As suggested yesterday, the market was under pressure today. It will continue to remain under pressure
The market was down today on weak cues from Asian bourses. The Sensex fell 255 points (1.4%) to close at 17,714 and the Nifty closed 70 points lower (1.3%) to 5,304.
The market touched the intra-day high during early morning trade. However, it pared gains soon and was on a downtrend throughout the day. Asian stocks fell for the first time in six days on Thursday after Japanese machinery orders unexpectedly dropped and US consumer credit slumped more than expected.
Key benchmark indices in China, Hong Kong, Singapore, Taiwan, Indonesia, and Japan fell by 0.28% to 1.92%. South Korea’s Seoul Composite rose 0.42%. US stocks slipped on Wednesday after a senior Federal Reserve member said that policy makers should start raising rates to 1%. The Dow Jones fell 72.47 points (0.86%) to 10,897.52. The Nasdaq declined 5.65 points (0.23%) to 2,431.16 and the S&P 500 fell 6.99 points (0.59%) to 1,182.45. European markets were down on fresh worries about the debt situation in Greece.
However, the Fed chairman said that the central bank is not thinking of any interest rate tightening now. The European Central Bank said that it will keep the interest rate at 1% to ease the financial crisis in Greece. The World Bank has said that it has lent a record $100 billion as financial support to developing nations over the past 18 months to help them recover from the economic crisis. It had stepped up lending in July 2008 at the request of member countries as demand from developing countries increased in the face of a worsening world recession and sharp drop in global trade.
Closer home, the food price index accelerated for the second straight session. The index rose 17.7%, which is higher than an annual rise of 16.35% in the previous week. The fuel price index rose by an annual 12.71% which is below the annual rise of 12.75% in the previous week. Foreign institutional investors were net buyers on Tuesday of Rs338 crore. Domestic institutional buyers were net sellers of Rs23 crore. The rupee was on a high on reports of a possible revaluation of the yuan and the buying of dollars by banks ahead of the 3G auction.
Bajaj Auto (down 0.1%) will distance itself from the parent brand Bajaj and will make motorbikes and rear-engine three-wheelers. Metal stocks declined as the LMEX—an index of six metals—traded down on the London Metal Exchange. The government plans to sell 20% stake in SAIL (down 7.1%) in two phases. The first sale of 10% is expected to bring in Rs8,000 crore. MphasiS has signed a pact to acquire 100% stake in Fortify Infrastructure Services in an all-cash deal. Bank and financial stocks were down today as investors opted to stay away from these counters ahead of the RBI policy meeting.
Oil exploration stocks were down as crude prices fell by almost $1 on the New York Mercantile Exchange on Wednesday. Elecon Engineering (up 1.6%) has received two orders aggregating Rs88 crore for the designing, manufacturing, supplying and commissioning of material handling equipment and gear boxes. While it received a Rs47.8-crore order from Jindal Steel & Power, another contract worth Rs40.55 crore was received from L&T. Mahindra & Mahindra (down 1.1%) has raised the price of its utility vehicle due to increase in input costs. The price of its flagship ‘Scorpio’ sport utility vehicle has risen by Rs10,300 to Rs17,500, that of the ‘Bolero’ by Rs26,100 and ‘Xylo’ prices have gone up by between Rs15,300 and Rs15,900.
Like we said yesterday, the market will continue to remain under pressure. Global cues may weaken over the next week. Indian corporate results for the last fiscal will be keenly watched, and these figures will decide the long-term course of local bourses.
In 2008, the government had banned smoking at public places and put a curb on tobacco advertisements
Taking its anti-smoking drive forward, the government today banned foreign direct investment (FDI) in cigarette manufacturing in the country.
Home minister P Chidambaram said that FDI will be prohibited in cigarette manufacturing, whether it is for domestic consumption or for exports.
“The approval is expected to enhance public accountability by way of the government’s commitment towards proliferation of (the) anti-smoking regime in the country,” he told reporters after the CCEA meeting.
The decision to ban FDI is the latest in the government’s long-standing drive against smoking. In 2008, the government had banned smoking at public places and put a curb on tobacco advertisements.
The proposal for banning FDI in cigarette manufacturing was mooted by the Department of Industrial Policy and Promotion and approved by the Cabinet Committee on Economic Affairs (CCEA) in its meeting.
“Prohibit FDI in manufacturing of cigarettes and to include the activity in the list of activities prohibited for FDI,” the official release said.
When asked about the existing foreign investment in the tobacco sector, Mr Chidambaram said the matter did not come up for discussion in the CCEA.
Under the existing norms, 100% FDI is permitted in cigarette manufacturing, but an industrial licence is required and the proposals need to be approved by the Foreign Investment Promotion Board (FIPB).
With the CCEA banning foreign inflows, Mr Chidambaram said, “This would bring the policy in line with the administrative decision not to grant industrial licence for cigarette manufacturing.”
The move would also align FDI policy with the existing legislation on tobacco control to a greater extent, the minister said.
The industry body has issued warning notices to HSBC, NJ India Invest, HDFC Bank and Kotak Mahindra Bank for not complying with NOC norms and luring investors to change distributors to garner trail commission
The Association of Mutual Funds in India (AMFI) has finally woken up to the messy game of assets under management (AUM) transfer and rampant mis-selling of mutual funds by banks and national distributors.
The industry body has sent warning notices to HDFC Bank, HSBC Bank, Kotak Mahindra Bank and NJ India Invest to stop this practice, reports CNBC TV18. AMFI has also sent a stern signal that if they don’t comply with the guidelines, AMFI will consider withdrawing their licenses.
Interestingly, Moneylife had first reported this practice on 2 February 2009. Post the implementation of the trail commission norms, AUM transfer by unethical means was gaining traction, and distributors and investors were being duped into signing dubious letters. (See here and here).
In the first article, we had identified HDFC Bank and NJ India Invest as among those distributors who were indulging in this practice. Now AMFI has acted against these two entities. AMFI is also in the process of issuing notices to other such entities.
Ironically, according to some smaller distributors, KN Vaidyanathan, executive director, SEBI, had addressed a gathering of distributors at the Bombay Stock Exchange (BSE) earlier this year where he had said that they should follow the practices of NJ India Invest and openly lauded the “ethical services” provided by NJ India Invest.
According to sources, NJ India Invest has a dedicated team for encouraging switchover of assets. In some cases involving national distributors, investors are duped into signing letters which eventually leads to a change of distributor, without the knowledge of the investor. The ban on no-objection certificates (NOCs) was supposed to ease investor woes while changing a distributor, but some players continued to demand an NOC from investors.
The entry of bank distributors in the MF distribution game is unlikely to end mis-selling of MFs. (See here). Recently, the State Bank of India has trained 18,000 employees to sell MFs through its banking channel. After SEBI allowed MF units to be traded through the exchanges in December 2009, brokerage houses have started providing free demat accounts to earn trail commission. Sources reveal that while converting physical MFs into demat forms, investors are made to sign a change of distributor. (Read here).
A Pune based certified financial planner K V Balaji recounts his experience with ICICIdirect: “I have received an SMS from ICICIdirect, offering a 'free service of converting offline mutual fund investments to online investments'. On calling the number, the person spoke about ICICIdirect offering a free service. When I asked how will ICICIdirect garner any revenue from this 'free' service, he didn’t talk of the trail. Instead, he stated that ICICIdirect would manage yearly maintenance fee of Rs500 per account holder from its demat accounts.”
However ICICIdirect denied having any such scheme which provides a free or even a discounted demat account based on mutual fund conversion.
Our email queries sent to HDFC Bank, Kotak Mahindra Bank, NJ India Invest and ICICIdirect remained unanswered till the time of publishing this piece.