Goldman Sachs downgrades RIL, Cairn to ‘neutral’

The global investment firm, in a report, stated that downside risks with regard to RIL include “weak refining margin and low petrochemical margins”, while those for Cairn include fall in crude prices, delay in production ramp-up and adverse regulatory developments

New Delhi: Investment banker and securities firm Goldman Sachs today downgraded Reliance Industries (RIL) and Cairn India to ‘neutral’ from ‘buy’, on shrinking refining margins and regulatory issues, reports PTI.

The global firm, however, upgraded the state-owned HPCL, ONGC and IOC to ‘buy’ list and retained the ‘Neutral’ outlook on other oil companies including GAIL, GSPL, BPCL and Oil India.

“We remove RIL from our Asia Pacific Conviction list and downgrade it to ‘neutral’ from ‘buy’ as we are concerned about lack of clarity on its sustainable growth drivers, implying limited scope of medium-term earnings surprise following Q4 results,” Goldman Sachs said in a report.

The downside risks with regard to RIL, the report said, include “weak refining margin and low petrochemical margins”.

The report also expressed concern over the performance of RIL’s “E&P (exploration and production) division owing to a lack of clarity on D-6 production levels and slow progress in exploration acreage”.

RIL’s shares slipped 1.56% to Rs985.15 on the Bombay Stock Exchange (BSE) today.

With regard to Cairn India, Goldman Sachs said, that although it had upgraded the oil company to ‘buy’ category in July 2010, the stock underperformed mainly on account of the “Cairn-Vedanta deal overhang”.

The downside risks for Cairn include fall in crude prices, delay in production ramp-up and adverse regulatory developments.

Shares of Cairn India closed down 0.13% at Rs348.20 on the BSE.


ED to attach properties of errant telcos in 2G scam

Senior advocate KK Venugopal, appearing for the ED did not mention the names of the companies but assured that attachment proceedings will be initiated soon and will be completed within two months

New Delhi: The Enforcement Directorate (ED) today told the Supreme Court that property worth Rs2,000 crore each will be attached against two companies which are involved in the second generation (2G) spectrum scam during the tenure of former telecom minister A Raja, reports PTI.
"Property worth Rs2,000 crore has to be attached relating to these companies," senior advocate KK Venugopal, appearing for the ED, submitted before a bench comprising justices GS Singhvi and AK Ganguly.

Mr Venugopal, who was reading the excerpts of the fresh status report of the ED submitted in a sealed cover, did not mention the names of the companies but assured that attachment proceedings will be initiated soon and will be completed within two months.

He hinted that attachment orders will be issued shortly under the Prevention of Money Laundering Act (PMLA) and Foreign Exchange Management Act (FEMA), against the two companies against whom the ED has so far registered the complaints.

"It will be done in two months time against the companies whose names have been mentioned in the complaints. We have to collect details of their properties as many of the companies keep benami properties," the senior advocate said when the bench asked how much time will the ED take to complete the investigation.

The ED in its status report said investigation was in progress regarding the involvement of five foreign companies in the 2G scam which are registered in Virgin Island.

On hearing this, the bench asked "What is the response of the CBI on it?"

Mr Venugopal said till now the ED has not written about it to the Reserve Bank of India (RBI) and future course of investigation will follow.

However, he said action has been taken and complaint has been registered for FEMA violation of Rs4,000 crore which will be added on as the investigation will progress and attachment will start.

The ED gave details of various financial transaction connected with the scam and said that the company connected with Shahid Usman Balwa's DB Realty was involved in the movement of Rs1,400 crore.

"The companies are connected with DB Realty. Funds started moving from a real estate company. Rs1,400 crore went from the top to the bottom and goes back to the original source," Mr Venugopal said referring to the transaction of money among various companies after the grant of 2G licence.

Meanwhile, CBI also filed fresh status report about its probe and sought more time to complete the investigation relating to the allocation of spectrum during the period of 2001-07.

The bench appreciated the probe done by the CBI and ED and said they have done a "commendable job".


Share prices still in a range: Wednesday Closing Report

The Nifty is yet to break past 5,900 levels, which is needed for an uptrend

The market closed with modest losses today, an indication that it is still in a range. Tepid quarterly earnings reports kept a lid on the market today. The Nifty is yet to break past the 5,900 levels, which is necessary for an uptrend. On the downside, support remains at 5,750 and then at 5,550.

Tracking good global cues, the local market opened higher with the Sensex gaining 66 points at 19,611 and the Nifty up 16 points to 5,884. The market was choppy, a feature ahead of the futures and options contract expiry tomorrow. Soon the indices touched the day's high, with the Sensex scaling 19,634 and the Nifty at 5,892.  However, the weak outlook from IT major Wipro disappointed the market, sending the indices into negative territory.

The see-saw movement continued till noon, when a huge bout of selling hurtled the indices further southwards. A mixed opening by key European bourses lifted investor sentiment a little in post-noon trade. But selling pressure pushed the market down once again to the day's lows in post-noon trade. At the intra-day low the Sensex was at 19,413, down 132 points, and the Nifty shed 48 points to 5,820.

Fluctuation continued till the end of trade with losses expanding today. The Sensex closed the session at 19,449, down 97 points from its previous close, and the Nifty lost 35 points to settle at 5,834. The advance-decline ratio on the National Stock Exchange was 574:817.

The broader indices ended flat. In the sectoral space, BSE PSU, BSE Fast Moving Consumer Goods gained 0.49% each and BSE Consumer Durables was up 0.26%. On the other hand, BSE Realty (down 1.55%), BSE Capital Goods (down 1.20%) and BSE Metal (down 0.81%) were the losers.

ONGC (up 1.57), Mahindra & Mahindra (up 1.61%), Maruti Suzuki (up 1.10%) were the top performers on the Sensex, whereas Wipro (down 2.86%), Jaiprakash Associates (down 2.66%) and BHEL (down 2.30%) were the major laggards.

The Reserve Bank of India (RBI) has imposed a total penalty of Rs1.95 crore on 19 banks, among them the State Bank of India, HDFC Bank, ICICI Bank and Citibank, for violation of norms on derivatives, an instrument that is commonly used to hedge financial risks.

According to the RBI, the lenders failed to carry out due diligence with regard to suitability of products and sold derivative products to companies not having risk-management policies. They also failed to verify the adequacy of eligible limits before selling derivatives.

Markets in Asia, which were trading higher for most part of the trading session, ended with key indices in the red. With policy announcements from the US Federal Reserve expected later in the day and from the Bank of Japan on Thursday, investors remained cautious. On the other hand, optimism on the news that 90% of Japanese factories will resume production by July, perked up spirits.

The Jakarta Composite gained 0.80%, the KLSE Composite was up 0.17%, the Nikkei 225 jumped 1.39%, the Straits Times rose 0.34%, the Seoul Composite added 0.02% and the Taiwan Weighted surged 1.13%. On the other hand, the Shanghai Composite declined 0.46% and the Hang Seng was down 0.48%.

Back home, foreign institutional investors continued to pull out funds from the equities segment on Tuesday, they were net sellers of stocks worth Rs554.03 crore. Conversely, domestic institutional investors were net buyers of shares worth Rs161.81 crore.


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