SEBI begins finalising bourses’ ownership, governance rules

New Delhi: Market regulator Securities and Exchange Board of India (SEBI) has begun the process of finalising its guidelines on the way bourses are owned and do business, based on the feedback received on recommendations made by a committee set up by the regulator on this matter, reports PTI.

In addition to the comments received by SEBI from various stakeholders such as exchanges, market participants and investors, the regulator would also take into account views expressed by eminent personalities in media and on public forums, a senior official said.

A synopsis of the feedback on the recommendations is likely to be placed before the SEBI board in its next meeting, but a final decision is not likely soon because of varied reaction generated by the proposals, he added.

The government's view on the matter will also be taken into account through its nominees on the board, he said.

SEBI had put forth the recommendations made by the Bimal Jalan committee for review of ownership and governance norms for market infrastructure institutions on 23 November 2010 and had invited public comments on the same till 31st December.

The committee suggested sweeping changes in the way stock exchanges are owned and function and its proposals include capping their profitability and not allowing them to get listed to safeguard their front-line regulatory role.

The proposals generated intense debate in the media and on public forums, while at least three surveys were also conducted by different organisations on its various proposals.

These surveys are on top of one conducted by the Jalan committee itself, wherein it had put forth a questionnaire for public comments to decide on its recommendations.

These surveys, conducted by research firm IMRB, economic think-tank and financial data provider CMIE and stock market website EquityMaster.Com were apparently aimed to gauge the opinion of stakeholders and investors on the issue.

Out of these, IMRB survey was commissioned by MCX Stock Exchange, a stakeholder in the issue and among those to be affected maximum by the recommendations. The bourse, which is currently allowed to trade in currency futures only, has opposed vehemently the committee's various proposals.

The IMRB and the Jalan committee surveys were based on responses from stakeholders in the exchange space.

However, IMRB claimed to have approached a total of 101 respondents for the survey, as against 29 respondents in the Jalan committee survey.

The results of IMRB survey apparently indicated a stiff opposition to the committee's proposals.

The CMIE survey claimed to have posed five questions about the issue to as many as 5,392 people, including retail investors.

The Jalan committee recommendations, incidentally, are limited to market infrastructure institutions-stock exchanges, depositories and clearing corporations, and not aimed at retail investors.

The survey also sought to gauge the opinion of retail investors on the issue.

The proposals have faced severe criticism from various quarters, including industry chambers and market participants, including the country's oldest bourse Bombay Stock Exchange (BSE) and MCX-SX.

The various options now likely to be considered by SEBI include making listing optional for bourses and separating their regulatory and business roles.

The regulator may also consider whether bourses can be asked to put in place 'Chinese Walls' between their regulatory and corporate functions.

The move is aimed at keeping the front-line regulatory role of the bourses unaffected by their profit-making and other business interests after they become publicly held companies following their listing.


Oil, metals, banks and auto expected to lead December quarter growth

Oil & gas, metals, banks and auto sectors will drive earnings; cement and telecom are expected to lag behind; low base effect may be over for the Sensex from this quarter, according to a brokerage house

An important factor to keep in mind when looking at the October-December 2010 quarter results, says Motilal Oswal (MOSL), is that the low base effect is almost over. At an aggregate level, the Sensex PAT growth was 23% in 3QFY10 and the brokerage expects it to be 23% for 3QFY11. Oil & gas, metals, banks (especially private banks) and auto sectors are expected to perform well, while cement and telecom will probably be laggards. The pharmaceutical sector is also expected to do well.

MOSL states in its December quarter earnings preview report, "Nine of the top 10 earnings growth companies in the Sensex are expected to be from autos (Tata Motors, M&M), commodities (Tata Steel, ONGC, Hindalco, Reliance Industries, Sterlite), and private banks (HDFC Bank, ICICI Bank). Telecom is the biggest drag on Sensex PAT growth with Reliance Communications' PAT expected to be down 67% year-on-year and Bharti's PAT (may be) down 23%."

With reference to the auto sector, MOSL expects volumes to be strong. An increase in end prices may cushion margins somewhat, but overall EBITDA levels are expected to come off a bit due to higher raw material prices.

Going forward, the auto sector is expected to face headwinds in the form of higher interest rates, steeper fuel prices, and higher product prices. This could be a trend across consumer-driven sectors in India, which is why MOSL says that export-driven sectors could perform better than domestic ones.

The report says, "We believe near-term challenges will impact performance of several sectors, particularly those dependent on domestic markets. We expect rising input costs, fuel prices and interest rates to impact discretionary consumption spends including (the) auto (sector). In this backdrop, global commodities and export-oriented sectors like technology and pharma would continue to outperform."

For the December quarter, in banking, MOSL expects credit growth to remain strong, but deposit growth to lag, putting pressure on net interest margins. Further clarity is expected on pension and gratuity related liabilities. Margins seem to have peaked for this sector, the brokerage believes.

Cement demand momentum is muted with volume growth of 7.3% year-on-year, but down almost 10% quarter-on-quarter. Domestic prices are about 7% higher quarter-on-quarter and 4.5% year-on-year.

Overall EBITDA margins may improve quite a bit quarter-on-quarter, but they are still down almost 800 basis points year-on-year. MOSL believes prices have bottomed out and that utilisation will improve from here.

The construction sector is expected to benefit from order flows from the National Highways Authority of India (NHAI) and the building segment after a sluggish first half. Construction costs and interest rates will rise, but MOSL expects "EBITDA and net profit margins to stabilise with growing composition of higher margin contracts in the order book."

Growth in the FMCG sector is expected to be volume-led, as very few have taken price increases. Although input costs have risen, players haven't passed all of them on. But this may not impact margins yet because of cost cuts.

The information technology (IT) sector is expected to see 5%-7% topline growth; commentary on near-term prospects is expected to be bullish; and rupee appreciation will hurt margins.

In metals, domestic steel demand and pricing was sluggish and only picked up towards December. "The shutdown of Ispat Industries in November helped in a supply-side correction. Improved price sentiment globally helped in recovery of prices in the domestic market." Margins may be under pressure due to higher iron ore prices. Zinc and aluminium prices have been strong and may reflect in earnings.

Inventory gain is seen for oil & gas companies, as crude gained $10 per barrel this quarter. It also expects strong GRMs (gross refining margins), led by naphtha cracks. Polyester margins were strong but polymer margins were weak. Despite a number of new launches, real-estate sales momentum could have been impacted due to sharp rise in prices and higher interest rates, says the brokerage.

In telecom, MOSL expects a revival of revenue and operating profit growth after a sluggish September quarter, "driven by a seasonal volume uptick and relatively stable pricing environment." For utilities, imported coal prices were higher and merchant prices continued to be lower.

(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security. Some of the opinions expressed in this article are the author's own and may not necessarily represent those of Moneylife.)


Tata Nano: Khushiyon ki chaabi? Hmmm

It’s a warm, emotional campaign that tugs at the heartstrings. But, my ‘positioning’ concerns for the car remain

I quite like the earthiness and joie de vivre of the Tata Nano commercial. In fact, this treatment one expected for the brand, so that’s cool.

But before I discuss the creative, a strategic point on Nano: It’s NOT a one-lakh rupee car as we all know, for even the most basic model is priced much more than that for on-road. But by repeatedly announcing that it costs just a lakh, the Tatas have positioned it as the broke bugger’s car, so there’s zero status associated with the brand. And status is paramount in this category, across all segments. I mean, what’s the point in buying a car if the peers perceive you as a poor man? May as well invest in a jazzy bike, and not worry about parking blues. This perhaps explains Nano’s sluggish sales. In short, the Nano is stuck in the price/image conundrum, and it’s difficult to see how they will work their way out of this self-created chakravyuh.

However, the ad itself is nicely done. It features a little, small-town girl excitedly awaiting delivery of the family’s first car, the Nano. And she goes ballistic when she spots it arriving. The Nano is a big hit in her mohalla, as all the other residents eye it curiously, jealously. Along the way we notice the car negotiating a rough terrain. A passerby admires the size. So the functional cues are also taken care of. Finally, the little girl, worried about the neighbour’s ‘buri nazar’,  applies a black tikka on the Nano—warm, emotional treatment that tugs at the heartstrings. The setting and target audiences are bang on too. So, no issues on the creative. But it’s wishful thinking, really.

Because like I said, my ‘positioning’ concerns for the car remain. To be honest, I actually want to buy the Nano because I adore small cars. Not just for the mileage, but because of Mumbai’s pathetic driving conditions where your car takes a hit now and then. And it makes sense to invest in a cheap car as repairs don’t make a serious dent in your pocket. I live close to a Tata showroom, and I often stop by to stare longingly at the little car, but just don’t have the heart to make a booking. Because I am paranoid that my pals/peers will snigger, ‘Saala Thakraney ekdum bhikhari ho gayaa!’ And mind you, this would be the case even if I lived in Ajmer’s Babu Mohalla.

Yes, the Tatas will find a way to stop the odd Nano from catching fire. But I have no idea how they will deal with the marketing inferno.



Ajit Misquitta

6 years ago

The use of swear words must be deleted before posting as the same may be read by many people like me who understand the roots of these words which unfortunately are not considered polite in a public forum.
But coming to the gist of the matter it is very clear that the main reason the Nano has not taken off is that the price factor on which the car was positioned is totally off center and can fool no one. The tatas have really fouled up a great opportunity. The only way that it seems they can salvage the show is to have some way where a family of four will be able to put together something in the region of 1500 to 1800 a month in installments (same as what is for a bike) and then look at the sales skyrocket.

Dr KS Rao

6 years ago

Yes, there is a fear among buyers that they will be dubbed as poor. Secondly, one lakh is not a big sum for anyone these days. My request to Tatas is to change the design a little in the front and hike the price. When I test-drove the car from their Khairatabad Showroom to my flat, my wife, who saw the car from the flat above, instantly disapproved it, because it "looks like a computer mouse." All its other features are pleasing, no doubt.


Hemant Bhatia

In Reply to Dr KS Rao 6 years ago

Wow,what an observation,in that case one should not look below BMW/MERC/ show off the RICHNESS :)

girish prasad

6 years ago

some thing is fishy in this all episode.
nano will be succesfull but it well take time justice to dream work of Sir tata can be delayed but can not be denied.
(this is from a four seater scooter driver)


6 years ago

Some people have an Inferiority Complex, and would like to act as a 'superior' millionaire although it is a highly unlikely prospect. Example is the guy who thinks that he will be considered a poor man if he buys a nano car.'Build up your self-respect and your self-confidence' is the only advice that I can give such people..



In Reply to MKM 6 years ago

cars ceased to be a status symbol long back. i dont think its a question of superior or inferior, the product in its present form is sub standard. in any case , figures do the talking. not many want to buy the nano it seems. wanted to buy the nano during its launch just because of what it meant for the auto industry. but didnt get drawn into the pre launch hype as wanted to drive it before as the boot not opening was clearly a design flaw. once i drove the car of a friend who applied for two and got two , i felt im driving some two wheeler or auto! my friend didnt even bother to take delivery of the second nano . he asked the dealer to sell it off!he is trying to sell the the other one too! have given my views on how i personally think demand for the car can be revived.


In Reply to citizenindia 6 years ago

I know several people who own the Nano as their second or third car. It has its advantages and is suitable as first /only car too.

Hemant Bhatia

In Reply to MKM 6 years ago

Well said:)


In Reply to Hemant Bhatia 6 years ago

Thank You.


6 years ago

the car looks cute. i think the car would have done well with better engine options and the boot lid opening. as rightly pointed out, the car is nowhere near one lac and yet people carry the stigma around when one drives this car. i would have still not had issues had the car been given a more refined engine. the alti is not much far away in terms of price. sombeody who makes full down payment can spend that extra buck i guess for an alto. and for someone who is financing, the alto is well within the reach. tata's selling idea hasnt worked. and precious time has been lost. personally, i think tata deserves a this given the way he behaved in bengal. for a few acres and friendship with buddha, he got drawn in a political battle in one of the most fertile areas in bengal. and almost in a confrontationist mood he went to gujarat to embarass mamta.all for the 35 year old left, which drove industry out of bengal . if he were genuine, he wouldnt have spoken the way he did in the press conference he called. inspite of the superb design, the nano got the drubbing. the only thing i think that can save its fortune is a diesel option and higher variants.

Chetan Bordawekar

6 years ago

I endorse the views expressed by the author. The main reason behind lower sales of Nano, is its marketing strategy. In fact When I took test drive of Nano at Wasan Motors Chembur, the Sales Executive, instead of explaining features, was actually telling me How Nano's steering is not responsive, How it is difficult to take U-turn, How engine makes noise like that of auto-rickshaw. So if person, selling the car, points out car's minus point then How one can expect upward movement of Nano sale?

Secondly, I don't agree with one argument on poor man's car. As everyone know the cocept story of Sir Ratan Tata, to manufacture such car that one he saw a family of 4 on scooter then idea came to his mind & all. So Tata Motors' end consumer should be the one who use bike/ scooter. They also should consider on How to replace auto-rickshaws with Nanos. This would definitely boost sale of Nanos.


Dr KS Rao

In Reply to Chetan Bordawekar 6 years ago

This is an excellent idea. Our autorickshaws, which are all rotten, should be replaced by Nanos. So, Tatas should direct their marketing to auto owners.
There is nothing wrong in Tata relocating his factory in Gujarat, because Mamata emphatically (and cruelly) negated his proposal both in Hindi (Na) and English (No)!

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