Markets surge,worries growing

Despite finance minister Pranab Mukherjee’s statement announcing no tax liability on the P- Notes holders, muddling remains in the markets.


THE week ended March 30, witnessed the BSE Sensex closing  at 17,404 points (up by 2%) and Nifty index at 5,295 points (up by 2.3%).  The rise followed when the Reserve Bank of India (RBI) intervened on Friday as the apex bank surprisingly engaged itself in bond purchases. Through this RBI move, the lenders gained as this is helping to inject liquidity into the sector.
 All 14-sectoral indices closed higher on the BSE. Banks (2.5%), metals (2.6%), energy (2.8%), realty (2.6%), auto (2.3%), IT (2.2%) and PSU (2.6%) stocks witnessed the biggest gains.
 Quarterly analysis of the markets reveals that the banking sector has been one of the top performing sectors for the quarter, as it surged 28 percent during the period (January – March). Overall, the Sensex rose 12.6 percent during the quarter. However, the month of March remained volatile. The market men see the markets to remain volatile in the short term as uncertainties from global and domestic front are emerging in bits and pieces at regular intervals.
 Even as the markets surged after registering consecutive five week losses, the markets cannot be predicted on positive note. Last week we observed nervousness in the markets over the lack of clarity on the general anti-avoidance rule (GAAR), which will come into force from today (April 1). Apprehensions continue that participatory notes (P - Notes), which account for a major chunk of investments into Indian stock markets, may be targeted under these provisions.
 Notably, foreign investors have bought a net of 460 billion rupees so far in 2012 in the markets here.
 Finance Minister Pranab Mukherjee while trying to remove these apprehensions said there will be no tax liability on Participatory Note holders. This announcement brought some momentum in the markets. “The question for liability of tax in India on P-Note holders would not arise. The necessary clarification would be issued in due course,” said the finance minister.
 But this is a temporary relief. Market men call the finance minister’s statement not having legal sanctity, so the apprehensions will continue to remain among investors. If the apprehensions brought in by the P-Note issue are to be removed permanently, then prescriptive guidelines should be issued immediately. Otherwise, the underline message is that the element of fear will remain in the market.

 Investor scenario in our state as compared with the rest of India such as markets in Mumbai and New Delhi, is still quite primitive and investors are often unaware of the investment opportunities in the market vis-à-vis their quality. Most of the investors here have lost their money in the market when their counterparts in other parts of India were booking hefty profits.
 Why they suffered losses even when the Sun was shining? Local investors lack discipline as far as making an investment decision is concerned. They treat investing in stock market as a short cut to become millionaire. They have developed a habit of hearing stories of persons who have made gains in the market. But turn a deaf ear to those who have suffered huge losses. Isn’t better to listen carefully to those who suffered losses? These stories can become eye opener for them on the fronts where an investor is trapped and registers losses. The most important thing is to overcome the element of fear or greed. This will guide them to sustain in the market for a longer period and make winnings on their investments.
(The views are of the author & not the institution he works for.

Lastupdate on : Sun, 1 Apr 2012 21:30:00 Makkah time
Lastupdate on : Sun, 1 Apr 2012 18:30:00 GMT
Lastupdate on : Mon, 2 Apr 2012 00:00:00 IST

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