Rupee appreciation not abnormal: Pranab

Gyeongju (South Korea): Finance minister Pranab Mukherjee has said today that huge foreign institutional investor (FII) inflow reflects foreigners' confidence in the Indian growth story and is not a matter of concern as of now since the appreciation in the value of rupee is not abnormal, reports PTI.

"The rupee appreciation is not abnormal. As and when Reserve Bank of India (RBI) feels that intervention is necessary, they start intervening.

But I'm not very much worried because our situation will not be of that level," Mr Mukherjee said ahead of G-20 finance ministers meeting here.

RBI had intervened in markets last week to restrain a sharply appreciating rupee.

The finance minister said that if rupee continued to appreciate for longer, exports would be impacted.

"Export is definitely affected if it continues for a longer period of time," he said.

The Indian rupee has appreciated by around 5% this year so far, to stand at around Rs44.36 against a dollar.

The finance minister said FII inflows reflects momentum in growth of Indian economy.

"One of the reasons is that when the recovery process in industrial world is slow, naturally those who have investible resources would like to come to emerging markets and confidence of Indian economy has allured the investment," he said.

The Indian economy grew by 8.8% in the first quarter of this fiscal, while major countries in Europe and the US are struggling to revive from the global financial crisis.

FIIs have poured in record over Rs1 trillion in Indian stock markets in the current year so far.

Mr Mukherjee favoured dialogue to resolve the issues of currency war, particularly between US dollar and Chinese yuan, instead of confrontation.

He said he was not sure whether somebody will raise the issue at G-20 finance ministers meeting, and that India's stand would depend on how the issue was raised at the meeting.

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Friday’s Market Preview: Market likely to open higher

The Indian market is likely to open higher tracking the global markets. Wall Street ended with marginal gains in the midst of a volatile session on a stronger dollar and positive earnings reports. Markets in Asia were trading mixed in early trade on strong earnings figures posted by US companies and a fall in initial jobless claims in the world’s largest economy. The SGX Nifty was up 15 points at 6,135 compared to its previous close of 6,120.

The local market opened on a strong note on Thursday on positive cues from across the globe. Easing of weekly inflation numbers and good earnings figures gave the indices the much-needed boost, enabling them to erase the losses suffered over the past two days. The Sensex ended the day's proceedings at 20,260, up 388.43 points (1.95%). The Nifty settled at 6,101, up 119.40 points (2%).

US markets closed with marginal gains on Thursday amidst a choppy session torn between positive earnings reports and a strong dollar. The markets gave up gains seen in the morning session as the dollar rose, raising fresh concerns about a currency imbroglio.

On the economic front, initial jobless claims fell last week by 23,000 to 452,000, Labor Department figures showed on Thursday. The Conference Board’s measure of the outlook for the next three to six months rose 0.3%, in line with expectations.

The Dow added 38.60 points (0.35%) to 11,146. The S&P 500 rose 2.09 points (0.18%) to 1,180. The Nasdaq gained 2.28 points (0.09%) to 2,459.

Markets in Asia were mixed in early trade on strong earnings figures posted by US companies and a fall in initial jobless claims in the world’s largest economy. However, investors remained cautious ahead of the Group of Twenty (G20) meeting in South Korea, speculating that a consensus on the currency imbroglio remains obscure.

The Jakarta Composite was up 0.30%, KLSE Composite was up 0.15%, Nikkei 225 was up 0.37%, Seoul Composite was up 0.77% and Taiwan Weighted gained 0.34%. On the other hand, the Shanghai Composite was down 0.50%, Hang Seng shed 0.06% and Straits Times was down 0.02% in early trade. The SGX Nifty was up 15 points at 6,135 compared to its previous close of 6,120.

The finance ministry is believed to have disfavoured the imposition of import duty on power equipment for ultra mega power projects (UMPPs) for now — a move that could benefit private players that are looking to source equipment from abroad.

Sources said the finance ministry has decided against the imposition of import duty after consultations with the power ministry and public sector equipment major BHEL, besides representations made by private sector players through the Association of Power Producers.

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SEBI insists that Coal India allow investors to withdraw their bids on a trivial mistake in prospectus!

In Coal India’s prospectus, two figures have got altered. SEBI, whose decisions are often biased and whimsical, has insisted that investors must be allowed to withdraw their bids on such a negligible mistake

The Securities and Exchange Board of India (SEBI), whose decision-making has always attracted charges of inconsistency, bias and whimsicality, is probably out to redeem itself. It is out to show that it is a stickler for rules and willing to throw the rulebook at even large public sector companies.

Therefore, in a bizarre instruction, it has also forced Coal India Limited (CIL) to give all investors, including the institutional bidders, the option to withdraw their bids for a trivial mistake in the prospectus. CIL was asked to issue advertisements in newspapers to make the small correction but part of the ad is an offer to investors to withdraw their bids just because two figures got interchanged.

Consequently, at a time when the Disinvestment Ministry and CIL should be celebrating the extraordinary success of a 12-time oversubscription of a gigantic Rs15,000-crore issue, that too only to retail investors, they are smarting under what is considered SEBI's rigid stance.

Coal India today issued a notice to investors, which essentially corrects one typographical error. The figure under 'accretion in stock' and that under 'other income' for the quarter ended 30th June 2010 got inadvertently inter-changed. So accretion in stock should read as Rs54.45 million instead of Rs31,945 million and other income should read the opposite. While the numbers seem huge, there is no change in total income figures or the summary statement of profit and loss.

In any case, it is clear that it was a tiny slip.

Stunningly, for such a minor error, SEBI has asked CIL to not only issue a correction advertisement, but also asked it to give investors an option to withdraw their shares for this correction. According to sources, SEBI was acting on a complaint received from an investor.

In ads issued today, CIL has said, "In view of the above kindly note that Bidders (including QIB bidders), if they so desire, may withdraw their bids." The request for such withdrawal will have to be made before 5pm today before the retail issue closes.

It is another matter that this correction is hardly going to affect the subscription of CIL, unless the original complaint itself was mischievously designed to disrupt the disinvestment process. However, so strong is the momentum for buying good stock that investors whom Moneylife spoke to this morning were unconcerned.



We also learn that there were discussions at the highest level of the government to allow CIL to issue a correction without the offer of withdrawal, but SEBI refused to budge. The question is, was SEBI adhering to the highest standards of fairness and discipline or was it being stubborn to send a signal to the government that it cannot be 'influenced'? There will always be two opinions on the issue. But two facts are abundantly clear. One, the mistake is inconsequential. It is not an omission but a mere typographical error with no material impact on profitability numbers.

More pertinently, public sector companies, ever since the disinvestment programme began in 1991, have not followed the normal disclosure rules. It may be remembered that Mahanagar Telephone Nigam Limited (MTNL) was listed even without a prospectus! Even today, government companies are listed with a floating stock that is way below the mandatory 10% applicable to all companies. Interestingly, SEBI has not implemented the minimum shareholding norm ever, despite the occasional warning by the previous SEBI chairman.
 

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COMMENTS

arun adalja

7 years ago

i will be obliged if somebody can get the figure of withdrawl of application in the retal category by the mistake from merchant bankers and sebi s action.

Shibaji Dash

7 years ago

If the contents of the bulky IPO application forms are amenable to careful study and understanding as in the case of Mr. Jim, let me point out with all respect and in all polieness that Mr. Jim is an exception to the rule of average. The crux of the issue is how come stock and income could be interchanged. All the waters of the Ganges will not be adequate to wash such casual and irreverant explanation like " small clerical' error.

REPLY

Jim

In Reply to Shibaji Dash 7 years ago

Mr. Shibhaji, what i understand from your reply is that every average retail investor sources the IPO form, reads the 25 -30 pages, analyses the IPO valuation and then decides whether he should invest in the IPO or not. I wish the Indian retail public would one day arrive at that stage. But sadly that is not the case right now. I am associated with the Financial Industry and day in and day out I see how people invest. Sadly for IPO's they dont even take the entire application form. They just take the first page and leave. Just to refer, if you look back six to eight months there were hardly any subscription, leave aside over-subscription in the IPO's that hit the market.

Shibaji Dash

7 years ago

May be as Ms. Dalal says the mistake was "clerical' ( clerks are an extinct tribe)and inconsequential. She would know better and I would trust her. But it's hard to digest that what SEBI did was nit picking. They did their duty. And Coal India reaffirmed its credibility by giving the option to withdraw. how could the merchant bankers fail to distinguish between stock and income? A mistake that a school student of commerce stream would not commit.Merchant bankers and Accountants are always ' barbarians at the gate' unless rapped in the knuckle in each event of a 'mistake' , 'clerical or otherwise.Ohm, Satyam!

REPLY

Ravindra Shetye

In Reply to Shibaji Dash 7 years ago

You can ust the merchant bankers not to make a mistake on the lower side when claiming their fees.

AP Agrawal

7 years ago

SEBI was correct. Those for whom the error is inconsequential, should not bother, those for whom it might be should get a fair chance to take an informed decision and for those who prepare these documents, it should be an eye opener. How can merely numbers or success of an offer or effect on it may bend the rules. It is better to have a hard precedent than a bad precedent.

Jim

7 years ago

Lot of investors do not even bother to go through the bulky application form of the IPO form. How many investors actually care to read the financial statements of the company when (and after) it listed on the bourses. What matters is factors like market sentiments, herd mentality, brokers advice etc. SEBI should have just asked CIL to advertise in all the national and regional newspapers across India about the typo error. There was no need to ask CIL to give the witdrawal option..

arun adalja

7 years ago

sebi is correct for the action but we have to analyse the issue why the thing came when the issue is over?who is responsible for this mistake?merchan bankers lead managers etc all are responsibe if yes why they are not punished?they must fine heavily and that money is given as a discount to investors as they have to go under mental worries.

REPLY

ashok

In Reply to arun adalja 7 years ago

mental worries for two figures interchanged?
put your money in FD. Bhave will be happy since Sebi has done nothing to expand india's investor base

oriental

7 years ago

yes ma'm,

your point taken.
but sebi has acted as per the letter of the law! how, then she can be faulted?

recently, in the similar case of va tech wabagh, they were asked to offer the refund option to the investors, by sebi.

i think the spirit of transparency and lawfulness must be upheld at all costs.

the behemoth cil should not be allowed to get away under other pretexts.

REPLY

Ishfaq Hussain

In Reply to oriental 7 years ago

have you been tracking sebi's "spirit of transparency and lawfulness" in nsdl and cb bhave case?

Ravindra Shetye

7 years ago

I do not think it was a tiny slip. Can you accept a similar slip in Tata Motors for example. No one will withdraw and many would not have noticed the slip since for most it is like a lottery. Moreover an ad giving the option to withdraw safeguards CIL on legal front. I do not agree with your views on this.

REPLY

ramchandra gadgil

In Reply to Ravindra Shetye 7 years ago

After seeing some of the comments here, I looked for the Coal India advt confident that Moneylife has reported selectively. Found it in the Indian Express courtesy a librarian friend. Clearly it is just a typographical error and given the size of the issue a tiny matter that did not hide law suits or involve contingent liabilities. Clearly SEBI is over reacting. As a lawyer i believe SEBI may want to consider the aspect of mens rea -- or guilty mind -- at least when it comes to typos that do not affect the bottomline or mis-state liabilities.
Even as an investor I think the matter is indeed "trivial".
Maybe the outgoing SEBI chairman wants to tell the government that he is not answerable to them anymore? Or maybe he is simply upset that he isn't getting a second term. (more likely)
Given SEBI's general level of inefficiency, I certainly think there is more to this than meets the eye. Especially when so many known culprits get away without even a warning on consent cases. That these can be 'fixed' is well known in legal circles.
Funnily, only moneylife and Mint seem to have reported it yesterday. Amusing to see that SEBI has ensured white wash in that paper -- also a big mountain of a mole hill.

Kulkarni

7 years ago

It is not clear why sucheta is agitated when the steps taken by SEBI is purely in the interest of the investors. We must appreciate SEBI for showing guts and treating govt and other issuers on par. I thing you are wrong this time sucheta.

REPLY

Manohar

In Reply to Kulkarni 7 years ago

The point is such "guts" from regulators is always selective and motivated. If you have been reading moneylife you would be aware of the larger picture. what, for instance, do you know about sebi's "guts" in case of quiet consent orders it is issuing to "settle" cases. in whose interest ?

Nadkarni

In Reply to Manohar 7 years ago

Kulkarni, don't be so foolish and naive about Indian regulators. "Purely in the interest of investors"! My foot. I was an investor of Global Trust Bank which was raped by the promoters, the ZEE group and Ketan Parekh. What did your great regulators RBI and SEBI do about them? The then RBI governor bailed out his the petty banker from his home state AP, Sebi slept over its so-called investigations regarding Ketan Parekh and ZEE. Finally, I read only in Moneylife how the ZEE group was let off only with a warning, possibly days after the current chairman took over! I don't think anybody other than Sucheta reported this. Grow up Kulkarni, the regulators are not there to act in the interest of investors. They are there to act in favour or against big guys and also on personal likes, dislikes, whims and motivation as this article has hinted.

Narendra Doshi

7 years ago

R Bala's comments are the way to go.

REPLY

Sunder

In Reply to Narendra Doshi 7 years ago

As usual Bala's comments are extreme and sweeping. I read him more for amusement

R Balakrishnan

In Reply to Sunder 7 years ago

Sundar, the point is that the regulators NEVER punish the merchant bankers enough to hurt them. It is a cosy nexus between the regulator and the merchant banker. And now, they have imported 'compounding'. This is what makes me angry. And I am glad that I provide you amusement.

Madhusudan Thakkar

7 years ago

This is all drama-bazi by SEBI

R Balakrishnan

7 years ago

The bigger issue is that of the lead managers, who do shoddy work, reflecting the caliber of ownership and employment. The bankers should also be barred for a few years from the capital markets, for such errors. Here, the error is trivial, but in cases like Vatech Wabag etc, the error was material. SEBI should demnostrate that it is not hand in glove with the investment bankers. Ban a few of them for five to ten years and the quality can improve.

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