A break in the 17,300-16,800 band will determine the direction
The market ended higher today; however, confusion exists in the street about the long-term sustainability of the rally as the crisis in the eurozone is yet to be resolved. The Sensex ended 95 points (0.5%) higher at 17,117 while the Nifty ended 25 points (0.5%) higher at 5,135. The indices started the day on a weak note taking cues from the Asian markets. The market started recovering in the early afternoon session and gained momentum on a strong start in European indices.
Asian indices settled mixed today. Key benchmark indices in China, South Korea, Singapore and Indonesia were up by 0.08% to 0.89% while markets in Hong Kong and Taiwan were down by 0.03% to 0.21%. In Japan, the Nikkei 225 average was down 0.13% after the country's ruling party selected finance minister Naoto Kan as Japan's new prime minister.
US stocks were up on Thursday, supported by a late-day rise in technology shares. The Dow was up 5.7 points (0.06%) at 10,255. The S&P 500 added 4.4 points (0.4%) to 1,103. The Nasdaq was up 22 points (0.9%) to 2,303. The US private sector created more jobs in May and the services sector increased payrolls for the first time in more than two years. In a separate report, the Labour Department said that US non-farm productivity grew at a 2.8% annual rate between January and March, the smallest advance in a year.
Back home, the monsoon activity is expected to regain next week after it was weakened by a cyclone. The monsoon rainfall was at 16.7 millimetres for the week ended 2nd June, down 11% from the normal weekly average of 18.8 millimetres.
India is likely to allow large consumers to keep larger stocks of sugar as prices keep dropping and supplies are likely to rise. The government had banned huge stocking by large consumers in February on poor domestic supply.
Foreign institutional investors were net buyers, purchasing stocks worth Rs406 crore on Thursday. Domestic institutional investors bought stocks worth Rs79 crore.
Bhandari Consultancy & Finance (down 4.9%) said that the Delhi High Court has directed that a meeting of the equity shareholders be convened on 10 June 2010, for the purpose of considering the Scheme of Arrangement between Sindhu Trade Links, Sindhu Holdings, Garuda Imaging and Diagnostic Pvt Ltd, Uttaranchal Finance, Parnami Habitat Developers, Suvidha Stock Broking Services Pvt Ltd, Reward Vinimay Pvt Ltd and Bhandari Consultancy & Finance along with their respective shareholders and creditors.
Modern India Ltd (up 0.2%) said that pursuant to the Bombay High Court order, Indian Institute of Jewellery Ltd, a wholly-owned subsidiary of the company, has been amalgamated with Modern India. Consequently, Indian Institute of Jewellery has been dissolved without being wound up on 3 June 2010.
Ceat (down 0.2%), which currently holds 54.84% stake in its Sri Lankan investment arm Associated Ceat Holdings Company Pvt Ltd, Colombo, has acquired the remaining 45,15,789 equity shares of the company. Consequently, ACHL has become a wholly-owned subsidiary of the company. ACHL holds 50% stake in Ceat Kelani Associated Holdings Pvt Ltd (CKAH), Colombo, a joint venture between ACHL and its Sri Lankan Partner, Kelani Tyres Ltd.
CKAH has three wholly-owned subsidiaries, which are engaged in manufacturing of tyres under the 'Ceat' brand.
Four retailers will be approaching various High Courts across the country to seek a stay order on service tax on commercial rentals
Four retailers will be approaching various High Courts across the country to seek a stay order on the service tax on commercial rentals that was imposed in this year’s Budget by finance minister Pranab Mukherjee. According to industry sources, the four retailers are Shopper’s Stop, Lifestyle, More and Reliance Retail Ltd.
The Delhi High Court had granted a stay in April 2010 in favour of Home Solutions Retail India Ltd on recovery of service tax under the newly amended Section 65 (105) (zzzz) under “Renting of Immovable Property Service”, of which the amendment was made retrospective with effect from 1 June 2006 by the Finance Act, 2010.
This ruling has encouraged other retailers also to follow the same procedure to relax the service tax on commercial rentals.
The “activity of renting itself is a taxable service,” Mr Mukherjee had said while announcing the 10% tax, the second attempt to impose the levy. It had first been introduced by then finance minister P Chidambaram in his 2007-08 budget proposal when he imposed a 12% service tax on commercial rentals.
“We haven’t approach a High Court as yet but we are contemplating it. In the next few weeks we will be approaching a High Court where our operations are impacted the most,” said Thomas Varghese, chief executive officer, Aditya Birla Retail Ltd.
While granting a stay on service tax for Home Solutions Retail India, the Delhi HC said that service tax is a tax on value addition provided by a service provider. If there is no value addition, there is no service. Renting of immovable property, by itself, does not entail any value addition and therefore cannot be regarded as a service. If there is some other service provided along with renting of immovable property, then any such other service would be covered under Section 65 (105) (zzzz).
The Retailers Association of India (RAI) will help these retailers to file the litigation. “RAI is helping its members to take the cases to court. The service tax impacts retail more than anyone else. Currently retailers pay 10%-12% of the turnover as rentals and the service tax is affecting them by 10.2%. On total turnover, the retailers might pay 1%-1.2% as service tax. Most retailers make a profit between 2%-4%. The government will take away half of the profit,” said Kumar Rajagopalan, chief executive officer, RAI.
He further added, “It was fine if goods and services tax (GST) was implemented in the country—then the service tax can be set off against sales tax. Retailers are already paying value-added tax (VAT). Most retail outlets are on leased spaces, they have to pay service tax. It is difficult for retailers to survive. Retailers are affected by VAT and service tax because the government is still not able to implement GST and retailers are landing in trouble.”
Reliance Retail declined to comment on any such development while Shopper’s Stop is planning to move court. “All the retailers are planning a similar action,” said Govind Shrikhande, president and CEO, Shopper’s Stop.
All listed entities will have to dilute at least 5% additional equity annually till they reach the threshold limit of 25%
The government today made it mandatory for listed companies to raise public shareholding to 25%, with at least 5% dilution a year, a move that would attract more investors and check share price manipulation, reports PTI.
In keeping with the budgetary promise, the finance ministry amended the relevant regulations to the effect that "the minimum threshold level of public holding will be 25% for all listed companies."
Accordingly, all listed entities would have to dilute at least 5% additional equity annually till they reach the threshold limit of 25%. And fulfilment of this condition would be must for them to remain listed.
The new rules were announced shortly after close of stock market. The BSE Sensex, which rose by 95 points today on top of a 450-point rally in past two days, could come under pressure on Monday, analysts said.
For a company seeking listing, it would have to dilute 25% in one go in case the issue size is just up to Rs4,000 crore. However, those already in the process of going public and have filed draft prospectus could disinvest the stipulated 10% and later meet the condition notified today.
The decision on mandatory increase in public exposure of a company to 25% had been hanging fire for more than a year due to differences the market regulator Securities and Exchange Board of India (SEBI) had with the finance ministry.
While SEBI's contention was that such broad-basing would require huge funds, which some estimates pegged at over Rs2 lakh crore, the government was firm on enforcing the decision announced in the 2009-10 budget as an effective means to check price manipulation by promoters.
A top government adviser on financial sector and Housing Development Finance Corporation (HDFC) chairman Deepak Parekh told PTI last week that the increased public exposure was one of the effective ways to tackle the problem of over-pricing of public issues.
"Tell me one IPO that has succeeded," asked Mr Parekh, who heads the Primary Market Advisory Committee of market regulator SEBI.
Elaborating, Mr Parekh said: "Our issuers (entities coming out with public offers) don't want to leave money on the table. They want to maximise the price. You need to have a heart to give money and let others make money."
The finance ministry had come out with a discussion paper in February 2008 and was to complete the discussion in May that year, but the same could not happen on account of divergence of views. Thereafter, finance minister Pranab Mukherjee came out with the proposal while presenting the 2009-10 budget in July 2009.
The argument was that larger the number of shares and the number of shareholders, the less is the scope for price manipulation.
At present, most companies dilute just 10% stake and the shares tend to trade at a premium.