Bonds, Currencies & Commodities
Rupee falls 13 paise against dollar in early trade

The rupee weakened further by 13 paise to trade at Rs59.70 against the US dollar in early trade on Friday, on unrelenting capital outflows and strong demand of the American currency from importers

Continuing its decline, the rupee weakened further by 13 paise to trade at Rs59.70 against the US dollar in early trade on Friday, on unrelenting capital outflows and strong demand of the American currency from importers.

 

However, the euro’s gain against the US dollar overseas, capped rupee’s loss.

 

The Indian unit had yesterday hit an all-time low of 59.93 intraday, before the Reserve Bank of India stepped in to help the local currency recover some ground. It had ended 87 paise down at 59.57 on huge outflows.

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SEBI’s call auction absurdity: A trade of 1 share wipes off Rs1.72 crore of market cap

Hind Industries, a small-cap company, saw its market capitalisation get decimated by Rs1.72 crore over a single trade of a single share on Wednesday! This is a result of SEBI’s newly-introduced call auction system of tackling illiquid counter

On Wednesday, Rs1.72 crore of market capitalisation was wiped off, in a single trade of just one share, in Bombay Stock Exchange (BSE) listed scrip—Hind Industries, points out investor Bosco Menezes. This trade took place in the much-touted and controversial Periodic Call Auction System (PCAS) window, introduced by Securities Exchange Board of India (SEBI), where illiquid scrips are traded. This clearly means that PCAS system is extremely susceptible to manipulation—exactly what the SEBI tried to counter through PCAS!

Here is what happened yesterday.
 

In the BSE’s PCAS window, just one share was traded at Rs 38.10, which is apparently the lower circuit filter and the first trade since 29 May 2013. Its previous close was Rs40.10 (i.e. 29th May). This means, roughly Rs1.72 crore of market capitalisation of Hind Industries was destroyed with a single trade. In fact, this isn’t helping the liquidity situation because the total traded volume was just one share!
 

What is more shocking is that Hind Industries was actually a healthily traded company, with decent volumes, at least by its small-cap standards. It wasn’t until the PCAS system introduced by SEBI which termed the company ‘illiquid’.
 

Hind Industries saw 78,939 shares traded in January 2013, followed by 31,525 shares in Feb 2013, and thereafter a volume of 56,873 shares in March 2013. This is a cumulative of 167,337 shares, or roughly 2,700 shares traded daily, over the three month period ending March 2013 (i.e. 62 trading days), just prior to the inauguration of the PCAS system. Last year it was greater than 1,600 shares and the year prior to that it was greater than 2,250 shares. These are decent numbers of shares traded for a small-cap company.
 

What happened after PCAS system came into force? The company became ‘illiquid’ overnight. The average daily traded volume tanked over 95%! In May, only 2,673 shares were traded over 23 trading days (and works out to 116 shares daily). In April, it was slightly better though, with 982 shares traded daily, but still way below the 2,700 shares in the first calendar quarter.
 

So much for SEBI’s effort to infuse ‘liquidity’ and “curb manipulation” through a separate window. This puts many counters at the risk of price manipulation (whether by the promoter or someone else). We had written about SEBI’s flawed PCAS policy in the past. You can access them below:
 

Curbing manipulation in illiquid stocks: Another harebrained idea by SEBI?
 

Bombay Stock Exchange declares 2,050 companies as ‘illiquid’

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COMMENTS

Sreeselva

3 years ago

Sreeselva

I offer my support to the movement

1. City I belong to - Bangalore

2. Willingness to contribute financially - Yes

3. Willingness to add their name as petitioners - Yes

4. Willingness to attend court hearings - No

imran

3 years ago

Imran from Trivandrum, Kerala

1. City I belong to - Trivandrum

2. Willingness to contribute financially - Yes

3. Willingness to add their name as petitioners - Yes

4. Willingness to attend court hearings - Sorry.

SS

3 years ago

I am a genuine small investor and SEBI's idea is hurting a lot. I am holding a good profit making company for one year now - but not easy to sell. I hope to just collect the dividend till SEBI gets better sense. The price and volume are subdued due to this rule. I have already made up my mind to stay away from this segment because of this stupid rule even when there are good companies with attractive valuations - mind you SEBI, I am a genuine investor with a minimal portfolio churn.

If I am an owner I would hate to have a step motherly treatment to my company, where investors avoid my company because of SEBI's mindless action.


It seems like the decision was purely academic. I doubt whether anyone in the panel is a significant investor in these companies and could think genuinely from a practical investors point of view or from owners point of view.

I am all for a PIL:

1. City I belong to - Bangalore

2. Willingness to contribute financially - Yes

3. Willingness to add their name as petitioners - Yes

4. Willingness to attend court hearings - No

Neeraj

3 years ago

Recently Finaicial Express has covered PCA mechanism. The link is:-
http://www.financialexpress.com/news/cal...

Call auction window for illiquid stocks fails to find many takers

FE Bureau : Mumbai, Jul 13 2013, 00:24 IST

More than three months have passed since the Securities and Exchange Board of India (Sebi) introduced the periodic call auction mechanism for illiquid stocks, but market participants are still questioning the merits of the practice as it has led to a notable drop in trading volumes on these stocks.

According to Bloomberg data, nearly 50% of the stocks under illiquid category have seen a drop in volumes since April. Stocks like Mafatlal Industries, Pioneer Distilleries, Hindoostan Mills, DCM Shriram Industries, Lancor Holdings, Anjani Portland and Nahar Capital have seen their volumes halve when compared to volumes seen in April before the periodic call auction was introduced.

Periodic call auction mechanism refers to a system wherein buy/sell orders are pooled for a predetermined period of time, after which the orders are matched and executed. Sebi is of the belief that call auction mechanism lowers the probability of speculative trades done at artificial prices.

However, according to an industry veteran, the system of 4-5 auction windows in a single day has made trading difficult with many investors ignoring the segment due to the uncertainty in the execution of trades

There seems to be no such precedent in any other leading market globally. Many investors find it cumbersome to trade in these illiquid windows. Most stocks have seen a fall in turnover and it cannot be said that only speculative trades have vanished, said the co-head of a domestic brokerage, wishing not to be named.

In February, Sebi stated that periodic call auction sessions of one hour each would be conducted throughout the trading hours with the first session starting at 9.30am. Market players, however, say that the mechanism has made trading in these stocks more complex, thereby driving away even the genuine investors.

Brokers further say if Sebi is keen on continuing with the auction windows, then it should at least cut down the number of such sessions each day so that a larger number of orders can be pooled in a shorter duration of time. This, they say, would enhance the probability of trades getting executed.

The biggest hindrance in the auction window is uncertainty of execution. Even if you place an order near the equilibrium price, there is a probability that it would not be executed. That defeats the whole purpose of the system aimed at efficient price discovery. These factors become major concerns at a time when the overall market scenario is also bleak, said another broker.

While market participants have discussed this matter with the regulator, it is believed that Sebi would like to wait for some more time before reviewing the current mechanism.

Interestingly, the regulator has implemented the periodic call auction window in the segment for small and medium enterprises (SMEs) launched by BSE and NSE. Market participants have already suggested to Sebi that the current system should be done away with and only one auction session should be allowed in one day.

Manoj Chakraborty

3 years ago

Manoj Chakraborty
I offer my support to the movement

1. City I belong to - Bangalore

2. Willingness to contribute financially - No

3. Willingness to add their name as petitioners - Yes

4. Willingness to attend court hearings - No

Subbu Murugesan

3 years ago

I offer my support to the movement

1. City I belong to - London

2. Willingness to contribute financially - Yes

3. Willingness to add their name as petitioners - Yes

4. Willingness to attend court hearings - No

Neeraj

3 years ago

I offer my support to the movement

1. City I belong to - Hissar, Haryana

2. Willingness to contribute financially - Yes

3. Willingness to add their name as petitioners - No

4. Willingness to attend court hearings - No

Neeraj

3 years ago

http://articles.economictimes.indiatimes...

http://www.anmi.in/admin/anmiatworkfiles...

Everybody knows that there is a perfect correlation between fall in cash mkt./delivery volumes & introduction of PCA in stocks. But SEBI is far too arrogant to realise its mistake & rectify it. Stock Brokers, one by one, are banning buy/sell in PCA stocks, which now comprise 60% of all listed & active stocks in Indian Stock Markets, making things even worse. - A Concerned Investor

Archana Chirawewala

3 years ago

Name: Archana C
1. City that they belong to: Mumbai

2. Willingness to contribute financially: No

3. Willingness to add their name as petitioners: Yes

4. Willingness to attend court hearings when free: Yes

Abhay Munot

3 years ago

Abhay Munot
I offer my support to the movement

1. City I belong to - Chicago, USA

2. Willingness to contribute financially - Yes

3. Willingness to add their name as petitioners - Yes

4. Willingness to attend court hearings - No

Vijayraghav rao

3 years ago

We need more of good governance and less of needless intervention into markets. The sebi needs to focus on big manipulators rather than come up with ill conceived ideas to destroy small cap market

Siva

3 years ago

I think a PCA exclusion list would save a lot of time for SEBI and investors. What crap!! Next, SEBI might propose going back to the old system of transacting share certificates!!

Bosco Menezes

3 years ago

PCAS - New List is out today .... 274 companies in the list, many well known names such as Kirloskar Industries, LG Bala Bros, Wendt, Rajshree Sugar, Oriental Carbon & Chemicals, Alkyl Amines, Warren Tea, ITD Cementation, Panasonic Appliances, Sandesh, Rishi Lazer, Ador Fontech, MRO-TEK, APW President, Rane (Madras), Asian Hotels (West) .... they will go into PCAS from July 8th.

Announcement is here : http://www.bseindia.com/markets/MarketIn...

aditya deorah

3 years ago

aditya

money life subscriber
[email protected]




1. City I belong to - kolkata

2. Willingness to contribute financially - Yes

3. Willingness to add name as petitioner - Yes

4. Willingness to attend court hearings when free - Yes

Shankarnarayan

3 years ago

Few more ill effects of PCA :

1.)Potential multibaggers are dying a slow death. Multibaggers , atleast during their initial stages of upmove, usually have characteristics like relatively unknown,low liquidity,low institutional holding etc. These are exactly the kind of stocks in PCA.

2.) Also many retail investors prefer low priced scripts than the high priced ones. A kind of feeling of safety buying a Rs 50 stock than a Rs 500 stock. Such investors are now discouraged to participate.

I am ready to contribute anyway to fight this.

Indians’ money in Swiss banks dips to record low of Rs9,000 crore
In a White Paper on black money tabled in Parliament last year, the Indian government said that the total liabilities of Swiss banks towards Indians fell by more than Rs14,000 crore during 2006-2010 period
 
Indians’ money in Swiss banks has fallen to a record low level of about Rs9,000 crore (1.42 billion Swiss francs), as a global clampdown against the famed secrecy wall of Switzerland banking system made it unattractive for their global clients.
 
The total funds held by Indian individuals and entities included 1.34 billion Swiss francs held directly by Indian individuals and entities, and another 77 million Swiss francs through ‘fiduciaries’ or wealth managers at the end of 2012, as per the latest figures released by the Swiss National Bank (SNB) in Zurich today.
 
The official data, which forms part of SNB’s annual report on Swiss banks, further showed that Indians’ money there fell by about 35% or Rs4,900 crore in 2012. This was much steeper than a 9.1% fall in the funds held by entities from across the world in Swiss banks, which also hit an all-time low of 1.4 trillion Swiss francs ($1.5 trillion) at the end of 2012.
While the Swiss banks had close to Rs14,000 crore (2.18 billion Swiss francs) of Indians’ money at the beginning of 2012, the equivalent figure for entities from across the world stood at 1.5 trillion Swiss francs ($1.65 trillion).
 
The data has been released at a time when Switzerland is facing growing pressure from the US and other countries to share the foreign client details, while its own lawmakers are resisting such measures.
 
The funds, described by SNB as ‘liabilities’ of Swiss banks towards their clients from India, are the official figures disclosed by the Swiss authorities and do not indicate towards the quantum of the much-debated alleged black money held by Indians in the safe havens of Switzerland.
 
SNB’s official figures do not include the money that Indians or others might have in Swiss banks in the names of others.
 
The sharp decline in Indian money in Swiss banks during 2012 followed a significant increase in the previous year, when such funds had risen for the first time in five years.
The quantum of funds held by Indians in Swiss banks stood at a record high level of 6.5 billion Swiss francs (over Rs 41,000 crore) at the end of 2006, but has declined by over five billion Swiss francs (over Rs 32,000 crore) since then.
 
For clients across the world, total funds in Swiss banks stood at a record high level of $2.6 trillion at the end of 2007, but have fallen by over $1 trillion since then.
 
In a White Paper on black money tabled in Parliament last year, the Indian government said that the total liabilities of Swiss banks towards Indians have been coming down since 2006 and fell by more than Rs14,000 crore during 2006-2010 period.
 
Amid allegations of Indians stashing huge amounts of illicit wealth abroad, including in Swiss banks, the government has said it is making various efforts to bring back the unaccounted money.
 
While a new treaty has been put in place for sharing of information on issues related to tax crimes on a prospective basis, Switzerland has also agreed to a limited retrospective clause for such information exchange in case of India.
 
As per SNB data, funds held by Indians directly in the Swiss banks declined sharply by about 700 million Swiss francs in 2012 to 1.34 billion Swiss francs (Rs8,500 crore) in 2012.
 
On the other hand, the funds held through ‘fiduciaries’ nearly halved to 77.4 million Swiss francs (about Rs500 crore) in 2011—marking the sixth straight year of decline.
 
Fiduciaries are essentially wealth fund managers who hold the money of Indian private holders and families in the so-called numbered accounts.
 
The Swiss banks’ direct liabilities towards clients from India include funds held in savings and deposit accounts by Indian individuals, financial institutions and corporates.
 

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COMMENTS

shrinivas

3 years ago

They have all been allowed to be withdrawn ! That is why it has come down, by the time our Govt., really opens about these accounts, none will be left !

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