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Monday, December 31, 2012

Resolution No. 1: Make A Financial Plan This Year

Understanding long-term needs and saving for them should be your first priority


    As New Year draws near, most of us make resolutions. But we often end up doing nothing to implement them and, suddenly, realise another New Year is just around the corner. Some resolutions fail because of circumstances beyond your our while we tend to ignore the ones that have long-term consequences. However, that should not be the case with resolutions related to our financial health and goals. 
    "Often we make New Year resolutions so complicated that we already know that most of them will never see the light of the day. Actually, the first resolution should be to make simple, practical New Year Resolutions," said Sanjeev Govila, a retired colonel from the Indian Army and CEO of Hum Fauji Initiatives, New Delhi. 
    "While on other issues we can afford to be light-hearted, we may not be able to afford such frivolity in matters financial, especially with advancing age," Govila said. 
    We propose some resolutions that are practical, have long-term implications for your financial health and also have a shelf-life of more than a year. In Govila's words, they would expire only when you get them right. 
    Most financial planners agree that one of the most important things that every investor should do, but they seldom do, is to maintain a proper record of all investments. "Put all your investments in an organised manner and please involve your spouse/family in it," said Mukund Seshadri of MSVentures Financial Planners. "We have come across cases where after the death of a person, the family and the nominees have no clue about where all the investments were made," he said. 
    One of the important financial 
needs for almost everyone is to have an emergency fund. "Depending on the certainty of your earnings, you need an emergency fund equal to 3-6 times your monthly earnings. Keep it in a place where you can easily access it, like a bank FD or liquid mutual funds," said Govila. 
    Another must have resolution is to write a will. "Age is not a criteria for writing a will and this should start as soon as possible," said Seshadrai. One should not presume that accidents and unfortunate incidents can strike 
only others, and so one should not wait to write a will. "Do not assume that your property will pass on to your intended heirs automatically. Take out those few minutes to write your will now," added Govila. 
    For every family, human asset is probably the biggest wealth builder. So, you should consider making a New Year resolution "to get a health check up done every year for yourself and family and ensure you have an adequate personal health cover, in addition to any office cover that 
you have", said Seshadri. 
    With increasing incidents to mis-selling of financial products, one should also consider having a better look at various investment products before investing. "You should look at investment products and insurance products separately," said Brijesh Damodaran, founder and managing partner, Zeus WealthWays LLP. "You should remember insurance is risk management and investment is wealth creation," Damodaran said. 
    Last, but not the least, you 
should be wiling to learn from your mistakes. Even the best money managers make mistakes, but they were also willing to learn from the same. So as an investor, who is not really well-trained in matters of investment management, "you should realise where you have gone wrong in the past, find out how to avoid the same mistakes, chalk out the correct path and stick to it", said Govila. 
    On this page, Sankar De, a professor of finance who is also associated with the Reserve Bank of India and some other policy making institutions, in a two-part article tells us the psychological barriers for retail investors to make rational long-term investment decisions, while Jiju Vidyadharan sets forth the case for long-term financial planning for everyone. 
    Here we assume that you have a basic financial plan in place and follow its rules in a disciplined manner. If not, it should be your resolution No. 1. If you are trained enough for such an exercise, do it yourself, or seek professional help. 

NEXT WEEK 
    
With the New Year here, it's also the time to mind one's taxes. Next week, we will look at some of the tax savings options for the remaining three months of the financial year, especially related to mutual funds. 

FIN RESOLUTIONS 
Keep the resolutions simple Document all investments Have an emergency fund Write a will Get health cover Try to better understand fi nancial products Learn from mistakes



ECONOMY WATCH 2013 Lower rates could boost economy in 2013

India Inc Likely To Fare Better On Falling Inflation, Reforms 

New Delhi: After going through a gloomy phase in 2012, the Indian economy is poised to return to a healthy growth trajectory in the early part of 2013-14 on the back of some positive factors. While it may not be a smooth ride due to several risk factors going ahead, investors and economists say the worst may be over for the Indian economy. 
    "We recently met 80-plus institutional investors across asset classes in Europe. While the consensus was that the worst was over, key concerns were (1) execution of reforms to sustain interest, especially if the outlook on other emerging markets (China) improves and (2) economics could be overshadowed by political compulsions by the second quarter of 2013," Rohini Malkani, an economist at Citigroup India, said in a recent research note. In recent weeks, some positive signs have emerged that hold out hope for the future. Industrial growth rebounded in October although it is too early to predict whether it would be sustainable, given the volatility in data. However, other data such as the HSBC Purchasing Managers Index points to an improvement in the manufacturing sector, which should augur well for industrial growth in the months ahead. 
    Inflation, which has emerged as a major policy challenge for the past nearly three years, is also expected to moderate in the months ahead and there is a consensus that it may settle in the 6-7% range by end-March 2013. Perhaps the most crucial factor that should help jumpstart growth and boost investments as well as sentiment would be easing of interest rates. The Reserve Bank of 
India has signalled its intent to support growth and expectations are that the central bank may cut policy rates in January. 
    Economists say that the much anticipated interest rate reduction, along with the impact of the reform measures announced by the government, should help revive growth. Clearances to mega projects are also expected to be streamlined with the Cabinet Committee on Investments set to approve pending projects. 
    Another major factor that could help the growth momentum would be the 2013-14 Union 
Budget in February. It could contain some positive measures to bolster the economic recovery, while reiterating the government's commitment to fiscal consolidation. Firm timelines 
about the implementation of the Goods and Services Tax could strengthen sentiment. 
    But skeptics say the Budget could contain populist measures given the spectre of general elections in 2014 and 
therefore this could pose a risk to the economy. 
    Moderation in global crude oil prices should also help in repairing the health of public finances. Much would also depend on the progress of the government's efforts to control unwieldy subsidies. Analysts and rating agencies will keep a hawk eye on how the cash transfer scheme pans out from January onwards. 
    So, despite many positives for Asia's third-largest economy, risks also loom large. Events in global economy will also have a huge impact on how the Indi
an economy fares in 2013. The situation in the United States and Europe would have a major bearing on prospects for the domestic economy. 
    Global rating agencies, which have cautioned India about its rating being downgraded to junk status, would be closely watched for any action. And finally, the progress of reforms would be the key to sustaining and accelerating the growth momentum. Any adverse developments on the political front could have a dampening effect on the economy and may reverse the recovery.


Friday, December 28, 2012

They are small, pesky and crop up everywhere. Though some of them may be hidden, the bulk of arbitrary fees and charges are right under your nose. Find out how they are devouring your hard-earned wealth


    You're a hard worker and, more importantly, a diligent saver. Yet, your monthly budget seems to be strained. The problem is the holes in your wallet, from tiny invisible ones to humongous ones, that have been created by pesky fees and charges. Whether they've sneaked up on you or have been stated upfront in bold letters, these seem to be cropping up everywhere. 
    Buy a car, pay exorbitant handling charges; dine at a restaurant, shell out a sizeable service charge; take a road trip, pay a toll tax after every 100-250 km. Every sphere of your life seems to have been overrun by some or the other capricious charge. 

    Every company, seller or dealer has come up with an innovative name for a novel fee, but a fee or charge by any other name is going to leave you poorer than you had accounted for. Nowhere is this more apparent than in school fees. As every parent will bemoan, a child's education will cost you at least 50% more than the advertised tuition fee. There is a sports facility fee, annual day fee, heritage festival fee, library charge, building development fee, laboratory fee…the list keeps getting longer each year. Most people have become resigned to it, if not entirely inured. 
    However, it's the prevalence of such arbitrary fees in other areas that has begun to pinch people. We've complained about it and a heated discussion and debate ensues every time someone comes up with a new charge, but, un
fortunately, on the ground, there's no concrete action. Even before the dust has had time to settle, there's a new charge that has been tacked on to yet another service. 
    "The onus is on the consumers. You need to read the fine print carefully before you avail of a service. However, if you find that you've been charged for something that hadn't been disclosed to you beforehand, you have the right to question it," says consumer activist Jehnagir Gai. 
    For most customers it's a grin-and-pay situation, since few have the time or the patience to follow up, especially if they are dealing with a small amount. But, remember, even minor charges can add up to big costs. So, scrutinise all your bills and statements to know which holes you need to, and can, plug. 

Cars 

Whether you're buying a new car or getting your old one serviced, be prepared to pay more than you had intended to. 

Logistics and handling charge 
One of the biggest grey areas, the dealer can include anything under this heading. It could be warehouse charges, the fuel that has been put in the car the cost of the number plate 
the pollution control check and the insurance cost while the vehicle was in transit. Logistics fee is 2-5% of a car's value, and, unfortunately, all dealers now levy this charge, though you could try to bargain for it to be lowered. "The ex-showroom price is the cost of the car at the dealer's, so why should you have to pay for a transit fee or warehouse charge? If you consider that a dealer is levying 3,000-5,000 as handling fee on a car worth 4 lakh, then dealers are minting thousands of crores every year. Where is this money going?" asks Adil Jal Darukhanawala, editor-in-chief of Zigwheels. 
Free servicing is not really free 
If you're a new car owner, be prepared that your free servicing will come for a price. You may find that you're paying for tyre rotation or body polishing, even if you hadn't asked for it. However, the major money-spinner is the overhauling that needs to be done at 40,000 km. The service centre will begin pestering you when your odometer starts inching upwards of 37,000 km. As a conscientious owner, you'll agree to it. However, the service centre will insist on the same overhauling after you cross the 40,000 mark. So, you may end up paying twice for the same thing. 

Travel 
Given the skyrocketing fares and arbitrary ancillary fees, the travel sector is rife with charges that can double your travel budget. 
Split pricing 
Most experienced travellers already know that airlines advertise a low base fare and that the additional taxes and surcharges add up to a sizeable amount. This 
pricing strategy now seems to have seeped into hotels too. Most hotels lure customers with a low room rate, but tack on various charges to the final bill that is presented to the traveller when he's vacating the hotel. "If the charges had not been disclosed to you while booking the hotel, you can refuse to pay them," advises Nikhil Ganju, country head, TripAdvisor India. However, he agrees that it can lead to a sticky situation. In fact, impatient not to miss their flights or trains, travellers grudgingly pay up. 
Arbitrary airline charges 
Domestic airlines often come under the scanner of the regulator if their fares skyrocket, which is why they keep a tight rein over their prices. However, they have carte blanche when it comes to fixing ancillary fees, so they keep hiking them arbitrarily (see Travel fee traps). Two of the latest are the seat preference charge, which ranges from 50-750, as well as the fee that you pay when you redeem frequent flyer miles. 
    "The airlines don't hide their fees. They just inform you about them at the last minute, when you don't want to go through the entire ticket 

booking process again. I had to recently pay a Web convenience fee of 200 while booking a GoAir ticket on their website. The fee was tacked on just before I had to make the credit card payment," says Gai. Adds Gan
ju: "I was booking a flight from Singapore to Bali and opted for Air Asia since it was cheaper than Singapore Airlines. However, the final fare for Air Asia was S$450, which included a checked-in baggage fee and an airport check-in fee. Also, for an overweight baggage of 10 kg, I had to pay S$180 extra, which wasn't mentioned in the ticket." 
Cancellation or rescheduling charge 
Most travel portals, hotels and airlines will clearly state their cancellation policy and charges. This is another charge that has been recently hiked by 750-950 by airlines. If you've booked your flight or hotel through an online travel agent, you may have to pay the cancellation fee twiceto the hotel/airline and a service charge to the OTA. If you need to reschedule your reservation, you will be told that you need to cancel the original booking, and, of course, pay the hefty cancellation charge. Only then will you be allowed to make a fresh booking. 

Entertainment 

It's a free-for-all market when you shop or dine out, more for sellers than buyers. Every retailer seems to tack on any charge that he wants to. 

Service charge 
This charge imposed by a restaurant doubles as a variable pay, which is non-taxable, and is given to staffers over and above 
their contracted salaries. But most restaurants pass on only about 50% of the service charge to the staff and the rest is kept to by the establishment compensate for crockery breakage and damage to property. 
Online convenience charge 
When you book a movie ticket online, you have to pay a convenience charge of 10-150, depending on the cost of the ticket. What's convenient about wasting printer's ink and still having to stand in a queue to get physical tickets at a counter? Worse, the charge is levied on each ticket, so even 
if it's a one-time transaction, you pay a sizeable sum. 
Parking at malls 
Parking charges vary from 10-200 for an hour. Builders justify it as the cost of maintaining the parking space as well as paying the salary of the staff. Does the maintenance vary so much among malls, especially since in most cities the parking space is not part of the FSI 
and is not included while assessing the property tax? Some malls have tucked away the entry to the parking area in a small corner and insist on valet service, which comes for a premium. 
Charity charge 
'Would you like to donate for charity?' It's a question most shoppers have heard at the billing counter. While it is good to be generous, be wary of establishments that do not put the contribution on the bill. "There's no accountability for this money. The merchant could be collecting 5 lakh a month from customers, but only giving 50,000 as charitable contribution," says Gai.














Friday, December 21, 2012

CBI charges telcos, ex-telecom secy in ’02 spectrum scam

Says Favours To Voda, Airtel Led To 846Cr Loss

Neeraj Chauhan & Abhinav Garg TNN 


New Delhi: Nearly two years after the CBI began probing spectrum allocation during the NDA regime, the agency on Friday filed a chargesheet in a case of corruption against telecom firms Airtel and Vodafone and ex-telecom secretary Shyamal Ghosh. The chargesheet claimed the allocation of airwaves during late BJP leader Pramod Mahajan's term as communications minister had caused a loss of Rs 846 crore. 
    The CBI estimate is 66% 
higher than the Rs 508-crore loss mentioned in the FIR and the agency's report to the JPC on telecom issues, including the 2G scam. The CBI said Ghosh, with Mahajan and the telecom firms, had abused his position to show undue favours to the companies, causing a loss of Rs 846.44 crore. 
CBI'S CLAIMS 
    
Then telecom secy Shyamal Ghosh, in conspiracy with Pramod Mahajan and telecom firms, gave undue favours to Airtel & Vodafone, causing a loss of 846cr 

Ghosh 'deliberately' did not obtain comments of then member 
(finance) of DoT despite huge financial implications SPECTRUMPED CBI chargesheet gives clean chit to telco promoters 
New Delhi: The CBI, in its chargesheet on spectrum allocation, has said former NDA minister Pramod Mahajan, former telecom secretary Shyamal Ghosh and telecom firms had colluded to cause a loss of Rs 846 crore to the exchequer. It said that there was an undue gain to telecom companies, including incidental benefit to other telecom firms, by charging an additional 1% of AGR (adjusted gross revenues) instead of charging the required additional 2% AGR for allocation of additional spectrum from 6.2 Mhz to 10 Mhz. 
    The chargesheet, accessed by TOI, added that former telecom secretary "Shyamal Ghosh 'deliberately' and with 'mala fide intention' did not obtain the comments of then member (finance) of DoT de
spite the issue involving huge financial implications. The wireless advisor, who was the custodian of the entire spectrum, was also intentionally bypassed on flimsy grounds that he was retiring on that very day i.e. on January 31, 2002". 
    In defence, Ghosh reportedly told the JPC that the issue of allocating spectrum was pending since 2000 and he could not, contrary to what CBI the has said, be accused of delaying the decision. 

    On the charge that the decision was rushed through in a single day, Ghosh reportedly said it was based on information developed over more than a year. Telecom regulator Trai had said that it would consider additional licences only if problems of existing operators were addressed. 
    Ghosh also argued that the 
extension of revenue sharing set at 2% for additional 5Mhz would be 4% for additional 10Mhz. The CBI named three telecom firms—Bharti Cellular Ltd, Hutchison Max Pvt Ltd (now Vodafone India Ltd) and Sterling Cellular Ltd (now Vodafone Mobile Service Ltd) —as accused. 
    Ghosh and the firms have been accused of criminal conspiracy and violating provisions of the Prevention of Corruption Act. Although the agency named the firms in the chargesheet, it said it could not find anything against their promoters. The agency accused Mahajan of conspiring with Ghosh to benefit the private players, but said no action was proposed as he is dead. Jagdish Rai Gupta, who was then deputy director general in-charge of value added services, has been made an approver in the case.

Thursday, December 20, 2012

Gold Price Lost $21.60 to Close at $1,644.90 it's Oversold but may Move Lower

Gold Price Close Today : 1644.90

Change : -21.60 or -1.30%

Silver Price Close Today : 29.612
Change : -1.43 or -4.61%

Gold Silver Ratio Today : 55.548
Change : 1.863 or 3.47%

Silver Gold Ratio Today : 0.01800
Change : -0.000625 or -3.35%

Platinum Price Close Today : 1546.20
Change : -46.70 or -2.93%

Palladium Price Close Today : 679.25
Change : -18.10 or -2.60%

S&P 500 : 1,443.69
Change : 7.80 or 0.54%

Dow In GOLD$ : $167.29 
Change : $ 7.50 or 4.69%

Dow in GOLD oz : 8.093 
Change : 0.363 or 4.69%

Dow in SILVER oz : 449.54 
Change : 22.63 or 5.30%

Dow Industrial : 13,311.72
Change : 59.75 or 0.45%

US Dollar Index : 79.25 
Change : -0.089 or -0.11%

The GOLD PRICE lost $21.60 to close Comex at $1,644.90. Silver lost a bruising 4.6% today, 143.3 cents, to smash support at 3100 AND 3000c by closing at 2961.2c.

For both the gold and SILVER PRICE today's move complete a 61.8% correction of the rise that began last June. Both have oversold RSIs, both have MACDs that are scraping their last bottom, both are below the long term moving averages I watch (150 and 200 for gold, 300 and 200 for silver).

In short, they are oversold and ready to get oversold-er. Perverse, but when morale is broken in a market, it has to have its back completely broken before it reverses.

GOLD/SILVER RATIO also points to more deterioration in silver. Today it gapped up to 55.548. and appears headed to close an old gap between 57 and 57.5. Silver and gold are in the waterfall phase, so this spasm could end in a few days. Will certainly pause for Christmas in any event.

Since both metals cut through their uptrend line form the June 2012 low, underneath them now is only the Downtrend line from the 2011 highs, 2900 - 2850c for silver, $1635 - 1620 for gold.

Sounds like I've got it all scoped out, but if I did I wouldn't have gotten it so wrong till now. More than that, markets never do exactly what you expect them to. They move to support, and instead of stopping, pierce through before they reverse, or never quite reach support. It's as if they know what you are thinking, and dodge on purpose. Thus the proverb that "bull markets always to shake off as many riders as they can." Question is, can YOU hold on? Can you stand the heat?

Thus every day markets give you a highly concentrated dose of humility.

What we surely know is that silver and gold remain in a primary uptrend, and that every day brings us closer to the end of this correction. Just stand back and watch it a few days. There's time, it's not running away, and if it starts to climb, well, give it more time still. We need more certainty here like a dying man needs a drink of water.

Be patient. Still, I have to buy at least a little silver here somewhere. Whenever that gap in the gold silver ratio is filled, that'd be about the day.

Aww, shucks! Tomorrow's the end of the world, according to some interpreters of the Mayan Calendar. Say, I have an idea for all y'all who're convinced the world will end tomorrow: y'all send me your money. Probably better wire it, as there's not much time left. While you're at it, mail me your credit cards, too, and any jewelry you're not planning to take with you. 

Dollar index fell 8.9 basis points to 79.245, nothing new there. Euro took advantage of that, hit $1.3300 as yesterday, but too spindly-armed to hold on there. Closed $1.3244, up 0.26%. Yen fell another tiny bit, to 118.49c/Y100. Got to be near the end of that fall.

Stocks suffered a bad beating this morning, but found "sponsorship" in the latter part of the day, and managed to close above 13,300 at 13,311.72, up 59.75. S&P500 rose 0.55% (7.88) to 1,443.69. Weak and wormy, but will climb more, I believe.

Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger
The-MoneyChanger.com
1-888-218-9226
10:00am-5:00pm CST, Monday-Friday

© 2012, The Moneychanger. May not be republished in any form, including electronically, without our express permission.

To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.

RIL’s Plea for Consent Order in ‘Insider Trading’ Case Rejected

Sebi issues supplementary show-cause notice to RIL, will go ahead with inquiry in insider trading


    Capital market regulator Sebi has rejected a third attempt by Reliance Industries (RIL), the country's largest private sector firm, for an out-of-court settlement of insider trading charges. The regulator has also issued a supplementary show-cause notice, incorporating new findings, to RIL on the same matter, sources told ET. 
Sebi has completed its investigation into trades carried out in November 2007 by entities allegedly linked to RIL. It is learnt that the investigation report has been submitted to the Sebi board and the regulator is going ahead with its inquiry proceedings on the matter. 
An email sent to an RIL spokesman seeking the company's response went unanswered till the time of going to press. Sebi is probing the sale of Reliance Petroleum (RPL) stock futures in the first week of November 2007, days before parent RIL began trimming its stake in the refining arm. The sellers were not well-known market players, but were allegedly located at the address of some RIL group companies, according to information provided to Sebi by unknown complainants. 

The regulator's investigations revealed that RIL made a profit of . 500 crore from the sale of Reliance Petroleum shares. RIL has been trying to settle the case through consent orders but its proposals have been rejected twice by the regulator, which felt the amount put up by the company was inadequate. In the first consent application, RIL offered to pay a penalty of . 3 crore while on the second occasion it offered to pay less than . 10 crore as penalty, which was unacceptable to the regulator. 
Consent orders are similar to negotiated settlements between the market regulator and alleged securities law violators. The settlement terms often involve monetary penalty and voluntary debarment from the capital markets without admitting or denying guilt. In May, the regulator came out with new rules which exclude serious offences such as insider trading, front-running and serious frauds from the consent process. 
Meanwhile, the office of the Chief Information Commissioner sought details of the case from Sebi after a petition filed by RTI activist and lawyer Arun Agarwal. Sebi has so far refused to share the details. 
The court has observed that RIL should be given an opportunity to 
present its case as the information sought by the RTI applicant relates to them. RIL, in its response, has to state that the information sought is not in public interest. On Thursday, a Bombay HC division bench comprising Justices DY Chandrachud and AA Sayed directed RIL to file its reply by January 14, while the court will hear the case on January 23. Senior counsel Janak Dwarkadas, appearing on behalf of RIL, sought time to file an affidavit before the court. 
The case pertains to the ongoing legal tussle between Sebi and Agrawal, who sought information from the regulator about the case and names of individuals, partners, directors and major shareholders involved. Early this month, the HC directed that RIL be made a party to the case. The bench expressed the view that the party should be given an opportunity to be heard before passing any order.



RIL May Get Approval for Voice Test on 4G Network

 The telecom department (DoT) is set to approve Reliance Industries' (RIL) demand that it be allowed to test voice services on its upcoming fourth generation (4G) networks. 

The DoT wing looking into this has recommended that RIL be allowed to test 10,000 connections (for 4G voice services) and the company be allotted these many mobile numbers. 
It has also said that the Mukesh Ambani-promoted Infotel Broadband, the only firm that holds fourth generation airwaves on a national basis, be allowed to connect its networks with other telcos for testing purposes, implying that these 10,000 people can make and receive calls from existing mobile customers. 
The Telecommunication Engineering Centre (TEC), the body that draws up standards for telecom products, services and networks, has also suggested that testing be restricted to a geographic area at a time, and the same infrastructure be used at different circles as the testing 
progresses. It also wants the government to allot time period like six months for the testing purpose and added that the company must not offer commercial services during this phase. 
Infotel Broadband's demands to test voice services is an indicator that the company intends to offer this facility when it launches high-end data services in the second half of 2013. Incidentally, RIL had sought permission to test voice facilities on its 4G networks despite existing regulations not allowing 4G spectrum winners to offer this service. But the new telecom policy, which is slated to come into effect from 2013, allows companies to offer all forms of communication services after migrating to a Unified Licence. 
Infotel Broadband is expected to shake up the telecom market in the same way as it did about a decade ago when it rolled out low-cost mobile services. 
At present, voice services are not available in the 2,300 MHz band, the frequency on which 4G or Long Term Evolution (LTE) services will be offered in the country. But voice facilities are available on other 4G bands like the 700 MHz that 
are used in the US and Europe. 
Infotel had recently informed the government that it had indigenously developed what it termed VoLTE — voice over LTE — and said a trial would be helpful in maturing this technology platform. It also said that the trials would involve RIL employees, consultants and technology partners using these services, while adding that the company would pay interconnect charges to link its network to that of other mobile phone companies for testing purposes. 

joji.philip@timesgroup.com 

115 cos still to meet holding norm Promoters Of These Firms Need To Offload 26K Cr Shares By June ’13


Mumbai: There may be still some time for companies to comply with Sebi's minimum public shareholding norms, but data shows that only a handful of firms have met the rules, with most tapping the Offer-for-Sale (OFS) route. While Wipro took the restructuring path, Godrej Properties opted for the Institutional Placement Programme (IPP) and Westlife Development, parent of McDonald's south and west India franchisee, is in the process of issuing bonus shares to non-promoting shareholders that would aid in complying with the 25% minimum public shareholding requisites. 
    There are some 115 companies where promoters are yet to pare their shareholding to 75% level, reveals New Delhi-based brokerage SMC Capital. Promoters of these companies will have to offload shares worth Rs 26,158 crore, according to current 
valuations. The rules have to be adhered to by June 2013, failing which action will be taken against the promoters by the market regulator. 
    In the last few months, Honeywell Automation, Blue Dart, JP Power, DB Corp, Reliance Power, Eros International, Hindustan Copper, 
ONGC and NMDC have taken the popular OFS route, while Adani Enterprises have announced OFS plans to increase public float. 
    So far, only the large companies have taken the OFS route, and this may not be the case for smaller companies, which may be forced to take 
the IPP route or other options, said Amitabh Malhotra, MD, Rothschild India, a UK-headquartered M&A advisory firm. "OFS is restricted to the top 100 companies based on average market cap of the previous quarter. Hence this method wouldn't be available for most of the companies, particularly small and mid cap companies," Malhotra said. 
    While private-sector firms have another six months to meet the deadline, state-owned units have more breathing time, which is August 2013. And unlike private sector firms, PSUs have to meet only 10% public shareholding level. 
    Some of the other options that companies could look at includes Follow-on Public Offer (FPO), rights issue and bonus shares. In case of rights and bonus issues, promoters have to let go of their entitlement. Market analysts argue that FPO makes sense for large issuances, while there are some who say a bonus is
sue scores over other methods as it is not dependent on market conditions. And a rights issue could be the preferred option for a company that requires capital, and since there is pricing flexibility, it becomes all the more attractive for non-promoting shareholders. 
    Sources said that a good number of companies have conveyed to Sebi that they would meet the changed shareholding norms. If companies fail to meet the June 30, 2013 deadline, then the possible legal consequences could be compulsory delisting, ban on promoters and companies from accessing the capital market and moving stocks to the trade-for-trade segment, which automatically bars day-trading in the counter. 
    Apart from the already listed ones, companies that have tapped the capital market for the first time, for instance, Bharti Infratel, will get three years from the time it gets listed to meet the new public shareholding norms.


Home NaMo Sweepaya Gujarat Wants Modi, But Does He Want Only Gujarat? His Big Hat-Trick In State Will Fuel Ambitions Of Going National. Will It Be Rahul Vs Modi In 2014?

"You should now get used to hearing me speak in Hindi," Narendra Modi told the adulatory droves, gathered to celebrate his emphatic victory, when they insisted that he speak in Gujarati. 

    The sudden switch to Hindi for someone who spoke in little else but Gujarati throughout the election campaign led to an obvious interpretation—Modi, having scored a hat-trick, was now flashing his fortified claim to be the BJP's choice for prime minister in 2014, setting the stage for a presidentialtype race with Rahul Gandhi in the Lok Sabha polls. 
    Although Modi said he did not plan to camp in New Delhi and would visit the capital only for a day on December 27 for the National Development Council meet, his devotees were already serenading him with "desh ka neta kaisa ho, Narendra bhai jaisa ho" chants. 
    Modi won 115 seats, just a couple short of his previous tally of 117 seats in the 2007 election. Modi's victory came against the backdrop of indifference, even opposition, from a section of the RSS, hostility of an influential and tenacious faction of civil society and the Congress's tacit understanding with BJP rebel Keshubhai Patel who sought to rally his community against the chief minister. 

DECODING THE WIN 

Tireless Campaigner | Modi addressed 250 rallies and reached out to 180 more locations through 3D projections. Sonia Gandhi addressed 7 and Rahul Gandhi 8 election meetings 
Sweeps Urban Seats | Delimitation increased urban seats. BJP won 12 of 16 seats in Ahmedabad, all 12 in Surat, and all 5 in Vadodara 
Safely Home | Modi was perturbed by the surging crowds of women a few months back when the Congress started distributing lakhs of forms to the homeless, promising them subsidized housing. But the results in seats with mainly poor neighbourhoods show the Congress was building 
castles in the air 
Sad-Bhavana | The last assembly had 5 Muslim MLAs, the new one will have only two, both from Cong. The BJP didn't give a ticket to any Muslim 
Turnout Works | The unusually high voter turnout of 71.9% was the key to the BJP's big win. This was 
almost 10% higher than in the previous two assembly polls. Modi told voters to come out and vote for him, not the candidates. The personality cult worked 
Caste Contours Change | Call it social engineering, Modi style. With Leuva Patels swinging away from the BJP, especially under Keshubhai's influence in Saurashtra, the OBCs 
consolidated around the BJP. This was seen as a reaction to the ganging up of the dominant Patels in the countryside 
Exchange Programme | Cong, BJP wrested 30 seats from each other. Cong gained in Saurashtra & N Gujarat, conceded seats to BJP in central and S Gujarat. 5 
ministers lost their seats, but so did Guj Cong president Arjun Modhwadia 
Batting Failure | Armed with a 'bat' as an election symbol, 84-year-old Keshubhai padded up for a match with Modi but flattered to deceive. He retired hurt, scoring only two but managed to inflict some body blows in Saurashtra where the 
BJP slipped by nine seats 
Bharuch Breached | The Congress won no seat in Bharuch district, home turf of Sonia's political secretary Ahmed Patel. Of the five seats, the BJP won four and the JD(U) one. Modi targeted Patel by calling him Ahmed 'Miyan' Patel and mischievously claiming he was the Congress' CM candidate 
Pro-Incumbency | Modi's strategy every time he faced an election was to drop most of the candidates — a good way to fight anti-incumbency at the local level. As the rejects would have switched over to Keshubhai, he decided to repeat most of the candidates and coined the word pro-incumbency 

    Modi is the 13th politician to serve at least 3 consecutive terms as CM. 
Including him, there are 6 such CMs serving at present, including Tarun Gogoi (Assam), Naveen Patnaik (Odisha), Okram Ibobi Singh (Manipur), Manik Sarkar (Tripura) & Sheila Dikshit (Delhi) 
    Gujarat is one of 7 states where Cong has been out of power for at least 20 years. The others are Bihar, Sikkim, Tripura, TN, UP and Bengal (barring a brief stint as junior coalition partner with Trinamool). These 7 states together account for 230 Lok Sabha seats



2002, 2007, 2012...2014? WILL MODI BE BJP'S POSTER BOY IN THE NEXT LOK SABHA POLLS?

Wednesday, December 19, 2012

Maruti Readies Plan for LCV Foray


Co's new 2-cylinder, 800 cc diesel engine may be key to its successful entry into the pick-up truck space

KETAN THAKKAR MUMBAI 



    Maruti Suzuki, India's largest car manufacturer, is exploring a foray into India's fastgrowing small commercial vehicle space. The segment is currently dominated by Tata Motors Ace with over 50% market share. 
Though the Japanese car manufacturer had the Omni Van, used as a cargo vehicle, it did not have a competitive offering in the loadcarrier segment, due to the lack of a small diesel engine. But with the development of the company's two-cylinder, 800 cc diesel engine for the passenger car shifting to India, it is actively exploring options to use the potential workhorse to enter the small pick-up truck market, ET learns. 
The project is codenamed 'AP' and if the exercise fructifies into an actual investment, the possible entry into light commercial vehicle (LCV) space could happen "between 2015 and
2017", according to informed sources. ET has learnt that the company is likely to develop an all-new platform, or may use the Suzuki carry pick-up truck platform which is sold in South East Asia and may tweak it to handle the overloading abuse in the country. When contacted, a Maruti Suzuki spokesperson replied that the company does not comment on product plans. 
According to Frost & Sullivan, the Indian small and light commercial vehicle segment is likely to grow by a compounded annual growth rate (CAGR) of 18% over the next five years to 8,30,000 units by 2016. 

With the development of infrastructure, the country is expected to shift to the 'hub-and-spoke' model of transporting goods. In the hub-andspoke model, heavy trucks ply on big highways, or hubs, and small commercial vehicles act as spokes in cities where the movement of heavy vehicles are restricted. 
In the April-November period, the mini truck and the pick-up truck segment combined (i.e. vehicles with weight below 3.5 tonnes) posted a growth of 24% with sales of 2,75,900 units. In the period, market leader Tata Motors posted a growth of 22.9% selling 1,57,183 units. 

ers in the small truck space, Tata Motors continues to enjoy over 50% of the market share and the others too are growing, that clearly shows that there is room for more players. Maruti Suzuki can certainly be a strong challenger to Tata Motors with the widest possible reach, but having a suitable diesel engine is the key," said Rathore. 
Just like the passenger car space, even in the mini-truck category, the demand is getting upgraded from 0.5-1 tonne segment of Ace Zip to 2 tonne segment of Tata Motors Super Ace, Mahindra Genio and Ashok Leyland Dost category. The sub-two tonne segment of Ace, Maxximo and Ape grew just 2.70% in April to November period to 1,61,741 units versus 1,57,492 units sold in the same period in FY-12. While Mahindra & Mahindra and Piaggio fared well in the last fiscal with their Maxximo and Ape mini trucks, the two automobile companies have seen sales dipping over 20% and 70% respectively, in the current fiscal. 
Experts say it will be interesting to watch, which space Maruti Suzuki would prefer to enter. "There is a clear upgrading happening from sub-one-tonne trucks to higher payload trucks of two tonnes and above and it is clearly seen in the numbers of Ashok Leyland Dost which has been a run away success," said an analyst with a leading broking firm. 
ketan.thakkar@timesgroup.com 

Despite the entry of major players like Mahindra & Mahindra, Piaggio and Ashok Leyland, Tata Motors continues to lead with a market share of around 57% this fiscal. Experts believe Maruti Suzuki may pose a major threat to Tata Motors as it has a wider reach in the country. Deepesh Rathore, managing director, IHS Automotive says, the technological entry barriers are limited in the mini truck space and the segment is one of the fastest growing segments in the Indian automotive industry with further potential to grow large volumes. 
"Despite the entry of many play-


Sorry: Ratan Tata Apologises to PM

Says report in London's Financial Times completely untrue


Tata group Chairman Ratan Tata has apologised for embarrassment caused to Prime Minister Manmohan Singh and the government by caustic comments attributed to him in a recent interview, a rare instance of such contrition from a business leader known for his blunt interventions on a range of issues in the past. 
London's Financial Times newspaper, which interviewed Tata earlier this month, cited him as being extremely critical of the government and the PM, sprinkling the article with words such as "lashed into the Prime Minister" and "rapped India" and "warned government of inaction". 
But Tata, in a hand-signed personal letter to the PM whose purpose he said was aimed at clearing his position, denied using such language. The Tata group has already rejected the characterisation of comments attributed to its chairman in the interview, one of many he has given in recent weeks ahead of his retirement on December 28. "I have been one of your greatest admirers and supporters, publicly and privately," Tata wrote. "You have been someone I greatly respect and the last thing I would want would be a misunderstanding between us, created by an opportunistic journalist reflecting his personal views and that of his newspaper." "I can only apologise for any embarrassment that this media misrepresentation 
may have caused you or the government," he added. The December 10 letter also appended a full transcript of the interview with the Financial Times journalist. Replying to Tata, the Prime Minister appeared to make light of the episode, noting that people in public life should be open to constructive criticism. 'It will Make Us Introspect' 
"Even as such criticism should persuade us to introspect about the path we are following, it is our conviction that should necessarily guide us forward," he said in the reply. The contents of both letters were described to ET by someone who had seen them. The PMO declined to comment, as did a spokesman for Tata Sons. The government came under criticism from industry luminaries in the past couple of years, many of whom bemoaned rampant corruption in the country, poor governance and a state of drift in policy-making. A group of 14 eminent citizens, which included Wipro chief Azim Premji, HDFC chairman Deepak Parekh and former RBI governor Bimal Jalan, even wrote a series of open letters addressed to the country's leaders lamenting the state of affairs in the country, in the process shaping and setting the discourse that over time defined the UPA government's second innings. 
While Tata was not a signatory to these letters, he has in the past also 
heaped criticism on the government, most notably in 2010 when transcripts of his conversations with lobbyist Nira Radia, whose phones were being bugged by tax authorities, found its way to the media. In a television interview that year, Tata warned that India was sliding towards a banana republic. "I think these are bad times. I wish the government would take a stand . . . If what has happened in the last few weeks is an indication of what can happen at any time, then we are going down the route that would lead us into a banana republic," he said, referring to the 2G spectrum scandal. 
In the latest interview with FT, he agrees that it is difficult to grow business in India given how the country is being governed. "Sometimes the issue is that different government agencies and different constituencies of the government, have contradictory interpretations of the law….You may have the PM saying one thing, and the ministers have a different view. This doesn't happen in most countries," he is quoted as saying.

PM REPLIES TO RATAN TATA

Royalty fees to parent co earn investors’ ire


Mumbai: Huge royalty payouts by Indian subsidiaries are being termed an 'unfair' corporate practice, drawing increasing concern and attention from investors and shareholders. Since the liberalization in royalty fees and payments for foreign technology collaborations three years ago (December 2009), payouts by these subsidiaries have increased significantly, while their sales and margins have not grown proportionately. 
    The recent high royalty outgo by ACC and Ambuja Cements to parent Holcim has again brought the issue into the spotlight. An analysis of the 25 highest royaltypaying companies reveals that these payments more than doubled over five years, while sales have grown by just over 70%. As against this, the BSE 100 companies have, by far, performed much bet
ter than these 25 companies. 
    Concerns have been raised by shareholder advisory firms on high royalty payouts, given the fact that their local competitors are growing faster and earning higher margins. The analysis done by shareholder advisory firm, Institutional Investor Advisory Services (IiAS), since 2007-2008, 
shows that three companies with the highest royalty remittance of Rs 2,495 crore had paid Rs 784 crore as these fees in 2007-08. While remittance has gone up 3.2 times, their revenues have gone up by only 1.8 times. The top 20 royalty-paying companies now remit Rs 3,601 crore as royalty payments, up from Rs 1,196 crore five years ago. Total royalty for the 25 companies in the study increased to Rs 3,635 crore in 2011-12, up from Rs 1,528 crore in 2007-08. 
    Interestingly, four (3M India, Timken India, Whirlpool of India and Asahi India Glass) of the 25 companies have not paid any dividend in the last five years, but have paid royalty of Rs 385 crore since 2007-2008 (excluding one-off dividend payments). 

    The 25 companies paid on an average about 25% of profits as royalty to foreign parents in FY12. ABB and Maruti Suzuki topped the list with this ratio at over 200% and 100% respectively. Other companies such as Nestle India, Procter and Gamble, Alstom T&D and BASF India paid royalty in the 30-40% range of net profits. A note from IiAS says, "Data indicates that foreign sponsors are less concerned about the impact royalty payments have on the bottom line of Indian subsidiaries." 
    Says Shriram Subramanian, MD of proxy firm In-Govern Research, "We recommend that institutional investors be very concerned when companies make high royalty payments to parents or group companies that cannot be justified."


Tuesday, December 18, 2012

NSE Brokers Told to Limit Orders within 10% of Prevailing Prices


With an aim to check systemic risk from erroneous trades, the National Stock Exchange (NSE) has asked brokers to restrict their trade orders within 10% of the prevailing price of shares and other securities. The proposed move, which would come into force from December 24, follows market regulator Sebi's directives regarding pre-trade controls, which where necessitated after a 900-point flash crash in benchmark Nifty due to an erroneous trade. 
The flash crash that happened on October 5 had halted trading for about 15 minutes, and wiped out nearly . 10 lakh crore of investor wealth. 
"It is hereby notified that as per revised operating policy, the dynamic price bands shall be 10% for stocks on which de
rivatives products are available and on stocks included in indices on which derivatives products are available," NSE said in a circular. 
NSE advised trading members not to place orders beyond the dynamic price bands in force. NSE said that in the event of a market trend in either direction, the dynamic price bands may be relaxed during the day in co-ordination with other exchanges.

RBI to Show its Interest in Rate Cuts Only in Jan

RILED FM SKIPS CUSTOMARY STATEMENT


    The Reserve Bank of India (RBI) maintained status quo on interest rates despite calls from the finance ministry for measures to support growth, but the prospects of cuts beginning January have increased because of easing price pressures and signs that the fiscal situation is on the mend. RBI Governor Duvvuri Subbarao's rigid anti-inflationary stance for more than a year appeared to be easing, even though he disappointed investors by not even reducing the cash reserve ratio (CRR) to ease liquidity pressures. 
Finance Minister P Chidambaram made no comment on the policy, possibly for the first time in years. In the past, he has publicly spoken of the need for lower interest rates. 

But Chief Economic Adviser Raghuram Rajan said it is good that RBI sees room for rate cut. "I think it's good that RBI sees there is room to ease. And clearly, they are taking a decision keeping in mind that their main job is combating inflation. I look forward to good news in policy (January)," he said, adding, "But 
they (RBI) also have some incentive to seek growth in the country." 
Subbarao left the key repo rate — the rate at which RBI lends to banks —at 8%, and CRR — the proportion of deposits banks need to keep with the central bank — at 4.25% as inflation remains elevated despite signs of moderation. "There is little doubt that RBI is readying to cut the policy rate in the first quarter of 2013, the only question is the timing — whether to cut in January or in March," said Rav
neet Gill, chief executive at Deutsche Bank India. "On the evidence of today's guidance, the likelihood of a January rate cut has increased." 
Thirteen of the 15 economists and traders polled by ET forecast status quo on repo rate. But seven of them forecast a cut in cash reserve ratio. In fact, Goldman Sachs economist Tushar Poddar, in a daring forecast a day before the policy, bet on a 25-basis-point cut in repo rate, citing easing inflationary pressures. 
Tone Shifts to Supporting Growth 
This comes even as the price rise of manufactured products is slowing. But Subbarao reiterated his promise of a possible reduction in January. "Headline inflation has been below the Reserve Bank's projected levels over the past two months," he said in his midquarter monetary policy statement. 
"The decline in core inflation has also been comforting. These emerging patterns reinforce the likelihood of steady moderation in inflation going into 2013-14, though inflation may edge higher over the next two months." 
The benchmark Sensex, after a kneejerk fall, rose 0.63% to 19,364.75. The rupee, after breaching 55 to the dollar in volatile trade, ended unchanged at 54.85. The 10-year bond yield was flat at 8.1491% after a brief climb. 
This is the fifth straight policy rate pause by RBI after it lowered repo rate by 0.5 percentage points in April 2012, anticipating reform measures that would have contained fiscal deficit. Although fiscal deficit may eventually breach the upwardly revised target set at 5.3% 
of GDP, the situation has improved with the government managing to raise funds from sale of shares in state-run companies such as miner NMDC. 
"RBI danced to its own tune and kept the policy rate on hold in light of the persistence of inflation and lingering upside risks to inflation," said Leif Eskesen, economist for India and the Asean region at HSBC. "However, it is gearing up for potential policy rate cuts early next year, assuming inflation risks recede and policy progress on other fronts is sufficient." 
Wholesale price rise eased to 7.24% in November from 7.45% in October, but is still above RBI's comfort level of 4-5% in the medium term. But consumer prices gained 9.9% in November from 9.75% in October. Indeed, the core inflation of manufactured products, which the central bank watches keenly, has fallen to 4.5% in November after remaining above 5% for months. Even the economy seems to be on the mend, with higher-than-forecast factory output and business sentiment improving. The Index of Industrial Production gained 8.2% in October, 
compared with 0.7% in September, even though it could have been due to the buildup of inventory for the festival season. 
"Expansion in new business and order book volumes suggests positive sentiment about increasing activity in the months ahead," said Subbarao. 
RBI's tone shifted significantly to supporting growth even though it did not even reduce CRR. The tightness in the money market, which has led to borrowings of more than . 1 lakh crore from RBI, was due to high government balances. 
To address any tightening, the central bank will conduct open market operations where it would buy bonds, releasing funds into the market. Traders expect another . 50,000 crore of bond buyback before April. "RBI is expected to limit its action on CRR cuts, given that the 175-basis-point reduction in 2012 has led to the money multiplier rising to near-17-year high, which could worsen the inflationary pressure the moment domestic demand revives," said Upasana Bharadwaj, economist at ING Vysya Bank.


RBI leaves rate cut for new year

Mumbai:The Reserve Bank of India disappointed markets on Tuesday leaving all rates unchanged in its midterm policy review but reaffirmed its commitment to support growth in the January policy by when inflation is expected to ease further. 

    Several statements by the central bank in its review are being seen by the market as a definite pointer to a rate cut in January which was indicated by RBI earlier. The comments include a lower growth projection, optimism on government measures boosting sentiment and an expectation that prices would ease in coming weeks. What this means for borrowers is that banks are unlikely to reduce lending rates before January. 
    Pointing out that GDP growth is evolving along the baseline projection of 5.8% for 2012-13, RBI said that the government's recent policy initiatives should boost sen
timent and improve the investment climate. "Headline inflation has been below RBI's projected levels over the past two months," the central bank said in its policy statement as it left cash reserve ratio (CRR) unchanged at 4.25% and the repo rate at 8%. CRR is the percentage of deposits that banks are required to park with RBI while the repo rate is the rate at which banks borrow overnight funds from the central bank. 
    "While disappointing, the status quo is as was widely expected. The recent moderation in inflation numbers, particularly non-food manufacturing at 4.5% in November 2012, a 32-month low, should provide the central bank comfort to begin to consider a rate cut early in the year 2013, as also imported inflation which reveals a decline to 6.5% in November 2012," said Naina Lal Kidwai, Ficci president , who is also country head, HSBC India. 
    "Liquidity has been tight. Given that there has not been any action on the cash reserve ratio front, RBI may infuse liquidity through open market oper
ations," said Shikha Sharma, MD & CEO, Axis Bank. The tightness in the money market is reflected in the extent of bank borrowings from RBI which crossed Rs 1.5 lakh crore on Tuesday. 
    According to Harihar Krishnamurthy, head of treasury at First Rand Bank, RBI may have desisted from a CRR cut because it would have been inadequate to meet the current shortfall. "Liquidity levels have reduced substantially after the advance tax outflows have exited the system, and the system has been running short to the extent of Rs 1.45 lakh crore per day. It is in this context that the RBI may have desisted from a 25-basis point cut in CRR, as that would have released only around Rs 17,000 crore which would have been insufficient. The markets are thus betting on announcement of open market operations by RBI to infuse liquidity into the system," said Krishnamurthy. 

RBI to infuse 8,000cr via OMO on Friday 

Mumbai: The Reserve Bank on Tuesday said it will infuse Rs 8,000 crore into the system by purchasing government securities on Friday as part of liquidity injection measure. 
    As part of the OMO operation, the RBI will auction three government securities with maturity in 2018, 2020 and 2026. AGENCIES


Monday, December 17, 2012

Sebi on Alert as Stocks Hit Position Limits Frequently

REGULATOR SUSPECTS SOME PEOPLE ACTING IN CONCERT


Recent instances of stocks hitting the market-wide position limit, or MWPL, in the derivatives segment have raised eyebrows, drawing regulatory attention. 
The MWPL has been devised to curb excessive speculation, but brokers say the current structure leaves a lot of scope to influence prices in certain cases. While there are broker and client-wise limits, analysts say it is not that difficult to get around these, which could be evident from the large movement in a stock's price after the position limits are hit. 
CORNERING COUNTERS 
Sources said the regulator is concerned as it has found that several clients have been hitting the 5% limit applicable to them in single stock futures. "If several people do this with a common objective, it is like persons acting in concert and results in cornering of the open interest," said a senior Sebi official. 
"It is fair as long as it is based on fundamental developments, but if it is artificially cornered, subsequent contracts may go up in price much more than they should," the official said not 
wanting to be named. 
Incidentally, there are growing instances of unusual rise in spot prices when a counter is under the F&O market limit. For instance, recently Pantaloon gained 36% in 20 days while it was in MWPL ban. 
In November, shares of Suzlon gained 20% while it was trading under the ban period. Similarly, shares of Welspun, United Spirits and IVRCL gained significantly 
in just a matter of days during the ban period. "We are seeing a lot of stocks hitting the MWPL limit. Many of these aggressive positions are built up when the market has some knowledge of developments. The underlying also has to move in a favourable direction if the trader has to benefit from securities in the ban period," said Rikesh Parikh, vicepresident, equities, at Motilal Oswal Securities. 
Brokers say it is not impossible for a few people to corner stocks with low free float. "While there are safeguards in terms of broker-wise and client-wise limits, it is 
not difficult to get around these restrictions," said a derivatives trader at domestic brokerage. 
Breaching Limits 
Large number of stocks hitting market wide position limits, or MWPL 
Sebi concerned as it feels a few are cornering most of the open interest 
MWPL calculated on 20% of non-promoter holding and includes F&O positions 
Outstanding positions 
in security should not exceed 95% f this 20% limit 
300 crore 
The revised minimum MWPL requirement 
200 crore 
Scrips failing to maintain this minimum requirement cease to be in F&O 
Low-Float Stocks Vulnerable 
THE MECHANICS 
MWPL is calculated on 20% of the non-promoter holding in a stock and includes positions taken in futures and options. For instance, if the equity base of a company consists of 1 crore shares with non-promoter holding at 40% (40 lakh shares), the number of shares considered for MWPL will be 8 lakh shares (20% of the 40 lakh shares). 
At the end of the trading session, the outstanding positions in that security should not exceed 95% of this 20% limit. So in this case, the outstanding positions should not be more than 7.6 lakh shares (95% of 8 lakh shares). If that limit is exceeded, the exchange bans traders from taking fresh positions till some of the existing positions 
are unwound. 
Brokers say if the floating stock in a certain stock futures is low, it is vulnerable to manipulation. For instance, if the value of MWPL in a certain stock is around . 300 crore, theoretically it is possible for a group of operators to corner this quantity by paying a margin of 25%, ie . 75 crore. 
However, the exclusion 
of many stocks from F&O have gone down after the regulator tightened the norms, making some stocks ineligible for the derivatives segment. In July, it revised the minimum MWPL requirement to . 300 crore from . 100 crore earlier. It also said that scrips which fail to maintain a minimum MWPL requirement of . 200 crore would cease to be in the F&O segment; earlier the limit was . 60 crore. 
THE OPTIONS GAME 
Brokers say there is a need to review the process to calculate MWPL so that the stock does not hit the 
limit too often. Some also suggest that the weightage of an options contract should be lower while calculating MWPL if the contracts are deep out of the money. Yogesh Radke, head of quantitative research, Edelweiss Securities, says that one of the ways could be to keep separate limits for futures and option for calculation of positions. "Many instances have been seen where the stock goes in ban due to open interest being created in deep-out-of-themoney option with a very low premium." 
Exchanges also provide the list of clients that have more than 3% positions in stocks on an individual basis. 
However, it is not difficult to sidestep this. Further, market participants say that friendly brokers enter into bulk contracts of deep-outof-the-money options contracts due to which the market-wide position limit is hit. 
This is because having a position in options, especially deep-out-ofthe-money option, is comparatively cheaper as compared to buying in futures. Once manipulators manage to corner the derivatives contracts of a certain stock and push it into the curb list, new players keep away from it.

Govt Thumbs RBI for a Lift on Road to Growth GDP growth seen at decade-low of 5.7-5.9%, but govt expects rebound in H2

  Declaring that the economic slowdown had "bottomed out" and inflation was "moderating", the government has predicted growth rebounding in the second half and made a pitch to the Reserve Bank of India (RBI), which reviews its monetary policy on Tuesday, for "supportive" steps to keep up the spirits. 

In its mid-year economic analysis presented in Parliament on Monday, the finance ministry said it expected GDP growth of between 5.7% and 5.9% for the year, which is lower than the 7.6% budgeted but higher than 5.4% achieved in the first half. This, the government said, meant the growth rate for the second half would be "close to around 6%", as it made an undisguised pitch to RBI to oblige by cutting rates. "To achieve this, both fiscal and monetary policies, however, would need to be supportive to sustain investor confidence," the review said. 
The Reserve Bank is due to review monetary policy on Tuesday and most analysts do not expect a rate cut just yet. The central bank has been under enormous pressure to cut rates from industry and the finance ministry, both of which be
lieve a monetary easing at this stage will lift spirits and ultimately aid growth revival. 
In any case, the review indicated that a rate cut was inevitable later even if it did not happen on Tuesday. "A further moderation in inflation, likely to commence from the fourth quarter of the current year, together with benign global commodity prices will also facilitate softening of the monetary policy stance of RBI," it said, expecting the inflation rate to be 6.8-7% by the end of March. 
Clear Signs of Improvement:Rajan 
Chief Economic Advisor Raghuram Rajan, who heads the ministry's economic division that prepared the midyear analysis document, said there were clear signs of improvement in India's economy despite difficulties the world over. He cited an upturn in the Business Expectation Index for the October-December quarter, resurgence of growth in manufacturing sector, improved internal accruals at companies, better rabi crop prospects, improved
performance of service sector, and moderating inflation as evidence. "India is an oasis... Who else is growing in the world?" Rajan said, as he suggested a three-pronged strategy to consolidate the economic recovery — a confidenceinducing budget, speedier clearances for projects and capital market reforms. The government, which has unveiled a fiscal consolidation road map, also expressed confidence that this year's fiscal deficit would be contained at 5.3% of GDP, worse than the 5.1% indicated in the budget but better than what independent experts have pencilled in at this stage. Even though it indicated confidence in sticking to its revised deficit target, the mid-year analysis flagged up challenges in areas such as disinvestment receipts and a higher subsidy bill. "Uncertainty on account of disinvestment receipts and likely higher subsidy requirement does make it a challenging task to adhere to the overall fiscal deficit target during 2012-13… Achieving the target of . 30,000 crore (from disinvestments) during the remaining period of 2012-13 would be a challenge," the review said. Experts said the government's mid-year self assessment was cautiously optimistic. 
"The report takes a very cautious view of the economy, though more on the optimistic side. A 6% growth in the second half would need serious changes and I don't see that happening," said Madan Sabnavis, chief economist at CARE ratings. Markets too were not too impressed. The Sensex closed nearly 0.4% lower while the rupee closed at a threeweek low against the dollar. The midyear analysis emphasised the need to keep a watch on the burgeoning current account deficit even though it said the deficit figure was unlikely to be as high as last fiscal year's 4.2% . It also cautioned against a decline in foreign exchange reserves.



 

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