Stocks
Nifty, Sensex precariously poised: Weekly closing report

A weekly close below 8,140 will signify deeper correction

 

The S&P BSE Sensex closed the week that ended on 26th December at 27,242 (down 130 points or 0.48%), while the NSE's CNX Nifty ended at 8,201 (down 25 point or0.30%). From here a weekly close below 8,140 will signify deeper correction. Previous week we had mentioned that Nifty will head higher subject to dips if it doesn’t close below 8,080.
 
On Monday the Nifty headed higher. Three days of consecutive gains wiped off almost all the losses suffered during the five consecutive session ending 17 December 2014. Nifty closed at 8,324 (up 99 points or 1.20%). The government introduced the Constitution Amendment Bill on Goods and Services Tax (GST) in Lok Sabha. GST will simplify and harmonise the indirect tax regime in India.
 
On Tuesday Nifty closed lower contrary to our anticipation. It closed at 8,267 (down 57 points or 0.68%). The market was awaiting the outcome of the assembly election results held at Jharkhand and Jammu & Kashmir.
 
On Wednesday, the day of derivatives expiry, Nifty witnessed a sharp downward move, closing at its lowest in the past four trading session (including Wednesday). Nifty closed at 8,174 (down 93 points or 1.12%). Main highlight of the day was the Union Cabinet approving promulgation of the ordinance on the insurance bill, re-promulgation of the coal ordinance and allowing up to 100% FDI in medical devices in the pharmaceutical sector under the automatic route.
 
Stock markets remained closed on Thursday on account of Christmas. Weakness on the Nifty continued on Friday as well. However some buying in the last few minutes of trading pulled the benchmark back in the green. Nifty closed at 8,201(up 27 points or 0.33%).
 
Out of the 27 main sectors tracked by Moneylife, top five and the bottom five sectors for this week were:
 

 ML Top sector

 

ML Worst sector

 

Cement

3%

Non-Ferrous Metals

-2%

Telecom Services

2%

Con_EPC_Infra

-2%

Media

2%

Refineries

-2%

Farm & Farm Inputs

1%

Software & IT Services

-2%

Auto Components

1%

Shipping

-1%

 

User

Nifty, Sensex still on a downtrend – Friday closing report

Nifty will come out of its downtrend at least temporarily, if it closes above 8,213 on Monday

 

After a day off on the stock exchange on account of Christmas, the benchmark opened higher today and hit the day’s high. However, immediately thereafter, the indices plunged lower and hit the day’s low. This was followed by the indices moving in a range. The benchmarks regained a little strength in the last half hour of trading and closed marginally higher. In Wednesday’s closing report we mentioned that Nifty has some support at 8,120 but the overall trend is weak.
 
The S&P BSE Sensex opened at 27,215 while the S&P CNX Nifty opened at 8,205. The indices hit a high of 27,371 and 8,235 before moving lower to hit a low of 27,091 and 8,148. Sensex closed at 27,242(up 33 points or 0.12%), while Nifty closed at 8,201 (up 27 points or 0.33%). NSE recorded a lower volume of 55.63 crore shares. India VIX fell 2.82% to close at 14.6450.
 
PSU banks were in focus today. Prime Minister Narendra Modi plans to hold discussions with chiefs of public sector banks on January 3 to work out an action plan for major reforms in the banking sector. The meeting comes amid the piling up of distressed assets with public sector banks (PSBs) even as they are under pressure to step up lending to core sector projects. Union Bank of India (5.65%), Syndicate Bank (4.93%), Corporation Bank (4.68%), Andhra Bank (4.46%), Allahabad Bank (4.19%), Indian Overseas Bank (4.16%) and UCO Bank (4.03%) were among the top 11 gainers in ‘A’ group on the BSE.
 
The RBI has on Wednesday notified that further purchases of shares of Gujarat State Fertilizers & Chemicals would be allowed only after obtaining prior approval of the RBI as foreign shareholding through foreign institutional investors (FIIs)/registered foreign portfolios investors (RFPIs) in the company has reached the trigger limit. The stock (3.87%) was among the top two losers in ‘A’ group on the BSE.
 
HDFC (1.18%) was the top gainer in Sensex 30 pack. Maruti Suzuki (1.31%) was the top loser in Sensex 30 stock. The company foresees to register it’s highest ever sales in a calendar year in 2014 at about 11.48 lakh units.
 
On Wednesday US indices closed flat. Asian indices which were trading today closed in the green. Shanghai Composite (2.77%) was the top gainer.
 
Japan's exports of cars, trucks and buses declined 11.5% in November for the fourth consecutive month, the Japan Automobile Manufacturers Association said Friday.
 
Singapore's manufacturing output fell 2.8% on year in November, according to preliminary figures released by the government on Friday, compared with the revised 0.2% contraction in October. Preliminary October data released last month had shown a 0.2% on year rise.
 

User

What are Bonus Debentures?

Bonus Debentures were first issued by Hindustan Lever Ltd. way back in 2001, and since then only six other companies have issued bonus debentures, the latest being NTPC. What are these instruments? 

 

The Board of Directors of National Thermal Power Corporation (NTPC) Ltd. at its meeting held on December 23, 2014, has approved a Scheme of Arrangement for the issuance of secured fully paid-up bonus debentures of face value of Rs12.50 each against every equity share of Rs10. In a first by a Public Sector Undertaking, NTPC has proposed to reward its shareholders through an innovative way of issuing bonus debentures. However, this innovative reward is seldom used by Indian companies. Bonus Debentures were first proposed to be issued by Hindustan Lever Ltd. way back in 2001, and since then only six other companies have issued bonus debentures. What are bonus debentures?
 
As the name suggests, a bonus debenture denotes a debenture issued as a bonus to the eligible shareholders, that will entail a certain interest payment on periodical basis and will be redeemable after a fixed duration as may be decided by the company. Accordingly, an issue of bonus debentures turns accumulated free reserves into debt for the company. 
 
Bonus Debentures v/s Dividend: While approval of dividend results in immediate cash outflow to the company, issue of bonus debentures defers the same. 
 
Bonus Debentures v/s Bonus Shares: Issue of bonus shares does not alter the net worth of the company, whereas issue of bonus debentures results in decrease in equity and a corresponding increase in debt. This results in increase in the debt equity ratio of the company. Further, bonus shares do not involve any cash outlay. But bonus debentures involve outflows in the form of dividend distribution tax, periodical interest and outflow towards redemption of bonus debentures. 
 
How does it impact Shareholders? As said above, issue of bonus debentures does not result in immediate receipt of cash by the shareholder. However, since these bonus debentures are generally listed on recognized stock exchanges, shareholders can sell these in secondary market. Going by the latest issued bonus debentures by Blue Dart Express Ltd. with coupon rate of 9.50% p.a. and redeemable after 5 years, it is being traded at Rs10.20 at BSE as against face value of Rs10. Hence, the shareholder would be able to pocket another gain of Rs0.20 per debenture by selling it in secondary market. 
 
Further, since the issue of bonus debentures is treated as deemed dividend under the Income Tax Act, 1961, the company has to pay Dividend Distribution Tax on the face value of the debentures issued. Accordingly, the shareholder does not have to pay any further tax on the face value of debentures issued to him. However, the annual interest receipt and capital gain on sale of debentures (over and above the face value) shall be taxable in the hands of the shareholders.
 
Why is not Popular? Despite all the inherent advantages of bonus debentures for the shareholder as well as the company, it is not a popular instrument. This is due to the fact that the issue of bonus debentures is not expressly covered under provisions of the Companies Act, 1956 or the Companies Act, 2013. Bonus debentures are therefore issued as a scheme of the arrangement under Section 391 to Section 394 of the Companies Act 1956 which involves procuring approvals of shareholders, High Court, Reserve Bank etc.  Hence, the use of this way to reward shareholders gets discouraged due to lengthy and time consuming procedures. 
 
Having come this far, it is really hoped that Companies Act also captures this innovative financial instrument soon and makes the process simpler for the companies. Till then, let’s celebrate the issue of bonus debentures by NTPC. Any bonus is a good bonus, after all!
 

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)