Stocks
Nifty, Sensex may rally a bit – Tuesday closing report
We had mentioned in Monday’s closing report that Nifty, Sensex were weak and might make an effort to stabilise. The major indices of the Indian stock markets could not make much headway on Tuesday and closed with small gains of upto 0.30% over Monday’s close. The trends of the major indices in the course of Tuesday’s trading are given in the table below:
 
 
The main indices traded in the green during the mid-afternoon session, as healthy buying was witnessed in automobile and fast moving consumer goods (FMCG) stocks. Initially, the key indices opened on a flat note, depressed by weak Asian markets, which were impacted by negative macro-economic data from Japan. The domestic markets soon receded on the back of risk-aversion on the renewed fears of a US rate hike in June. A hike is expected to lead FPIs (Foreign Portfolio Investors) away from emerging markets such as India. This had led to an outflow of foreign funds from the domestic equity markets on Monday. Besides, investors were seen reluctant to chase prices higher due to the upcoming F&O (futures and options) expiry and a weak rupee. However, positive European indices restored investor confidence and supported prices.  The BSE market breadth was skewed in favour of the bears -- with 1,599 declines and 907 advances.
 
The Central Board of Direct Taxes (CBDT) on Monday announced the creation of a committee to examine applications of offshore funds having fund managers in India and looking to avail the beneficial tax regime in India. The three-member committee will examine the application of overseas fund managers and submit its recommendations to the CBDT about grant or refusal of approval, a finance ministry release said. This being a new development, the market and foreign institutional investors are yet to react to it.
 
India has received a very positive feedback from international investors in Singapore and can look forward to good investments coming from Singapore, Power Minister Piyush Goyal said on Monday. "I do feel that the mood is very favourable for India. They (investors) can see the India story structurally improving. They can see the demand that India provide and to my mind India can look forward to good investments coming from Singapore," Goyal, who was on a one-day visit to Singapore at the head of industry chamber FICCI delegation, told reporters. 
 
Assocham on Monday urged the government to remove anti-dumping duty on flexible slabstock polyol because domestic production is not enough to cater to local demand. Flexible slabstock polyol, a polyether, forms polyurethane foams on reaction with catalysts and additives, which is then used in packaging, pillows, mattresses, transport seating, etc. The Associated Chambers of Commerce and Industry of India (Assocham) claimed that trade barriers on flexible slabstock polyol were based on misrepresentation of facts by certain domestic manufacturers. "In India there is no dumping of flexible slabstock polyol. Besides, domestic production is not enough to cater to local demand. As such there should be no safeguard duty imposed on import of flexible slabstock polyol from Thailand," said Assocham in a statement issued. "Large parts of the demand for flexible slabstock polyol in India are being catered by imports of raw material due to non-availability of domestically manufactured polyol in sufficient quantity," the statement said, citing Secretary General D.S. Rawat. Reliance Industries shares closed at Rs940.05, up 1.08% on the BSE.
 
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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Why TIL's proposal to hive off its Caterpillar business is anti-shareholder
The decision of TIL (formerly Tractors India Ltd) to hive off its Caterpillar dealership business, which is spread over India, Nepal and Singapore, to Delhi-based Goodearth Minetech Pvt Ltd (GMPL) for Rs350 crore is not in the interest of shareholders, as there is a conflict of interest. A managing director of TIL's unit is also director on the buyer company, a clear conflict of interest and should have been questioned by the regulators and exchanges. Shockingly, this example of poor corporate governance is being set by Sumit Mazumder, managing director of TIL who is the immediate past President of industry body Confederation of Indian Industry (CII). 
 
Mumbai-based Stakeholders Empowerment Services (SES), the proxy advisory firm, said, the main reason for its advice to shareholders for voting against TIL's proposal was lack of disclosure about performance and financials of companies to be sold as well as details of buyer and inherent conflict of interest.
 
The transaction involves sale of Tractors India Private Ltd (TIPL), which housed Caterpillar's dealership of earthmoving and road construction equipment, along with two overseas ventures. The company expects to earn additional revenues from the sale of its Nepal and Singapore businesses.
 
However, according to SES, the conflict of interest is very wide and open and thus must be questioned by shareholders. Sunil Chaturvedi, the managing director and chief executive of TIPL is also one of the directors of GMPL, the buyer of the company's Caterpillar dealership business. 
 
SES says, "A managing director of a subsidiary is allowed to set up a private firm, GMPL (incorporated 1 March 2011) and then manages to convince the company (TIL) to sell the subsidiary to his own firm... reflects absolute failure of governance. How come GMPL with a paid-up capital of Rs1 lakh is going to support a business, which is being sold at a price of Rs350 crore plus. And if it is being supported by the current managing director, shareholders would certainly like to know his source of funds."
 
According to a report from the Business Standard, Life Insurance Corp of India (LIC) is the largest public shareholder with 10.38% stake in TIL. State-owned general insurers General Insurance Corp of India (1.99%) and Oriental Insurance (1.2%) are among large minority shareholders. Some mutual funds and financial institutions together hold around 1%, the report says.
 
TIL has been carrying on the business of dealership of products of US-based Caterpillar Inc for the past six decades in North and East India, Nepal and Bhutan. 
 
While TIL itself reported a net loss of Rs29 crore, TIPL is part of the business that earned the company a significant profit of Rs37 crore in FY15.
 
SES had recommended that shareholders reject the transaction and ask for forensic audit of subsidiaries, especially TIPL and ensure that business being conducted by TIPL under Chaturvedi was above Board in all respects.
 
The ballot closed on 23 May 2016. Sumit Mazumder, managing director of TIL told the newspaper that the Board of Directors recommended the sale of the dealership business, after much deliberation. “They firmly believe that TIL should focus on the manufacturing aspect and unlock all possible funds to invest in manufacturing” he was quoted in the report. 
 
TIL closed Tuesday 1.85% up at Rs294 on the BSE, while the 30-share benchmark ended the day marginally up at 25,305.

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Setting up of data centres should not be mandatory: Amitabh Kant
A decision to set up data centres in the country cannot be mandatory and it will be not be conducive for the eco-system, Niti Aayog CEO Amitabh Kant said on Tuesday.
 
"Decision to set up data centre in the country cannot be mandatory and it will be not be conducive for the eco-system. I will initiate a dialogue with departments like IT, Telecom and Energy to create the best possible infrastructure for data centres," Kant said.
 
He was speaking at the launch here of a report "Make in India - Conducive Policy & Regulatory Environment to Incentivise Data Centre Infrastructure" by Internet and Mobile Association of India (IAMAI).
 
According to the report, India's data centre infrastructure market will be around $7 billion by 2020.
 
The Indian data centre infrastructure market is valued at $2.2 billion and is poised to be the second largest market for data centre infrastructure within the Asia Pacific region by 2020.
 
The IAMAI report highlights the opportunities for India to become a leading player in the global data centre market if conducive policy and regulatory frameworks are adopted. 
 
The paper highlights key measures to increase innovation and stimulate innovation in what is widely considered to be one of the fastest growing technology segments at present.
 
The paper urged the government to facilitate data centre operations in India through clear policies to facilitate trans-border flow of data and tax incentives to woo foreign players.
 
At the same time, the paper warns against the dangers of forced localisation of data, adding that the same would reduce competitiveness, affect gross domestic product and harm India's fledgling reputation as an emerging data centre hub.
 
"India has the potential to capture a big share in the Global Data Centre market," said IAMAI president Subho Ray.
 
To fully realise this potential, India needs to "address some of the risks and barriers to data centre operations in the country today and create the right incentives for businesses to build effective data centre infrastructure," said Ray.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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