Nifty, Sensex skid on global concerns: Tuesday Closing Report

The Nifty may be readying for a short bounce but the trend is medium sharply lower, unless the budget can pull off a miracle

The market dropped over 1.5% in trade today on broad-based selling and negative global cues. The lacklustre Railway Budget also pulled down the broader indices. The Nifty may be readying for a short bounce but the trend is medium sharply lower, unless the budget can pull off a miracle. The National Stock Exchange (NSE) recorded a volume of 63.55 crore shares and advance-decline ratio of 273:1266.
The market witnessed a gap down opening on cautiousness ahead of the Railway Budget, which will be announced later in the day and on unsupportive global cues. Uncertainty about the outcome of the Italian elections sent the US markets lower in overnight trade. A similar sentiment was seen across the markets in Asia in morning trade today.
The Nifty opened 17 points down at 5,838 and the Sensex started the day at 19,291, a cut of 41 points from its previous close. The benchmarks hit their intraday highs in initial trade itself with the Nifty inching up to 5,839 and the Sensex rising to 19,293. However, the sell-off, which started in a short while, saw the market taking a southward journey.
The Nifty stood at 5,807, down 48 points (0.81%) and the Sensex touched 19,180, a fall of 152 points (0.78%) as railway minister Pawan Kumar Bansal began his maiden budget speech.
All sectoral indices, barring technology, IT and fast moving consumer goods sectors, were in the red in noon trade on the overall weakness in the market. A weak opening of the European markets added to the woes of the domestic investors, as the local indices drifted lower in post-noon trade.
The rout continued in the late session with the key benchmarks dropping to their intraday lows in the last half hour. The Nifty fell to 5,749 and the Sensex touched 18,977 at their respective lows.
The market closed near the lows as the Rail Budget failed to cheer investors. The Nifty settled 93 points (1.60%) down at 5,761 and the Sensex finished trade at 19,015, a cut of 317 points (1.64%).
The broader indices were punished in today's trade as the BSE Mid-cap index tanked 1.76% and the BSE Small-cap index tumbled 2.43%.
BSE IT (up 0.89%) and BSE TECk (up 0.77%) were the only gainers in the sectoral space. The top losers were BSE Oil & Gas (down 3.07%); BSE Auto (down 2.76%); BSE Capital Goods (down 2.44%); BSE Metal (down 2.30%) and BSE PSU (down 2.29%).
Only five of the 30 stocks on the Sensex closed in the positive. The gainers were TCS (up 1.56%); Infosys (up 1.47%); Bharti Airtel (up 1.38%); NTPC (up 0.73%) and Hindustan Unilever (up 0.22%). The main losers were Hindalco Industries (down 4.49%); Bajaj Auto (down 4.20%); HDFC, ONGC (down 3.74% each) and Reliance Industries (down 3.51%).
The top two A Group gainers on the BSE were-Idea Cellular (up 3.69%) and Berger Paints (up 3.40%).
The top two A Group losers on the BSE were-Jet Airways India (down 11.12%) and IFCI (down 6.07%).
The top two B Group gainers on the BSE were-Everlon Synthetics (up 10.05%) and Ashima (up 10%).
The top two B Group losers on the BSE were-Aanjaneya Lifecare (down 20%) and Onelife Capital Advisors (down 20%).
Of the 50 stocks on the Nifty, eight ended in the green. The key gainers were TCS, Infosys (up 1.75% each); Bharti Airtel (up 1.30%); Grasim Industries (up 1.24%) and Jaiprakash Associates (up 0.74%). The top losers were Ranbaxy Laboratories (down 4.76%); Bajaj Auto, Hindalco Ind (down 4.31% each); HDFC (down 3.75%) and Maruti Suzuki (down 3.61%).
Markets in Asia closed lower as a stalemate in the outcome of Italian elections stoked fears of a fresh crisis in Europe. Sentiment was also rattled by comments from the Chinese central bank that it would pull out around 5 billion yuan through repurchase initiatives in a bid to tighten its monetary stance.
The Shanghai Composite tanked 1.140%; the Hang Seng dropped 1.32%; the Jakarta Composite declined 0.70%; the KLSE Composite fell 0.19%; the Nikkei 225 tumbled 2.26%; the Straits Times dropped 1.05%; the Seoul Composite slipped 0.47% and the Taiwan Weighted settled 0.84% lower.
At the time of writing, the CAC 40 of France was down 2.24%; the DAX of Germany dropped 1.845 and UK's FTSE 100 was trading 1.26% lower. However, the US stock futures were trading in the positive.
Back home, foreign institutional investors were net buyers of equities amounting to Rs246.71 crore while domestic institutional investors were net sellers of stocks totalling Rs161.97 crore.
Modest investment plans announced in the Railway Budget for 2013-14 resulted in railway-related stocks settling lower. Titagarh Wagons tumbled 9.43% to close at Rs241.20 on the NSE. Kernex Microsystems plunged 16.92% to Rs43.45, Texmaco Rail & Engineering dropped 12.05% to settle at Rs54 and Kalindee Rail Nirman fell 12.56% to Rs69.30.
Wind turbine maker Suzlon Energy has received an order for a 102.9 MW project from ONGC. The project, to be located in Rajasthan, comprises 49 units of Suzlon's S88 - 2.1 MW wind turbines and will be commissioned in 2013-14. Suzlon declined 4.49% to close at Rs21.25 on the NSE.


Salary growth to slow down, says Nomura

One of the key indicators of prosperity—salary—indicates that the future is not all that bright and it could get worse. Nomura thinks GDP will not pick up anytime soon

Salary is one of the important yet often ignored economic growth indicator. It is believed, according to Nomura, that salary growth will moderate and thereby affect consumer spending, which in turn will affect economic growth. The report stated, “According to global HR consultancy firm Aon-Hewitt, nominal salary growth in India is likely to moderate to 10.3% y-o-y (year-on-year) in 2013, down from an estimated 11.9% in 2012. Adjusted for inflation, we estimate that real salaries are likely to grow at a meagre 0.7% y-o-y in 2013 from 2.2% in 2012.” This is a scary statistic, if proved true.

The chart below illustrates salary growth over the last 10 years. As you can see, real salary growth has been in a sort of secular decline and it does not look good at all. In fact, if it goes into negative territory, it could spell trouble for the economy.

One of the key reasons, according to Nomura, has been corporates in cost-cutting mode, as they anticipate slack demand and higher inflation, going forward. The report said, “In our view, a steady decline in corporate profitability and no clear sustained demand recovery on the horizon has forced firms to rationalise employee costs.”

However, according to Nomura, this is confined to urban areas. It is not known how the situation is in the rural and India’s hinterland. If it is sounds bleak for urban areas, it is plausible that it is worse in rural areas. Nomura expects the economy to slow down. It said, “With flat real income growth and a worsening employment outlook, we expect private consumption growth, particularly in urban areas, to remain weak. Ongoing fiscal consolidation, a sluggish investment cycle and lacklustre external demand all suggest that GDP growth is unlikely to pick up quickly.”

Our policy makers seem fixated on GDP rather than addressing the real problem—inflation—which reduces the purchasing power of the masses and the middle class. With the budget around the corner, it remains to be seen what the government intends to do to tackle this problem and revive the economy though most pundits are expecting it to be populist.

Ensure that you attend the budget special on Saturday at Moneylife Foundation. For more information, click here.


Did CRISIL’s ‘independent’ research report give 5/5 grade to Helios & Matheson ignoring the criminal case pending against its chairman, MD?

Rajeev Sawhney, who is fighting a bruising battle with H&M over the takeover of Vmoksha, alleges that the ratings agency did not look into the pending criminal case against the chairman and MD of H&M before assigning its highest rating. How independent is CRISIL’s grading of H&S?

In a bizarre piece of ‘independent’ research, ratings agency CRISIL has assigned Helios & Matheson Information Technology (H&M), an unfancied software company, its highest grading of 5/5. While the selection of H&S from hundreds of excellent companies looks fishy, the agency has overlooked several reports about a criminal case pending against the chairman and managing director of H&M, alleged Rajeev Sawhney, chairman of Vmoksha Technologies Pvt Ltd. Mr Sawhney, a US-based non-resident Indian (NRI) is fighting a bruising battle with H&M over the takeover of Vmoksha.


The Reserve Bank of India (RBI), under a Right to Information (RTI) reply to Mr Sawhney, has admitted that its permission was not sought by State Bank of Mauritius while providing a loan facility on personal guarantees of V Ramachandra, chairman and GK Muralikrishna, managing director of H&M. The RBI has already submitted a detailed note to the Enforcement Directorate (ED) in the matter.


The ED is conducting investigations against Mr Ramachandran and Mr Muralikrishna for their alleged role in the acquisition of Vmoksha.



In its reply under the RTI, the central bank while acknowledging the ‘deal’ stated that “...instead of crediting the acquisition proceeds to the account of Vmoksha Technologies maintained with HSBC Bank, the proceeds were credited to the Vmoksha Technologies account with State Bank of Mauritius at its Mauritius branch. It was then observed that this account was purportedly opened in a fraudulent manner by Pawan Kumar, the then CEO and chairman of Vmoksha Technologies with the help of two persons, i.e. chairman and MD of H&M. Pawan Kumar also applied for a loan of $13.5 million with State Bank of Mauritius at Port Louis branch in Mauritius. This loan account was immediately sanctioned by the bank against personal guarantees of two persons i.e. chairman and MD of H&M,” the RBI said.


RBI in its note sent to the ED further added that “...the issue relating to State Bank of Mauritius, Port Louis branch sanctioning loan to Vmoksha Technologies Mauritius against personal guarantees of two resident Indians i.e. chairman and MD of H&M, it was advised by the Mumbai branch of State Bank of Mauritius that through inadvertence, RBI’s prior approval for such guarantee was not obtained.”


Hire an independent rating?


CRISIL has assigned H&M a strong upside from the current market price with highest grading point of 5/5. According to CRISIL, banking, finance and insurance companies (BFSI) and healthcare segment would drive future growth of IT services in India during 2013 and, H&M would get benefits from it as the company works with seven of the 20 largest global banks.

CRISIL said, “The company has a track record of uninterrupted profits for 84 straight quarters and consistent dividend distribution year on year since inception. Strong organic growth momentum has led to double-digit growth sequentially quarter-on-quarter and a 42% topline growth (YoY) in the September 12 quarter over September 11.”


For the year ending September 2012, H&M’s consolidated revenues increased to Rs451.9 crore from Rs394.14 crore, over same period a year ago. Except that the market either does not believe in the numbers or does not believe that the future is all that rosy. The stock price of H&M is down from the intra-day high of Rs267 in early 2006 to Rs50 today. Crisil’s discovery of H&S’s hidden features is remarkable given that virtually no analyst tracks this company regularly.


Moneylife had previously reported about the bruising battle between H&M and Rajeev Sawhney. The battle started in 2005 when H&M announced a $19 million buyout of Vmoksha, co-founded by Rajeev Sawhney and Pawan Kumar (former CEO of the controversial DSQ Software), with the former putting in the money and the latter running the operations. Mr Sawhney soon realised that he had been kept in the dark about many aspects of the deal.


On 11 May 2005, both the companies signed a share purchase agreement under which V Ramachandran, chairman of H&M, was to pay $19 million for the three units, out of which $4 million was to be paid to Pawan Kumar, the then chief executive of Vmoksha and also former CEO of the controversial DSQ Software, as earn out. Although, Pawan Kumar and his family members were also stakeholders in Vmoksha, Mr Sawhney later bought out their stake as well.


Mr Ramachandran was supposed to pay $13.4 million to Mr Sawhney, after paying some amount to Tapan Garg and Madhuri Garg, son and wife of Pawan Kumar for their holding. Mr Sawhney soon realised that he had been kept in the dark about many aspects of the deal. For instance, he found that instead of receiving $19 million, a bank account had been ‘fraudulently’ opened in the State Bank of Mauritius in Vmoksha’s name and used to borrow $13.5 million, using a fake board sanction and false entries. That money was remitted to H&M ostensibly for subscription of redeemable preference shares on 28 June 2005.


Earlier in December 2011, the Supreme Court dismissed special leave petitions (SLPs) filed by H&M and Pawan Kumar, the then chief executive officer of Vmoksha Technologies. Both have challenged the Bombay High Court (HC) order, which allowed the revision application of Vmoksha’s co-founder Rajiv Sawhney against H&M.


In an order passed on 6 May 2011, the HC had restored an order passed by the Additional Chief Metropolitan Magistrate (ACMM) of the 47th Court at Mumbai, to restart proceedings against the accused, including H&M's chairman V Ramachandran.


Read more…

SC dismisses special leave petition of Helios and Matheson

Helios & Matheson under the scanner





3 years ago

Lets wait for the final Judgement before we take a call who is right and who is wrong on this issue


4 years ago

i am surprised that such a reputable agency ( atleat i thought so ) could give a 5/5 grading to H&M


4 years ago

Do we a regulator for these rating agencies too ?


4 years ago

These rating agencies are running a freak show. It is high time that something was done about them!


4 years ago

Crisil is an arm of Standard & Poor's -- their shoddy rating practices are very well known and well documented. Crisil seems to be in sync with the S&P model!


4 years ago

financial probity and corporate governance are two weak spots of indian businessses.

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