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Mumbai: Sundaram BNP Paribas Mutual Fund (MF) has launched a select thematic fund, PSU Opportunities Fund, an equity fund that would primarily invest in public sector companies. The units of the fund are priced at Rs. 10 apiece and will be open for subscription from November 25-December 23, 2009, reports Financial Chronicle.

"Public sector units (PSUs) are a direct play in the high-growth sectors of the Indian economy with added comfort of a large-cap profile. The listed PSU universe is marked by high-quality firms with clear ownership and business structures, focused business and robust financials. PSU firms enjoy a position of dominance in several sectors such as oil and gas, banking insurance, mining and utilities," said J Venketesan, the Portfolio Manager for the fund.

According to Sundaram BNP Paribas Mutual Fund, PSUs today account for about 30 percent of the market capitalisation on the National Stock Exchange (NSE) and stocks of such companies are likely to undergo a re-rating in the next five to 10 years. "We are looking to collect around Rs. 350-400 crore from the new fund offer," said Sunil Subramaniam, Executive Director, Sales and Marketing, Sundaram BNP Paribas Asset Management Company. The market cap of the PSU segment has risen from about Rs. 90,000 crore to Rs. 15,10,254 crore in this decade.

Mumbai: Indian equities markets shut shop Thursday on a downtrend, with a key index losing two percent or 344.02 points from its previous close even as the total turnover touched an all-time high of Rs.1.59 lakh crore.

The sensitive index (Sensex) of the 30-scrip Bombay Stock Exchange (BSE) opened the day at 17,199.05 points against Wednesday's close at 17,198.95 points, and closed at 16,808.87points. The stock chart for 52-week is given on left.



Around the same time, at the National Stock Exchange (NSE), the broader 50-share S&P CNX Nifty was ruling at 5,001.75 points against the previous close at 5,108.15 points, reflecting a loss of 2.08 percent or 106.4 points.

Broader market indices were also in the red, with the BSE midcap index down 1.41 percent and the BSE small cap index ruling 0.95 percent lower. The market breadth was negative, with 866 stocks advancing, 1,878 scrips declining and 69 remaining unchanged.

The British Pound retraced the previous day’s decline against the greenback and crossed back above the 20-Day SMA (1.6619) to reach a high of 1.6729, and the currency may continue to appreciate going into the North American trade as the economic docket reinforces an improved outlook for the U.K. Taking a look at overnight price action shows the GBP/USD tipped lower following the upward revision in the third quarter GDP report however, the pound-dollar remains higher on the day following the rise in risk appetite.

The preliminary GDP report showed economic activity weakened 0.3% during the third quarter amid an initial forecast for a 0.4% contraction, while the annualized rate slipped 5.1% from the previous year versus the 5.2% decline seen in the advanced reading. The breakdown of the report showed private consumption held flat from the second quarter, which topped forecasts for a 0.2% drop, while business investments slipped 0.3% versus projections for a 3.3% decline, and conditions are likely to improve throughout the remainder of the year as the expansion in monetary and fiscal policy continues to support the real economy. However, as policy makers see a risk for a protracted recovery, market participants speculate the Bank of England to expand its asset purchase program over the coming months in an effort to stem the downside risks for growth and inflation, and expectations for further easing is likely to weigh on the interest rate outlook as the central bank maintains an “open mind” for future policy.

The Euro rallied against the U.S. dollar for the third day and rose to a fresh yearly high of 1.5097 during the overnight trade, and the single-currency may continue to retrace the sell-off from the previous year as market participants raise their appetite for risk. As trader sentiment improves, we could see the EUR/USD work its way above 1.5100 over the remainder of the week as U.S. traders go off-line in observance of the Thanksgiving holiday, and thin trading conditions could spark increased volatility in the euro-dollar as risk trends continue to drive price action in the foreign exchange market. Nevertheless, the economic calendar showed consumer confidence in Germany unexpectedly weakened for the second month in December as the GfK index slipped to 3.7 from 4.0 in the previous month, and the data foreshadows a weakened outlook for private spending as households face a weakening labor market paired with tightening credit conditions.

The greenback weakened across the board, with the USD/JPY tumbling to a low of 87.56, and the pair looks poised to test the yearly low at 87.15 as equity futures foreshadow a higher open for the U.S. market. Nevertheless, personal spending in the U.S. is expected to rise 0.5% in October after contracting 0.5% in the previous month, while personal incomes are projected to increase 0.1% during the same period after holding flat in September. Moreover, durable goods orders are forecasted to rise 0.5% in October after advancing 1.0% in the previous month, while new home sales are anticipated to increase 0.4% after contracting 3.6% in September, and the data is likely to encourage an improved outlook for future growth as the economy emerges from the worst recession since the Great Depression.

The British pound lost 1 percent against the US dollar and nearly 2 percent versus the Japanese yen over the course of the past week as the minutes from the Bank of England’s November meeting led the markets to price in fewer rate increases over the next 12 months. The vote count showed that seven Monetary Policy Committee members voted to expand the Asset Purchase Facility (APF) by £25 billion to £200 billion, but one voted for no change while another voted to increase the APF by £40 billion. This suggests that the BOE may be open to expanding the APF later on, and evidence of this will only be amplified by disappointing news.

Looking to this week’s event risk, Tuesday’s data is expected to show that total business investment fell for the fifth straight period in the third quarter, this time at a rate of 3.9 percent. Declines generally don’t bode very well for broader growth, as companies that aren’t investing aren’t likely to be experiencing improved activity or hiring workers. On the other hand, the BBA’s measure of loans approved for house purchases is projected to rise for the seventh straight month in October to 44,000 from 42,088, signaling percolating demand and potentially, increasing prices.

On Wednesday, the second reading of UK GDP for the third quarter is anticipated to be revised slightly higher to a quarterly rate of -0.3 percent from -0.4 percent, and an annual rate of -5.1 percent from -5.2 percent. This will continue to reflect the sixth straight quarter of contraction, and the only way the British pound is likely to respond in a positive way is if GDP surprisingly rises on a quarterly basis. That said, traders also need to keep in mind that US markets will be closed on Thursday for the Thanksgiving holiday and will close early on Friday, and as a result, volumes will be lower than usual, which may contribute to either flat price movements or extremely choppy trade. The latter may dominate, though, as US-based event risk will be very high. From a technical perspective, FXCM SSI – a contrarian indicator – positioning recently flipped to net long, suggesting GBPUSD could be in for further declines. Additionally, the pair’s break below a rising trendline drawn from the October 13 lows and bearish weekly candle formation leads us to maintain a bearish outlook on GBPUSD.

The Japanese Yen outperformed last week as capital retreated from stocks, commodities and FX carry trades funded in the perennially low-yielding currency. A bland domestic economic calendar and thin liquidity conditions around the Thanksgiving holiday in the US promise more risk-driven volatility ahead.

Although scheduled event risk is ample on next week’s Japanese data docket, the market-moving potential of upcoming releases is limited at best. The Bank of Japan’s monthly report is unlikely to yield much more insight than traders already derived from the most recent interest rate decision. An up-tick in the jobless rate after three consecutive months of moderation coupled with parallel declines in retail trade and household spending will reflect now-familiar concerns about the ebbing effects of fiscal stimulus and should come as no surprise after the central bank’s constant admonitions about a weak consumption outlook. Likewise, another negative yearly consumer price index reading should not be shocking after both monetary and fiscal authorities acknowledged the economy had firmly retreated back into deflationary territory last week, with the BOJ adding that rising oil prices will offer help in that regard in the months to come.

The trajectory of risky assets seems likely to be a far more potent catalyst for price action. Although the earnings season is winding down, the US calendar offers a hefty dollop of market-moving releases that could shake things up on Wall St and consequently translate into Yen volatility. Most notably, the second revision of US third-quarter GDP is expected to be trimmed to 2.9% from the 3.5% initially reported, with at least some of the reduction accounted for by a lower personal consumption levels. Consumer confidence, new home sales, and durable goods orders data is also on tap. Thursday’s Thanksgiving holiday adds another dimension to the potential for sharp swings in prices, with any moves heading into the end of the trading week likely to be amplified by thin liquidity conditions and so make the realization of a break past key support and resistance levels that much more likely. This is especially important for USDJPY, where prices are flirting with trend-defining double bottom support in the in the 87.09-88.23 area.

There is a lot to watch when trading the euro in the days and weeks ahead. In the background, we have a withdrawal of stimulus that is starting to build momentum, developing interest rate expectations and concerns that the Euro-region economy will fall behind in the bid for recovery as government spending tapers off and exposes the true cut of the nation’s health. However, traders will more concerned with what is in the foreground. A range of notable economic indicators will offers some sense of predictability for volatility. But, the intense threat of an impending break and trend revival rests with intangible fundamental dynamics like liquidity and the influence of a domineering US dollar.

It should come as no surprise to any trader that risk appetite is the primary catalyst and fundamental fuel for the financial markets. After an eight-month trend founded largely on the investors’ need to reinvest funds and take advantage of a historical rally; we have seen confidence turn into hesitation and concern. No other currency translates this sentiment into price action quite like EURUSD does. A big-picture look at this pair shows an intact, rising trend of higher lows from March; but the past few weeks have turned to chop that is starting to develop an ominous bias. This unnatural sense of calm is reason enough to worry about a potential breakout this week; but aligned with the unusual market conditions that back this liquid pair up, the probability for a violent end seems far more remarkable. Though a true trend development will come on the basis of underlying sentiment, the currency market will likely take its cues from the US dollar – which has been battered for its safe haven qualities. Adding to the torrential calm, the US markets (adding the greatest single injection of liquidity in the world) is looking at an extended holiday weekend starting Thursday; and in turn, a full-week of notable economic releases will be condensed into just a few days. A constant application of event risk and shallow market depth may be the final ingredients for a breakout.

For its own part, the European economic docket is stocked with significant market-movers of its own. At the start of the week (before US liquidity drains), we will be offered a thorough reading of sentiment and growth. The German GfK consumer and IFO business confidence readings will define growth expectations into the months ahead. The former will be particularly important considering the German Finance Ministry recently suggested fourth quarter regional growth would slow from the strong third quarter showing owing to consumers’ efforts to retrench themselves as jobs and wages recede. Perhaps the most visible release of the week, the second (final) reading of 3Q GDP will offer much needed detail on the health of the various sectors. It is important to weigh how much of the recovery to this point is on the back of German citizens, businesses, trade and government. However, trumping the quarterly figure for timeliness, we will also see the first measurements of the November PMI figures. Though they cover predominantly service and manufacturing based activity, it is considered a good gauge for broader growth. Then, after the US markets close up shop early, euro traders will have many more notables including German CPI and Euro Zone confidence readings for most of sectors.

In the above mix of scheduled and unscheduled risk, we will likely find the break in EURUSD – whose liquidity alone will likely carry those other euro crosses that don’t already have a direct link to risk along with it. However, we should not lose sight of the big picture. After we see a meaningful reversal in speculative influences, the influence surrounding forecasts for growth and interest rates as well as efforts to improve fiscal health will likely gain prominence.

The US Dollar finished the week higher against all major currencies except the Japanese Yen, but the downtrodden currency failed to break key range highs against the Euro and other important counterparts. Forex markets remained highly indecisive and traders were seemingly unwilling to bust the Euro/US Dollar exchange rate from its multi-week range. Our DailyFX 1-Week Volatility Index continues to trade near its lowest levels of the year, and it seems FX Options traders are pricing in similar range trading for the holiday-shortened trading week ahead. A number of historically market-moving economic releases may nonetheless force sharp intraday price moves through mid-week trade—especially given the state of relative unease across key asset classes.


The North American Thanksgiving holiday means that markets will likely become illiquid through later-week trade, but earlier-week price action could produce big US Dollar moves on several important reports. The first on the ledger is the admittedly unpredictable Existing Home Sales report, which often goes unnoticed but occasionally produces great equity market volatility. The following day brings the second release for Q3 Gross Domestic Product figures, Conference Board Consumer Confidence survey results, and the minutes from the Federal Open Market Committee’s most recent policy-setting meeting. All three events have been known to force considerable moves in the S&P 500 and US Dollar, and it remains important to watch for surprises from each.

Fed Chairman Ben Bernanke recently shook US Dollar markets when he said that the Fed was paying close attention to exchange rate moves. Markets will pay very close attention to any and all references to the US Dollar through the Fed’s discussions—especially as the Greenback trades near significant lows versus the Euro and other key counterparts. We admittedly put low odds on any explicit mention of the US Dollar in the Fed minutes, but such low expectations could make for extensive volatility if we do see the Fed talking the dollar higher. Suffice it to say, traders should be on the lookout for post-Fed financial market price moves. Personal Income and Spending, Durable Goods Orders, and New Home Sales reports round out the week of significant US Dollar event risk. Any one of these releases could likewise spark big moves—especially in the relatively illiquid trading session before the US holiday.

The US Dollar remains in an uneasy range against major counterparts, and exceedingly low volatility expectations suggest that it may remain restricted through the week ahead. Many weeks ago we argued that extremely one-sided FX Futures and Options positioning meant that a substantive US Dollar correction was inevitable. We have indeed seen the Greenback bounce off of range lows, but positioning has subsequently corrected and does not necessarily point to further Dollar gains. This leaves us in a very uncertain position, and we may need to wait for a large shock across financial markets to force substantive shifts in trends. FX Options put low odds on any such occurrence in the week ahead, however, and low volatility expectations leave markets primed for further range trading.

New Delhi: Now, for investors who want to invest in mutual funds but are in two minds on investing in the product through fund managers. Securities and Exchange Board of India, the market regulator, has decided to allow mutual funds to be traded on stock exchanges so that more investors can access them and have a basket of various categories of securities to get assured of maximum returns.

"It is a positive development and an enabling decision by Sebi for an additional way of buying mutual fund schemes. It will facilitate the geographical reach for mutual funds. However, the effectiveness of this channel for scheme distribution remains to be seen in the days ahead, said Dhirendra Kumar, Chief Executive of Value Research Online.

The guidelines are already there for sellers of mutual fund products. They include agents' qualifications, the investor redressal mechanism, stamping and also monitoring by Sebi for appointment of intermediaries for selling mutual fund products. With all this, stock brokers intending to extend the transaction in mutual funds through stock exchange mechanism need to comply with the requirements specified by Sebi for passing the Association of Mutual Fund Investors (AMFI) certification examination.

In the new system, investor grievance mechanism for stock exchanges shall provide for investor grievance handling mechanism to the extent they relate to disputes between brokers and their client in case of mutual funds.

This step has been taken with an aim to use the infrastructure of stock exchanges that already exists for the secondary market transactions in over 1,500 towns and cities, through over 2,00,000 stock exchange terminals, for facilitating transactions in mutual fund schemes.

The Swiss Franc ended the week higher against the U.S. Dollar and the Euro, with the USD/CHF continuing to push toward parity as the pair slipped to a low of 1.0034, just 2pips shy of the yearly low at 1.0032, and low-yielding currency is likely to remain range-bound over the following week as investors weigh the outlook for future policy. SNB member Thomas Jordan reaffirmed the central bank’s policy stance during a speech earlier this week and said that the board has reached its goals and does not see any reason to shift policy as it aims “to support an economic recovery during a difficult phase without low rates and an elevated liquidity creating an inadequate evolution.”

In addition, Mr. Jordan continued to voice his concern about the marked appreciation in the Swiss franc, stating that “the exchange rate has quite an important impact” on the economy, and went onto say that the central bank’s efforts to stem the rise against the euro were largely “successful.” Moreover, the board-member said that central bank will look to normalize policy over the medium-term as conditions improve, but noted that the outlook for the global economy remains highly uncertain and pledged to support the economic recovery in the short run. At the same time, SNB Governor Jean-Pierre Roth expects to see weaker growth following the crisis, and said that the slump in employment remains a concern as growth prospects remain subdued. As policy makers maintain a cautious outlook for the region and vow to prevent a further appreciation in the exchange rate, the low-yielding currency may continue to trend sideways as investors weigh the prospects for another SNB intervention. Nevertheless, the economic docket for the following week could stoke increased volatility in the Swiss franc cross rates as the Swiss National Bank holds an improved outlook for growth and forecasts GDP to expand at an annual rate of 0.4% in 2010 amid an initial forecast for a 0.4% contraction.

The British Pound survived a week of fairly lackluster fundamental developments to trade marginally higher against the US Dollar, but a busy week of economic event risk may pose further challenges for the UK currency in the week ahead. Early-week news that Fitch Ratings took a “cautious” view on its outlook for the UK Government Bond’s AAA sovereign rating rattled markets and sent the Sterling instantly lower. The following Bank of England Quarterly Inflation report expressed a similarly cautious outlook for economic growth, and it seemed like the GBP was headed for a break of key support against the US dollar. Yet traders clearly had other things in mind, and the GBPUSD held key technical levels through the week’s close. Whether or not the pair can sustain its defense will likely depend on key event risk in the days ahead, setting the stage for another eventful week of British Pound price action.

Consumer Price Index numbers and mid-week Bank of England monetary policy minutes will likely be the major highlights in the week ahead, but traders should likewise keep an eye out for late-week UK Retail Sales results. Inflation and BoE outcomes will almost certainly cause volatility in UK interest rate expectations and—by extension—the British Pound. The currency rallied sharply through the Bank of England’s most recent interest rate announcement as officials boosted Quantitative Easing measures by less than expected. Traders will want to see the voting for that decision and general commentary on the future of monetary policy, while the previous day’s CPI data will likewise play a large part in determining monetary policy forecasts. Current consensus forecasts call for a modest rise in year-over-year inflation rates, and it is admittedly difficult to handicap likely reactions to the event. Lofty expectations for later-week Retail Sales numbers, on the other hand, leave large room for disappointment.

The British Pound has thus far been able to hold key technical and psychological support versus the Euro and US Dollar, but traders’ resolve will likely be put to the test in the week ahead. We have long called for GBP outperformance versus the Euro on clear sentiment extremes. According to US CFTC Commitment of Traders data, Non-Commercial traders remain fairly heavily long the EUR/USD and short the GBP/USD—giving us a fairly bearish EUR/GBP bias. Yet positioning has thus far eased considerably from previous extremes, and the British Pound is at clear risk for losses on continued disappointments in domestic fundamental developments. All else remaining equal, we expect the British Pound to break the psychologically significant 0.8900 mark against the Euro, but our forecasts will likely be put to the test in the week ahead.

Continued S&P 500 rallies made the safe-haven Japanese Yen the second-worst performing G10 currency to finish the week’s trade, finishing higher only against the similarly-downtrodden US Dollar. All major world equity indices finished anywhere from 2-3 percent above their weekly open except for the Japanese Nikkei 225—raising serious doubts on investor demand for Japanese financial asset classes and reflecting poorly on the domestic currency. Indeed, the fundamental arguments for Japanese Yen strengths are becoming increasingly scarce—especially through times of healthy financial market risk appetite.



Week in and week out, we have repeated that financial market risk sentiment and the trajectory of the S&P 500 would be the major determinant of USDJPY price action. Yet the US Dollar has actually taken top-billing as carry trade funding currency as it now carries the lowest overnight yield of any major world currency. The truly substantive shift in interest rates has meant that the USDJPY’s correlation to risky assets has fallen considerably from its heights, and it is admittedly unclear whether the USDJPY would decline on S&P 500 tumbles. In fact, the rolling correlation between the US Dollar Index and S&P is very near record-highs—emphasizing the Dollar’s sensitivity to risk sentiment.

The Japanese Yen may subsequently struggle to find a bid against the US Dollar as it trades near substantive highs. The confusing US Dollar/Japanese Yen links to risk sentiment likely explain low volatility expectations for the currency pair, and it seems traders are pricing in range trading for the often fast-moving USDJPY. This stands in fairly stark contrast to volatility expectations for other major currencies—theoretically providing safe haven for range traders and scalpers in the week ahead.

The dollar was able to manage its most aggressive rally against its chief counterpart (the euro) in months this past week; but the move would not last. Without a scheduled or unscheduled event to dramatically alter the dollar’s status in the well-worn carry trade, risk appetite would ensure the currency would remain shackled to its eight-month old bearish trend channel. Looking out over the week to come, the most pressing question for any trader is determining if and when the greenback will finally catalyze its next trend. Some may argue that direction is the primary concern; but without momentum and follow through, the result is fundamental chop that leaves the market open to volatility while slowly building up the pressure behind the eventual breakout. So, is there potential for a clear, dollar trend in the week ahead?

While there are a few notable economic indicators scheduled for release over the coming days, the experienced fundamental trader knows there is a low probability that any one (or very likely all of data working in conjunction) could actually leverage such a meaningful change of trend. These indicators’ principal value is in establishing the forecasted pace of economic recovery and, to a lesser extent, offering minor adjustments to the Fed’s time frame for a return to a hawkish policy regime. However, those following the dollar know that the asset’s primary role is as the safe haven and funding currency for the broader market. Therefore, the analysis on this single currency’s future turns into an assessment of overall risk appetite through the global financial markets. Taking a more expansive look at sentiment, there seem to be few scheduled events or indicators that can spark fear or greed all on its own. In fact, the quality of the data is all-in-all relatively reserved. Somewhat counter-intuitively, these may be the ideal conditions to reestablish a true bias. Often times, when there is a major market-moving event due; price action leading up to its release is muted as traders do not want to leverage risk by increasing exposure. What’s more, if the news doesn’t fall far from forecasts or it otherwise doesn’t play into the larger market themes; a modest increase in volatility is all it can rouse. More often than not, it is those times when the docket is otherwise unencumbered that we see sentiment build momentum and define new trends.

Through the coming weeks and months there is little doubt that risk appetite will define the dollar’s future. However, eventually this negative correlation will eventually fade. To break from the all-consuming fundamental current, the greenback will need to shed its role of the market’s safe haven and funding currency (depending on whether optimism or pessimism is the primary temperament at any time). Altering this brand will be difficult; but a shift in interest rates (target and market) and/or the fiscal health of the US can do it. Currently, the benchmark market rate, the three-month Libor, is at a discount to its Japanese counterpart (history’s favored carry trade component) at 0.2725 percent. A major shift in capital flows into the US or an accelerated timeline for Fed rate hikes can change this. To increase the tepid probabilities of a near-term rate hike (there is a mere 5.7 percent chance for January 27th and only 44 percent probability for June 23rd according to Fed Fund futures), we will take note of the week’s economic offerings. Retail sales will serve as a barometer for consumer spending (accounting for approximately three-quarters of GDP) and the October CPI numbers will reveal whether there is any merit to hawkish concerns through fears of looming inflation.

Mumbai: Sensex closed the week after registering a gain of 262 points amid fluctuations present during the period. The bourses witnessed the growth because of the strong quarterly results, continued buying action and strong worldwide signals.

The 30 share index, Sensex marked its closure at 16,158.28, up 1.64 percent, while Nifty posted a gain of 84.45 points at 4,796.15 during the same period. During the week, mid-cap scrips gained 240.06 points to 6254.36, whereas small-cap shares surged 112.22 points to 7,170.94.

Among sectoral indices, public sector units (PSU) index surged 4.69 percent, realty zoomed 4.35 percent, metal increased 4.06 percent, banking index gained 3.79 percent, auto rose 3.34 percent and healthcare profited 3.27 percent. In contrast, the FMCG index dropped 1.56 percent in the 30-share index.

Festival period along with lower rate of interest rubbed its effect on the country's auto business as demand for cars as well as bikes remained healthy during the last month, with most of auto biggies registering a strong double digit increase in sales.

The Madras Stock Exchange (MSE) has joined hands with National Stock Exchange (NSE) to permit its members to trade openly on the NSE stage. On November 6, the first day of trading last week, 10 companies had registered in this initiative.

The administration declared a big push for PSU withdrawal on Thursday. All PSUs, which are listed and earn profits, will have to drop off about 10 percent equity stake. Incomes from the divestment are likely to help lessen the country's fiscal deficit that is projected to hit Rs. 4,000 billion by the end the current financial year.

Bangalore: In the week ended November 6, AIG World Gold Fund tops the mutual fund (MF) scheme with a growth of 5.39 percent. The current net asset values (NAV) of the fund is Rs.11.54. Ruchir Parekh is the Fund Manager of this open ended scheme, which had a market size of Rs.264.46 crore as on September 30, 2009.

The primary investment objective of the scheme is to provide long term capital appreciation by investing predominantly in units of AIG PB Equity Fund Gold. The scheme may, at the discretion of the investment manager, also invest in the units of other similar overseas mutual fund schemes. The scheme may also invest a certain portion of its corpus in debt and money market securities and units of debt schemes of mutual funds, in order to meet liquidity requirements from time to time. According to mutualfundsindia.com, other funds which followed AIG Gold Fund in top list for the last week are Birla Sun Life Commodity Equities Fund, Tata Life Sciences and Technology Fund, DSP BlackRock World Gold Fund and Birla Sun Life Mid Cap Fund with a growth rate of 5.29, 5.09, 5.03 and 4.63 percent respectively.

For many of us who have been investing in financial instruments, the relentless rise of old poses a problem because we have no easy framework in which to think of gold. Till as recently as a couple of years ago, gold lived in a completely different world from stocks, funds and debt products. There was no easy way of investing in gold except for buying it as jewellery or coins and bullion trading was a mysterious world that was inhabited by a different set of species altogether. Gold investing was very much an out-of-sight and out-of-mind phenomena.

However, it is undeniable that many investors have started buying gold-backed securities of one kind of another as short-term trading opportunities. In the mutual fund space, there are actually two distinct kinds of gold-related funds available. One is the straightforward Gold ETFs. These closely track the price of gold itself and deliver profits and losses that mirror investing in physical gold. The others are a couple of equity funds (one from AIG and the other from DSP BlackRock) that actually invest not in gold but in foreign gold-related stocks, like gold mining and processing companies. Interestingly, these funds seem to act as sort of high beta versions of the gold price itself. Over the last one year, gold has gained 44 percent but these funds have gained more than twice that. Will the gold run last? If you look around, you will see as many cheerleaders as sceptics.

The British Pound was among the top performing currencies to finish the week’s trade, as relatively bullish fundamental developments helped push the currency from major bearish sentiment extremes. The highly-anticipated Bank of England monetary policy statement predictably shook FX markets, sending the British Pound immediately higher on unexpectedly limited actions from the central bank. The BoE expanded its Quantitative Easing measures by ₤25 billion to ₤200Bn—normally a bearish fundamental shift. Yet financial markets are all about discounting expectations, and consensus forecasts of a ₤50Bn change meant that the British Pound actually rallied on the news. Whether or not the GBP can continue recent gains may depend on the coming week’s employment numbers, but previously-extreme FX market positioning suggests that risks remain to the topside through the foreseeable future.


FX Options market volatility expectations remain elevated on what promises to be yet another eventful week of price action. Major highlights will likely include a Bank of England Quarterly Inflation Report and UK Jobless Claims Change results—both capable of forcing substantive moves in the British Pound. The recent Bank of England rate announcement underlined market sensitivity to any and all shifts in monetary policy. Fundamental trends have left BoE interest rate expectations in the middle of their 3-month range as markets are unsure of when the British central bank will withdraw its aggressive monetary policy stimuli. Much like interest rate markets we are unsure of what to expect from the often-unpredictable central bank. Yet we would advise that traders pay close attention to the upcoming Quarterly Inflation Report release. Any excessively dovish or hawkish rhetoric could easily force substantial volatility in forecasts and—by extension—the domestic currency.

UK Jobless Claims numbers are similarly difficult to handicap, but fairly bullish market expectations arguably leave the door open for bearish surprises. Current consensus forecasts call for the smallest unemployment gain in since May, 2008—likely a positive result for economic trends. The Bank of England is an inflation-targeting central bank and, as such, does not technically target unemployment rates. Yet one can reasonably be sure that the Unemployment rate is a major factor in the BoE’s decision-making process. If nothing else, any surprises in UK Jobless Claims numbers could force major moves in yield expectations.

The British Pound currently trades at fairly substantial technical resistance against the Euro and US Dollar. We have argued that previous bearish sentiment extremes would lead to a major GBP recovery, and we believe that a further correction in overextended positioning could force major breaks higher for the UK currency.

The euro is still the fundamental chameleon of the currency market. Without particularly stimulating forecasts for interest rates (hawkish or dovish) or an economic recovery that looks to keep pace with the US or Japan through 2010; the world’s second most liquid currency doesn’t have the kind of influence that can overcome volatility and trends that emanate from the partner in its various pairs. However, looking at the economic docket for the week ahead; we may finally have a round of European data that can finally distinguish the currency for its own fundamental prospects. On the other hand, this influential release is scheduled at the very end of the week; and late break are rare – trend development as liquidity is draining from the market is even more uncommon. Therefore, general risk appetite will once again have the most time with the euro as traders try to gauge their conviction in their speculative positions.

Though it is a long-term concern; the desire to diversify away from a heavy exposure to a volatile US dollar is a global one. And, as we can see through the IMF’s recent measure of the world’s central bank’s reserves, there is already a definable effort being made to lessen the single currency’s presence on balance sheets. In this fundamental change, the primary benefactor is without doubt the second most liquid currency: the euro. It is important to understand that this relationship doesn’t mean that we will have a significant shift from the dollar to euro in the next week, month or even year; but what it does mean is that these two currency’s are inextricably linked. And, the dollar is threatening a meaningful, bullish reversal after a month of congestion. There are a few factors that can turn the dollar; but the most likely culprit is risk appetite. Still among the top funding currencies in the currency market; the dollar has been drawn lower than economic fundamentals and interest rate speculation would alone suggest. This chasm between speculative and fundamental interest will likely be closed sooner than many expect; and we can be sure that the euro will lead the retreat as the dollar regains lost ground.

With that larger and ill-defined threat in the back of our minds, there is also a round of European economic data due this week; and the headline release is the first round 3Q GDP numbers. As suggested above, Friday is the worst day of the week to develop trends because liquidity fades as each session closes for the weekend. Nonetheless, if there is substantial shift in the data; the market will move whether everyone is there to participate or not (and if it is indeed meaningful enough, it can spark a trend that carries momentum well beyond a single day’s volatility). Looking at economists’ official forecasts, the German economy is seen growing 0.8 percent over the three months; France will have expanded 0.6 percent; and the entire Euro Zone is expected to push back into positive territory for the first time in six quarters with a 0.5 percent pickup. Considering the IMF is projection a meager 0.3 percent growth through 2010 and ECB President Trichet has warned that growth could be very frail; this data has the ability to charge bullish or bearish expectations.

Before we come to the main event on Friday, the economic docket will offer plenty of data to feed more timely expectations of activity and sentiment. The ZEW and Sentix investor confidence surveys will gauge the expectations from the most sensitive economic players. Industrial production and trade are also notable updates – which will be especially important for Germany who is heavily dependent on its manufacturing and export sectors for broader growth.

The US dollar was easily the weakest of the majors during the past week of trading as fed fund futures shifted to price in a lower chance of rate increases in mid-2010 after as the Federal Reserve left rates at 0.25 percent and indicated that they would likely leave rates “extremely low” for an “extended period.” The other factor to consider was the increase in risk appetite, as evidenced by the concurrent weakness in the Japanese yen (the other “safe haven” currency) and the 3 percent increase in the S&P 500 over the course of the week.

The continued correlation between the greenback and risk aversion is a notable one, and will be quite useful in the coming week of trade as scheduled event risk will be remarkably low and contained to Friday. First, the US trade balance may show a wider deficit for the month of September as it is expected to reach -$31.8 billion from -$30.7 billion. This is a change from last month, when the deficit narrowed on rising exports and falling oil imports, as government stimulus measures around the world along with the weak US dollar helped to stoke foreign demand. Later in the morning, the preliminary reading of the University of Michigan’s consumer confidence index is forecasted to improve slightly in November by rising to 71.0 from 70.6. That said, it’ll be interesting to see if the index can hold at such robust levels after the latest US labor market report showed that the unemployment situation continues to worsen. A major issue we want to point out with this report is that the official time of release is 10:00 ET, but it typically hits the wires at 9:55 ET, which can exacerbate any surprise factor from the actual results.

All told, risk trends will likely be the greater factor to keep in mind, and from a technical perspective, the confluence of a falling trendline drawn from the July highs and the 50 SMA at 76.50 serves as a solid “line in the sand” for the US dollar index. Until we see a break above there, the currency’s trend remains bearish.

Though they are inextricably linked, economic health and interest rate policy post two very unique concerns for sterling traders. The extension of the nation’s record-breaking recession a few weeks ago has devalued the currency’s standing amongst peers that have already emerged from the gloom. In turn, this throws interest rate timing and monetary policy in general into question. The Bank of England (BoE) will convene this coming Thursday and the outcome - whether it result in looser, tighter or no change to policy - will almost certainly alter trends and stoke volatility. What traders need to ask themselves is whether any drives will last long enough to break prominent ranges (GBPUSD) and perhaps reestablish the pound’s standing in the constant ebb and flow of risk trends.

Over the past month, we have seen a number of dramatic swings in the pound; and nearly every one of them has been tied to interest rate speculation. On Friday October 23, GBPUSD plummeted after the Office of National Statistics (ONS) reported the UK unexpectedly contracted for a sixth consecutive quarter – extending the worst recession on records going back to 1955. This specific release has been central to speculation heading into the November 5 meeting and it will no doubt weigh on central bank members’ decision. There will be no change to the benchmark lending rate; but there is high debated disagreement on what will happen with the group’s quantitative easing program. A few weeks ago, a central bank economist stated his belief that the group will likely pause its purchases. In fact, former MPC member Goodhart projected the same thing despite the dismal outcome of the economic update. However, market participants are highly skeptical. Economists are calling for a 50 billion pound extension to 225 billion (though there is debate about the size and whether they will in fact increase the limit). Regardless, the current target for gilt purchases was already reached through this past Thursday; so the central bank will have to make a decision to pause or increase the target.

Initially, the BoE was expected to make a decision on whether to extend or cap its unusual policy efforts at its last meeting; but they instead deferred to the forthcoming summit in order to review the updated economic activity and inflation forecasts. This assessment will have a fundamental importance all of its own (though its initial influence will be through establishing an argument for quantitative easing limits). After the surprise expansion of the economy’s painful recession through September, there is now less of a worry over whether the pound can remain competitive in the slow, global return of interest rates and more of a concern that the UK won’t be able to make a significant push into positive growth before the world-wide recovery levels off. Forecasts for general growth and its major components will be of primary concern; but inflation projections should be noted. Aside from the central banks outlook, there are a number of economic releases on deck to watch for potential volatility explosions. Indicators for housing, consumer confidence, manufacturing, services and construction health will provide a well-round and timely update on activity.

And, though pound traders have a lot of notable event risk to keep track of next week; it should not be forgotten that the underlying current is still investor sentiment. Should the BoE’s asset purchase target be altered, the impact on the pound will be filtered through the progression of risk appetite. Stationed at the extreme of the risk spectrum, this currency is considered a risk-philic as its financial markets and economy stand to benefit the most through the global advance of growth and investment

The Japanese yen was easily the strongest of the majors over the past week, rallying nearly 7 percent against the New Zealand dollar and over 4 percent versus the euro, Australian dollar, and Canadian dollar. The yen’s gains were not as extreme against the US dollar, though the 2 percent drop in USDJPY is nothing to laugh at. Ultimately, broader trends suggested that 1) risk aversion made a big comeback and 2) both the US dollar and Japanese yen have maintained their “safe haven” status. Indeed, the CBOE’s VIX volatility index, one of the prime “market fear” gauges, rose above 30 for the first time since July, which may indicate that the shift in sentiment may extend into the weeks ahead.

That said, the moves we saw in the Japanese yen crosses were nothing short of extreme, which may warrant some caution at the start of this coming week, as the majors could see a bit of a consolidation period. At the same time, event risk for currencies like the Australian dollar, US dollar, euro, and British pound will be very high ahead of a few rate decisions, which will only exacerbate changes in investor sentiment and thus, FX carry trades.

Japanese-specific news will be quite limited. First, the minutes from the Bank of Japan’s latest policy meeting could add to optimism that the economy is in the process of recovery, especially since we already know that they’ve decided to allow their liquidity programs to expire, as planned, in December. Next, Japan’s leading economic indicator is projected to rise to 86.2 for the month of September from 83.2, which would mark a one-year high as well as the sixth month of improvement. Likewise, the coincident index is forecasted to rise to a 10-month high of 92.5 from 91.2, all of which would reaffirm the BOJ’s more optimistic stance on growth. All told, traders looking for a harbinger of Japanese yen strength or weakness may prefer to look toward broader risk trends, as fundamental forces have yet to truly play any role in the currency’s moves.

There is a reason that EURUSD is the world’s most liquid currency pair. While the European regional and US economies are large trade partners; the real basis for this active is that the US dollar and euro account for the highest and second highest level of reserves in the world’s central banks. The dollar has held the title of top reserve currency (and in turn being used to value commodities, acting as a benchmark or pegged currencies, etc) for decades; but it has been the talk of academic, political and speculative circles for months that the greenback is slowly losing its clout. Who will step in to replace the dollar? Naturally, the euro fits the bill as being the next financial medium for international investors and consumers. Admittedly, such a significant shift will not happen all at once nor is it expected to develop especially soon. However, this relationship is obviously anchoring one currency to the other, leaving the dollar’s strength and weakness to guide the broader trends of the euro.

Its incontestable link with the dollar has in turn stamped the euro with a fundamentally questionable label as a risky currency. For the euro itself, there is little to actually attribute this fundamental title to the currency: there is a modest yield advantage over many of its peers but there is as of yet no clear timetable for rate hikes; and the German and French economies have led the economic recovery for the Western world. However, when most currency transactions are tied to the top safe haven currency, the associative effect is infused. Hence, over the coming week and beyond, euro traders will have to keep a vigilant eye on the underlying currents of sentiment behind the financial markets and the dollar as its proxy. Considering that many of the majors (EURUSD included) have backed up to dollar-based resistance through Friday; the pressure will be on almost immediately after liquidity returns. To confirm that a meaningful shift in risk appetite is indeed underway, a similarly bearish fate for benchmarks among other asset classes would be reason enough to expect momentum. And, while the ultimate collapse or revival in risk appetite will likely be founded through sentiment itself; there are plenty of benchmarks to watch along the way. The myriad of rate decision (the RBA and BoE most prominent among them, but the Fed and ECB certainly important) as well as Friday’s US labor figures offer tangible catalysts to prepare for.

While risk appetite is always important to monitor regardless of what asset you are trading, the euro may still find volatility or alter its position on the risk spectrum through its own event risk. Many of the timely, top tier economic indicators that usually define economic forecasts have already crossed the wires in the past couple of weeks. The primary concern of volatility traders next week is Thursday’s ECB rate decision. The market and economists are unanimous in their forecasts for rates to be held unchanged at 1.00 percent; but there is potential for the statement and President Jean Claude Trichet’s commentary to develop speculation for the timetable for the eventual, hawkish turn. Just this past week, ECB member Axel Weber suggested that it was time to start withdrawing stimulus from the markets. And, just to confirm his bias, he went on to say that policy officials will not wait for employment to pick up to hike rates as by then it may already be too late. In contrast, a draft of the EU’s recent summit reveals officials’ belief that it is too early to start pulling back support for the recovery, though they did not repeat the 2011 timeframe that was suggested before. Euro traders should also be weary of the BoE’s policy announcement (due 45 minutes for the ECB’s) as an expected change to the MPC’s bond purchasing program could spark interest rate speculation throughout the majors.

The US Dollar finally showed signs of life through the past week of trading, setting a substantial low against the Euro and other key forex counterparts. An early-week tumble in the US S&P 500 and other financial risk sentiment barometers provided the spark for the dollar turnaround. Given extremely one-sided Dollar-bearish sentiment, it was little surprise to see the previously downtrodden currency continue mostly higher through Friday’s close. We have long argued that the Greenback was likely to establish a substantial low on overstretched market positioning. Of course, it is never profitable to be early on calls for major counter-trend moves. Yet the substantive week-long turnaround gives us reason to believe that the US Dollar has set a major low and will likely continue higher through end-of-year trading.

A substantial week of economic event risk promises no shortage of excitement in the days ahead. Forex options market volatility expectations are now at their highest since early July ahead of highly-anticipated central bank decisions and the infamous US Nonfarm Payrolls report. Recent US Third Quarter Gross Domestic Product figures suggest that the world’s largest economy is in much better shape than previously believed, and consensus forecasts are calling for relatively steady improvements across key economic indicators. Yet bullish expectations leave substantial room for disappointment, and the recent spike in the S&P 500 Volatility Index (VIX) suggests traders will dump risky assets at the first sign of trouble.

Early-week ISM Manufacturing and Pending Home Sales could spark further volatility across key asset classes, but the true fireworks will likely wait until the mid-week’s ISM Non-Manufacturing and US Federal Open Market Committee Rate Decision results. Traders are likely to pay especially close attention to the ISM Non-Manufacturing Employment Index ahead of Friday’s Nonfarm Payrolls result. The sub-index has seen fairly steady improvements after setting record-lows through 2008, but the below-50 reading shows that employment will likely continue to contract through the near future. Surprises in either direction will likely set the tone for the afternoon’s FOMC decision, while Friday’s NFPs will wrap up the week of substantive economic event risk.

Global financial markets are expecting big price moves in the week ahead, and traders should be careful of substantial day-to-day volatility across US Dollar pairs. We have made no secret of our calls for further US Dollar strength, but prices never move in a straight line. Suffice it to say, we expect our convictions will be put to the test in what promises to be an exciting week of forex market price action.

New Delhi: Large public sector banks such as State Bank of India (SBI) and Punjab National Bank (PNB) are planning to withdraw the special schemes on home loans that offer rates as low as eight percent for the initial years.

With the Reserve Bank of India (RBI) sending out signals in its second-quarter review, these banks may have to raise their home loan rates by January to align them with the expected hike in key policy rates. The special schemes offered by public sector banks have resulted in the cost of home loans crashing to the lowest levels in five years, reports The Economic Times.

While the special offers will be withdrawn from the end of the current calendar year, most banks are extending the festival offers such as zero processing fee till that time. Chairman and Managing Director of PNB, K.R. Kamath confirmed that the discounted rates on housing loans would be extended till December-end.

Currently, various banks are offering teaser rates for the first few years on home loans. Development Credit Bank is offering 7.95 percent rate for the first year on their home loans. SBI, Dena Bank and Canara Bank are currently offering eight percent rate for the first few years. After the offer period, such loans will be converted into floating rate loans.

Some public sector banks (PSBs) have already informed the Finance Ministry that with RBI looking at reversing the expansionary credit policy, they will not be in a position to continue with the offers on retail loans. The government is keen that the soft interest rate regime continues till the time there is more confidence in the economic recovery.

Private sector banks, which were forced to offer lower rates after the announcement of special schemes by their state-owned rivals, are likely to hike rates once the PSBs withdraw such schemes. Analysts expect HDFC Bank, the largest player in housing loan segment, to marginally increase its lending rates. The current floating rate offered by HDFC are 8.75 percent for loans up to Rs. 15 lakh, nine percent for loans between Rs. 15 lakh and Rs. 50 lakh and 9.5 percent for loans beyond Rs. 50 lakh.

Bangalore: In the week ended October 30, 2009, 'Religare Gilt Fund - Long Duration Plan' tops the mutual fund scheme. The value of Religare Gilt Fund went up by 2.29 percent with the net asset value (NAV) of Rs.9.78. Ashish Nigam is the Fund Manager of this open ended scheme, which had a market size of Rs.12.88 crore as on September 30, 2009.

The objective of the scheme is to generate optimal returns by investing in a portfolio of securities issued and guaranteed by Central and State government. The fund may utilize derivatives as permitted by regulations in order to achieve its objective. According to mutualfundsindia.com, other funds which followed Religare Gilt Fund in top list for the last week are ICICI Prudential Income Opportunities Fund, Birla Sun Life Gilt Plus PF Plan and ICICI Prudential Gilt Fund Investment Plan with a growth rate of 1.91, 1.05 and 0.97 percent respectively.

In the last week, total money market mutual fund assets fell by $2.27 billion to $3.37 trillion. Assets of the nation's retail money market mutual funds fell by $7.4 billion to $1.096 trillion. Assets of taxable money market funds in the retail category fell by $5.75 billion to $856.69 billion. Retail tax-exempt fund assets fell by $1.66 billion to $239.69 billion.