Stocks
Nifty, Sensex in no-man's land – Weekly closing report
The S&P BSE Sensex closed the week that ended on 9th January at 27,458 (down 430 points or 1.54%), while the CNX Nifty ended at 8,285 (down 111 points or 1.32%). In the previous week we had mentioned that Nifty may hit 8,500 over the coming week.
 
This week although trading on Nifty began on a negative note by the end of the week, on Thursday and Friday, the benchmark regained strength.
 
On Monday it began on a positive note but was pulled lower after hitting the day’s high bringing to a halt the six days of consecutive gains. Nifty closed at 8,378 (down 17 points or 0.20%). The pessimism of Asian counterparts and the Greek concerns played negatively on the market sentiments.
 
At the two day “Retreat for Banks and Financial Institutions” called “Gyan Sangam” held on 2 January 2015 and 3 January 2015, PSBs suggested that eventually the government should reduce its stake in PSBs to less than 51%. It also suggested that the government should transfer the government's stake in PSBs to a bank investment company.
 
As we anticipated on Monday Nifty was pulled lower on Tuesday. Nifty closed at 8,127 (down 251 points or 3.00%). The two days of loss wiped off all the gains made in the six days of rise ending 2 January 2015. The market moved lower as the oil prices sank to 5 and half year lows and worries over excess supply increased.
 
The seasonally adjusted HSBC India Services PMI Business Activity Index declined to 51.1 in December 2014, from 52.6 in November 2014.
 
On Wednesday the Nifty witnessed a highly volatile session and closed in the red again. Nifty closed at 8,102 (down 25 points or 0.31%).The Department of Financial Services, Ministry of Finance, issued a circular to the chief executive officers of all public sector banks, financial institutions and insurance companies assuring them of non-interference in matters of commercial decisions, transfers, and postings.
 
Nifty reacted in line to the positive performance of the Asian indices on Thursday. As we anticipated, the Nifty bounced back and closed at 8,235 (up 133 points or 1.64%).
 
The Indian economy is moving on the right track with efforts to fast track reforms, raising prospects of pickup in growth from 5.4% in FY15 to 7% by fiscal year 2017, says a Macquarie report.
 
On Friday the Nifty remained in the green for most of the session. The trend was weaker at the beginning of the session and gaining strength by the end of the session. Nifty closed at 8,285 (up 50 points or 0.61%). Infosys yesterday posted its December 2014 quarter result which was better than the estimates.
 
The government is likely to exempt state-run firms ONGC and Oil India from payment of fuel subsidy during the remainder of the FY2014-15 due to a steep decline in global oil rates to around US $50 per barrel.
 
Among the Nifty stocks, the top five stocks for the week were Hindustan Unilever (14%); Kotak Mahindra Bank (7%); BPCL (5%); Asian Paints (5%) and Maruti Suzuki (3%); while the top five losers were NMDC (-8%); BHEL (-7%); Sesa Sterlite (-7%); Punjab National Bank (-6%) and ICICI Bank (-6%).
 
Of the 1,492 companies on the NSE, 517 companies closed in the green, 949 companies closed in the red while 26 companies closed flat.
 
Out of the 27 main sectors tracked by Moneylife, top five and the bottom five sectors for this week were:
 

 

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A short-term breather for Southern Urea units?

The three urea makers in the South, which are currently using naphtha as feeder stock, must have a definite assurance that the subsidy will not be withdrawn till gas connectivity is fully operational

 

The government had notified that the three naphtha based urea plants in the South of India, which are owned by Madras Fertilizers, Southern Petrochemical Industries Corporation and Mangalore Chemicals & Fertilizers, that subsidy will be stopped from September last year. The plants were not ready for switching over to gas instead of naphtha as feeder stock and so, from October these plants stopped production. They were not ready, simply because the gas pipe lines were not in place.
 
Now, after losing three months of production, and being subjected to unjustifiable demands, the Union Minister for Fertilizers has announced that the subsidy would be available for the next 100 days. What happens after 100 days?  Would the pipeline be ready for gas supplies?  In the meantime, to meet the national needs, urea had to be imported from the international market at current prices.
 
In this connection, it may be recalled that due to the farmers’ agitation in 2013, work on the GAIL pipe line, being laid through some farm lands had to be stopped, as the Tamil Nadu government wanted these to be aligned to the national highways.  The matter of this 300 kms pipe line is in the Supreme Court.
 
After the stoppage of production by these three urea producers, naphtha produced by the Chennai Petroleum Corporation, a subsidiary of Indian Oil Company had to be exported at low prices.  In addition to supplying naphtha, they were also selling other related products to these urea units.  The urea producers had demanded that instead of shipping out naphtha why not make it available at export parity price to them?  Seeing the plight of the Urea producers, the Tamil Nadu Government made the first move to waive the 5% Value Added Tax.
 
In the meantime, there has been some good news that came from B Ashok, Chairman of Indian Oil Corporation, while on a visit to Chennai.  While meeting the media persons, he gave details of the Ennore LNG import terminal with a capacity of 3 million tonnes costing about Rs5,130 crore, in North Chennai, and is expected to be completed by 2017.
 
The LNG pipeline will be laid by IOC mostly following an existing route for liquid petroleum products, for which IOC has floated a joint venture with TIDCO (Tamil Nadu Industrial Development Corporation), who will work within the guidelines set by the State.  It may be stated that IOC has LNG resources overseas in Canada and Cameroon.
 
In the case of Mangalore Chemicals and Fertilizers, it has been in the news due to take over bids etc, but which also had stopped production from October. However, with the announcement of subsidy extension by 100 days, they expect to resume production in the next few days. Following the steps of Tamil Nadu Government, Karnataka State Government also agreed to waive the 5% VAT.  MCF has already incurred the capital expenditure of over Rs300 crore for converting the factory to be able to change over from naphtha to LNG-based operations.  However, it will take a couple of years before the LNG pipeline can be coupled to the plant.
 
The agitating Union leaders in the Mangalore Chemicals and Fertilizer plant had sought the intervention of the Union Minister for Fertilizers, saying that the Central government must ensure expeditious arrangement for gas connectivity and pleaded that till this is done subsidy must continue.
 
It is a sad state of affairs that subsidy on such essential items like Urea was withdrawn without any forethought because laying the gas pipeline is not within the realms of control of the fertilizer plants. The farmers agitation in Tamil Nadu hit the headlines a long time ago and all the concerned parties were trying to work out an acceptable formula. As mentioned, the matter is now with the Supreme Court.
 
The three urea makers in the South, who are currently using naphtha as feeder stock, must have a definite assurance that (a) subsidy will not be withdrawn till gas connectivity is fully operational; (b) 5% VAT will be waived till this (gas connection) occurs and (c) naphtha will be supplied to the urea makers at export parity price.
This move will at least prevent import of urea at international price and save the much needed foreign exchange.
 
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
 

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COMMENTS

Dr Anantha K Ramdas

2 years ago

It may be of interest for readers to note that the Matix Fertilizers and
Chemicals plant at Panagarh, in West Bengal, in which an investment of Rs 4700 crores was made by Kanodias of Datamatics group has been idling for almost two years. Essar Oil had promised to supply 2.8 mmscmd of methane from 2012 but has not been able to do so. Now Essar may be able to reach 60% of the needs by middle of 2015 and 100% by first quarter of 2016.

Since our gas supplies are erratic, such urea plants must take into account the alternative stand-by routes so that they do not suffer.

Matix when fully operational would be able to produce 1.3 mt of urea and would be the first plant in the world to to use CBM (coal bed methane) as feedstock.

The promoters should also consider the prospects of using naphtha if balancing equipments can do the trick and overcome the current impasse?

Government assures non-interference in bank decisions, transfers and postings

While assuring freedom of non-interference in matters of commercial decisions, transfers, and postings to chiefs of banks, FIs and insurance companies, the Ministry also warned to hold them accountable for favouring somebody

 

Perhaps, for the first time, the Department of Financial Services under the Finance Ministry has issued a circular to chiefs of banks, financial institutions and insurance companies assuring them of freedom of non-interference in matters of commercial decisions, transfers, and postings.
 
The circular issued by Manish Kumar, under secretary, on 5th January, following the Gyan Sangam held last week at Pune, says, "It is trusted that the freedom given to Banks/FIs by assurance of non-interference will be used in the most objective manner. However, if any complaint comes to this Department from anybody informing that exceptions were made in certain cases without any objective basis, and in order to favour somebody, the person taking such decision would be accountable."
 
Here are the points mentioned in the circular...
 
1. The Banks and FIs should take all commercial decisions in the best interest of the organization without any fear or favour. All decisions should be taken based on facts of the case and objectivity. No such decision should be taken out of any other extraneous considerations such as the influence or the position that the borrower is holding."
 
2. Each Bank/FI should have their own objective, well laid out transfer and posting rules, which should be followed strictly. No exception should be made in such rules at the behest of any recommendation given by anyone including anybody from the Ministry of Finance. If, for genuine reasons, any exception to the rule is made, it should be done only by CMD by giving proper reasons. 
 
3. Each Bank/FI should have a robust grievance redressal mechanism for borrowers, depositors as well as staff. The aggrieved person should have an opportunity to represent his case at least at two levels. 
 
4. It is trusted that the freedom given to Banks/FIs by assurance of non-interference will be used in the most objective manner. However, if any complaint comes to this Department from anybody informing that exceptions were made in certain cases without any objective basis, and in order to favour somebody, the person taking such decision would be accountable. 
 
In his address, Prime Minister Narendra Modi had also told bankers that banks would be run professionally, and there would be no interference. But the accountability was essential. He said the Government had no vested interest, and public sector banks can derive strength from this fact. This circular is also in line with these directions of the Prime Minister.
 

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