Regulations
NDTV asks bourses to disregard ‘allegations, based on surmises and conjectures’ as they are an ‘abuse of your good offices and bring disrepute to the company’
New Delhi Television Ltd (NDTV), which has made several disclosures to bourses based on action pursued against it by investigation agencies, has also proffered some advice to stock exchanges in its latest disclosure dated 27 June 2016. This is based on specific queries sent to the NDTV on 23rd June in connection with an earlier disclosure made by the company. While the company has provided a point-wise response to the bourses, it is the closing paragraphs that are extremely startling. 
 
 
"We would like to further submit that any allegations, based on surmises and conjectures, that a penalty has been imposed on the company by way of the SCN are meritless and should be disregarded by your good offices. The same are an abuse of your good offices to disrepute the company," Navneet Raghuvanshi, company secretary of NDTV, said in a reply to BSE.  
 
For several years now, exchanges have been routinely writing to companies to seek clarifications based on media reports as well as information received by them. These are put into the public domain without further verification or comment. 
 
 
On 23 June 2016, BSE had sought a clarification from NDTV about the company's regulatory filing on receiving a SCN that was consequential to the assessment order or 1 February 2014 passed by the Income Tax Department for the AY2009-10. BSE had asked NDTV to provide, quantum of the penalty amount included in the SCN and its impact on the financials of the company.
 
 
In its clarification, NDTV says, "...the SCN is not a final order, instead it only refers to a proposed penalty and no penalty has been imposed on the company as of date. Further, the company, based on advice received from tax experts believe that the possibility of such a penalty being imposed and any economic outflow resulting from it is remote. The quantum of such proposed penalty as stated in the SCN is Rs525.39 crore."
 
 
"It is further stated that the SCN does not impose any penalty on the company. The proceedings contemplated under the SCN are premature and can only be commenced once a final determination of the assessment order is provided by the Income Tax Appellate Tribunal (ITAT) in view of the provisions of section 275(1)
(a) of the Income Tax Act. As informed to your good offices in the earlier disclosures, the company believes and as opined by its legal counsels, that the additions so made in the assessment order are not legally sustainable, are baseless and in the considered opinion of the company, the said additions and the consequent demand are likely to be dismissed by the ITAT. Consequently, no penalty would be leviable after the receipt of the order of the ITAT," NDTV said in its reply to the BSE. 
 
 
NDTV had informed the BSE that it received a show cause notice from a Deputy Commissioner related with an assessment order (AO) passed by the Income Tax Department for assessment year 2009-10. Earlier in February 2014, the I-T Department had served a tax demand of Rs450 crore on the company for AY2009-10, which the company did not inform to exchanges at that time. 
 
 
The assessment of AY2009-10 is sub-judice before the ITAT. NDTV had appealed before the ITAT against the assessment order dated 21 February 2014. The ITAT had stayed the demand arising out of the assessment order on payment of Rs5 crore, as per NDTV's filing with the stock exchanges.  The appeal has been pending before the ITAT for more than two years. 
 
 
This show cause notice comes on the back of the show cause notice from Securities and Exchange Board of India (SEBI) against the company and its promoters for their failure to multiple disclosures information to exchanges. (Read: SEBI finally initiates action against NDTV, promoters)
 

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Nifty, Sensex may put in a rally – Tuesday closing report
We had mentioned in Monday’s closing report that Nifty, Sensex were still directionless. The major indices of the Indian stock markets recovered to close in the green on Tuesday. The gains of the major indices at Tuesday’s close of trading were less than 0.50%. The trends of the major indices in the course of Tuesday’s trading are given in the table below:
 
 
A sharp rise in US futures markets, a rise in European indices, and a rebounding rupee led key Indian equity indices to trade in the green on Tuesday, while recovering considerably from last week's Brexit hangover. Healthy buying was particularly witnessed in stocks of fast moving consumer goods (FMCG) and healthcare. The BSE market breadth was tilted in favour of the bulls -- with 1,596 advances and 999 declines.
 
The United Kingdom is likely to explore direct bilateral trade agreements with India post the vote to exit from the European Union, thereby giving a boost to slowing UK-India trade, Development Bank of Singapore (DBS) said on Tuesday. "Post exit EU, the UK is likely to explore direct bilateral trade agreements with other trading partners, including India," DBS said in a research note.
 
"This might provide an alternate route to India, in comparison to the tough and the drawn-out negotiations on the EU Free Trade Agreement, in turn providing a fillip to a slowing India-UK trade," said DBS. Noting that the UK accounts for 15% of India's total merchandise trade, the report said this share has, however, been declining. Trade in services has also eased. The report highlighted the notable investment links between both countries. The UK is the third largest inward investor into India, after Mauritius and Singapore, with cumulative foreign direct investment (FDI) equity investments of $22.7 billion (from April 2000 to December 2015), or 8% of the total FDI inflows. In turn, India is the third largest investor, based on the number of projects, into the UK. Indian businesses that tap the UK domestic markets are unlikely to face many challenges, DBS said.
 
State-run United Bank of India on Tuesday said it will focus its lending on Micro, Small and Medium Enterprises (MSMEs) and retail and will avoid capital guzzling sectors. The bank is planning to raise up to Rs 1,000 crore ($145 million) in one or more tranches through a public issue or qualified institutional placement (QIP) or rights issue for which it sought shareholders' approval at its Annual General Meeting. "In 2016-17, the bank's focus areas for lending would be in the MSME and retail segments," Managing Director and Chief Executive Officer P. Srinivas told the shareholders. The bank will strive to achieve all its targets under Mudra Scheme, Standup India scheme and strengthen its retail channels, particularly housing, education and vehicle loan segments, he said. "While making advances, the bank will endeavour to avoid sectors which are capital guzzlers and concentrate on government guarantee schemes. The bank will also augment its resources to ensure wealth generation for the future," he said. The shares of the bank closed at Rs22.45, up 0.45% on the BSE.
 
The multiple downside risks in the proposed consolidation in the Indian public sector banking (PSB) space far outweighs the potential benefits, said global credit rating agency Moody's Investors Service. The Bank Nifty closed at 17,561.55, up 0.27%.
 
The US dollar continued to climb against most major currencies after Britain voted to leave the European Union in a historic referendum. In late New York trading on Monday, the euro fell to $1.1019 from $1.1144 of the previous session, and the British pound decreased to $1.3192 from $1.3696. The Australian dollar went down to $0.7343 from $0.7508. The dollar bought 101.99 Japanese yen, lower than 102.24 yen of the previous session.  The dollar rose to 0.9776 Swiss francs from 0.9724 Swiss francs, and it climbed to 1.3092 Canadian dollars from 1.2936 Canadian dollars. Currency movements are considered important by stock market analysts in India, as a substantial portion of the investments come from foreign institutional investors into emerging markets like India. However, international interest rates in the banking sector are expected to be stable and not contribute to volatility.
 
The top gainers and top losers of the major indices are given in the table below:
 
 
The closing values of the major Asian indices are given in the table below:
 
 

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Decision on implementation of 7th Pay Commission soon?
The Union Cabinet is likely to discuss and take a final call on the recommendation to implement the seventh Central Pay Commission. This follows a report submission by the Committee of Secretaries, which has recommended a little less than 20% average hike as against an earlier media report of a hike of 30%. 
 
According to Religare Capital Markets Ltd, the implementation of the 7th CPC recommendation should boost consumption, reduce slackness in the economy and step up investment demand. Large consumer discretionary names are likely to be the top gainers in this scenario. 
 
"However," it says, "With the states and public sector units (PSUs) also set to effect similar hikes (some states like Telangana have already done it); we see a permanent fiscal stimulus of $50 billion over the next two years, with significant multiplier effect on gross domestic product (GDP)."
 
In January this year, the Indian government had set up the high-powered panel to process the recommendations of the 7th Pay Commission which will have bearing on the remuneration of nearly 50 lakh central government employees and 58 lakh pensioners.
 
A Committee, headed by Cabinet Secretary PK Sinha, has already vetted the 7th Pay Commission recommendation and its report is being translated into a note for Cabinet. The Commission had recommended 23.55% overall hike in salaries, allowances and pension involving an additional burden of Rs1.02 lakh crore or nearly 0.7% of the GDP, says a report from the Business Standard.
 
The entry level pay has been recommended to be raised to Rs18,000 per month from current Rs7,000 while the maximum pay, drawn by the Cabinet Secretary, has been fixed at Rs2.5 lakh per month from current Rs90,000. 
 
While the Budget for 2016-17 fiscal did not provide an explicit provision for implementation of the 7th Pay Commission, the once-in-a-decade pay hike for government employees has been built in as interim allocation for different ministries, the newspaper report says.
 
According to the Religare, the Budget for FY2016-17 has for only Rs70,000-Rs73,000 crore towards 7th CPC wage bill increases and one rank one pension (OROP). As per 7th CPC recommendations, the total requirement would be around Rs1.02 lakh crore for the two payouts. "If only 20% hike is finally awarded, the FY17 incremental spend on wages and salaries and OROP would still be more than Rs90,000 crore, leaving a fiscal gap of about Rs20,000 crore.
 
The other possibility is that the allowances payment is deferred to next year. Further, as per media reports, the central government employees may get their first higher salaries from July onwards, to be credited on 1st August, along with a likely arrears of six months' since the higher salary is effective from 1 Jan 2016," it added.
 

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