guide you on how to benefit from the geographical diversification.

The next fifteen days will be very critical. The RBI meets on the 29th of January to release its third quarter review of the monetary policy for FY13. Will the Governor blink on the interest rates this time at least? Hopes are running high, and there is a pressing need to do so. By the time I write to you again, we would have gone through the crest or trough of this event, as the case may be. Until then, we will continue to guide you on the market front so that you can book profits.