Regulations
Government says three executives of SEBI being probed in bribery, other cases

These SEBI executives being investigated for alleged cases of irregularities, bribery and corruption are assistant general managers Jerome K Alexander and Rajesh Pratap Singh and deputy general manager Avarjeet Singh

 
New Delhi: The government on Thursday said three executives of market regulator Securities and Exchange Board of India (SEBI) are being investigated for alleged cases of irregularities, bribery and corruption, and all of them have been suspended from their respective jobs, reports PTI.
 
Replying to a written question in the Rajya Sabha, Minister of State in Finance Ministry Namo Narain Meena said that these executives include Assistant General Managers Jerome K Alexander and Rajesh Pratap Singh and Deputy General Manager Avarjeet Singh.
 
To a question from MP Rajeev Chandrasekhar that whether any investigation has been conducted into allegations of irregularity, bribery and corruption by the staff in SEBI, Meena replied in affirmative.
 
Giving specific details for the three executives, Meena said an investigation is being held against Alexander relating to his alleged involvement in the issuance of a forged letter in the matter of Pyramid Saimira Theatre Ltd.
 
Alexander has been placed under suspension from 15 April 2011, the minister said.
 
In another matter, CBI, Kolkata has informed SEBI that two cases have been registered against Rajesh Pratap Singh for alleged possession of disproportionate assets and alleged acceptance of bribe.
 
"The employee has been placed under suspension from 1 February 2010..." Meena said.
 
Besides, CBI, Gandhinagar has informed SEBI that a case has been registered against Avarjeet Singh for allegedly demanding illegal gratification and the employee has been placed under suspension from 31 May 2012.
 
The Minister further said the alleged involvement of Alexander in the matter of forged letter is yet to be concluded by SEBI's Chief Vigilance Officer (CVO), while alleged corruption case against Singh is being investigated by SEBI.
 
Anti-Corruption Bureau, CBI, Kolkata has initiated prosecution against Avarjeet Singh and has filed two charge sheets against him before CBI court in Kolkata.
 
 

User

Uptrend on Sensex, Nifty halted for now: Thursday Closing Report

The Nifty is indecisive over the extreme short-term, awaiting further news flows. The slightly longer term trend is up

 
Dismal industrial production numbers for June, forecast of lower GDP growth by another global agency and not so impressive corporate results resulted in the market paring its gains in post-noon trade and settling lower. Today the Nifty broke the past three days’ trend of a higher high and higher low. Yesterday we had mentioned that the index is waiting for a break-out to decide the further direction. We may see now the index moving sideways for a day or two before it is able to find its further move. The National Stock Exchange (NSE) saw a volume of 64.76 crore shares.
 
The market opened in the marginally positive following supportive cues from the Asian pack, which was higher in morning trade on speculation that Chinese authorities would tweak its monetary policy in view of a lower reading of the country’s consumer inflation. The Nifty started off trade at 5,348, up 10 points and the Sensex gained 11 points to resume trade at 17,612.
 
Support from banking, capital goods, IT and auto sectors enabled the benchmarks hit their intraday high in initial trade itself. At the highs, the Nifty rose to 5,368 and the Sensex climbed to 17,703.
 
However, nervousness ahead of the release of the industrial production numbers for June saw the indices paring their gains as trade progressed as analysts expected a contraction in the industrial output data.
 
Worries that the dismal IIP numbers would impact the GDP growth, the market continued its southward journey. Industrial production declined by 1.8% in June, mainly due to poor show by the manufacturing and capital goods sectors, indicating a persistent slowdown in the economy. Industrial output in the April-June quarter too contracted by 0.1% this fiscal.
 
The market was seen near its previous closing levels in noon trade in the absence of any fresh triggers and two of the three key European indices opening lower. Index heavyweight Tata Motors slipped on lower-than-expected quarterly numbers while government-owned lender State Bank of India dropped over 4% ahead of the announcement of its numbers tomorrow.
 
The benchmark made an attempt to emerge into the green at around 2.45pm but selling pressure once again pushed the market lower.
 
The market settled lower on concerns about lower growth and not-so-impressive corporate results. The Nifty settled 15 points down at 5,323 and the Sensex lost 40 points to finish trade at 17,561.
 
The advance-decline ratio on the NSE was in favour of the losers at 567:1120.
 
Among the broader indices, the BSE Mid-cap index fell 0.26% 0.20% and the BSE Small-cap index declined 0.41%.
 
The top sectoral gainers were BSE Fast Moving Consumer Goods (up 1.42%); BSE Metal (up 0.64%); BSE Auto (up 0.44%); BSE Power (up 0.26%) and BSE Capital Goods (up 0.22%). The main losers were BS Oil & Gas (down 1.05%); BSE TECk (down 0.88%); BSE Bankex (down 0.70%); BSE PSU (down 0.66%) and BSE Consumer Durables (down 0.34%).
 
The Sensex was led by Sterlite Industries (up 3.36%); Mahindra & Mahindra (up 2.87%); Tata Power (up 2.55%); Hindustan Unilever (up 2.38%) and Coal India (up 2.03%). Bharti Airtel (down 6.40%); State Bank of India (down 4.33%); HDFC (down 3.63%); Reliance Industries (down 1.31%) and Wipro (down 1.24%) settled at the bottom of the index.
 
The top two A Group gainers on the BSE were—Bajaj Finserv (up 6.35%) and Marico (up 5.63%).
The top two A Group losers on the BSE were—Aurobindo Pharma (down 7.66%) and Bharti Airtel (down 6.40%).
 
The top two B Group gainers on the BSE were—Mount Shivalik Industries (up 20%) and Landmarc Corporation (up 20%).
The top two B Group losers on the BSE were—SP Capital Financing (down 16.38%) and Alchemist Realty (down 13.88%).
 
The top stocks on the Nifty were M&M (up 3.09%); Sterlite Ind (up 3.07%); HUL (up 2.64%); Tata Power (up 2.60%) and Coal India (up 2.27%). The main laggards were Bharti Airtel (down 6.25%); SBI (down 4.31%); HDFC (down 4.08%); BPCL (down 3.24%) and Ranbaxy Laboratories (down 2.51%).
 
Markets in Asia settled mostly higher on hopes of fresh stimulus from Chinese policymakers in view of a drop in consumer inflation. This apart, China’s factory output for July slowed to its weakest in over three years.
 
The Shanghai Composite advanced 0.61%; the Hang Seng surged 1.02%; the Jakarta Composite climbed 0.99%; the KLSE Composite jumped 1.10%; the Seoul Composite jumped 1.96% and the Taiwan Weighted settled 1.56% higher. Bucking the trend, the Straits Times declined 0.50%.
 
At the time of writing, the key European indices were down between 0.11% and 0.60% and the US stock futures were mixed.
 
Back home, foreign institutional investors were net buyers of shares amounting to Rs1,114.20 crore on Wednesday while domestic institutional investors were net sellers of stocks totalling Rs794.71 crore.
 
IT hardware major HCL Infosystems today said it has bought out the remaining 40% stake in Dubai-based IT services and solutions provider HCL Infosystems MEA. The company acquired the stake through its Singapore subsidiary and now HCL Infosystems MEA is a wholly-owned subsidiary of HCL Infosystems, it said in a statement. HCL Info declined 0.77% to settle at Rs38.55 on the NSE.
 
SAIL has decided to outsource development of two huge virgin iron ore mines at Rowghat in Chhattisgarh and Chiria in Jharkhand, a company official has said. It would cost Rs1,000-Rs1,200 crore each for developing the mines, he said, adding that if this method is successful, SAIL’s investment for mine development would be reduced by around Rs2,500 crore. The stock tanked 1.33% to close at Rs85.45 on the NSE.
 
Suven Life Sciences today said it has secured four product patents for new chemical entities that are targeted at potential treatment of disorders associated with the brain. These patents are from Australia, Canada, Korea and New Zealand. Their validity will be through 2026 to 2028, the company said in a release. The stock jumped 6.86% to settle at Rs16.35 on the NSE.
 

User

Morgan Stanley Research claims buyback delivers 73% outperformance. But not all buybacks work

Morgan Stanley Research claims buyback delivers alpha but a closer look shows that it is all random and returns are highly skewed. Not all buybacks work and finding the winner is as good as a coin toss

 
Morgan Stanley Research (Asia/Pacific), in a recent report, has estimated that since 2005 investors have got as much as 73% excess returns over Sensex. However, this figure looks misleading because only 67 stocks out of 125 were able to outperform the Sensex. This would imply that much of the 73% outperformance over Sensex is due to the skewed nature of returns towards the few stocks which have truly outperformed by a large margin. For instance the 271% was the best return while on the other extreme it was minus 67%. 
 
The report does not mention which stocks have performed well and which haven’t and whether there is anyway to select these in advance. Further, Morgan Stanley Research claims that “Buyback plus positive change in fundamentals is the recipe for excess returns. The top decile of performers produced a surplus return of 73% over 12 months.” However, the average returns over Sensex, of all the buybacks was found to be 14% over 12 months, while the worst performers (bottom decile) saw them underperform the Sensex to the tune of 38%. 
 
Morgan Stanley analysed 125 companies and found out that half of the companies involved in buybacks have outperformed the Sensex over the 12-month period after the start of their buybacks. This is as good as a coin toss. If this is the case, finding those companies generating positive returns well in advance, that too with stupendous returns is would be anybody’s guess.
 
One of the more interesting patterns that Morgan Stanley Research has found out is that the start of the repurchase is more important to returns than mere announcement of the programme and that the average returns (absolute and relative) improve as buyback progresses—but market outperformance comes only after 12 months have passed following the buyback notice. In other words, investors should not expect immediate results and are advised to wait towards the end of 12 months or so. This is easier said than done. The report said, “Median outperformance is statistically insignificant until the passage of 12 months after commencement of the buyback. In any case, buyback yield excess returns only in a 12-month period—there is no short term benefit.” The median return was found to be just 5% excess performance over 12 months. You might as well invest in an index fund and not worry at all whether the buyback will succeed or not. 
 
Some of the companies which have recently announced buybacks are Reliance Industries (RIL), Zee Entertainment and Indiabulls Real Estate.
 
Consider RIL, the biggest of them all. We had written about Reliance buyback before (http://www.moneylife.in/article/reliance-share-buyback-what-the-market-remembers/23058.html). Reliance buyback has clearly not worked. In fact, it has given negative returns of 10% since it started its buyback programme on 1 February 2012. At that time, the price was Rs830 per share. It had bought back only Rs2,512 crore, or nearly one-fourth of the total amount up to 13 July 2012. The buyback price was Rs870 per share, which is to be completed by 19 January 2013. The total value of the buyback is Rs10,440 crore, one of the biggest in India. Usually buyback programmes are accretive and climb up slowly. But the scrip is currently quoting at Rs784.40. 
 
Share buybacks is one of the strategies used by companies to realise their “true value”, especially if the owners or promoters think that their company is undervalued and a weak market could be an opportunity to buy back at cheap valuations. This is also done during times where excess cash is lying idle and there is no scope for increasing capital expenditures (capex) due to the nature of demand which can be low and weak. Thus, when the markets are moving sideways, a company can resort to buybacks as one of the strategies for boosting shareholders’ return. The report states, “Apart from being a tool to return cash to shareholders, buybacks are used by controlling stakeholders to raise their stakes and to signal management’s view of the likely return on share prices.
 
The report by Morgan Stanley Research seems to give the investor an impression that buybacks work. Some do but the trick is finding those winners. You might as well toss a coin.
 

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)