The fight for bringing exchanges under the ambit of the RTI Act is not over yet. But MCX’s willingness to be brought under the Act would certainly put pressure on other exchanges
Multi-Commodity Exchange (MCX), which received a thumping response for its initial public offering (IPO) in a lacklustre market, said that it is in favour of bringing exchanges under the ambit of the Right to Information Act, 2005 (RTI Act) and willing to work with policy makers to develop a framework for it. This is a path-breaking initiative from MCX, which is the first exchange in India to be listed.
As of 5pm on 24th February, the MCX IPO was oversubscribed by 54 times. The issue size of MCX IPO at the upper band is about Rs663.30 crore and with 54 times over-subscription, the total money mobilised comes to about Rs36,000 crore.
In a statement, the commodity exchange said, “MCX is in favour of bringing exchanges under the ‘Right to Information’ (RTI). The exchange will work with policymakers to develop a framework for exchanges’ RTI policy.” This is in stark contrast with other exchanges like the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), which so far have resisted any attempt to bring them under ambit of the RTI Act.
Surprisingly the Securities and Exchange Board of India (SEBI), which has been accused of a strong pro-NSE bias by the MCX group, has done nothing to ‘persuade’ the bourse that as a first-line regulator, it falls under the definition of ‘state’ for application of the RTI Act, even if it insists it is just a private company. The regulator’s benign attitude to the NSE would have been unexceptional, but for the fact that both SEBI and the Reserve Bank of India (RBI) use every opportunity to emphasise and underline the fact that bourses are ‘public utilities’ (both regulators made this point in September 2010 at the launch of the United Stock Exchange).
Just two weeks ago, Central Information Commissioner (CIC) Shailesh Gandhi ruled that citizens have a right to know about public-private partnerships (PPPs), which directly or indirectly envisage a partnership with public funds. He also said that any entity which has received finance or grant of over Rs1 crore from the government would constitute “substantial financing” rendering such entity a public authority under the RTI Act.
Earlier in 2007, the CIC had held that stock exchanges are quasi-governmental bodies which are bound to disclose information to the public under the RTI Act. The RTI Act defines a public authority as one that is created by a notification issued by the government or a law passed by Parliament. Stock exchanges are owned by private investors or brokers and have independent managements. NSE is an exception as the majority equity of some of its large shareholders, such as the State Bank of India (SBI), is owned by the government.
SEBI has said that despite their independence in operations, exchanges ought to be classified as public authorities as they can start business only if they are notified by the government. However, so far the exchanges have been adamant about their stance on the Right to Information Act and have resisted the attempts by activists to procure information.
In fact, the NSE even tried to maintain that since it is an autonomous body and not controlled by the government, it cannot be forced to disclose information under the RTI Act. However, SEBI, in an affidavit before the Delhi High Court, said that Government of India or government companies own more than 50% of the shares of NSE. The exchange then tried to dispute the counter affidavit as “contention and not factual statement”. Although the single bench of the high court ruled that NSE is bound to reveal information under the RTI Act, the exchange was successful in getting a stay order from a division bench of the Delhi High Court on the matter.
Last year, the public information officer (PIO) of SEBI directed BSE to allow an RTI applicant to inspect files, documents relevant to the exchange’s market making activities. Earlier in 2009, SEBI slapped BSE with a show-cause notice for engaging in market making without acquiring approvals from the regulator. Market making is artificially creating volumes in the derivatives segment, which infuses liquidity. Market makers quote both ‘buy’ and ‘sell’ for a financial instrument or commodity, hoping to make a profit on the trade.
The fight for bringing exchanges under the ambit of the RTI Act is not over yet. But MCX’s willingness to be brought under the Act would certainly put pressure on other exchanges, which so far have been adamant and reluctant on the RTI Act.
Nifty may move in the range of 5,390-5480
The market witnessed its first weekly close in the red, snapping its seven-week gaining streak that started since the beginning of 2012. The reversal happened as investors booked profits on global economic concerns and a slowdown in the country’s economic growth. The Sensex and Nifty fell by 2% in the week after having rallied 18% and 20%, respectively, in the last seven weeks.
The Sensex declined 366 points at 17,924 and the Nifty lost 135 points to finish the week at 5,429. If the pattern of a lower low and lower high continues, as it did on Thursday and Friday, we may see the decline continuing with the Nifty finding support at 5,390. At the higher level, index may get resisted in the 5,460-5,480 area.
Resuming after an extended weekend, the market extended its gains on Tuesday following comments from Reserve Bank of India (RBI) deputy governor Subir Gokarn that the central bank may go in for another CRR cut on the back of tight liquidity. Late sell-off resulting from a weak opening of the key European markets saw the indices settling lower on Wednesday. The market settled lower on Thursday amid a highly volatile session on weak global cues. Offloading of blue-chips by institutional investors saw the benchmarks settling lower on Friday.
Among the sectoral gainers, BSE Fast Moving Consumer Goods and BSE IT, rose 1% each, while BSE Realty and BSE Bankex (down 7% and 5%, respectively) were top losers among indices.
TCS (up 3%), ITC (up 2%), ONGC, Sun Pharma and Coal India (up 1% each) were the top gainers on the Sensex while the losers were led by Sterlite Industries, DLF (down 11% each), State Bank of India (down 9%), Larsen & Toubro (down 7%) and HDFC (down 6%).
The top performers on the Nifty were Bharat Petroleum Corp (up 6%), TCS (up 3%), Power Grid Corp, ITC (up 2% each) and Coal India (up 1%). The main laggards on the 50-stock index were Jaiprakash Associates (down 12%), Sterlite Ind, DLF (down 11% each), Punjab National Bank and Reliance Communications (down 10% each).
Inflation based on the all India Consumer Price Index (CPI) stood at 7.65% in January, as per the first nationwide retail inflation data released by the government Tuesday. Experts believe that the CPI will become a benchmark for the RBI’s monetary policy decisions, besides being used by the government but it will take some more time to replace the WPI bases inflation data. Inflation based on WPI was 6.55% in January this year.
Leading global financial services company Citi Inc has sold its entire stake in mortgage lender HDFC for $1.9 billion (around Rs9,327 crore). The bank said that it sold its entire holding of 145.3 million shares, or 9.85% stake, in HDFC through the National Stock Exchange (NSE) at Rs657.56 per share.
Earlier this week, reports indicated that SBI planned to lend around Rs1,200 crore to the troubled Kingfisher Airlines, including working capital of Rs400 crore, bank guarantee of Rs500 crore and loan repayment extension worth Rs250-Rs300 crore. While SBI denied any such move, the stock tumbled over 8% on Wednesday.
On the global front, pressure on Iran on account of its nuclear ambitions has led to a rise in oil prices. Besides, markets around the world will eye the Group of 20 (G-20) finance ministers’ meting which will discuss additional funding for the IMF.
The Nifty did decline, as anticipated, and filled the “gap” between 5,428-5,460 points on the daily charts. As long as these levels hold, one can expect the Nifty to test if not cross the recent high once the rally resumes in the coming month. However, it is now time to be selective in stock picking
S&P Nifty close: 5429.30
Short Term: Up Medium Term: Up Long Term: Down
The Nifty opened flat and rallied further to stall very close to the 61.8% retracement (5,648 points) of the entire decline from 6,338-4,531 points. The resistance line of the Wolfe Wave pattern (in pink) as mentioned last week and a break of the low made on 21st February saw the beginning of a correction in the Nifty which saw it shed 2.43% this week. The sectoral indices which outperformed were BSE Fast Moving Consumer Goods (+0.89%), BSE IT (+0.67%) and BSE Oil & Gas (+0.09%) while the gross underperformers were BSE Reality (-7.27%), BSE Bankex (-5.24%) and BSE Metal (-3.97%).
The weekly histogram MACD turned down but is above the median line indicating that a correction is on. We have seen the Nifty rally for seven consecutive weeks during which it rose more than 23% resulting in it becoming overbought in the weekly charts, hence the profit taking. This correction could last for a week or maybe a couple of weeks at best looking at the current scenario. Last week we saw the Nifty come close to the R1 level and then declined to hit the S2 level on the last day of trade.
Here are some key levels to watch out for this week
1. The EPA target as per the Wolfe Wave pattern was hit and prices fell after facing resistance from the trendline (in pink).
2. The Nifty also came near the 61.8% retracement of the entire decline from 6,338-4,531 points, pegged at 5,648 points.
3. Despite the sharp rise, the weekly averages continued to be negatively phased which also implied that a correction was overdue.
4. We saw the “gap area” of 5,428-5,460 being filled in the decline, indicating that the Nifty might take a breather around these levels before resumption of the uptrend.
The Nifty did decline, as anticipated, and filled the “gap” between 5,428-5,460 points on the daily charts. We have seen the Nifty correct 38.2% retracement (5,418) of the last part of the rise from 5,076-5,629 points and the 50% (5,353) and 61.8% (5,288) retracement levels will act as support in declines. In fact 5,231 points, the 38.2% retracement of the rise from 4,588-5,629 points will act as significant support. One should look for buying opportunities in the declines close to the above mentioned levels. As long as these levels hold, one can expect the Nifty to test if not cross the recent high once the rally resumes in the coming month. However, it is now time to be selective in stock picking.
(Vidur Pendharkar works as a consultant technical analyst & chief strategist, at trend4casting.com)