If Nifty stays above today’s low, it may try to rally above 8,000
We mentioned in our Monday closing report that indices will move sideways. Today for most of the session, this was so. Even though the Indian indices shot up and down in the afternoon, on a closing basis it hardly moved much. On Monday, we had mentioned that the bias would remain upwards as long as NSE’s CNX Nifty does not go below last week’s low. We continue to believe so.
The S&P BSE Sensex opened higher at 26,611 while NSE’s 50-share benchmark opened lower at 7,949. Both the Sensex and Nifty managed to hit a four-day high (including today) at 26,851 and 8,031. However, thanks to massive selling, during the last hour of trading, both the indices hit their respective low at 26,481 and 7,924. Sensex closed at 26,631 (up 33 points or 0.13%) while Nifty closed at 7,965 (up 6 points or 0.07%). NSE recorded a volume of 87.86 crore shares. India VIX fell 1.79% to close at 13.1450.
Among the other indices on the NSE, the top five gainers were Media (2.05%), Pharma (1.28%), MNC (0.94%), FMCG (0.90%) and Consumption (0.79%) while the top five losers were Realty (2.52%), Metal (1.10%), Infra (0.70%), PSU Bank (0.61%) and Bank Nifty (0.53%).
Of the 50 stocks on the Nifty, 24 ended in the green. The top five gainers were Zee Entertainment (3.49%), BPCL (3.22%), Sun Pharma (2.42%), HDFC (2.17%) and Maruti (1.74%). The top five losers were DLF (5.05%), Bhel (4.24%), Power Grid (3.12%), IDFC (2.38%) and ACC (2.33%).
Of the 1,601 companies on the NSE, 712 companies closed in the green, 810 companies closed in the red while 79 companies closed flat.
The Reserve Bank of India (RBI) kept cash reserve ratio unchanged at 4% of net demand and time liabilities (NDTL). It has reduced the liquidity provided under the export credit refinance (ECR) facility from 32% of eligible export credit outstanding to 15% with effect from 10 October 2014. On the other hand, the RBI has eased norms for importers for hedging foreign exchange risk. The central bank has raised the eligible limit for importers under the past performance route to 100% from the existing 50% i.e., importers can hedge up to 100% of the average of past three years' import turnover or the preceding year's import turnover, whichever is higher, subject to compliance with other conditions applicable for hedging under this route.
Finance Secretary Dr Arvind Mayaram said in Chennai that that the government is committed to an early rollout of the goods and services tax (GST), providing gainful employment to its youth through its skill development programme, fast tracking work on industrial corridors and bringing in the requisite amendments in the Land Acquisition Act to expedite project clearances.
Falling rubber price and upcoming festive season favour auto stocks and auto components sector. Apollo Tyres (5.81%) and MRF (5.23%) were among the top four gainers in the ‘A’ group on the BSE. MRF hit its 52-week high today. Bajaj Auto (1.96%) and Maruti (1.85%) were among the top four gainers in the Sensex 30 pack.
Real estate stocks were at the losing end today. Indiabulls Real Estate (5.33%), Unitech (4.77%) and DLF (4.77%) were among the top five losers in the ‘A’ group on the BSE.
The government has cancelled approvals of nine special economic zones, including that of Hindalco Industries, Essar and Adani as no "satisfactory" progress was made to execute the projects. Hindalco (1.69%) was among the top three losers in Sensex 30 stock.
US indices closed Monday in the red.
Except for Shanghai Composite (0.26%) and Taiwan Weighted (0.07%) all the other Asian indices closed in the red. Hang Seng (1.28%) was the top loser.
Activity in China's vast factory sector showed signs of steadying in September as export orders climbed, a private survey showed on Tuesday, easing fears of a hard landing but pointing to a still-sluggish economy facing considerable risks. The final HSBC/Markit Manufacturing Purchasing Managers' Index(PMI) hovered at 50.2 in September, unchanged from the August reading which was a three-month low, but lower than a preliminary reading of 50.5. A sub-index measuring new export orders, a gauge of external demand, expanded to a 4-1/2-year-high of 54.5, though domestic demand appeared soft. The 50 mark separates expansion from contraction in activity on a monthly basis.
European indices were showing mixed performance while US Futures were trading higher.
German unemployment unexpectedly increased in September, the country's labour agency said Tuesday, suggesting that the labour market in Europe's largest economy is beginning to weaken after a contraction in output last quarter.
RBI must act instead of simply issuing warnings about mutliple accounts opened under the PM’s pet project
The finance ministry has set stiff targets for nationalised banks to open new accounts under the Jan Dhan Yojana. But RBI governor, Dr Raghuram Rajan, has warned banks to be careful since people may be tempted to open multiple accounts lured by the prospect of a Rs1 lakh insurance cover and Rs5,000 overdraft.
The central bank says that multiple identification options acceptable under the know your customer (KYC) norms make this a possibility. Senior RBI officials have also been warning banks about ‘smurfing’ and ‘money muling’. This is American jargon to describe different money-laundering techniques.
Smurfing means splitting deposits into smaller sums to avoid being detected by regulatory systems. Money muling refers to laundering money through another person’s account (that account being the money mule). But weren’t these, and many other dubious, practices exposed by the Cobrapost’s sting operation? RBI then did a perfunctory investigation that ended in a small slap on the wrist to a few banks and a few officials losing their jobs. Dr Rajan has correctly warned banks to avoid duplication of accounts to meet Jan Dhan targets. He probably needs to pay attention to specific examples of aggressive tactics amounting to mis-selling. For instance, HDFC Bank has been spamming mailboxes using third-party databases (Avrial Technologies), with a mailer which says, “There is no minimum credit score requirement for availing its personal loans.”
It further claims ‘personal loan eligibility in one minute’ even when copious income and identification documents are required. The Bank used similar gimmicks by offering a 20% discount on e-Bay India for purchases in July but failed to meet its commitment when the response was significantly higher than its budget. Several years ago, RBI had treated such a gimmick by Citibank (free air tickets on a designated amount of credit card purchase) as a class action and forced it to pay up. Hasn’t RBI noticed this mischief or does it absolve itself by issuing a consumer charter and general warnings to people?
Overzealous implementation of CSR is a wrong strategy. Why is BJP-led government doing this?
In July this year, I wrote that the United Progressive Alliance (UPA) had stopped just short of prescribing penalties for those corporates who fail to spend the mandatory 2% of their net profit on corporate social responsibility (CSR) projects. The CSR provisions in the Companies Act 2013 (the Act) were clearly structured to introduce such penalties, but had stopped at asking companies to explain the failure to comply.
The Narendra Modi government was expected to put CSR rules under the Act on hold and also rework some of its more draconian provisions. Nothing of that sort happened. In fact, The Economic Times reports that Modi sarkar seems set to outdo the UPA-2 on this front.
The paper reports that the government is already planning to introduce penalties for failure to meet CSR targets for two or more years. This is regressive and contrary to the prime minister’s poll promise to eliminate bureaucratic hassles and unnecessary red-tape and make it easier to do business in India.
Consider how things have played out on the CSR front. In July this year, we applauded the ministry of corporate affairs for expanding the scope of CSR eligibility. We believed that CSR ought to be voluntary, or at least not prescriptive, and must include a company’s core strengths.
Instead of doing this, the Modi government is headed in the opposite direction. Industry continues to lobby against CSR, while an army of consultants, who see this as a lucrative business opportunity, are lobbying for stringency.
Meanwhile, public sector undertakings (PSUs) and nationalised banks are pulling in different directions on the issue. SCOPE, the apex body of Central government-owned units, reportedly made an audacious suggestion that ‘angel funding’ or takeover and revival of sick-undertakings should be considered part of public sector CSR. A clear recipe for massive write-offs.
Meanwhile, banks are being pushed to please the PM by building toilets all over India. The finance ministry and the Reserve Bank of India (RBI) also want banks to conduct ‘financial literacy’ seminars in schools and colleges, leading to much irritation. School managements say that say that election duties and frequent holidays have them struggling to complete their syllabus; they have little time to cooperate with companies wanting to meet CSR ‘targets’ with perfunctory workshops aimed at disinterested students. But nobody seems to care.
CSR is laudable when done voluntarily and diligently. It will only lead to mis-directed efforts, fudging and squandering of precious funds when forced upon reluctant companies. The real losers will be entities that are doing genuine and dedicated work for public benefit. With over 14,000 companies expected to spend Rs15,000 crore on CSR, we hope that good sense will prevail about spending scarce funds.