The weak rally is still playing out. We maintain that a dip is likely over the short term
The market was up today, taking a cue from global bourses, with bank and software stocks supporting the uptrend. The Sensex ended at 17,558, higher by 55 points (0.3%) and the Nifty ended at 5,278, higher by 24 points (0.4%). The market started the day with a sharp rise and touched the intraday high of 17,646 in the early morning session. However, it pared its gains and traded throughout the day in a narrow range.
Asian markets rose for the first time in four days as improved quarterly results buoyed investors’ sentiment. Key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Indonesia were up by 0.08% to 1.42%. Taiwan’s main index fell 0.62%. US stocks surged on Thursday (29th April), after fear subsided over the eurozone debt crisis. The Dow rose 122 points (1.10%) to 11,167. The Nasdaq gained 40 points (0.63%) to 2,512 and the S&P 500 was up 15 points (1.3%) to 1,206. The US economy’s growth is expected to slow down in the first quarter. However, growth in consumer and business spending is likely to be robust. The Bank of Japan has said that it will soften monetary policy further to spur economic growth. The central bank kept the interest rate unchanged at 0.1% at its policy meeting. It also forecast that the consumer price index will edge up to 0.1% by March 2012, relieving concerns over the persistent price decline that is threatening Japan’s economic recovery.
Closer home, the consumer price index (CPI) rose 14.86% in March from a year earlier. The industry secretary said that the industrial output growth in March is expected to be around 15% on a year-on-year basis. In February, industrial output grew an annual 15.1%. The government has pledged to reduce the fiscal deficit and also increase spending in infrastructure and has announced changes in personal tax slabs for individuals. The government is set to borrow a record $100 billion in FY11 to fund its fiscal deficit, which is projected to be 5.5% of gross domestic product. The fiscal deficit has been a dominating factor in the monetary policy of the Reserve Bank of India, limiting its option in its fight against inflation which is near 10%.
Foreign institutional investors were net buyers on Thursday of Rs90 crore. Domestic institutional inventors also bought stocks worth Rs266 crore. The rupee was strong due to the small gain in the equity markets and on the weakness of the dollar.
Spanco (up 17.4%) and GTL (up 1.4%) have emerged as the highest bidders to distribute power in two cities in Maharashtra. The bids were called by State-owned Maharashtra State Electricity Distribution Company for appointing licensees to distribute electricity in Nagpur and Aurangabad. Pantaloon Retail (up 1%) and its unit Future Value Retail plan to issue non-convertible debentures worth Rs750 crore in the next three-four months. The proceeds will be used to repay debt and convert certain short-term loans into longer duration debt. MindTree (down 0.08%) has received an application development service offer from the government’s Unique Identification (UID) Project at a cost of about Rs20 crore. Peninsula Land (up 0.61%) has invested Rs115 crore to acquire a plot for redevelopment in south Mumbai. Air India has written to the government, asking it not to allow the tie-up between Kingfisher Airlines (up 2.5%) and British Airways, arguing that the move will hurt its commercial interests. Puravankara Projects (up 3.8%) plans to launch about 18 million square feet of residential space in FY11 on the upsurge in demand for houses in south Indian cities. Jindal Steel & Power (up 0.3%) is close to acquiring Oman-based Shadeed Iron and Steel for nearly $500 million. Tata Motors (up 3.5%) touched its 52-week high taking a cue from the surge in its ADRs which rose 2.46% on Thursday.
UltraTech Cement (down 4.5%) posted growth of 3% in sales; its operating profit declined 24% in the March quarter over the year-ago period.
The government has already approved 20% share sale in the steel major, which will include 10% equity dilution by the government and the company raising fresh equity in the same proportion
The government today said that it is targeting to raise Rs18,000 crore through the 20% share sale in the country's largest steel-maker SAIL, reports PTI.
“At current prices, total receipt from the disinvestment and issue of fresh equity would be approximately Rs18,000 crore,” steel minister Virbhadra Singh informed the Rajya Sabha today.
The minister, however, said, “The actual amount that would be raised through disinvestment as well as from FPO would depend on a number of factors, including the prevailing market conditions, share price and the investors’ interest at the time of the actual disinvestment.”
The SAIL counter today closed at Rs218.55, down 1.38%, on the BSE.
The government has already approved 20% share sale in the steel major, which will include 10% equity dilution by the government and the company raising fresh equity in the same proportion. At present the Centre holds about 85% stake in the steel major.
The Centre is likely to go ahead with divestment in 12-15 public sector units, including SAIL, Coal India, Hindustan Copper, SJVNL and EIL—among others—in the current fiscal to raise about Rs40,000 crore.
The government had announced new FDI norms last year that say that if indirect FDI in an Indian company exceeds 50%, its investment in subsidiaries will be treated as foreign investment
The government today said that ICICI Bank and HDFC Bank cannot be called ‘Indian-owned’ banks, setting at rest the debate generated over the nationality of the top two private sector lenders, reports PTI.
“At best, these two can be called as Indian-controlled banks,” DIPP secretary RP Singh said today when asked about the government’s stance in the wake of the two seeking clarifications on the matter.
“ICICI Bank managing director & CEO (Chanda Kochhar) met me day before yesterday, she has discussed (the issue) with me,” Mr Singh said.
ICICI Bank had maintained that it continues to be an Indian bank as both its management and board were Indian.
However, both ICICI Bank and HDFC Bank have over 74% foreign holding, including that of foreign banks and overseas institutional investors.
“Banks will be covered in one paper which we are trying to bring out on the financial aspects totally,” Mr Singh said, referring to the six discussion papers on FDI that the Department of Industrial Policy and Promotion is planning to bring out soon.
“You know the definition of what is a company controlled by Indians and what is the definition of a company owned by Indians,” Mr Singh said.
Going by the definition, both entities are certainly banks not owned by Indians, because equity of at least 74% or around 74% is from outside, he pointed out, buttressing the government's stand.
But they can be construed as banks controlled by Indians if the majority of directors are Indians and right to directorship is with Indians. So depending upon that, both banks are construed as banks controlled by India, but they can certainly not be called banks owned by Indians.
“There is a way of resolving their problem. We will try to find a solution for that. The handicap they are suffering, we will try to resolve,” Mr Singh said.
The banks’ claim that they are Indian is significant in the light of the government announcing new FDI norms last year that say that if indirect FDI in an Indian company exceeds 50%, its investment in subsidiaries will be treated as foreign investment.
Moreover, in calculating indirect foreign investment in an Indian entity, the sum total of FDI, stake from Non-Resident Indians, American and Global Depository Receipts, foreign currency convertible bonds and convertible preference shares will be taken into account.
Both ICICI Bank and HDFC Bank have insurance ventures, where FDI is capped at 26%.