Bernanke at Jackson Hole: No more easing, for now

Federal Reserve Chairman Ben Bernanke delivered a mostly somber message on growth Friday, but offered no further central bank action to stimulate the moribund economy.


In his much anticipated speech from the central bank summit in Jackson Hole, Wyo., Bernanke reiterated his position that the Fed’s Open Markets Committee stands at the ready to provide help but is not yet unleashing additional stimulus.


As Bernanke’s remarks were reported on CNBC, the stock market initially ceded most of the strong gains posted earlier in the session before bouncing right back.


Bernanke has used the Jackson Hole speech in the past to tip his hand about asset purchases known as quantitative easing (learn more). The Fed has expanded its balance sheet to USD 2.8 trillion through purchases of Treasurys and other debt to goose the stock market and stimulate the economy.


The central bank also has kept its funds rate target near zero and has indicated that policy is unlikely to change until at least 2014.


But rather than deliver a substantial shot of adrenaline, Bernanke’s speech was mostly an academic exercise that explained the Fed’s rationale for its actions since the 2008 financial crisis, with just a smattering of its intentions going forward.


(Get the full text of Bernanke’s speech here.)


Bernanke said research shows that Fed asset purchases “have significantly lowered” yields for long-term Treasurys, corporate bonds and mortgage-backed securities, while lifting stock prices and helping the economy.


“It is probably not a coincidence that the sustained recovery in U.S. equity prices began in March 2009, shortly after the FOMC’s decision to greatly expand securities purchases,” Bernanke said in his prepared remarks. “This effect is potentially important because stock values affect both consumption and investment decisions.”


Further Fed action is viewed with wariness in Washington as legislators worry about the potential inflationary effects from central bank money printing.


But Bernanke contended that the risks are “manageable, implying that we should not rule out the further use of such policies if economic conditions warrant.”


Investors seem to have been pricing in monetary easing both from the Fed and the European Central Bank, which is struggling to put a lid on the continent’s sovereign debt crisis.


Bernanke’s speech comes as the equity markets, though prone to violent swings, have been humming along while the economy struggles.


The Standard & Poor’s 500 has gained more than 11% in 2012, a critical measuring stick Bernanke and the rest of the Fed’s Open Market Committee use in determining monetary policy. The Dow industrials are up about 6.5% while the Nasdaq tech gauge has surged 21%.


Yet the market’s strength has been dimmed by a meager 1.7 percent growth in gross domestic product for the second quarter. Inflation is right around the Fed’s favored target of 2% and the housing market is showing signs of modest improvement.


Unemployment stands at 8.3%, which Bernanke said is 2 percentage points higher than where the Fed would feel comfortable.


“Unless the economy begins to grow more quickly than it has recently, the unemployment rate is likely to remain far above levels consistent with maximum employment for some time,” he said.


Economists and market strategists, though, have expressed almost universal doubts about whether a third round of quantitative easing will provide a significant lift to the economy or the stock market.


“The failure of the economy to recover strongly in recent years has cast doubt on the healing properties of unconventional monetary stimulus,” said John Higgins, senior markets economist at Capital Economics. “Skepticism has usurped optimism.”


Bernanke insisted that the economy has been boosted by the Fed’s actions.


“Model simulations conducted at the Federal Reserve generally find that the securities purchase programs have provided significant help for the economy,” he said.


© 2012 CNBC.com

 5 Minutes Read

Will Bernanke give the market what it wants?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

 Listen to the Article (6 Minutes)

Summary

Financial markets are likely to continue to expect another round of Fed easing for the time being, even if Fed Chairman Ben Bernanke just holds out hope for more without committing to it.

Financial markets are likely to continue to expect another round of Fed easing for the time being, even if Fed Chairman Ben Bernanke just holds out hope for more without committing to it.


Bernanke gives his much anticipated speech at 10 a.m. ET in Jackson Hole Friday, and because he discussed quantitative easing at the Fed’s annual symposium there two years ago, market expectations have been running high that he would promise more.


“I think the market is coming around to the right place in terms of much-reduced expectations of QE,” said Alan Ruskin, head of G10 currency strategy at Deutsche Bank. “I don’t think he’ll close the door on QE, but I think there’s a much more realistic perspective that Jackson Hole is not the place to come up with new policy initiatives, particularly when the next meeting is very contentious. There’s a sense they’ll have an active debate.”


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JPMorgan chief technical strategist Michael Krauss said stocks could look past Bernanke’s speech Friday, if he just repeats previous comments.


“The market will wait, maybe there will be a little bit of disappointment. I think tomorrow is just too early. There are more important things that will happen in the first week of September. The highest probability is that he just repeats previous comments,” said Krauss.


“It’s hard to understand how much is discounted. With QE1 and QE2, the markets were very weak and he sort of saved them. Now the market has been going up and had a very spirited rally during the summer,” said Krauss.


Krauss said the critical level for the S&P to hold is above 1390 through the Bernanke speech and into September. Besides the Fed meeting Sept. 12, the European Central Bank meets Sept. 6. There is also the August employment report next Friday that will be the last big piece of data the Fed will consider before its meeting starts Sept. 12.


But Krauss said the market is also showing some technical warnings, such as narrowing leadership.


“The market feels like fewer and fewer stocks are driving the market up. If you look at small and mid-caps, they’ve been underperforming. Dow Transports have been making lower highs,” he said. He said if there are two closes below 1390 the S&P would risk a downside acceleration to 1350, or even 1325. His upside target pre-November election is 1435, 1445.


“Clearly the market’s fate is in the hand of policy makers and central bankers for the next three weeks,” he noted.


Central banks have also kept markets supported, with just the idea more easing could be coming. “There’s some warning flags,” he said. “The market is bending, not breaking and you do have the carrot (of easing) out there.”


_PAGEBREAK_


Stocks slumped Thursday, after Spain indicated it may delay its request for a bailout, and also as traders talked down the idea that Bernanke would announce new stimulus. The Dow dropped 106 points to the key 13,000 level. The S&P 500 fell 11 to 1399, under 1400 for the first time since Aug. 6. The Nasdaq was off 32 at 3048.


Even though market expectations had been running high that Bernanke would hint at whether the Fed will pull the trigger on a new program of quantitative easing, Fed watchers have said Bernanke will not have enough information on the economy and probably not the agreement of the Federal Open Markets Committee when he speaks in Jackson Hole.


“The speech title on the web site is ‘Monetary Policy Since the Crisis,’” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi. “It sounds like another review of what they’ve done. When he does hint at things it’s always in context of ‘yes, we could do X, Y and Z, and of course we’ll be talking about this and that when we sit down at the Sept. 12/13 meeting.’ The market really wants to see more than that at Jackson Hole. They want to see explicit mention of what they might do.”


But Rupkey said it’s most likely Bernanke leaves open the possibility for easing or other extraordinary measures, but repeats the caveats that the benefits will have to outweigh the costs, and that further action is dependent on the economy. “The market is going to remain hopeful on this for a while,” he said.


Ruskin said the dollar could see slight gains if Bernanke does not lean more toward easing. Quantitative easing has weighed on the dollar while helping lift risk assets, like stocks and commodities. Fed watchers say if there’s a new round of QE, it could include Fed purchases of mortgage-backed securities and Treasurys. Some say it could be smaller than previous programs, and run through December, or be open ended. Many economists expect the Fed to extend the end date to keep interest rates low into 2015, from mid 2014.


“The overall message will be we’re not out of bullets. We still have the capacity if need be to pursue unorthodox measures, but not going out on a limb and suggest policy easing is inevitable,” Ruskin said.


Fed officials have been holding their debate about further policy moves publicly. Early Thursday, Atlanta Fed President Dennis Lockhart told CNBC’s Steve Liesman that more quantitative easing, or QE, is a “close call,” and Philadelphia Fed President Charles Plosser told him on “Closing Bell” that he doesn’t believe QE is what’s needed now.


“I don’t think it really beats the cost benefits test right now,” Plosser said. Plosser said the trouble with the economy is that consumers want to save, and low rates makes that harder. At the same time, businesses don’t want to spend because of the uncertainties surrounding fiscal policy, taxes and regulation. Those things, he said, can’t be fixed with monetary policy.


Last week, St. Louis Fed President James Bullard said while the Fed’s last meeting minutes showed many members favoring easing Aug. 1, the economic news has since improved with a fair amount of data coming in better than economists’ forecasts.


There are a few economic reports Friday, including Chicago PMI at 9:45 a.m., consumer sentiment at 9:55 a.m. and factory orders at 10 a.m.


© 2012 CNBC.com

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nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95

Currency

Company Price Chng %Chng
Dollar-Rupee 73.3500 0.0000 0.00
Euro-Rupee 89.0980 0.0100 0.01
Pound-Rupee 103.6360 -0.0750 -0.07
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US economy will hit its stride next year: Moody’s

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Summary

The Federal Reserve will do more to stimulate the economy later this year, Mark Zandi, chief economist at Moody’s Analytics, said on Wednesday, and once the US deals with its fiscal issues, economic growth should improve sharply.

The Federal Reserve will do more to stimulate the economy later this year, Mark Zandi, chief economist at Moody’s Analytics, said on Wednesday, and once the US deals with its fiscal issues, economic growth should improve sharply.


“Federal Reserve members were quite clear that the economy will have to improve for them to not QE,” Zandi told CNBC’s “Power Lunch,” referring to the minutes from the Fed’s last meeting.


And with all the issues surrounding the fiscal cliff – when a host of tax cuts expire and automatic spending increases kick in – the economy is unlikely to improve much in the near term. “Given all the fiscal issues we have, we’ll get another round of QE,” he said.


Zandi isn’t expecting the Fed to move until after the presidential election, however, “when we’re really dealing with our fiscal issues,” he said. At that point, he expects the economy to be much weaker and the Fed to act.


Fed easing should continue until the economy shows signs of consistent growth, Zandi said.


That improvement should start to show up heading into 2014, when Zandi is forecasting economic growth of 4%. “By this time next year, the economy will begin hitting its stride,” Zandi said.


The fundamental reason for his optimism is the strength of American corporations which have cut costs and have improved profit margins.


“We nail down those fiscal issues and these good fundamentals will start to shine through,” he said. “By 2014-15, the surprise is going to be how strong the economy is growing.”


© 2012 CNBC.com


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sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95

Currency

Company Price Chng %Chng
Dollar-Rupee 73.3500 0.0000 0.00
Euro-Rupee 89.0980 0.0100 0.01
Pound-Rupee 103.6360 -0.0750 -0.07
Rupee-100 Yen 0.6734 -0.0003 -0.05
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Why to expect a strong market reaction to Bernanke

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Summary

Whether it’s disappointment or a hint that a further monetary boost to the economy is on its way, the speech on Friday from Federal Reserve Chairman Ben Bernanke is likely to trigger a strong swing in either direction in US stock, currency and bond markets, which are sitting on critical technical levels, one analyst says.

Whether it’s disappointment or a hint that a further monetary boost to the economy is on its way, the speech on Friday from Federal Reserve Chairman Ben Bernanke is likely to trigger a strong swing in either direction in US stock, currency and bond markets, which are sitting on critical technical levels, one analyst says.


Bernanke delivers a widely-anticipated speech on Friday at the Fed’s annual symposium in Jackson Hole, Wyoming, and for weeks now markets have been pondering whether or not the central bank chief will use the address to pave the way for another round of monetary stimulus via quantitative easing or asset purchases.


Daryl Guppy, CEO at Guppy Traders, says because US equity markets are hovering around key chart levels, investors can expect a big move up or down in response to Bernanke’s speech.


“Technically, on the S&P, Dow and Nasdaq we are sitting on resistance levels and what that means is if the news is good we will have an exceptionally strong break out above the resistance levels,” Guppy told CNBC Asia’s Squawk Box on Thursday.


“Equally if there is a bad news we will get a powerful retracement, so we are looking at high volatility going into Bernanke,” he added.


The Dow Jones industrial average closed US trade on Thursday at 13,107.48, the S&P 500 index ended at 1,410.49 and the Nasdaq finished at 3,081.19. All three major US stock indices, which closed marginally higher, are now hovering at key resistance levels, Guppy said.


He added that there was technical support in the 12,100-12,200 range on the Dow Jones index, which meant any selling here may be limited compared with other stock indices. Guppy said any good news from Bernanke could push the S&P 500 index up to 1,500 – a gain of more than 6% from current levels.


US equity markets have edged higher in the last few months, helped by expectations for more monetary stimulus from the Fed. However, signs of an improvement in the jobs market and strong July retail sales numbers have dampened the talk of further easing and put investors on edge ahead of Bernanke’s Jackson Hole speech.


“I don’t think we are going to get QE3 at the Fed’s next meeting, but maybe later in the year,” Don Hanna, Managing Director at Fortress Investment Group told Squawk Box, referring to a possible third round of quantitative easing from the Fed.


In a sign that uncertainty in the equity markets is rising, the Chicago Board of Options Exchange Volatility Index, the VIX, has been moving higher over the last two weeks, suggesting fear is creeping back among investors.


Stocks were not the only market to watch for signs of likely strong reaction to Bernanke’s speech, Guppy said, noting that Treasurys and the US dollar were also at critical levels on the technical charts.


He said that the dollar index, which measures the dollar’s value against a basket of major currencies, is hovering around a long-term uptrend line in the 80-81 area. The index was trading at 81.55 in early Asia trade Thursday.


“We are sitting back on this (long-term uptrend) point so we either see a strong reaction away or a strong break away from this level (in response to Bernanke),” Guppy said. “And that’s the key factor we’re seeing across the board, because we are sitting on critical levels.”


– By CNBC’s Dhara Ranasinghe


© 2012 CNBC.com


Related Links


Markets May Not Change Much the Rest of This Year: Gross


What Markets Really Think Bernanke Will Say on Friday


Economy Will Hit Its Stride Next Year: Zandi

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95

Currency

Company Price Chng %Chng
Dollar-Rupee 73.3500 0.0000 0.00
Euro-Rupee 89.0980 0.0100 0.01
Pound-Rupee 103.6360 -0.0750 -0.07
Rupee-100 Yen 0.6734 -0.0003 -0.05
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Nymex to hit $100 but experts say sell the rally

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Summary

Even as US crude prices are expected to touch USD 100 this week as the strengthening Tropical Storm Isaac threatens to disrupt offshore oil production in the Gulf of Mexico, experts say the upside will likely be short-lived, recommending investors sell into the rally.

Even as US crude prices are expected to touch USD 100 this week as the strengthening Tropical Storm Isaac threatens to disrupt offshore oil production in the Gulf of Mexico, experts say the upside will likely be short-lived, recommending investors sell into the rally.


Nymex light sweet crude climbed over USD 1 to USD 97.39 on Monday, after the US National Hurricane Center warned that Isaac was expected to strengthen to a Category 2 hurricane and hit the Gulf Coast midweek.


The Gulf of Mexico accounts for around 20% of America’s oil output, or 1.4 million barrels of crude daily, according to the US Energy Information Administration.


“This potential disruption is coming at a time where prices are already in the higher end. Unless we get a significant amount of oil capacity taken off the market, the chances are this sort of event won’t have a significant impact from a medium-term point of view,” Ric Spooner, chief market analyst at CMC Markets told CNBC.


Spooner forecasts the upside will be capped at USD 102 in the next week, given the country’s reserves and sufficient capacity in the rest of the world.


Dominic Schnider, Head Commodity Research at UBS Wealth Management, agrees it is “highly likely” that oil prices will touch USD 100, but adds that the move is likely “short-term.”


“I don’t expect a lot of real damage to infrastructure (in the oil fields)…things have been modernized, oil rigs have been the replaced and the new ones will be able to withstand such storms,” he said.


In this context, both Spooner and Schnider recommend that investors take profit.


“The global demand outlook (for oil) is for moderate growth at best and is well covered by supply capacity…I’m looking for opportunities to sell into the current strength anywhere from here on up to about USD 102 a barrel (for US crude) and USD 120 a barrel for Brent,” Spooner said.


Schnider advises to wait until the eve of Tropical Storm Isaac’s landfall – forecast for early Wednesday – when uncertainty is at its highest, to sell oil.


“When the market realizes damage isn’t so severe…we expect prices to fall,” Schnider said.


Related links:


  • Storm Isaac Bearing Down On US Refining Hub
  • Storm Isaac Bearing Down On US Refining Hub
  • Explosion at Venezuelan Oil Refinery: At Least 39 Dead

    © 2012 CNBC.com

  • Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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    Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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    index Price Change
    nifty 50 ₹16,986.00 -72.15
    sensex ₹1,882.60 +28.30
    nifty IT ₹2,206.80 +30.85
    nifty bank ₹1,318.95 -14.95
    index Price Change
    nifty 50 ₹16,986.00 -7.15
    sensex ₹1,882.60 +8.30
    nifty IT ₹2,206.80 +3.85
    nifty bank ₹1,318.95 -1.95
    index Price Change
    nifty 50 ₹16,986.00 -72.15
    sensex ₹1,882.60 +28.30
    nifty IT ₹2,206.80 +30.85
    nifty bank ₹1,318.95 -14.95
    index Price Change
    nifty 50 ₹16,986.00 -7.15
    sensex ₹1,882.60 +8.30
    nifty IT ₹2,206.80 +3.85
    nifty bank ₹1,318.95 -1.95
    index Price Change
    nifty 50 ₹16,986.00 -7.15
    sensex ₹1,882.60 +8.30
    nifty IT ₹2,206.80 +3.85
    nifty bank ₹1,318.95 -1.95

    Currency

    Company Price Chng %Chng
    Dollar-Rupee 73.3500 0.0000 0.00
    Euro-Rupee 89.0980 0.0100 0.01
    Pound-Rupee 103.6360 -0.0750 -0.07
    Rupee-100 Yen 0.6734 -0.0003 -0.05
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    S&P 500 facing 25% drop before election: Nomura

    KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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    Summary

    The S&P 500 is likely to fall by 20-25% over the next three months according to Nomura strategist Bob Janjuah.

    The S&P 500 is likely to fall by 20-25% over the next three months according to Nomura strategist Bob Janjuah.


    In a research note published on Tuesday, the long-term bear who called the recent rally for U.S. stocks said he expects investors to be back in risk-off mode until the U.S. election is over.


    “I now think the correct thing to do — as I also said in April and June — is to prepare for a serious risk-off phase between August and November…over the August to November period I am looking for the S&P 500 to trade off down from around 1400…by 20 to 25 percent…to trade at or below the lows of 2011.”


    Janjuah expects the dollar to be a big beneficiary if the S&P 500 does fall as sharply as he predicts.


    “This coming major risk-off phase will, in my view, also be very dollar bullish and bullish core government bonds,” said Janjuah, who thinks 10-year debt in the US, Germany and the UK could hit just one percent, and who is predicting more quantitative easing from the Federal Reserve in December.


    Those hoping for a big bazooka from the Fed or the European Central Bank before December will be disappointed, he said.


    We expect “Mr Bernanke to disappoint markets at Jackson Hole next week, and also because we are confident that markets will soon discover that neither the ECB nor Eurozone politicians will actually be able to deliver on their promises,” Janjuah said.


    “For now we are happy to risk 30 S&P points against us, in order to potentially pick up 300 S&P points in our favor.”

    Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

    3 Mins Read

    Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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    index Price Change
    nifty 50 ₹16,986.00 -72.15
    sensex ₹1,882.60 +28.30
    nifty IT ₹2,206.80 +30.85
    nifty bank ₹1,318.95 -14.95
    index Price Change
    nifty 50 ₹16,986.00 -7.15
    sensex ₹1,882.60 +8.30
    nifty IT ₹2,206.80 +3.85
    nifty bank ₹1,318.95 -1.95
    index Price Change
    nifty 50 ₹16,986.00 -72.15
    sensex ₹1,882.60 +28.30
    nifty IT ₹2,206.80 +30.85
    nifty bank ₹1,318.95 -14.95
    index Price Change
    nifty 50 ₹16,986.00 -7.15
    sensex ₹1,882.60 +8.30
    nifty IT ₹2,206.80 +3.85
    nifty bank ₹1,318.95 -1.95
    index Price Change
    nifty 50 ₹16,986.00 -7.15
    sensex ₹1,882.60 +8.30
    nifty IT ₹2,206.80 +3.85
    nifty bank ₹1,318.95 -1.95

    Currency

    Company Price Chng %Chng
    Dollar-Rupee 73.3500 0.0000 0.00
    Euro-Rupee 89.0980 0.0100 0.01
    Pound-Rupee 103.6360 -0.0750 -0.07
    Rupee-100 Yen 0.6734 -0.0003 -0.05
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     5 Minutes Read

    China’s economy still flying high: Mark Mobius

    KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

     Listen to the Article (6 Minutes)

    Summary

    Mark Mobius, Executive Chairman at Templeton Emerging Markets Group, believes the Chinese economy is still ‘flying’ high compared to advanced economies like the United States and Europe.

    China’s economy has slowed for six consecutive quarters and exports growth is almost stagnant, but the world’s second-largest economy is still “flying” high compared to advanced economies like the United States and Europe and will do very well over the long term, said Mark Mobius, Executive Chairman at Templeton Emerging Markets Group.


    Exports, while slowing, are “not disappearing,” Mobius said in an interview with CNBC on Tuesday. “They are still very, very big and I am quite optimistic China will continue to power ahead,” he added.


    Mobius says a very pessimistic view would put China’s GDP growth at 5% for the current year, which is still “five times more than the US”


    “They are not landing, they are continuing to fly and chances are growth would be better than that. It’d be more like 7%,” he said.


    Faltering demand from China’s two biggest customers – the European Union and US – caused Chinese exports to post just one percent growth in July from a year earlier, the poorest showing since January, when exports fell. A Reuters poll had expected exports to grow 8.6% in July.


    The 7.6% expansion of the economy posted in the second quarter was also the weakest in three years, prompting some economists to say that the country is already in a “hard landing.”


    These worries have hurt Chinese stocks, and the Shanghai stock market is the worst-performing bourse in Asia this year, having lost nearly 3.9%. Measures to bolster the economy such as slashing reserve requirement ratios for banks and cutting interest rates have not had an impact on the stock market. In the meantime, investors are still waiting for these measures to take effect and the economy to rebound.


    Despite the economic challenges facing China, Mobius thinks that the picture is still positive and he is continuing to buy Chinese stocks, regardless of daily shifts in sentiment.


    “We continue to buy Chinese stocks, particularly consumer oriented stocks,” Mobius said. “Sentiment changes from day to day. Markets go down because people think that Europe is in trouble or US has got a problem or China is slowing but the reality is that over the long term these economies will do very well.”  


    He favors consumer stocks because he believes there will be a consumer boom in China as workers’ wages increase at a 20% clip per year and the Chinese government works to boost domestic consumption’s share of GDP.


    – By CNBC’s Jean Chua. Reporting by Rhie-Young Lim.

    Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

    3 Mins Read

    Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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    index Price Change
    nifty 50 ₹16,986.00 -72.15
    sensex ₹1,882.60 +28.30
    nifty IT ₹2,206.80 +30.85
    nifty bank ₹1,318.95 -14.95
    index Price Change
    nifty 50 ₹16,986.00 -7.15
    sensex ₹1,882.60 +8.30
    nifty IT ₹2,206.80 +3.85
    nifty bank ₹1,318.95 -1.95
    index Price Change
    nifty 50 ₹16,986.00 -72.15
    sensex ₹1,882.60 +28.30
    nifty IT ₹2,206.80 +30.85
    nifty bank ₹1,318.95 -14.95
    index Price Change
    nifty 50 ₹16,986.00 -7.15
    sensex ₹1,882.60 +8.30
    nifty IT ₹2,206.80 +3.85
    nifty bank ₹1,318.95 -1.95
    index Price Change
    nifty 50 ₹16,986.00 -7.15
    sensex ₹1,882.60 +8.30
    nifty IT ₹2,206.80 +3.85
    nifty bank ₹1,318.95 -1.95

    Currency

    Company Price Chng %Chng
    Dollar-Rupee 73.3500 0.0000 0.00
    Euro-Rupee 89.0980 0.0100 0.01
    Pound-Rupee 103.6360 -0.0750 -0.07
    Rupee-100 Yen 0.6734 -0.0003 -0.05
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     5 Minutes Read

    Markets to face critical test once summer vacation ends

    KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

     Listen to the Article (6 Minutes)

    Summary

    A market that rallies without a lot of participation is generally standing on shifting ground, at least according to Dow Theory.

    After a summer of low volume and high gains, the stock market soon will face the challenge of whether it can sustain a rally once the crowd comes back from vacation.


    A market that rallies without a lot of participation is generally standing on shifting ground, at least according to Dow Theory, which uses volume confirmation as a key tenet in testing strength.


    With September historically a month where trading activity rises, and when volatility increases, the stock market faces a critical test.


    “Our macro technical work displays an ominous foreboding which strongly suggests that the powerful summer run in rates, crude and global equities will soon be at end,” Richard Ross, global technical strategist at Auerbach Grayson in New York, said in a note to clients.


    “With both volume and volatility absent from the advance, and a myriad of major markets and macro proxies steaming into stiff resistance during a period of vulnerable seasonality, conditions are ripe for a rapid risk reversion to the mean,” he added.


    The “reversion to the mean” prediction is a reference to the belief that stocks will always move back to their long-term averages, whether lower or higher from their present positions.


    The Standard & Poor’s 500 is trading well above its 50- and 200-day moving averages, suggesting a pullback is in order though the timing and degree are, obviously, uncertain.


    “The first couple of days after Labor Day, the market most likely will go down. People will most likely want to take profits,” said Michael Cohn, chief market strategist at Atlantis Asset Management in New York. “Everything is hostage to the news flow, and as it stands right now the news flow out of the US has been benign to not-so-bad.”


    Cohn cited a recent statement from widely followed market bear Marc Faber, author of the Gloom Boom and Doom newsletter, who noted that global central banks have been effective in limiting market drops, and would so again in case of a sharp selloff.


    “There’s a floor under this market,” Cohn said. “If any bad news flow comes out, the central banks can jawbone this thing into submission.”


    Still, the unwillingness of retail investors to participate in the rally is striking.


    Market volume on the New York Stock Exchange has hit 2012 lows in recent sessions and is about half of where it was for the same week a year ago. Options volume is down about 11 percent, while trading activity at the Chicago Mercantile Exchange is off 30 percent from its 2011 pace, according to financial services firm Keefe, Bruyette & Woods.


    Fund flows have told a similar story: Equity funds, including exchange-traded funds, lost another USD 6.3 billion last week while bond funds took in USD 3 billion, according to Lipper. Stock funds lost USD 11.5 billion in the second quarter while bond funds gained USD $55.4 billion.


    “The individual investor is still not in,” said Keith Springer, president of Springer Financial Advisory in Sacramento, Calif. “At some point there could be some panic buying by some individuals if they gain confidence. But the average investor doesn’t believe in this.”


    That’s unfortunate, according to Thomas J. Lee, chief market strategist at JPMorgan, who anticipates the S&P 500 will rise to 1,475 by the time the presidential election hits in November, before pulling back to 1,430 by the end of the year.


    In Lee’s scenario, the late-year pullback will come not from concerns over Europe’s debt crisis or the perils of Congress failing to hit deficit-reduction targets and sending the economy over the fiscal cliff of tax increases and spending cuts. Rather, he said the market likely will retreat if President Obama wins re-election.


    “Investors, in our view, are continuing to underestimate the durability of this rally,” Lee said in a note. “Basically, we believe the beta chase underway will be sustained. In terms of timing, we see this high being established before election day and that any further gains from that point would be contingent on a Romney victory.”


    Springer is advising clients to buy stocks but to move carefully, as he sees the market coming apart next year after central banks are no longer successful in stimulating the market.


    “It’s not a rising tide raises all boats in this case,” he said. “They’re being very selective generally, in large-caps, interest-sensitive stuff. It tells you there’s very selective buying, which is not what bull markets are made of.”


    – By CNBC’s Jeff Cox


    © 2012 CNBC.com

     

    Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

    3 Mins Read

    Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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    KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

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    index Price Change
    nifty 50 ₹16,986.00 -72.15
    sensex ₹1,882.60 +28.30
    nifty IT ₹2,206.80 +30.85
    nifty bank ₹1,318.95 -14.95
    index Price Change
    nifty 50 ₹16,986.00 -7.15
    sensex ₹1,882.60 +8.30
    nifty IT ₹2,206.80 +3.85
    nifty bank ₹1,318.95 -1.95
    index Price Change
    nifty 50 ₹16,986.00 -72.15
    sensex ₹1,882.60 +28.30
    nifty IT ₹2,206.80 +30.85
    nifty bank ₹1,318.95 -14.95
    index Price Change
    nifty 50 ₹16,986.00 -7.15
    sensex ₹1,882.60 +8.30
    nifty IT ₹2,206.80 +3.85
    nifty bank ₹1,318.95 -1.95
    index Price Change
    nifty 50 ₹16,986.00 -7.15
    sensex ₹1,882.60 +8.30
    nifty IT ₹2,206.80 +3.85
    nifty bank ₹1,318.95 -1.95

    Currency

    Company Price Chng %Chng
    Dollar-Rupee 73.3500 0.0000 0.00
    Euro-Rupee 89.0980 0.0100 0.01
    Pound-Rupee 103.6360 -0.0750 -0.07
    Rupee-100 Yen 0.6734 -0.0003 -0.05
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     5 Minutes Read

    Is this market rally legit or nothing but a head fake?

    KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

     Listen to the Article (6 Minutes)

    Summary

    The few people left on Wall Street in the coming week will likely debate whether the stock market is on a course to new highs, or just in the final stages of a head fake rally that will end in pain when September rolls around.

    The few people left on Wall Street in the coming week will likely debate whether the stock market is on a course to new highs, or just in the final stages of a head fake rally that will end in pain when September rolls around.


    During the summer doldrums, stocks have continued to move steadily higher, befuddling traders and analysts, who still see Europe lurking in the background as they worry about the US economy, the election and the “fiscal cliff.”


    “It’s like a late December move,” said James Paulsen, chief investment strategist at Wells Capital Management. “Do you really put much credence in it? If everyone comes back in the first few weeks of September and this thing continues, then more people get on board. I think a lot of people think when the players get back, this thing is going to reverse.”


    In the coming week, there are a few important reports including housing data and durable goods. There are also a few big earnings, including Hewlett-Packard.


    Stocks ended the past week with gains, including in the Russell 2000 small cap index and the Dow Transports, two indices that had been lagging and both up more than 2%. The S&P 500 rose 0.9% to 1418, just below its April high of 1419, a four-year high. The S&P is now up nearly 12% since early June. The Dow, up 10% since June, was up a half percent in the past week to 13,275. The Nasdaq had the best gain in the past week after the Russell and Transports, rising 1.8% to 3076.


    The stock market’s gains since June came amid signs of a slowing economy, dented by a lack of confidence and hit by a slowdown in Europe and elsewhere. But lately, the U.S. economic news has outpaced the substantially lowered expectations of economists, and analysts are monitoring the widely-watched Citigroup economic surprise index to see if it will continue to move higher.


    The surprise index measures the actual data against economists’ expectations, and some of the data has beaten forecasts, including the July employment report and last week’s July retail sales. Just Friday, consumer sentiment improved, rising to a three-month high and leading economic indicators also topped forecasts, rising 0.4 percent, after June’s 0.4 percent decline. While it still shows sluggish growth ahead, the improvement in leading indicators was due to a drop in jobless claims and the surprise jump in housing permits.


    Paulsen said while increasingly disappointing manufacturing data has been a source of concern, the surprise index is generally consistent with what happens in the market. “If nothing else, it’s a leading confirming signal,” he said, adding its recent choppiness will probably reverse when the latest data is factored in.


    The past week has also seen a return to a higher interest-rate environment, as Treasury yields continued to climb off the record lows set last month when markets were gripped by fear about Europe’s debt crisis. The better data helped send the 10-year yield as high as 1.88, just above its 200-day moving average. By late Friday, it was yielding 1.817%.


    With little to rouse markets, traders will be watching how yields continue to perform. This past week, speculation circulated that the improving data could keep the Federal Reserve sidelined at its September meeting, and forecasts cropped up that pushed much anticipated Fed easing back into the end of the year, or not at all. The Fed has been expected to conduct another round of quantitative easing, or the purchase of Treasurys or mortgage securities, in an effort to keep rates low and push investors into riskier investments.


    The speculation the Fed will now hold off makes Wednesday’s release of minutes of the Fed’s last meeting important, even though the meeting occurred before improvement in the employment data, retail sales and housing reports. “These minutes will reflect the dovish statements, not the data we received that has mitigated against it. One could interpret the minutes as dovish. I hope people will see through it,” said David Ader, chief Treasury strategist at CRT Capital.


    Ader said yields, off their week highs Friday, may have found the top of their range for now. “The 30-year came within breathing distance of 3%,” he said.


    As for the coming week, anything from Europe could be important but the market itself may become the story. “Price action sometimes is the news,” said Ader.


    Related links



    _PAGEBREAK_


    Whither Stocks


    Even as stocks rise, the market has remained skeptical and investors are still fearful. The fiscal cliff, the combination of the expiration of Bush tax cuts and automatic spending cuts, looms at the end of the year if Congress takes no action. The anticipation of that event has held off business investments and already weighed on growth, according to economists.


    Yet, J.P. Morgan equity strategist Thomas Lee Friday boosted his S&P 500 target to 1475 by early November. But after the election he expects stocks to fall, and his year-end target is 1430. He recommended investors move into cyclicals.


    Citigroup analysts, in a note Friday, said the election and fiscal cliff could hamper further market gains, but they wrote that the Citigroup surprise index could be signaling further gains.


    Savita Subramanian, Bank of America Merrill Lynch chief equity strategist, said she sees just modest upside for the rest of the year. “Nothing to write home about. For the rest of the year, our target implies 3%,” she said in an interview.


    She said on the positive side, sentiment is very negative. Subramanian did a study this summer that showed the average equity allocation among strategists was below 50% for the first time in almost 15 years. It usually runs at 60%.


    “Everybody’s throwing in the towel. it’s a contrary indicator,” she said.


    “We’ve got conservative positioning from the investment base. Cash levels are high. There’s a real lack of conviction in the market. Those could all help to bolster returns through the end of the year,” she said.


    Subramanian said she favors tech and consumer staples, but the strategy that has worked best in the last several years has been stocks that have dividend growth.


    She said there are risks ahead, and investors would be wise to buy protection. She said the fiscal cliff could be a major negative if Congress lets automatic spending cuts bite into government agencies and defense spending. “Just the fact you have USD 750 billion in cuts on the table, and even if only half of that goes through, it’s a pretty big hit to GDP,” she said. “I think earnings would do okay, but it would stymie growth and it would be a negative for consumers and sentiment.”


    As stocks crept higher Friday, the VIX set a new five-year low, indicating complacency, but the VIX futures curve through the end of the year is very steep, showing a heightened concern among investors that a spike in volatility could be in the offing.


    Monday


    Earnings: Lowe’s, Urban Outfitters


    Tuesday


    Earnings: Dell, Best Buy, Barnes and Noble, Williams Sonoma, Wet Seal


    0800 am Atlanta Fed President Dennis Lockhart speaks


    0215 pm FOMC minutes


    Wednesday


    Earnings: Hewlett-Packard, Kayak Software, American Eagle Outfitter, Chico’s FAS, Express


    1000 am Existing home sales


    1030 pm China flash PMI


    Thursday


    Earnings: 1-800-Flowers.com, Big Lots, Salesforce.com


    0830 am Initial claims


    0858 am Markit U.S. PMI preliminary


    1000 am New home sales


    1000 am FHFA HPI


    Friday


    Earnings: Pandora


    0830 am Durable goods


    © 2012 CNBC.com

    Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

    3 Mins Read

    Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

     Daily Newsletter

    KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

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    index Price Change
    nifty 50 ₹16,986.00 -72.15
    sensex ₹1,882.60 +28.30
    nifty IT ₹2,206.80 +30.85
    nifty bank ₹1,318.95 -14.95
    index Price Change
    nifty 50 ₹16,986.00 -7.15
    sensex ₹1,882.60 +8.30
    nifty IT ₹2,206.80 +3.85
    nifty bank ₹1,318.95 -1.95
    index Price Change
    nifty 50 ₹16,986.00 -72.15
    sensex ₹1,882.60 +28.30
    nifty IT ₹2,206.80 +30.85
    nifty bank ₹1,318.95 -14.95
    index Price Change
    nifty 50 ₹16,986.00 -7.15
    sensex ₹1,882.60 +8.30
    nifty IT ₹2,206.80 +3.85
    nifty bank ₹1,318.95 -1.95
    index Price Change
    nifty 50 ₹16,986.00 -7.15
    sensex ₹1,882.60 +8.30
    nifty IT ₹2,206.80 +3.85
    nifty bank ₹1,318.95 -1.95

    Currency

    Company Price Chng %Chng
    Dollar-Rupee 73.3500 0.0000 0.00
    Euro-Rupee 89.0980 0.0100 0.01
    Pound-Rupee 103.6360 -0.0750 -0.07
    Rupee-100 Yen 0.6734 -0.0003 -0.05
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     5 Minutes Read

    Is the US dollar finally breaking out of its funk?

    KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

     Listen to the Article (6 Minutes)

    Summary

    The rally in the dollar overnight following upbeat US economic news may well mark the start of something currency strategists say they have not seen for some time – the dollar’s direction being driven by the prospects for the economy rather than just risk appetite.

    The rally in the dollar overnight following upbeat US economic news may well mark the start of something currency strategists say they have not seen for some time – the dollar’s direction being driven by the prospects for the economy rather than just risk appetite.


    Tuesday’s stronger-than-expected US retail sales data for July have dampened talk of further monetary easing from the Federal Reserve and could also set the tone for currency markets ahead of the central bank’s annual symposium at Jackson Hole, Wyoming, at the end of this month, analysts add.


    After the data release, the dollar rose against all major currencies. In Asian trade Wednesday, the greenback hovered near a one-month high of 78.94 against the yen and was steady against the euro.


    “For once, the dollar traded on the outlook for the US economy and not on risk appetite,” said Kathy Lien, Managing Director of FX Strategy for BK Asset Management in a note.


    “While we believe that the rebound in consumer spending and inflation is not enough to alter the central bank’s plans for monetary policy, it could trigger a tinge of optimism from (Federal Reserve Chairman Ben) Bernanke, which may be enough to help the dollar hold onto its gains,” she said.


    Related links


    Will a Strong Dollar Finally Be Good Sign for Stocks?
    Fed Holds Off on New Steps to Stimulate US Economy
    The Dollar Rally Could Accelerate: Chart


    The dollar has been edging higher since May, with the dollar index  which measures the dollar’s value against a basket of other major currencies – rising almost 5%.


    Since the start of the year, the dollar has gained about 4.8% versus the beleaguered euro and 2.5% against the yen. Much of the gains stem from investors’ preference to hold the U.S. currency against the backdrop of a debt crisis in Europe and volatile markets, analysts say.


    The world’s most beautiful currencies


    Sean Callow, Senior Currency Strategist at Westpac, said that the movements in the currency markets suggest that expectations for the US economy have been too low.


    Jackson Hole Key


    Focus is now on the Fed’s meeting at Jackson Hole, Wyoming, on August 31, which has become an annual check point on the state of play in the US economy. Indeed, a speech by Bernanke at Jackson Hole in 2010 laid the ground work for the Fed’s bond-buying program to revive the economy – one that also triggered weakness in the dollar.


    _PAGEBREAK_


    “This year’s speech is highly anticipated because the Fed appears to be on the fence when it comes to further monetary easing,” said Callow. “So when you get good numbers like the retail sales data, that does lower the chances of further quantitative easing and that is a good sign for the dollar.”


    He expects the dollar to edge up to 80 yen over the next month.


    Currency analysts added a note of caution, saying that further positive economic news was needed before expectations for further monetary easing were fully scaled back.


    “One data set doesn’t make a trend. We need to see the upbeat data continue to see the quantitative easing expectations really scaled back,” said Emma Lawson, Senior Currency Strategist at National Australia Bank in Sydney.


    US retail sales rose 0.8% in July from a month earlier, marking the first rise in four months on broad demand for a range of goods and a sign that consumer spending could bolster economic growth in the third quarter of the year.


    There have also been signs of improvement in the U.S. labour market – the latest payrolls numbers showed 163,000 jobs were added in July, above expectations for a 100,000 gain, while the number of Americans filing new claims for jobless benefits fell unexpectedly last week.


    The positive data, together with signs of improvement in the U.S. jobs market and no further bad news from the euro zone, may give Bernanke reasons to be optimistic, Lien at BK Asset Management said.


    “Originally, many economists and traders believed that Jackson Hole would be the forum at which Bernanke laid the foundation for QE3 in September. But if these improvements in U.S. data continue and Spanish bond yields remain below 7 percent, the Federal Reserve has very little reason to rush into another round easing,” said Lien, referring to a third round of expected quantitative easing by the Fed.


    – By CNBC’s Dhara Ranasinghe


    © 2012 CNBC.com

    Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

    3 Mins Read

    Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

     Daily Newsletter

    KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

    Previous Article

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    index Price Change
    nifty 50 ₹16,986.00 -72.15
    sensex ₹1,882.60 +28.30
    nifty IT ₹2,206.80 +30.85
    nifty bank ₹1,318.95 -14.95
    index Price Change
    nifty 50 ₹16,986.00 -7.15
    sensex ₹1,882.60 +8.30
    nifty IT ₹2,206.80 +3.85
    nifty bank ₹1,318.95 -1.95
    index Price Change
    nifty 50 ₹16,986.00 -72.15
    sensex ₹1,882.60 +28.30
    nifty IT ₹2,206.80 +30.85
    nifty bank ₹1,318.95 -14.95
    index Price Change
    nifty 50 ₹16,986.00 -7.15
    sensex ₹1,882.60 +8.30
    nifty IT ₹2,206.80 +3.85
    nifty bank ₹1,318.95 -1.95
    index Price Change
    nifty 50 ₹16,986.00 -7.15
    sensex ₹1,882.60 +8.30
    nifty IT ₹2,206.80 +3.85
    nifty bank ₹1,318.95 -1.95

    Currency

    Company Price Chng %Chng
    Dollar-Rupee 73.3500 0.0000 0.00
    Euro-Rupee 89.0980 0.0100 0.01
    Pound-Rupee 103.6360 -0.0750 -0.07
    Rupee-100 Yen 0.6734 -0.0003 -0.05
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    Are you a Crypto Head? It’s time to prove it!
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    Win WRX (WazirX token) worth Rs. 1500.
    Question 1 of 5

    What coins do you think will be valuable over next 3 years?

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    Should Elon Musk be able to buy Twitter?