The market is expected to be driven by global cues and domestic indicators this week
The Indian stock market is likely to open in the positive on the back of supportive global cues. Wall Street closed in the green with good gains, higher for the fifth day in a row, on positive economic news. Markets in Asia were up in early trade on Monday, tracking the gains in the US on Friday. The SGX Nifty was 49.50 points higher at 5,682.50 compared to its previous close of 5,633.
Optimism associated with the Greek government securing a crucial vote of confidence for its austerity plan, a necessity to secure a fresh bailout, led the global and Indian markets higher last week. The domestic market gained 3% in the week, making the second weekly gain in succession. However, overall in the April-June quarter the market lost 3%.
Gains in the oil & gas sector, after the government hiked retail fuel prices on 24th June, led to a positive close on Monday. Riding on positive sentiment, the market added modest gains on Tuesday. The positive developments in Greece led the market higher for the next two days.
The market settled lower on Friday, led mainly by huge losses in Reliance Industries. The Sensex closed the week up 522 points at 18,763 and the Nifty settled 156 points higher at 5627. The Nifty is likely to move sideways in a range of 5,500 and 5,700.
Markets in the US ended in the green for the fifth day in a row on good economic news, the biggest rally in two years. The Institute of Supply Management’s (ISM) manufacturing index rose to 55.3 in June from 53.5 in May. Gains were also supported by positive developments in Greece earlier in the week.
The Dow surged 168.43 points (1.36%) at 12,582.77. The S&P rose 19.03 points (1.44%) at 1,339.67 and the Nasdaq gained 42.51 points (1.53%) at 2,816.03. The US markets will remain closed on Monday for the Independence Day holiday.
Markets in Asia were higher in early trade on Monday as signs from the US indicate that the global economic growth is on track. Automaker Honda Motor gained 2.7% and tyre maker Bridgestone jumped 3.1% in Japan on hopes of exports picking up. Korean auto giant Hyundai Motor was also trading with gains on a rise in US sales.
The Shanghai Composite surged 1.13%, the Hang Seng jumped 1.72%, the Jakarta Composite gained 0.62%, the KLSE Composite rose 0.26%, the Nikkei 225 climbed 1.05%, the Straits Times was up 0.66%, the Seoul Composite advanced 1.03% and the Taiwan Weighted rose 0.72% in early trade.
Back home, suspecting possible circumvention of its disclosure norms for share pledging, the Securities and Exchange Board of India (SEBI) is mulling changes in the rules to bring to the fore cases of promoters raising funds by keeping shares as ‘indirect collateral’.
At the same time, the market watchdog is also considering making it mandatory for company promoters to disclose the amount of funds raised by share pledging and the utilisation of such proceeds, a senior official said.
Manoj Tirodkar of GTL admits that his group needs de-leveraging, but shouldn’t regulators investigate the true extent of its borrowing and pledge of shares?
Manoj Tirodkar of the Global Group of companies is no stranger to controversy. In an interview to Business Standard recently, Tirodkar said that he had survived a "tsunami and is still recovering from it". Well, when it comes to Tirodkar, his investors and lenders probably have to learn to survive many tsunamis.
Tirodkar was once a close buddy of scamster Ketan Parekh and his flagship company—then called Global Tele-Systems—which was part of the 10 key stocks that were relentlessly ramped up by Ketan Parekh. In the aftermath of Ketan Parekh's financial collapse and the Joint Parliamentary Committee (JPC) investigation, the shares fell to a fraction of their pumped-up high.
Tirodkar then left India for a while and seems to have used the time well to come out nearly unscathed.
However, the steep drop of over Rs4,400 crore in the market-cap of his two companies—GTL Ltd and GTL Infrastructure on 20th June—has jolted investors as well as lenders into taking stock of his self-confessed need to 'de-leverage' his balance sheet by infusing more equity into his companies.
GTL has announced the appointment of SBI Capital Markets (SBI Caps) to assess its financials and suggest appropriate steps to protect lenders' interest. We at Moneylife think that the regulators—both the Reserve Bank of India (RBI) and SEBI (the Securities and Exchange Board of India) ought to be investigating GTL rather than its own financial intermediary.
SEBI needs to unravel and make public the mystery of the seven companies who dumped GTL stock on a single day. These seven—Green Ridge Properties, Cosmo Advisory Services, Reckon Trading, Aerolite Advisory Services, Cross Link Trading, Plasma Advisory Services and Savyasachin Estates—accounted for roughly 40% of shares delivered on that Monday, when its stock price dropped dramatically. So far, GTL has offered no convincing explanation and has denied that these are financiers getting rid of pledged shares.
From 16th June to the end of today's trading session, GTL is down by 76% to Rs97.20 and GTL Infrastructure by 51% to Rs15.85 on the BSE (Bombay Stock Exchange).
Meanwhile, the RBI ought to look into the borrowings by the entire group. Remember, Global Tele, along with Himachal Futuristic and the Zee Group, had colluded with Ketan Parekh to bring about the demise of Global Trust Bank in 2000.
Which are the banks that have been lending to the Global Group entities to the extent that it is over-leveraged again? Have they followed prudent lending norms? And what are the repayments due in the coming months?
According to bankers, GTL has been borrowing through all its entities—listed and unlisted—from Indian banks. While the listed entities are tracked by investors and analysts, very little is known about the loans to unlisted companies, which are also substantial.
For instance, it is reliably learnt that Corporation Bank had disbursed Rs170 crore to GTL as of January 2011. It has also sanctioned another Rs500 crore to Chennai Network Infrastructure Ltd, of which Rs300 crore has been disbursed. GTL Infrastructure amalgamated with Chennai Network to form a Special Purpose Vehicle (SPV) to acquire Aircel's tower assets.
Global Holding Corporation (GHC) has other subsidiaries such as Global Rural Netco Ltd and Global Projects and Aviation Pvt Ltd (GPAL), which have borrowed Rs102 crore and Rs150crore, respectively, from Corporation Bank alone. This is the borrowing from one bank alone—only the RBI has the power to seek and collate how much the Indian banking system has lent to Mr Tirodkar in his second innings of high-speed growth.
Interestingly, in November 2009, Forbes magazine listed Manoj Tirodkar at the 84th rank in its list of richest Indians. His net-worth was estimated at $570 million. Less than a year later, in September 2010, CNBC-TV18 had reported that "Rs 800 crore of alleged bogus billing has been detected by the I-T sleuths" along with Rs8 crore of cash in raids on GTL group entities. It also claimed "several priceless paintings by Pablo Picasso, Salvador Dali and Rabindranath Tagore have also been found by I-T officials at residential premises and godowns" which were being valued by the tax authorities. Nothing further has been heard on that front.
Financial planner Dilip Samant underlined the importance of savings and talked about investment options and how to pick the right ones, at a Moneylife Foundation workshop
"It's not how much you earn that is important, but what matters is how much you save and for how long," Dilip Samant, Mumbai-based columnist and financial planner with Golden Investments, said today.
"You spend around 200-250 hours a month to earn money, but your spending continues for more than 720 hours every month," he said. Therefore, "saving is important, to strike a balance."
Mr Samant was addressing the first seminar conducted in Marathi by Moneylife Foundation on financial literacy. To underline the importance of saving, he described the case of Chandulal Shah, founder of Mumbai's Ranjeet Studio, who despite being rich and a millionaire at one time, ended up on road side mainly because of a careless attitude with regard to his earnings and practically zero savings.
He elaborated on the basics of understanding the financial circle, from bank accounts and transactions, various types of insurance, loans, to savings and investments, emphasising a right and timely approach and the need for due diligence before buying financial products.
He also described various investment options like fixed deposits, mutual funds, equities, gold and silver, as well as real estate, as the way to provide for future needs.
Mr Samant explained the documentation required to open a bank account, the types of bank accounts, advantages and disadvantages, interest rates, income-tax rules, penalties and the security of funds with banks. He also talked about credit and debit cards and cautioned people to be careful with the ATM PINs.
He discussed various investment platforms such as banks, cooperative societies and even bhishi (chit fund schemes).
Mr Samant also dwelt on home loans and education loans, and how to go about getting the loan from a bank. He assessed and explained the pros and cons of investment in real estate, and elaborated on investing in a new house, newly built property and housing under construction. "Always carefully assess the monthly EMI and read the loan document in detail," Mr Samant advised the participants.
On insurance, he explained the different types of policies-life, education and health insurance-and how to select the right policy. "The attitude of insurance as an investment is a wrong approach. One should have a policy just to take care of future uncertainties," he said.
Mr Samant said it was very important to know when, where and how to invest and he gave an in-depth presentation with examples ranging from fixed deposits to gold and the risks and advantages associated with these. "Make your money work for you. Just keeping money is not an option; but investing it rightly is the wise thing to do," he said.
Focusing on the returns on investment, he compared various options in the context of the impact of inflation. "Historically, the returns on fixed deposits are negative due to inflation. The real interest on fixed deposits erodes due to the price rise factor," Mr Samant said. He supported his argument with detailed figures of investment and returns over various time periods.
He examined multiple options like jewellery, gold exchange-traded funds, gold savings funds and e-gold/silver. He also discussed equities, mutual funds and systematic investment plans, again with examples that made it easier to understand.
One of the participants raised the issue about multi-level marketing schemes that promised double returns and gave such returns initially. Responding to the participant's question about how investors could guard against being lured by such investment proposals, Mr Samant said, "Any scheme promising such huge returns and not under the scanner of any regulator such as the Reserve Bank of India and the Securities and Exchange Board of India, should be avoided."
On the issue of MLMs, Yogesh Sapkale, deputy editor of Moneylife magazine, also warned against investing in these schemes. "Savings bank deposits give about 4% interest, fixed deposits close to 9% and Employees Provident Fund about 10%. So anything that promises returns more than 10% and seeks to get a large number of people to invest, should be strictly avoided," Mr Sapkale said. He mentioned that the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, was helpful in dealing with such schemes.