As suspected, the market corrected today but the up-move is not over
The market ended its seven-day winning streak to end in the red, led by Reliance Industries (RIL) as its annual general meeting (AGM) was short of investors' expectations. The Sensex ended at 17,570, down 45 points (0.2%) while the Nifty settled at 5,262, down 12 points (0.2%). The benchmarks started the day with gains. Trading was range-bound with the market slipping into negative terrain around noon. It managed to recover, but profit-booking pulled the indices lower again.
Asian stocks were mixed as concerns over the US economic recovery weighed on investors. Key benchmark indices in China, Singapore, Japan, and Taiwan were down between 0.04% and 1.8%. Indices in Indonesia, South Korea, and Hong Kong were up by 0.2% to 0.9%.
US markets gained in late trade on Thursday, to end with modest gains despite a worse-than-expected reading on manufacturing activity in the Philadelphia area and an increase in jobless claims. The Dow was up 24.7 points (0.2%), to 10,434. The S&P 500 was up 1.4 points (0.1%) to 1,116 and the Nasdaq was up 1.2 points (0.05%) to 2,307. This is the ninth straight day of rally for world markets which regained losses posted on concerns over the euro debt crisis.
Spain sold treasury bonds worth €3.5 billion on Thursday, which will provide liquidity to the debt-ridden economy. The International Monetary Fund (IMF) praised the country's effort to tackle its debt and deficit issues.
Back home, exports in May were up 35% over the year-ago period, trade secretary Rahul Khullar said. Imports have been up 30% over the year-ago period.
Reserve Bank of India (RBI) governor D Subbarao said that inflation is getting more generalised with the demand side pressure building up in the economy. The RBI will take a calibrated exit from the loose monetary policy, he added.
Foreign institutional investors were net buyers of equities worth Rs462 crore on Thursday. Domestic institutional investors were net sellers of Rs363 crore.
The board of ITC (up 0.1%) has recommended the issue of bonus shares in the proportion of one bonus share of Re1 each for every existing ordinary share of Re1 each. The board also approved an increase in the authorised share capital from Rs500 crore divided into 500 crore ordinary shares of Re1 each to Rs1,000 crore divided into 1,000 crore ordinary shares of Re1 each. The company will seek approval of the shareholders at the annual general meeting (AGM) to be convened on 23rd July.
Larsen & Toubro's (up 1.2%) buildings & factories arm has secured orders aggregating Rs1,440 crore for the construction of residential towers, township and factory buildings. L&T has secured new orders aggregating Rs1,294 crore for the construction of residential towers and townships from leading developers and clients. Majority of the above orders have been secured on a design-and-build basis. Further, orders worth Rs146 crore have been secured from various clients, including add-on orders from the ongoing factory jobs.
Unitech (up 0.3%) said that, further to the allotment of 10,90,56,781 shares upon conversion of equivalent number of warrants on 29 March 2010 and 2 June 2010, the company has further allotted 2 crore equity shares of Rs2 each at a premium of Rs48.75 per share to Harsil Projects Pvt Ltd, a promoter group company, upon conversion of 2 crore warrants, by way of preferential allotment.
The promoters' shareholding in Unitech after such allotment on conversion of warrants has increased to 46.72% from 46.30%. The company had issued 22,75,00,000 warrants convertible into equal number of equity shares at the aforesaid price within a period of 18 months.
The UP sugar industry is likely to incur loss of Rs600 per quintal due to falling sugar prices and over-production
With the concerns of higher production and low recovery of cost, the Uttar Pradesh (UP) sugar industry is set to reel under heavy losses this year. The State has paid the highest cane price of Rs2,500 per tonne on an average recovery of 9% to the farmers. Thus, sugar factories in UP are not able to recover even their raw material cost.
Fair Remunerative Price (FRP) acts as a floor price for sugar farmers. They are legally entitled to get this minimum price. If any State government or any other authority fixes any price for sugarcane above the FRP, the difference is paid by that State government. But sugar mills are allowed to offer any price above FRP.
"UP has produced 51 lakh tonnes of sugar this year. For one bag of sugar the industry has lost as much as Rs400. The break-even cost in UP is Rs3,600 per quintal this year. This is considering the levy price of 20%. On a production of 51 lakh tonnes we will be losing approximately Rs3,000 crore. The loss is Rs600 per quintal," said Shyam Lal Gupta, secretary general of the Uttar Pradesh Sugar Mills Association.
"The industry is in heavy losses on account of the higher cane prices paid to the farmers and as per the present valuations we are not even covering the cane cost.
If this situation prevails in the long run then the UP sugar industry will become sick or farmers will move away. The industry has paid Rs2,500 per tonne to the farmer. But seeing the sugar prices, the industry will not be able to pay even the FRP," said CB Patodia, advisor, Birla Group of Sugar Companies and president, UP Sugar Mills Association.
The UP sugar industry is now under a situation where it is not capable of paying more than the FRP of Rs139 a quintal.
UP is the second-biggest sugar producer after Maharashtra. Following expectations of oversupply, the government is planning to decrease the levy quota from 20% to around 15%. The imposition of import duty will provide the much-needed relief to the sugar factories and farmers.
According to industry sources, the State government pleases the farmers by ensuring that factories should pay a good price to them while the Centre looks at the interest of the consumers. The industry is required to pay a good price to farmers during the sugar-producing season (October-September).
"Farmers in Maharashtra are getting lower prices despite good-quality cane. Sugar is the only industry which is subsidised by the Centre," added Mr Patodia.
Cane acreage in UP is likely to touch 2.15 million hectares during the year 2010-11. India is likely to produce 23 million tonnes (MT) of sugar in 2010-11. Last year the country produced 19MT of sugar. India already has 3.5MT of stocks from the 2009-2010 production, thus putting further pressure on prices.
Sugar prices in UP have crashed from Rs3,800 per quintal to Rs3,000 as the Central government allowed import of raw sugar and increased the stock limit.
Due to the bad monsoon last year, India allowed imports of white and raw sugar to bring down domestic prices when the production declined to 14MT.
A software glitch in IndusInd Bank’s system puts customers in a spot, levies charges for low account balance for no fault of the customer
Issues related to technology continue to plague our banking system even today. On the one hand banks claim to have in place state-of-the-art technology and infrastructure in place to serve customers in a faster and efficient manner. But on the other hand, the same banks face regular issues with maintenance and upkeep of this so-called technology, at the expense of the customer.
Glitches in a bank's software system are rare, but when they do raise their ugly head, they can be one of the most irritating and troublesome issues that customers have to deal with. Currently, a bug in the software of IndusInd Bank is posing similar problems for its account holders. A current account holder with the bank, Girish Mittal, has brought this to the attention of Moneylife.
The bank has a facility wherein the excess funds in the account (above Rs 10,000) are transferred to a fixed deposit. However, the bug in IndusInd Bank's software does not allow funds to be drawn from the fixed deposit wherever any cheque is debited from the account. Instead, the software allows the account to be charged directly. Due to this the balance in the account becomes lesser than Rs 10,000 and the software levies unnecessary charges to the customer.
Explaining the issue, Mr Mittal said, "If for instance, a cheque for Rs5,000 comes for debit, it gets debited from the balance in the current account, instead of being replenished from the fixed deposit. The balance thus reduces to Rs5,000 and the software then charges my account."
This has been happening for the past one year and more, with the software levying penalties every time the account balance goes below the minimum, when actually the account holds substantial funds.
Having raised this issue with the bank, one would expect that it would look into a matter as alarming as this. Surprisingly, even after repeated complaints to the bank authorities, IndusInd Bank has chosen not to act on it. Every time the customer is forced to call the top management officials, who then arrange for the charges to be reversed for that month. But that hardly is the solution as the same thing happens the next month.
Mr Mittal said, "I had brought this to the notice of IndusInd Bank several times, but they seem least interested in resolving the issue. Instead of providing a permanent solution, they are only making stopgap arrangements."
The pressing issue here is, can banks randomly charge customers' accounts without being authorised to do so, just because the account exists?
An email query sent by Moneylife to IndusInd Bank remained unanswered till the time of writing this piece. The customer has now approached the Reserve Bank of India's customer services department to look into the matter. RBI has asked IndusInd Bank to explain their stance.