News Round Up

The acquisition will help Kotak to offer home and personal loans to retail borrowers in the low income segment.
Kotak In Talks To Buy CitiFinancial - Kotak Mahindra Bank Ltd, a leading financial major, is in talks with Citibank NA’s Indian management for a possible acquistion of the latter’s consumer finance arm -- CitiFinancial Consumer Finance India Ltd. The acquisition, if materialises, will help Kotak to offer home and personal loans to retail borrowers in the low income segment. Kotak is reportedly conducting due diligence on CitiFinancial’s assets. It currently has 249 branches across 145 locations, with an asset base of Rs 37,439 crore. (Mint)
RBI Yet To Decide Sequoia’s Stake Buy In Care- Private equity fund Sequoia Capital, which was planning to pick up stake in the rating agency Care, has encountered fresh hurdles. Though Sequoia has received approval from the Foreign Investment Promotion Board (FIPB), the Reserve Bank of India (RBI) is yet to take a stand on the deal. It is believed that the investment may not meet the minimum requirement of $500,000 (around Rs 2.25 crore) that foreign entities must invest in non-banking finance companies or credit rating agencies. Sequoia is said to have been in talks with a number of stakeholders to purchase anywhere between 10% and 15% of the organisation. (DNA)
GVK Power Plans Separate Holding For Portfolios - GVK Power and Infrastructure Ltd, a Hyderabad-based infrastructure major which owns substantial minority stake in two of India’s international airports, is planning to form separate holding companies for its assets in various divisions. The company has interests in power, airports, special economic zones, roads and urban infrastructure. It also has presence in the hospitality, services and manufacturing sectors. The move is part of company’s plan to have holding in each vertical and unlock better value when they are listed. (BS)
VLCC Plans IPO In 18 Months - VLCC Group of Companies, one of India’s leading fitness services and wellness products majors, is planning to hit the capital market with its initial public offer (IPO) in the next 18 months. Though the size of the IPO is not disclosed, its founder reoportedly said the issue size would be fairly big. The company has posted revenue of Rs 700 crore in the last fiscal from all its business verticals, and is expecting to achieve a turnover in excess of Rs 1000 crore by the end of 2011-12. Apart from domestic operations, VLCC has 14 centers overseas, in UAE, Oman, Bahrain and Nepal. (BS)
Blackstone, THL Group's Fidelity Bid May Exceed $15B - Blackstone Group LP, Thomas H. Lee Partners LP and TPG Capital are in talks to pay more than $15 billion including debt for Fidelity National Information Services Inc. Fidelity National is likely to reach for an agreement with the buyout group by May 16. At this price, the deal would value the company at about $32 a share. Fidelity National had about $2.9 billion of net debt and noncontrolling interest as of March 31. (BS)
L&T To Foray Hotel Biz - Larsen & Toubro (L&T), India’s leading infrastructure company, is planning to foray in hospitality business. The hotel projects will include budget, mid-market, business hotel, five-star and serviced apartments. It has identified four markets for its hospitality business foray that include Navi Mumbai, Chandigarh, Bangalore and Chennai. The proposed hotels will be developed through the special purpose vehicle (SPV) route, either directly through L&T Ltd or through a group company such as L&T Urban Infrastructure Ltd. (DNA)
Golden Tulip To Biuld 8 Hotel Properties In 2010 - Golden Tulip Hospitality Group, a Netherlands-based hospitality major, is planning to invest over $200 million in the next three years to expand its footprint in India. The company plans to open eight properties by the end of 2010, comprising a total of 1,100 rooms. Out of the eight properties, three will be developed with company equity, while the balance will be through franchise or management contracts. The hotels will be developed in Gurgaon, Rajasthan, Jaipur, Bangalore, Mumbai and Goa. (Business Line)

PE NEWS

The company is expecting around $225 million valuation at this stage.
Kings XI Punjab May Sell Majority To PE - ISIS Equity Partners, a UK-based private equity fund, is in talks with some of the promoters of KPH Dream Cricket Pvt Ltd, the holding company of Kings XI Punjab. The PE fund is likely to buy a majority stake in the IPL franchisee. KPH Dream is in discussions with four suitors and nothing is finalized yet. Mohit Burman and Ness Wadia were the key shareholders in the company, and together hold around 40% stake. The company is expecting around $225 million valuation at this stage. (ToI)
Reliance Big Buys Hollywood Distributor IM Global - Reliance Big Entertainment Ltd, part of diversified ADA Group, has bought a majority stake in IM Global, a Hollywood film sales company. IM Global has bases in Los Angeles and London. The acquisition is part of company’s plan to ramp up its own distribution abilities for Bollywood movies in key markets outside India. Both the firms were already in alliance since February this year by which IM Global was distributing Bollywood cinema - essentially films produced and distributed by Reliance Big - in the US and the UK. (DNA)
GMR Energy To Raise Rs 450Cr From IDFC PE - GMR Energy, a subsidiary of GMR Infra, is raising $100 million (Rs 450 crore) from private equity firm IDFC Private Equity. The fund raise is part of company’s plan to boost its power generation capacity from the current 808 Mw to 6,500 Mw over the next 3-4 years. This is the second round of equity raising by GMR Energy. Last month, it had raised $200 million from Singapore-based investment company Temasek. The deal is expected to be closed in the next few weeks. (BS)
Srei To Launch $500M International Infra Fund - Srei, an infrastructure focused fund, is planning to launch a $500-million international infrastructure fund. This will be the fifth fund of the company, and will be launched under Srei Venture Capital Ltd (SVCL), the wholly owned subsidiary of Srei Infrastructure Finance Ltd. At present, the subsidiary has about Rs 440 crore fund under management. The company is looking to rope in international investors for the new fund. (BS)
IVRCL Assets To Raise Rs 1,000Cr Via QIP - IVRCL Assets & Holdings Ltd has received shareholders’ approval to raise up to Rs 1,000 crore through qualified institutional placement (QIP) of shares. IVRCL Assets is a newly formed entity in which two group firms of IVRCL were merged together. IVRCL has restructured its businesses and merged two of its group firms, IVR Strategic Resources and Services Ltd and IVRCL Water Infrastructures Ltd with IVR Prime Urban Developers Ltd, and subsequently renamed the unit as IVRCL Assets & Holdings Ltd. (Business Line)
Dalmia Cement Looks To Buy Sugar Firm - Dalmia Cement, the company which brought private equity major KKR recently in a Rs 750-crore deal, is planning to acquire a sugar mill and is in talks with two such firms in Karnataka and Andhra Pradesh. The size of the proposed deal would be around Rs 250 crore, including the investment to be made for a power plant to run the sugar mill. The company currently has three integrated sugar mills in Uttar Pradesh with a capacity of 22,500 tonne of crushing a day. (ET)
Cantabil Receives SEBI Nod For IPO - Cantabil Retail India Ltd, an apparel manufacturer and retailer, has received approval from market regulator the Securities and Exchange Board of India (SEBI) for its forthcoming initial public offering (IPO). The firm had filed the draft red herring prospectus (DRHP) for the IPO in September 2009. It intends to raise upto Rs 105 crore from the IPO, which may hit the market in a month or two. (Business Line)
GSPC To Merge Two Of Its Units - Gujarat State Petroleum Corporation (GSPC), a state-owned oil and gas major, is close to merging unlisted unit Sabarmati Gas with its gas distribution subsidiary, GSPC Gas. This is part of company’s plan to increase its presence in the gas distribution business in Gujarat. The department of energy and petrochemicals, which is the nodal ministry for energy in the state, has given its in-principal approval to the merger and a swap ratio is expected to be completed within a month. (ET)
Evolve Medspa To Invest Rs 75-100Cr Over Three Years - Evolve Medspa, a joint venture between Yash Birla Group and Pacific Healthcare, that provides integrated healthcare in Singapore, Hong Kong and China, is planning to expand its operation in the domestic market. The company has earmarked an investment of Rs 75-100 crore for the expansion and branding exercise. Evolve is also open to venture capital and private equity investments in the company. The proposed investment will be made over the next three years, and it plans to expand its footprints in Mumbai and other major cities across the country. (FE)

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Birla Sun Life MF launches Birla Sun Life India Reforms Fund

Birla Sun Life Mutual Fund has launched Birla Sun Life India Reforms Fund. The New Fund Offer (NFO) for the open ended growth scheme opened for subscription today and will close on June 9, 2010. An exit load of 1% of applicable NAV is payable for units redeemed / switched out within 1 year from the date of allotment. For units redeemed / switched out after 1 year from the date of allotment, no exit load is payable. The investment objective is to generate growth and capital appreciation by building a portfolio of companies that are expected to benefit from the economic reforms, PSU divestment and increased government spending.

Mutual funds rework strategies on new plans

As the Rs7.47 trillion Indian mutual funds (MF) industry comes to terms with the new no-load scenario and several such measures, mutual funds are reworking their strategies to launch new funds. No longer are new fund offers (NFOs) used as an excuse to gather assets. Apart from an occasional exception, fund houses expect to collect a modest amount. With a drop in distributor commissions and a need to keep costs in check, fund houses are tweaking their strategies to get more bang for their buck. Fund houses are, finally, trying hard to find a balance between what they want to sell and what investors really want. Is the product relevant?
As NFOs are costly affairs, fund houses claim a lot more thought is going into whether a scheme makes sense or not. Historically, fund houses have launched funds to garner more assets. In April 2006, when the capital market regulator, the Securities and Exchange Board of India (Sebi), banned open-ended funds to charge 6% NFO expenses and later amortize that over a period of five years, fund houses took to launching closed-end funds. According to data provided by mutual fund tracker Value Research India Pvt. Ltd, fund houses had launched 43 open-ended funds and no closed-end fund in 2005 during rising markets. Between April 2006 and December 2006, 10 closed-end funds were launched that garnered Rs7,764.25 crore as against six open-ended funds launched that garnered Rs1,521 crore. In fact, when Sebi announced its decision in July to ban entry loads, a total of eight NFOs hit the market within a span of a month compensating distributors in a last-ditch attempt to woo assets; together these funds mopped up Rs1,260.79 crore in total, as per Value Research.

Graphic: Yogesh Kumar/Mint

With entry loads abolished and fund houses having to compensate the distributors out of their own pocket, they have become realistic. “NFOs these days are purely need-based. Instead of aiming to gather assets under management, fund houses are paying more attention these days to see if a gap in an investor’s portfolio can be filled up by launching a new scheme. The days where you’d typically get two-three huge NFOs once a quarter are gone,” says Yogesh Kalwani, head (investment advisory), BNP Paribas-Private Banking. “Apart from abolition of entry loads, Sebi has been particular in ensuring that clones of existing schemes within the same fund house do not enter the market,” says Dhirendra Kumar, chief executive of Value Research.Kumar also says that up until 2007, investors had forgotten that equity markets also fall, even if temporarily. The fact that investors’ capital has got permanently eroded in “in quite a few funds”, says Kumar, has made investors wiser.
Hard or soft launch

Once fund houses decide on the product they want to launch and its viability, they decide on their decibel level—a “soft” launch versus a “hard” launch. Typically, a “hard” launch—such as DSP BlackRock Focus 25 Fund (DBF25)—would entail printing more forms, engaging as many agents as possible and wall-to-wall advertisements. A “soft” launch—such as Baroda Pioneer Infrastructure Fund or DWS Global Agribusiness Offshore Fund—is one where the fund houses launch a fund quietly. “Typically, we have our regional managers (RMs) shortlist the top 30-50 odd agents in their town and cities that they feel would rake in good business and have our RMs focus all their energies on a select few,” says Rajan Krishnan, chief executive officer, Baroda Pioneer Asset Management Co. Ltd.
Krishnan met Mint in one of a series of meetings with a few journalists over tea to talk about his newly-launched scheme, marking a contrast with glitzy press conferences and lavish luncheons in five-star hotels that characterized NFO launches till about a year ago.
Earlier, MFs could spend as much as 6% of their initial collection on marketing, sales and advertising and charge it to the scheme (the net asset value or NAV would drop by that amount) over a period of five years. If an equity fund NFO collects Rs1,000 crore, an AMC (asset management company) could spend a maximum Rs60 crore as issue expenses. Sebi first banned amortization of NFO expenses in April 2006 for open-ended funds and then in January 2008 for closed-end funds.
While “hard” launches are expensive, “soft” launches help curtail costs. For the first kind, a fund house prints and dispatches around three million forms and spends around Rs5-8 crore for advertising and marketing. The second sort of launch entails around one million forms and Rs2-4 crore for advertising and marketing.
Distributor events are no longer preferred to be held at five-star hotels. A typical luncheon at a banquet room at the Taj Mahal Hotel, Mumbai, would set back the fund house by around Rs2,300 (including taxes, soft drinks and juices) per person. If 100 people were to attend one such meet and the fund house holds 10 such events across the country, the fund house incurs around Rs23 lakh on such an exercise. The total cost now can be brought down to around Rs7.50 lakh.
“The choice of hotels is done carefully. The idea is to not to cut down on quality, but to save costs,” says Karan Datta, national sales head, Axis Asset Management Co. Ltd.
Adds a sales official of a Mumbai-based fund house: “Many fund houses prefer to go for ‘soft’ launches these days; garner a small corpus, build up a decent track record and then target fresh investors.”
Obviously, the collections are expected to be muted in “soft” launches. Market sources say that DWS Global Agribusiness Offshore Fund collected around Rs25 crore. This pales in comparison to the Rs1,500-2,000 crore that DSP BlackRock is expecting for DBF25.
Where to advertise
Advertising is another avenue where fund houses are chasing value. Instead of going after print, TV and outdoor advertisements (billboards), fund houses are picking and choosing.
A marketing official of a fund house whose NFO closed recently says that while a front page solus advertisement would cost between Rs11 lakh and Rs25 lakh (discounted rate), the same money could pay for 15-20 commercials on TV over several days.
MFs are allocating more money to TV than print, some analysts say.
Fund houses need to pare spending on advertising and marketing as much as they can. Say, a fund house spends Rs4 crore on advertising, marketing and sales on an NFO that garners Rs100 crore. It can charge around 1% as management fees, which is its own income from managing the scheme on an ongoing basis.
In other words, assuming the corpus of Rs100 crore stays with the fund house for the first few years, it earns Rs1 crore every year. At this rate, it would take at least four years for the fund house to make money on this NFO. 

Is the hand of God playing around Dalal Street?

 In response to a Securities and Exchange Board of India (SEBI) directive urging investors not to make investments based on astrological predictions and other unreliable sources, we at MoneyLife decided to visit a website offering astrological predictions based on the positions of the sun, moon, stars, and various other celestial bodies. It was surprising that not only did the website offer general advice about the trend for the day; it even gave the reasoning behind the prediction, based on the position of a certain planet.

This advice was not for free; however, to get “accurate and reliable” predictions on individual sectors and stocks, one had to subscribe to the service for a modest fee of around several thousand rupees a month. Apparently, more specific predictions can cost even more.

This site is not alone; a simple search on any search engine will throw up a number of similar sites, all claiming to offer the same information, in spite of a SEBI directive  specifically asking investors to stay away from such unreliable sources.

These sites all have several things in common such as guaranteed predictions—one site even claiming a 95% success rate and vague predictions such as “markets will be volatile”. More detailed predictions may perhaps be found once one subscribes to this service. A certain website even offers a one year “financial astrology course” admission to which is by “selection only”.

A simple analysis shows that the predictions given by these sites are either ambiguous statements or educated guesses based on upcoming events. For example, one site predicted that on 7th May, the markets would make a possible U-turn at around 11 am; conveniently, this was also the time the verdict in the RIL-RNRL case was due.

In view of this, such statements are at best educated guesses, and at worst, reckless speculation.

The basic question that occurs to all of us is that if seasoned traders and veteran market players cannot time the markets with certainty, how can an astrologer? More importantly, if these astrologers could predict the future, then why aren’t they in the list of India’s wealthiest people, or heading successful investment houses?

The fact that many of these websites exist and are growing means that not only do people believe such predictions, but are also willing to pay a premium for these services.

SEBI went as far as issuing a note of caution “The public in general is advised not to fall prey to or be lured by such sources of information promising quick gains and unrealistic high returns. It is advised that investors should take well-informed investment decisions.”

The customers these websites are targeting are not uneducated daily wage earners, but middle-class white collar workers with access to a computer and a trading account. That these customers are not only willing to pay for these predictions, but also risk large sums of money based on this information shows that a significant number of investors believe that the biggest bull on Dalal Street is not Rakesh Jhunjhunwala, but someone far more divine

Shape of the stock market recovery

V is the mould in which the market has been cast. With a correction expected in the second half of May and during July-September, those who invest for the long haul will emerge winners.

It is not only global stock markets that have traced out a V shape in the 19 months since Lehman. Most world economies have experienced a business-led recovery with technology, infrastructure, materials and energy leading the way. Stocks today are cheapest since 1990 on a ‘V-shaped profits boom’ basis.
  
The script of the Greek tragedy and choreography of the Spanish dance are by now baked into the cake. Stock markets move on new news, not old news. You cannot get junkier than junk.
  
What appears as a source of despair should be a cause for reassurance. Greece, as messed up as it is, can still borrow. Pessimists are forgetting that as recently as 20 years ago, responsible borrowers like Germany were paying as much to borrow money as shaky borrowers like Greece and Italy are paying today. Fear of a false factor is always bullish.
  
Events are making life easy for the Federal Reserve, which, in turn, makes life easier for everyone else. Last week’s Federal Open Market Committee (FOMC) statement did not signal a start to the process of lifting rates from their current ‘exceptional’ lows.

Instead, it laid out a Goldilocks scenario, in which growth is not too hot, not too cold. Inflation is ‘likely to be subdued for a time’, while economic activity ‘has continued to strengthen’. The Greek crisis has helped; by driving funds to the US and strengthening the dollar, it has helped damp inflationary pressure.
  
The reasons for strong undercurrents are many. Companies slashed their inventories post-Lehman as demand collapsed. However, a light pick up in demand was enough to lead to an inventory restocking boom. Judging by the ISM surveys, this effect was strong, but it has by now largely played itself out.
  
Second was the impact of government stimulus spending.Third, trade figures and capital expenditures have started to improve, suggesting that companies now have the confidence to plan for expansion as there is much ground to make up.
 
Fourth, the ISM supply managers’ survey — where 50 marks the dividing line between expansion and recession — is now at 59.6, its highest reading since July 2004. Payrolls of US private sector, which started falling since Lehman went under, grew by 1,23,000 last month. Non-farm payroll data is noisy and prone to revision, but is keenly watched, and has, of late, sparked optimism.
  
Fifth, the purchasing manager index, a widely-watched leading economic indicator for the US, is wildly expansive in emerging markets. Those markets — India, China and Brazil, among others — make up more of global GDP than the US does.
  
Sixth, in Europe, which is lagging the rest of the world, business confidence data from the German IFO and ZEW surveys and Belgian confidence data point to a broader recovery, taking over from the restocking boom.
  
Seventh, wage inflation has been relatively benign — in the US, we have seen the first decline in hourly wages in 20 years — offsetting soaring commodity prices — value of metal in a 5-cent US ‘nickel’ coin that also contains copper, currently stands at 6.2 cents.
  
There have been 16 real Dow Jones Industrial Average (for which most data is available) recoveries since 1896. High inflation, such as during the 1974 recovery, gives an exaggerated sense of price growth. Deflation, which accompanied several of the earlier market cycles, makes recoveries appear weaker.
  
Investors will do best to recall that even a ‘tortoise rally’ eventually crosses the finish line. Is there steam left, however?
  
The GDP-weighted global yield curve — spread between long-term and shortterm government interest rates — is steeper than it has been since the 1960s. Banks borrow short-term money and lend long term. A wider spread means higher bank gross operating profit margins. This is bullish because it reflects future eagerness to lend and has historically been a great market-timing tool.
  
The spread between 10-year Treasury yields and the average cost of credit default swaps has narrowed to zero, indicating the US economy — at the epicentre of the credit crisis — is keyed to expansion and credit demand, which is bullish.
  
Investor’s mood is to notice anything bad — 9.5% US unemployment, the RBI’s rate hike, Chinese rate tightening and risk of its bank lending atrophying — while treating anything good — narrowing credit spreads and fiscal consolidation steps in Budget — with trepidation. Healthcare legislation in the US is an Obamanation, and so on. This is the wall of worry bull markets love to climb.
  
Does China matter? On February 26, 2007, the Shanghai Composite index, which had rallied for months, suddenly fell 268 points, or 8.8%. A global selloff ensued. As it turned out, the first Shanghai bubble kept inflating for six more months before popping in October 2007.
  
The benchmark Shanghai Composite Index has recently fallen to its lowest level since last September when China’s economic recovery began to gather pace.
  
Administrative measure has been announced to curb real estate speculation including raising minimum deposit and interest rates for home mortgages, reintroducing a sales tax and outright ban on families buying third homes.
  
A soft landing for a bubbly housing market could help underpin the rebound in the economy in the medium term. If impact on prices is limited, it could force the authorities into harsher measures that could be devastating for an infrastructure-reliant economy such as China’s.
  
Looking at global trends, stock prices could correct in the second half of May and between July and September 2010. Washington’s relationship with Wall Street could get so schizophrenic as to lead to the arrival of the Minsky moment at which markets could correct.
  
However, as the enclosed chart illustrates, those who invest for the long haul emerge winners. In the short term, the V will continue until all sceptics have given up. Only at that point will the stock market sketch out a W.

Bajaj Finserv enters retail loans, wealth

 

 

Insurance player Bajaj Finserv on Wednesday announced its entry into retail lending and wealth management businesses. The company derives close to 80 per cent of its revenue from the insurance business. "Bajaj Finserv will be launching wealth management business, which will act as an advisory (for) distribution of financial products and services to retail investors. The service would be launched by September 2010," said Sanjiv Bajaj, MD, Bajaj Finserv. Arpit Agarwal of Dawnay Day will head the wealth management business, Bajaj said. Under Bajaj Finserv Lending, the company announced launch of retail lending against securities and also a construction equipment (CE) finance business in April 2010.

Five-year index options: A viable option?

Buoyed by the rising share of index-based options in total derivatives volumes in the past few years, capital markets regulator Securities and Exchange Board of India (SEBI) has allowed exchanges to offer options contracts with tenure up to five years.

However, it will be a difficult task for the stock exchanges to attract enough liquidity on a sustained basis in this segment. Currently, contracts that are even two months away, form only a small portion of the derivatives markets. Shorter duration contracts attract a lion’s share (90%) of the total trades on the National Stock Exchange (NSE).

Monal Desai, VP & head-Institutional Equities (Derivatives), Prabhudas Lilladher Pvt Ltd, does not believe that long-dated options are of any value. “I don’t see how this move will work out given that liquidity is already quite low currently. Besides, not many investors would want to take a call over the five-year period. Long-dated contracts have a very minuscule part to play in the overall market. I hardly anticipate any growth in volumes as a result of this move,” he said.

Indeed, there is hardly any trading in this space as the contract expiry grows longer. At the strike price of Rs5,100 (the Nifty’s current level), there were 213,878 transactions on Wednesday for the contract expiring on 27 May 2010. For the 24 June 2010 contract, the volume was just 7,285 contracts. For the September series, there was no volume at all. If this is the situation over near-term contracts, there is no scope for having any amount of liquidity over a five-year period.

Since liquidity is low, the bid-ask spread is so wide, it is difficult to see how one can expect to attract liquidity at such prices. For instance, for the 30 December 2010 contract, the bid-ask spread is Rs325-Rs537. For the contract expiring in 27 June 2013, it runs up to Rs1,213-Rs2,000. The situation is so abysmal that there is not even any open interest at this level.

Not only is there not any trading in long-dated options, it would also create some administrative difficulties while managing the settlement of these contracts, which will be offered on a three-monthly and quarterly basis, besides eight semi-annual contracts being offered with June or December expiry.

Earlier in March this year, the proposal of the derivatives market committee of SEBI to introduce longer-term options contracts was approved by the SEBI board. The committee had suggested in its report, “The growth in turnover of long-dated options is greater than that of short-dated options. With the market having gained sufficient experience in longer tenure options, it is recommended that options with tenures of up to five years may be considered for introduction.”

An option is a contract between two parties wherein the buyer receives a privilege for which he pays a fee (premium) and the seller accepts an obligation for which he receives a fee. An option gives a person the right but not the obligation to buy or sell something.

In January 2008, SEBI had allowed stock exchanges to offer options contracts with tenure up to three years. SEBI has stipulated certain conditions before the exchanges could launch such contracts. It has mandated that there should be eight semi-annual contracts maturing in June or December. In addition, three monthly and quarterly contracts that expire in March, June, September or December must also be offered. SEBI has also stipulated that the exchanges put in place the appropriate risk management framework for such derivative contracts.

GLobal Market

USA

Dow Jones Industrial Average

The Dow is consolidating between 11000 and 11200. Upward breakout would signal another advance, but Twiggs Money Flow (21-day) reversal below the long-term rising trendline warns of a correction. In the long term, the target for the advance is 11500*, while reversal below primary support at 9900 is most unlikely.

* Target calculation: 10700 + ( 10700 - 9900 ) = 11500

S&P 500

S&P 500 recovered above short-term support at 1190, but threat of a correction will only be dispelled by breakout above 1220 — signaling an advance to 1250*. Twiggs Money Flow (13-week) reversal below the rising trendline indicates short-term selling pressure. Retracement to test support at 1150 remains likely, but reversal below primary support at 1050 is most unlikely.

* Target calculation: 1150 + ( 1150 - 1050 ) = 1250

Transport

UPS leads the charge, with all three transport indicators signaling a primary up-trend.

* Target calculation: 4300 + ( 4300 - 3800 ) = 4800

Technology

The Nasdaq 100, having reached its target*, is consolidating between 2000 and 2060. Twiggs Money Flow (13-week) breakout below the rising trendline indicates selling pressure. Reversal below 2000 would warn of retracement to test support at 1900.

* Target calculation: 1900 + ( 1900 - 1750 ) = 2050
 

Canada: TSX

The TSX Composite is consolidating between its new support level at 12000 and resistance at 12300. Upward breakout would signal an advance to 13000*, while reversal below 12000 would warn of a correction. Rising Twiggs Money Flow (13-week) indicates buying pressure, favoring an upside breakout.

* Target calculation: 12000 + ( 12000 - 11000 ) = 13000

United Kingdom: FTSE

The FTSE 100 is testing support at 5550, with Twiggs Money Flow (21-day) below zero indicating selling pressure. If support breaks, expect a test of 5280.

* Target calculation: 5500 + ( 5500 - 5000 ) = 6000

Germany: DAX

The DAX is testing support at 6050. Reversal above 6300 would signal an advance to 6600*, while a fall below 6050 would warn of a correction. Twiggs Money Flow (21-day) reversal below zero would confirm the correction.

* Target calculation: 6000 + ( 6000 - 5400 ) = 6600

India: Sensex

The Sensex is testing short-term support at 17400 on Tuesday; breakout would signal a correction to test primary support at 15800. Twiggs Money Flow (21-day) falling below zero strengthens the correction warning. Recovery above 18000 is now unlikely, but would signal an advance to 19800*.

* Target calculation: 17800 + ( 17800 - 15800 ) = 19800

Japan: Nikkei

The Nikkei 225 is closed until Wednesday, but Friday saw a recovery above support at 11000. Breakout above 11200 would signal an advance to 12000*. Bearish divergence on Twiggs Money Flow (21-day), however, warns of selling pressure — and reversal below zero would indicate a correction. Failure of support at 10900 (and penetration of the rising trendline) would confirm the correction.

* Target calculation: 11000 + ( 11000 - 10000 ) = 12000

South Korea

The Seoul Composite is headed for another test of support at 1700 after respecting resistance at 1750. Rising Twiggs Money Flow (21-day) indicates buying pressure. Recovery above 1750 would signal an advance to 1900*. Reversal below 1700 is less likely, but would warn of a correction.

* Target calculation: 1720 + ( 1720 - 1550 ) = 1910
 

China

The Shanghai Composite Index closed below primary support at 2900, signaling a primary down-trend. Twiggs Money Flow (13-week) reversal below zero would confirm. Expect further support at the August 2009 low of 2650.

* Target calculations: 2900 - ( 3150 - 2900 ) = 2650
The Shenzhen Composite Index is falling sharply, but has yet to penetrate support at 1100 — confirming the Shanghai Index. Twiggs Money Flow (13-week) bearish divergence indicates selling pressure.

The Hang Seng Index is already in a primary down-trend. Having respected resistance at 21000 early Tuesday, reversal below 20800 would confirm another test of primary support at 19500. In the longer term, failure of 19500 would offer a target of the July 2009 low at 17000*. Twiggs Money Flow (13-week) reversal below zero indicates rising selling pressure.

* Target calculations: 19500 - ( 22000 - 19500 ) = 17000

Commodities & Resources Stocks

The Baltic Dry Index is hovering above primary support at 2560, but rates may be distorted by abnormally high Capesize vessel deliveries.

Capesize vessels are typically used for iron ore shipments, while the smaller Panamax class are used to ship coal and wheat. Capesize means the vessel is too large to traverse the Panama canal. The current abnormal situation is reflected by Panamax rates higher than Capesize rates.

The Baltic Panamax Index remains in a healthy up-trend. We will only take signals from the (composite) Dry Index when confirmed by the Panamax index. Shipments of resources remain in a primary up-trend. Reversal of the BPI below its rising trendline, however, would warn of trend weakness.
 

Australia: ASX

The All Ordinaries is undergoing a correction, having broken the rising trendline and support at 4900. Twiggs Money Flow (21-day) falling below zero confirms the signal. Expect a test of primary support at 4500.

The ASX 200 paints a similar picture. Twiggs Money Flow (13-week) reversal below zero would strengthen the bear signal.

IRDA to roll out vehicle insurance tracking system

The Insurance Regulatory and Development Authority (IRDA) plans to unveil a web-based system in order to track vehicle insurance status in a month's time. IRDA will be launching the system formally from June 9 and will have a database of all the insured vehicles from across India. Meanwhile, the data will also be shared with the transport and police authorities in different States. Meaning, that the Road Transport Authority (RTA) in every State will have way in to the insurance status of different vehicles on the road. They can also launch a drive to track down challan defaulters. The good thing for insurance companies is that the centralised data will help them avoid duplications or multiple claims. Moreover, the system will make a big difference for the vehicle owners and general insurers. The premium per policy is expected to decline, as all vehicles will now have to be insured. The third-party insurance procedure will now be efficient, especially for victims of hit-and-run cases. The system may help reduce insurers' losses as these claims will be settled from a 'Solatium Fund' now while currently, the insurers pay for losses caused by the uninsured vehicles. The new system will also help them verify the insurance status of any vehicle, as the data are to be shared with the transport authorities and the police. Earlier, it was said that many insurance companies were taken by surprise, as the Insurance Regulatory & Development Authority (IRDA) changes disclosures norms regarding Unit-Linked Insurance Plans (ULIPs) under the head of controlled fund. As per the investment guidelines, investments under controlled funds are regulated by IRDA. For example, 50 % of the traditional policies fund is invested in government securities, 15 % in infrastructure and 35 % in equity and other approved securities. Meanwhile, IRDA had said that the Initial Public Offer (IPO) guidelines for the insurance sector are likely to come by next month. Mr. J Harinarayan, Chairman of IRDA said the IPO guidelines could take a month-time and the final decision would be taken by Securities and Exchange Board of India (SEBI). Mr. Harinarayan said that the valuation norms for the company has been finalised and sent to the Institute of Actuaries. Once Institute of Actuaries committee clears the valuation norms, it will be sent to SEBI and then the market regulator would take a final call. Before issuing the final norms, IRDA, which has been working on the guidelines along with SEBI, is likely to come out with a draft for public comments. The Insurance Regulatory and Development Authority (IRDA) is a national agency of the Government of India, based in Hyderabad. It was formed by an act of Indian Parliament known as IRDA Act 1999, which was amended in 2002 to incorporate some emerging requirements. Mission of IRDA as stated in the act is "to protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto."