Stocks
Rajya Sabha MP raises concerns to finance minister about the sorry state of stock markets

In a matter-of-fact letter to the finance minister, Rajeev Chandrasekhar, Rajya Sabha MP, has asked the government to address the burning issue of stock market reforms

Minister of state for finance Namo Narain Meena's startling and worrisome disclosures in Parliament regarding investor participation in stock markets has hit home hard. Moneylife has reliably learnt that Rajeev Chandrasekhar, Member of Standing Committee on Finance, in a letter to the finance minister, has called for the government to focus on and address the further deepening of the Indian stock market, as the depth of the market remains a major cause for concern. Moneylife had written about the finance ministry's startling revelations in Parliament (see: http://www.moneylife.in/article/72/8312.html and http://www.moneylife.in/article/72/8347.html).

Mr Chandrasekhar wrote, "…despite the perception of a healthy stock market in our country, the market remains narrow, shallow, illiquid and concentrated in the hands of a few individuals located in a few centres, even 20 years after India embarked on financial liberalisation and ostensibly unleashed a boom in stock investing and spreading  the equity cult." Rounding off his letter, the MP wrote, "I strongly believe that reforms and further deepening of our stock market is an important policy objective for the government to focus on and address."

The letter follows Mr Meena's startling disclosure in Parliament in response to a question asked by Mohammed Adeeb, a Member of the Rajya Sabha. On 10th August, the minister said only 30.90 lakh investors traded on the National Stock Exchange's (NSE) cash market in the April-June quarter. Of these 52% were retail, High Net-worth Individuals (HNIs) and corporate customers. Institutional investors and proprietary traders accounted for 48% of all trading (24% each).

The figures as broken down by Mr Meena are indeed worrisome for policymakers. The minister said that 90% of trading in the April-June 2010 period came from just 192,200 investors. Further, the minister said 80% of turnover came from just 41,654 investors. In other words, 1,50,546 investors (78%) accounted for just 10% of trading turnover. Further, the minister said 8,727 investors accounted for 70% of turnover among which 413 were proprietary traders, mainly brokerage houses. Mr Meena also said that 60% of trading came from a mere 1,563 traders and half the trading turnover (50%) came from a shockingly low 451, of which 156 were proprietary traders!

Highlighting these figures in his letter to the finance minister, Mr Chandrasekhar wrote, "I am sure these figures would be extremely worrisome for the government and yourself." The data shows that the market has neither depth nor diversity and only a small segment of Indians are involved in it - that too in the form of speculation by day traders in a few select products including the NSE's main index, Nifty.

The reality about the depth of Indian stock markets appears to have hit home, at least among a few government officials. It remains to be seen whether this translates into any meaningful action on the part of the government. 

User

COMMENTS

natasha

7 years ago

contrary to public perception India does not have a very high savings rate at all .
Most of the savings are concentrated only in blackmoney . the middle class which is the backbone of the economy is dwindeling currently is totally having to service debt products like emis housing and car , credit card loans at floating interest rates , and 70 % of the population lives on only 20 rupees per day .
our GDP per capita is nearly as low as that of Pakistan which is a failed state .
What you see in the televisions is all hype and not true INDIA .
What your politicians BS about gdp and growth is utter humbug .If you talk gdp and it doesnt carry the entire country forward its useless .Show me the roads railroads bridges ports .

NOTE : your IPL 20-20 also contributes to GDP . It results in more tvs being sold more beer being drunk more sleepless nights more junk wafers food pizza donut being eaten more electricity being consumed more atf fuel being consumed ,more activity being done with so called socialites hopping from her eto htere and people going to stadia moving around and bookies rolling currency and money around and all this is complete wasteful expenditure .THIS IS ALSO CONTRIBUTING TO YOUR GDP . make a study of how much GDP is due to consumption and that to wasteful consumption .do you really need those batata chips and wafers . MOST INDIAN GDP is ABSOLUTELY WASTEFUL expenditure and this mostly currently comes out of the SAVINGs ...>>
nowadays .People have no work so they watch all this crap on tv night after night .

above is just example .

REPLY

Roopsingh Solanki

In Reply to natasha 7 years ago

I fully agree to your all points and real concerns-india is sitting on a volcano of critical problems-like population,poverty,un-employment,illiteracy,pollution,corruption-we can stretch this list to numerous factors-and still we live in 'euphoric 'state-we are just copying technology and development models which has been fully utilised in west-we are just best copiers but copying without brain-we never think we wont be able to accomodate so many cars on highways and city roads-and still we have no plans to start metro trains in most of multi-million cities-we dont have sewage or drinking water available to all-not enough toilets on city roads-we dont have hand pumps in citiies in case a war breaks and electricity will not be available( what people will drink if whole city gets cut of electric power)-have we ever planned for all these consequences-we are not trying to use renewable energy like wind or solar energy-we have best sunny months in world-but we are just wasting electricity on air conditioning to stop room heating-we are proving our selves as ''BIG BIG FOOLS"-

Aparna Ramachandra

7 years ago

Hi
everybody is making noise about reduced investors, not too much depth maturity in the market etc. But on the other hand we have one of the highest savings ratio....so hat does it mean. The average investor is not just wary, scared but also plain lazy. So I believe we also have to work towards not only building the investor community, but also make it more pro active. It needs be hammered that investing, investing with a goal and self discipline is the only mantra to ensure that your sons take care of you in old age (fat balance sheet!!!)...

What’s in store for the banking sector?

ENAM, CLSA banking sector reports suggest bullishness to continue; banks also expect loan growth to pick up — liquidity is not expected to be a major concern

In a recent report on the banking sector, leading brokerage CLSA said, "There is a broad-based pickup in credit demand and the momentum is expected to improve further in 2H which is generally a busy season. However, deposit mobilisation is becoming a challenge and competition in the wholesale market has turned intense, driving rates up by ~200bps." The firm expressed concern that although banks believe they have the pricing power right now, which has allowed them to raise lending rates by 50bps-75bps, deposit rates are rising faster as loan-deposit ratio is near its historical peak.

A recent report by Enam says it does not expect the Reserve Bank of India (RBI) to raise rates by more than 50bps for the rest of FY11 since inflation and IIP growth have begun to moderate. RBI's unofficial target of a minimum 8% Tier-1 ratio will force many banks to go in for dilution over the next four-eight quarters, but it is likely to be book accretive for most. Banks whose Tier-1 is below 8% are Bank of Maharashtra, Central Bank, UCO, IDBI Bank, Syndicate Bank, Vijaya Bank, Andhra Bank and Union Bank - but most of them are getting equity infusion from the government. Enam favours banks with high CASA (current account savings accounts) ratio, which would cushion the net interest margins. Its top picks are SBI, Canara Bank, Axis Bank, Yes Bank, PFC, and IDFC.

Unlike the impression we got from the Q1 results, CLSA says that banks are a bit worried about asset quality because of the broad-based growth in slippages in Q1 and that most have renewed focus on recoveries. Other interesting observations in the report - credit growth for the sector has moderated a bit to 20% and deposit growth to 14%, but incremental LDR (loan to deposit ratio) is still near 100%; insurance companies, other than SBI, did very well in the June quarter - annualised new business premium of the sector grew by 68% y-o-y led by 131% growth of LIC, ex-SBI private sector NBP was up 37% y-o-y (116% decline for SBI).

Mutual fund performance was dull - Assets Under Management (AUM) grew by 6% m-o-m to Rs6.7 trillion (down 7% y-o-y). The report says the recent growth in insurance has come about as companies and agents aggressively pushed sales of Unit-linked Insurance Plans (ULIPs) ahead of implementation of the new guidelines - the low base also helped.But it believes that this growth is not sustainable and the lower profitability of ULIPs may force companies to focus on traditional products which have lower ticket-size and this can impact sales growth. Enam also believes that new business margins could take a significant hit and could even fall to single digits.

Enam expects value unlocking from subsidiary investments for banks - it points out the fact that HDFC Standard Life will become eligible for an IPO in October this year, followed by ICICI Prudential Life and SBI Life in subsequent months. It expects the Insurance Regulatory and Development Authority (IRDA) to come out with IPO guidelines before this.

Post-result television interviews reveal that banks expect CASA growth to remain strong, believe that new banking licenses will not disrupt the sector, and loan growth will pick up. Unlike the general perception, liquidity tightness has actually moderated a bit of late.

Enam warns that NPA recognition norms based on CBS (core banking system - in short, computerised branch connectivity) could throw up nasty surprises in a few cases as some NPAs that may be hidden in non-CBS branches could be revealed. While SBI and Indian Bank have disclosed current NPAs on based on the CBS platform, many PSU banks have yet to do so.

CLSA's interaction with various bank managements threw up some interesting points. HDFC's Keki Mistry (vice chairman and CEO) let on that despite the 15%-20% rise in prices of real estate, loan growth has picked up. For HDFC, Delhi is growing faster than Mumbai followed by Chennai and Pune. HDFC's borrowing costs are on the move and it will have to raise lending rates. He also said that growth in the insurance business (HDFC Standard Life) is coming back and that it will remain focused on ULIPs.

The brokerage's interaction with Standard Chartered's Jaspal Bindra (group executive director and CEO, Asia) and Neeraj Swaroop (regional chief executive, India and South Asia) gave some interesting international perspective. They believe Western regulators will start tightening only towards the end of next year. In India, they think that 300 branches may be an optimal size; Standard Chartered currently has ~100 branches (largest within foreign banks). The bank still sees some possibility of a double-dip (in the global economy) and is sitting on excess liquidity to brace for that.

SBI's Anshula Kant (deputy general manager) believes that SBI will benefit from growth in the syndication business where it has 40% market share. It is seeing good loan growth from infrastructure, cement and steel.

She believes costs of deposits for SBI will rise from here (they were re-priced lower in Q1). Fee growth rate may not match FY10. SBI would look at raising funds by March next year.

ICICI Bank said that it continues to remain selective about the loan proposals that it is considering and yet, is likely to report 20% growth in the domestic business in FY11. Its Q2 results may be consolidated with Bank of Rajasthan. Oriental Bank of Commerce's RL Agarwal (general manager, treasury) said it is targeting 18% loan growth in FY11.

Bank of India's Ravi Kumar (deputy general manager) said the target loan growth was 20%. BoI still has surplus liquidity and hence it has not raised the benchmark prime lending rate.

User

Cranes Software could be delisted; governance issues surface

The company’s shares are set to be delisted from the NSE due to non-compliance of listing agreements

Bengaluru-based software products provider Cranes Software International Ltd has been repeatedly postponing its announcement of financial results for the past two quarters. This has caused consternation among institutional investors who suspect Cranes could go the way of dubious software companies like Satyam Computer, Silverline Industries, Pentamedia and Prithvi Infosolutions.

On 27 April 2010, the company sent a notice to the Bombay Stock Exchange (BSE) that it would publish the audited results for the year ended 31 March 2010 before 30 May 2010. But on 22 June 2010, the company told the BSE that it has not received audited results from its overseas subsidiaries and so its results have been delayed. Cranes has not published its year ended 31 March 2010 and its Q1 results yet. An email query sent to the BSE and the company did not elicit a response until the time of writing this article.

The company's shares will be suspended from trading on the National Stock Exchange (NSE) from 3 September 2010 due to non-compliance of listing agreements. The company failed to satisfactorily respond to the NSE.

Cranes reported Rs84.8 crore consolidated revenues in Q3 FY10. The company derived 94% of its revenues from its international operations while 6% was contributed by its domestic operations. Its domestic revenues stood at Rs4.96 crore while international revenues were at Rs79.89 crore. It reported a consolidated net loss of Rs1.43 crore and paid Rs15.13 crore as interest in the third quarter of FY10. The stock was trading at Rs11.35 at the time of writing.

Asif Khader, managing director, Cranes Software International, while announcing the company's results had said, "The last few quarters have been the most challenging for Cranes from an operational perspective. In particular, high debtor days as result of the global recession had squeezed cash flows and affected business from exports. To overcome these difficulties, the management has initiated direct sales from its subsidiaries, thus considerably increasing our subsidiary revenues and reducing the going forward collection period. On the domestic front, the company has lost significant revenue in the third-party business; the reason for this loss was because The MathWorks Inc, which is the parent company of MATLAB, decided to set up (its) own operations in India."

Cranes Software is supposed to be a specialised, high-end software company focused on statistical analytics and engineering simulation. Foreign investors hold 13.51%; promoters hold 14.52% and public shareholders hold 85.48% of the equity.

User

COMMENTS

amit

7 years ago

At least make sure that shareholding pattern adds to 100.
Foreign incestor - 13%
Promoter - 14%
Public - 85%
total - 112%

Makes no sense... shows your groundwork in writing articles

devendra k chouhan

7 years ago

i have 200 shres of cranes software in nse of the purchase of 34 rupees,should it be gateble or not as it is delisted from nse

Er SS Hari

7 years ago

KURUTO fund was holding big chunk and they have dumped all 8.64 lac shares.Angel broking had come with a research report dated 31 oct 08 with target price of 106.Angel holds 1.2 percent shares.Religare also holds 1.2 percent.Allahabad bank and J&K bank also hold 1.2 percent each.foreign investors are very sensitive to governance issues..they threw earlier Prajay Engineer from 380 levels to 12 levels now it is around 30 stagnant.most brokerage house research reports are published when stock is at peak impressing investors it has entered unchartered territory can go to sky.this is drama to prepare exit route for biggies.indian market is casino for biggies and small investors keep quite about losses as they had done that investment keeping secret from their wives as indian ladies are against risk taking by nature.as for as cranes is concerned confusion is at peak indian traders will be making money by churning it daily in lacs here and there.after few days they will also dump to public and then no takers like birla power inspite of full page advertisements in all pink papers.let us hope for the best.it is also suggested that in your magazine tutorial chapter on tech analysis and market strategies be added.

rajesh

7 years ago

tnks moneylife for the writeup on cranes
the following 4 companies also make for inteersting mini satyams
kgn industries this is by no means small it has as of 31-8-2010 a mcap of 1 billion us dollars
minal industries
mavens industries and
beckons industries

shreyas

7 years ago

sebi must bring the promoters of the cranes soft under trial. suspension must be revoked till the completion of trial.

ErSS Hari

7 years ago

the stock had earler daily high volume and JMP Sec was the main market maker even now they hold 11.3 percent.Goldmansach and Copthall sold 1.2 crore shares.on a hindi business channel one day in flash news said co is almost sure to get nucleur energy sector orders stock that flashed within minutes 29 to 33 levels and within two hours FIIs exited.it was a ploy.business channel reporters are the biggest culprits for small investor trappings.ZEE business and AWAZ are now even playing matches daily morning and innocent investors lose daily.onlybld editors like Madam Sucheta Dalal can expose the game which has wider ramifications.see the price fluctuations in ramanewsprint bagfilms karuturi ksera dcw hfcl northgatetech tricom vishalinfo fcs birlapower wirewire it is all looting game by ring traders with help of media so called TV channels.

Ramachandra Pai

7 years ago

The share holding pattern mentioned adds up to 113%...According to BSE India, it is Foreign investors hold 13.51%; promoters hold 14.52% and public shareholders hold 64.95% of the equity and DIIs another 7.02%

Lalitha Viswanathan

7 years ago

JBF Industries Ltd has so far made no announcement about holding AGM although they have declared Dividend and record dates for the same.

This is worth checking.

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