Jalan backs labour ministry stand; against EPFO investment in equities

The labour ministry had opined that if employees' provident funds are to be ploughed into the stock market, the government has to provide a guarantee regarding the safety of the workers' funds and a reasonable rate of return. However, the finance ministry stated that the government cannot stand guarantee to the EPFO investment in the share market

New Delhi: Amidst a debate in the government over investment of employees' provident funds (PF) in the stock market, former Reserve Bank of India (RBI) governor Bimal Jalan cautioned that any such move will have to be backed by a government assurance for making up for losses, reports PTI.

"If it (PF) is invested in equity, there should be backing with government assurance that in case of any shortfall, the funds will be provided by the managers," the well-known economist told PTI.

He said these funds can be invested in equity, provided "we have sufficient resources to be able to weather fluctuation of at least 10% in the stock market."

Mr Jalan's views are consistent with the stand taken by Employees' Provident Fund Organisation (EPFO) that it was not in favour of investing a part of its Rs3.5 lakh crore corpus in stocks as proposed by the finance ministry.

"... if the investment in the capital market is so good, then there should be no problem for the government to provide a guarantee regarding the safety of the workers' capital funds and a reasonable rate of return on the capital," the labour ministry had opined.

However, the finance ministry had made it clear that the government cannot stand guarantee to the EPFO investment in the share market.

"There is no question of government providing the sovereign guarantee to any provident fund... The government gives no guarantee of safety of returns to any provident fund," it had said.

Recently Securities and Exchange Board of India (SEBI) chairman UK Sinha also batted for investment of the EPFO funds into the equity market.

"India is perhaps the only significant country where there is a prohibition that workers' money cannot be invested in the market. I have not seen any other market where workers' money is prohibited by regulation," he said.


USE to enter equity trading, but won’t antagonise BSE: CEO

The move could put USE in direct competition with BSE, but its managing director and CEO TS Narayanasami said that the bourse would make sure not to rub shoulders with its larger rival BSE, which also happens to be its largest shareholder

Mumbai: The country's newest bourse United Stock Exchange (USE), currently offering currency futures trading only, is looking to soon enter new segments such as equities and interest rate futures to expand its business and profits, reports PTI.

The move could put USE in direct competition with Bombay Stock Exchange (BSE), but its chief said that the bourse would make sure not to rub shoulders with its larger rival BSE, which also happens to be its largest shareholder.

"Yes, it is true that we have to enter more segments of trading, which is in fact a natural business progression," USE managing director and CEO TS Narayanasami told PTI.

He, however, added that USE was yet to approach its board with any such plans.

Currently, BSE and NSE (National Stock Exchange) are the only two major national stock exchanges providing equity trading, while two others, USE and MCX-SX are only present in currency futures market.

BSE withdrew itself from currency futures in favour of USE, while NSE is present in virtually all the segments.

The issue of competition in stock exchange arena has become a hot topic of debate and the Competition Commission of India (CCI) recently slapped a Rs50 crore penalty on NSE after finding it guilty of abusing its dominant market position.

In its order, which followed a probe conducted by it pursuant to a complaint filed by MCX-SX, the competition watchdog also asked the NSE to immediately stop subsidising its products in currency derivatives market and start imposing a transaction fee.

Welcoming the CCI move, Mr Narayanasami said there has to be a revenue model for any business and it was good that some transaction fees are charged, especially for those entities which have only single-source revenues.

Noting that USE needs to diversify, he said: "We will ensure that there is no conflict of interest with the BSE, as and when we decide to enter new segments.

"After all BSE is our largest shareholder with 15% stake and we have no plans to antagonise them," he added.

He also noted that it was "a very delicate issue, since BSE had shut their currency business when they picked up stake in us. We have to respect that decision".

Mr Narayansami's comments come in the midst of rumours that BSE might sell its 15% stake in USE, following which the two would compete in all the market segments.

Mr Narayanasami also scotched rumours about any plans to leave USE and said that there was "no basis for such reports.

They are all sheer rumours. I am very much with the exchange and have great plans for it as of now."

Asked whether as the CEO he supports USE entering the equity space, Mr Narayanasami said, "Yes as a natural course of our business, but everything depends on the board decision."

On whether BSE could sell its stake, he said: "Never, not at all."

When contacted, a senior BSE official also said that the premier exchange had no plans to exit USE.

"They (USE) have given us tremendous return on our investment. Why should we quit a venture that is giving us high returns and also has higher potential to deliver more?" said the BSE official, who did not want to be identified.

On the business strategy for USE as it completes the first year of operations in mid-September, Mr Narayanasami said, "Over the past 10 months we have consolidated our position in the market with our volume share touching 26%. My target is clutch at 30% market share by September."

As on June-end, USE had 21.65% of the volume, while NSE had 42.75% and MCX 35.06%, according to the data available on their websites.

This is a major jump for USE from March, when it had just 10.40% of the market, while MCX-SX was on the top with 46.26%.

USE had recorded largest number of contracts on the first day of trading with a 52% market share. It operates on four currency pairs against the rupee-the US dollar, the euro, the pound and the yen.

On the new business areas that the company is looking to enter, USE's president for marketing and business development Saurabh Arora said they will approach market regulator Securities and Exchange Board of India (SEBI) to seek permission for entering interest rate futures segment.

"We are filing for application for interest futures shortly. We already have the board approval for this," Mr Arora told PTI.

Mr Narayanasami said that as the market matures, USE intends to launch other currency pairs and it already has the SEBI approval to commence currency options.

While BSE is the largest investor in USE with 15% stake, its other shareholders include leading banks like Axis Bank, Federal Bank, HDFC Bank, J&K Bank, Yes Bank, ICICI Bank, Standard Chartered and corporate entities like Jaypee Capital, MMTC and Indian Potash.


JSW Steel crude steel production grew by 9% in Q1 FY12

JSW Steel said crude steel production rose by 8.64% in the first three months of the current fiscal

JSW Steel today reported a 14% year-on-year increase in crude steel production to 5.73 lakh tonne (LT) in June this year. In comparison, the company produced 5.03 LT steel in June, 2010.

In a statement, JSW Steel said crude steel production rose by 8.64% in the first three months of the current fiscal to 17.1 LT from 15.74 LT in the April-June period of the previous fiscal.

It produced 5.77 LT in May and 5.60 LT in April this year. In contrast, its production stood at 5.65 LT last May and 5.06 LT last April.

JSW Steel's cumulative crude steel production in the January-March quarter of the previous fiscal amounted to 16.47LT.

On Wednesday, JSW Steel ended 1.57% up at Rs888.90 on the Bombay Stock Exchange, while the benchmark Sensex ended .09% to 18,726.97.


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