Will Tendulkar overtake sensex? - Straight from the Hip by J Mulraj
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Investing in India - Straight from the Hip by J Mulraj
Will Tendulkar overtake sensex? A  A  A

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2 APRIL 2011


Sachin Tendulkar has already crossed 18,000 runs in first class cricket and, with the expected century at the world cup finals on Saturday, would be inching towards the sensex, which closed the week at 19420. Will he overtake the sesnsex?

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Whats more likely is that the sensex will undertake Sachin, rather than Sachin overtaking the sensex. Sachins tally can only rise whereas the sensex can fall too. The rally, which started from the 17,300 level, seems to be petering out and should start retracing any time from now upto the 20,000 mark. Since there do not seem to be any worrisome domestic factors at the moment, the downward correction would be on foreign factors or simple profit taking.

Perhaps a trigger for the fall may be an interest rate hike by the US Federal Reserve when its Open Markets Committee next meets on March 15. The US Fed has kept interest rates low, to stimulate the economy after the global melt down. Its current fear is inflation and, with the economy seemingly on track, may start the upward interest rate cycle soon.

Or perhaps the trigger may be a spread of the jasmine revolution in the Middle East, maybe to Saudi, the worlds largest oil producer.

In domestic news, the ninth NELP round did not attract major oil and gas companies, barring BG. This could be, perhaps, due to flip flops in taxation policy by the Indian Government or due to their assessment of a low potential in the fields being auctioned. Neither augurs well.

Taxation claims seem to be bordering on the bizarre. Huge claims have been made on Hasan Ali Khan, ostensibly a horse breeder (one did not know there was so much money in this business!) Now a claim of Rs 20,000 crores is being made on his associate, Kashinath Tapuriah. The Enforcement Directorate is, however, reluctant to name the persons (politicians) whom Hasan Ali has pointed to as having laundered money for, earning a rebuke from the Supreme Court for its reticence. There have been several instances of such cases, involving politicians, where the investigation has been deliberately slipshod in order to allow the case to be dismissed. One has no reason to feel sanguine that this time offenders will be brought to justice.

Instead, the tax authorities are slapping tax demands on Mahindra Satyam on the basis that the income, self-admittedly fictitious, was genuine and embezzled, making the company liable for tax on it. The Mahindra group, which essentially bailed out the company and its tens of thousands of employees, at the behest of the Government, is now being penalised by the same Government, for having done so! Wierd! The Andhra High Court has asked the company to pay the CBDT Rs 300 crores!

The same discretionary behaviour is seen in the 2G telecom scam. Although several persons are being called for investigation and questioning, it is unlikely that serious action would be taken against politically connected persons. Such is the pathetic state of public governance. And it is this pathetic state of governance which is why foreign investors, both direct (as in NELP) or indirect, hesitate to invest in what is otherwise a good India story.

And why investments into India are pale compared to other countries. Discretion is the better part of pallor!

Discretion is also seen in the diktat by the Labour Secretary, P C Chaturvedi, when he maintains that private sector pension funds MUST pay interest at 9.5%, as has been paid by EPFO! The EPFO payment is suspected to be made thanks to accounting legerdemain more than skilled fund management. How can the Government compel the payment of a specific return by private players? Would it next, for example, ask private sector mutual funds to pay dividend at the same rate as that paid by UTI? How asinine that would be!

The main corporate news of interest was the decision, by Vodafone, to exercise its put option to acquire the 33% stake held by Essar, for $ 5 b. For the Essar group this has been one of the smartest deals!

Lanco Infratech has obtained debt funding of Rs 5500 crores, for its Rs 7000 crores project to add 2 coal based power plants of 660 MW each, at Chattisgarh, though the stock has been steady at around Rs 40.

SEBI has cleared the open offer by Sesa Goa (a Vedanta group company) for Cairn India. It appears that ONGCs claim for the royalty issue to be sorted out has not been heeded. Maybe someone beat ONGC in appealing to Indias royalty!

The market continued its rally last week, with the sensex gaining 604 points to end at 19420 and the Nifty closing at 5826, up 172. It looks as though the current rally is exhausted and caution would be advocated.

J Mulraj is a stock market columnist and observer of long standing. His weekly column on stock markets has run for over 27 years. An MBA from IIM Calcutta, he has been a member of the BSE. He is Conference Head - India, for Euromoney. A keen observer of events and trends, he writes in a lucid yet readable style and takes up issues on behalf of the individual investor. Nothing pleases him more than a reader who confesses having no interest in stock markets yet being a reader of his columns. His other interests include reading, both fiction and non-fiction, bridge, snooker and chess.

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4 Responses to "Will Tendulkar overtake sensex?"
M.K.SREEDHAR
Apr 4, 2011
It is too much of hype for cricket and Tendulkar. Share market, Tendulkar and cricket have no connection except that all fall in the bracket of speculation.

Your comment that taxation is bizarre in the case of Hassan Ali etc betrays lack of understanding of the taxation proceedures. In the cases of the type where tax investigation is based on the information about investments made by certain persons for which no satisfactory explanation is offered, the entire investment is treated as income under sections 68 AND OR 69 of the Income Tax Law. Better check the law before commenting as to why an assessment is made in aparticular way.

In the case of Satyam, which is nothing but untruth, this is the second time u have made this comment. Income Tax Assessments are based on the annual Returns filed and subsequent self serving statements cannot e taken as evidence under the IT Law. Further, unless a revised return is filed validly, the returns filed must be acted upon. If the return is based on fictitious accounts, then it is for Satyam or the successor to seek remedy under the Law. Your comments seem to be based on in correct appreciation of the LAW. Better some research is made on the subject before giving ur comments in public.

Sreedhar
Like 
Sekhar DC
Apr 4, 2011
Dear Mr. Mulraj, while criticising the stand of EPFO, let's consider the interests of employees who park their funds for retirals. The high inflation rates are eroding the real value of money. Did they not deserve 9.5% in 2010-11, when banks were paying 9.5% even on medium to long term deposits? To whom the private PF trusts are accountable? The employess does not know how the money is getting invested and what are their plans to improve the rate of return. When there is near double digit i.e. 8% to 10% WPI/CPI inflations, one needs to be sensitive to the interests of salaried employees who are highly taxed? One should debate on how to provide slightly higher rate of returns with adequate safety mechanism built against market and inflation risks. Let's be considerate in our views. Like 
Sunil Doshi
Apr 4, 2011
"Perhaps a trigger for the fall may be an interest rate hike by the US Federal Reserve when its Open Markets Committee next meets on March 15. " Some Mismatch in DATE 15th March ?? Like 
humairatabassum
Apr 2, 2011
yes Like 
  
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