Stocks
Nifty, Sensex still on an uptrend – Monday closing report
Nifty has to stay above 7,800 for the uptrend to continue
 
We had mentioned in the Friday’s closing report that Nifty, Sensex are headed higher and that as long as Nifty stays above 7,800, the market will be bullish. Negative cues from Asian stock markets and anxiety on macro-economic data to be released by the government kept investors cautious and the major indices in the Indian stock markets were trading flat through the day. They closed with marginal gains/ losses. The trends of the indices during the day are given in the table below:
 
 
Initially, both the bellwether indices of the Indian equity markets opened on a firm note supported by hopes that the Goods and Services Tax (GST) bill will get passed during the winter session of parliament. However, concerns over the weak Asian markets, given the major fall in Chinese exchanges on Friday and a decline in country's industrial profits spooked investors in India. Furthermore, there were concerns ahead of the release of the upcoming macro-economic data like India's July-September GDP (gross domestic product) and eight core industries (ECI) numbers both of which are expected to be released later in the evening.
 
Aiming to provide better quality network, Bharti Airtel on Monday said it will invest Rs60,000 crore in the next three years. "The programme, called Project Leap, will see a network transformation. Large parts of this investment will improve voice services," Gopal Vittal, MD and CEO, Bharti Airtel, said. Airtel will deploy over 70,000 base stations in 2015-16. Its shares closed at Rs334.50, down 2.09% on the BSE.
 
Ahead of the Reserve Bank of India's fifth bi-monthly policy review for this fiscal next week, industry chamber CII on Sunday said the country's overall financial conditions have shown a healthy improvement, thanks to low cost of funds, strong liquidity, better external financial linkages and uptick in economic activity. "The CII-IBA Financial Conditions Index at 70.3 for Q3 FY 2015-16 shows healthy improvement in the overall financial conditions in the Indian economy vis-a-vis the previous quarter," the Confederation of Indian Industry (CII) said. The index is based on a survey of major banks and financial institutions on their expectations of key financial and economic variables determining financial conditions of the Indian economy. A majority of respondent banks and financial institutions surveyed reported improvement or no change in overall financial conditions as against the deterioration over the previous quarter. "It is heartening to note that financial conditions of the Indian economy are improving in tandem with the overall macro-economic outlook," said CII director general Chandrajit Banerjee. “The scale of improvement in the financial conditions index for the current quarter will provide necessary comfort to RBI in continuing and further extending the accommodative monetary policy stance for supporting higher economic growth," he said. A total of 36 leading banks, including 21 state-run ones, and financial institutions took part in the survey.
 
Prime Minister Narendra Modi said on Sunday "though the MUDRA (Micro Units Development and Refinance Agency) Yojana is in place to help small entrepreneurs, the speed at which I want to go with it has not been attained," in his Mann Ki Baat address on All India Radio. "But the beginning is good. So far about 66 lakh people have benefited ... with Rs42,000 crore spent. I am happy to announce that out of 66 lakh people, some 24 lakh are women," he said. "And the majority of these beneficiaries are from among the Scheduled Caste, Scheduled Tribe and Other Backward Class, people who stand up and themselves take responsibility to take care of their families.”...PMMY funds the unfunded and is thus focused on empowering people in the true sense," he said. "It provides a boost to three Es - Enterprises, Earning and Empowerment. The scheme encourages enterprises, provides opportunity for earning, and in the truest sense empowers people. It is helping small entrepreneurs." "The scheme is trying to help small workers such as barbers, laundrymen, milkmen, newspaper vendor...," he added.
 
The top gainers and top losers of the 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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Power sector employees to hold nationwide strike on December 8
Leaders of power sector national federations would meet in Delhi on Tuesday to finalise their strategy for a day-long strike on December 8 against the proposed Electricity (Amendment) Bill, 2014.
 
The strike is to be observed by power employees, engineers and contract workers.
 
All India Power Engineers Federation (AIPEF) chairman Shailendra Dubey told reporters here on Monday the National Coordination Committee Of Electricity Employees and Engineers (NCCOEEE) has already served the strike notice on union Power Minister Piyush Goyal at Kochi, Kerala, earlier this month during the power ministers' conference.
 
Leaders of all national federations would be meeting on Tuesday in the national capital to finalise the strategy for the strike, he said.
 
Goyal had assured the employees' representatives at Kochi that the central government is making several changes to the bill, to be placed in public domain and inviting comments before the winter session of parliament, Dubey said.
 
Despite opposition of power sector employees, the government has placed the electricity bill on the agenda of the Lok Sabha for on-going winter session, he added.
 
He also said more than a week has passed without any response from the power minister to NCCOEEE convener A.B. Bardhan's letter about the minister's promise at Kochi.
 
A crucial amendment to the bill proposes to separate carriage from content, that is to segregate the power distribution network from electricity supply business.
 
Dubey alleged that the amendments to the electricity bill were not based on ground realities, but were meant only to serve the interests of the private sector, provoking bankruptcy among state-run power utilities.
 
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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NRI-controlled overseas corporate bodies are back
While the new dispensation will add to the ease of making investments in India, regulators will have to keep a close watch to avoid history repeating itself
 
The far-reaching changes in the regulatory regime for foreign direct investment (FDI), as per changes made by the recent press note (no. 12 dated 24 November 2015) (http://dipp.nic.in/English/acts_rules/Press_Notes/pn12_2015.pdf) issued by Department of Industrial Policy & Promotion (DIPP), has also silently brought about a significant change. In the press note, overseas corporate bodies (OCBs), which were de-recognised in 2003, have been re-recognised.
 
This re-recognition comes by virtue of para 3.1.3 of the FDI Policy, which says: A company, trust and partnership firm incorporated outside India and owned and controlled by non-resident Indians can invest in India with the special dispensation as available to Non-Resident Indians (NRIs) under the FDI policy.
 
After the stock scam of 1992, Securities and Exchange Board of India (SEBI) investigations discovered NRIs setting-up OCBs in Mauritius for the purpose of carrying out high-value transactions to gain tax benefits. Based on the investigations, OCBs were disallowed from making an investments in India under the portfolio investment scheme (PIS) vide Notification No. FEMA 46 dated 29 November 2001. 
 
NRIs were allowed to hold the shares and convertible debentures purchased under PIS till such time these are sold on stock exchanges in India and the authorised dealer (AD) shall continue to report, every sale transactions undertaken by the OCBs. They were also allowed to enjoy the facilities of opening and maintaining non-resident accounts and were considered to be eligible for making FDI, under Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000.
 
The Reserve Bank of India (RBI) carried on review of investment activities of OCBs in India on the recommendations of Joint Parliamentary Committee (JPC) on Security Market Scam. Considering the fact that the OCBs were owned by individuals (i.e. either by Indians or NRIs) and not being regulated by any of the regulatory authority, they were de-recognised in October 2003 by passing Foreign Exchange Management (Withdrawal of General Permission to Overseas Corporate Bodies (OCBs)) Regulations, 2003.  Hence, OCBs as a separate 'class of investor' entity were not be allowed to make fresh investments in India under various routes/ schemes available under the FEMA provisions including FDI.
 
New rule for overseas NRI bodies: Earlier, there was a requirement of 60% NRI control – now it is merely controlling the management and holding more than 50% of capital. Amended para 2.1.7 states: ‘Control’ shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements. Amended para 2.1.28 states: A company is considered as 'Owned’ by resident Indian citizens if more than 50% of the capital in it is beneficially owned by resident Indian citizens and / or Indian companies, which are ultimately owned and controlled by resident Indian citizens;
 
The body need not be a corporate body – it may be either a company or trust or partnership firm.
 
Special dispensation for investment by NRIs: Special dispensations available to NRIs, which may not be available to other non-residents, are as follows:
 
  1. Press note no. 7 dated 3 June 2015 allowed investment by NRIs under Schedule 4 of FEMA (Transfer or Issue of Securities by Persons Resident Outside India) Regulations, 2000 (FDI Regulations) shall be deemed to be domestic investment at par with the investment made by residents;
  2. FDI cap shall not apply if NRIs make an investment through Schedule 4 of FDI Regulations;
  3. As per Para 3.1.5, NRIs under Schedules 3 of FDI Regulations, can invest/trade through a registered broker in the capital of Indian Companies on recognised Indian Stock Exchanges. However, the same is not the case for other non-residents except for registered FIIs and FPIs;
  4. Para 3.2.2 states that an NRI can invest in the capital of a firm or a proprietary concern in India on non-repatriation basis subject to fulfilment of conditions specified therein;
 
The press note amended the definition of NRI to mean an individual resident outside India who is a citizen of India or is Overseas Citizen of Indian Origin (OCIO) cardholder within the meaning of section 7(A) of the Citizenship Act 1955. Person of Indian Origin (PIO) cardholders registered as such under Notification No. 26011/4/48 FI, dated 19 August 2002, issued by the Central Government are deemed to be "Overseas Citizen of India" cardholders.
 
Impact of the amendment: Several NRIs may either already have OCBs in foreign jurisdictions or they may find it easy to form such bodies in lightly regulated jurisdictions, particularly those that have comprehensive Double Taxation Avoidance Treaties (DTAT) with India. NRIs may find it much better to invest through bodies registered outside India, than to form bodies in India.
 
While, the new dispensation will add to the ease of making investments in India, regulators will have to keep a close watch to avoid history repeating itself.
 
(Vinod Kothari is a chartered accountant, trainer and author. Nidhi Parmar works in Corporate Law Services Group at Vinod Kothari & Co) 
 

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