SEBI warns investors regarding two Sahara group companies

Mumbai: Market regulator Securities and Exchange Board of India (SEBI) today warned investors that two Sahara Group companies have been raising funds without its approval and said it will not be able to redress any complaint in this regard, reports PTI.

The regulator, in a public notice, said investors of Sahara India Real Estate Corporation (SIRECL) and Sahara Housing Investment Corporation (SHICL) should take investment decision at their own risk.

"SEBI will not be able to provide redressal to any investor on any complaint in connection with these OFCDs (Optionally Fully Convertible Debentures)", the notice said, pointing out that the two companies have not sought regulatory approval from SEBI for raising funds.

The two Sahara group companies have been raising funds through OFCDs, which SEBI said "were not issued in compliance with the applicable SEBI regulations..."

Furthermore, the notice added, "the Red Herring Prospectus submitted to the RoC (Registrar of Companies) has not been vetted by SEBI with reference to compliance to SEBI regulations."

The public notice, it added, is being "issued to safeguard the interest of investors."

The regulator further said that it had been receiving complaints alleging that SIRECL and SHICL have been issuing OFCDs to the public for many months with varying face value and maturity period extending up to 15 years.

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Inflation, current account deficit to hit D-Street this year: Report

New Delhi: Wiping out hopes that the stock markets will scale new highs in 2011, a report said that the year will rather bring negative returns for the Indian equities, with a string of disappointing cues from the domestic arena, reports PTI.

"In all likelihood, 2011 will be a year of negative returns for Indian equities. Growth in capital formation is faltering, current account deficit is widening due to rising energy import dependence, inflationary pressures are building up and policy rates are set to further harden," a report by brokerage house IIFL said.

In the year gone by, the stock market's benchmark Sensex gave a modest return of over 17% and witnessed an all-time high closing on Diwali day.

However, in the current year, the equity markets will have to struggle with the current account deficit, which is running over 3% of the gross domestic product (GDP). The widening current account deficit will slow down the foreign capital flows which in turn will upset several macro economic variables, it said.

Besides, rising energy import dependence, coupled with the recent spike in energy prices, is also a concern for the domestic stock markets.

Also, inflationary pressures are likely to dictate the Reserve Bank of India's (RBI) monetary policy outlook in the first half (H1) of 2011.

"While headline wholesale price index (WPI) will decelerate year-on-year (YoY) till January this year due to the higher base, the medium-term outlook for inflation is already changing for the worse-and this will dictate RBI's monetary policy outlook," it said.

If the rupee comes under pressure owing to a slowdown in capital flows, it can potentially aggravate the inflationary outlook. It is now widely expected that policy rates will rise by 50 bps in the monetary policy review this month, the report noted.

It also feared that consensus growth estimates will see downgrades, and deterioration in the earnings mix will weigh down market valuations.

Meanwhile, on a brighter side the report showed optimism that software and pharma sectors remain strong and the growth environment is very favourable for them in this year.

Besides, the country's FY' 11 fiscal deficit will be at 5.1% of GDP, much lower than the budgeted 5.5%, it said. The bonanza from the third generation (3G) spectrum auctions, higher than budgeted tax collections will help more than offset higher government expenditure and higher oil subsidies this year.

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Capital control measures valuable for India, Brazil: IMF

Washington: The International Monetary Fund on Thursday said capital control measures could be valuable for countries like Brazil and India, facing excessive short-term capital inflows that threaten to damage their economies, reports PTI.

"Capital controls are a little bit in the eye of the beholder, but it is certainly a part of the toolkit," said IMF spokesperson Caroline Atkinson at a news briefing.

"Some capital control measures are focused on macro-prudential stability. Others focus on shifting the length of the maturity of inflows, as they are taxing short-term and encouraging long-term flows.

So these are all part of a range of measures that countries may consider," she said.

Ms Atkinson comments come even as India has maintained that the economy is resilient enough to absorb the current short-term foreign institutional investor (FII) inflows and, therefore, does not need capital controls at the moment.

Brazil has, however, threatened to take more measures to stem the rally in its currency-real.

The Latin American nation had imposed an upfront 2% tax on capital inflows in October 2009, paving way for countries like South Korea, Thailand who in 2010 adopted similar measures to safeguard their economy from excessive FII inflows.

Ms Atkinson said a number of emerging markets were facing substantial capital inflows at the moment, as their economies were recovering and growing rapidly.

"And these are good signs. It's a sign of strength and some of the inflows are structural and will be accommodated over time and help to promote investment and growth in those economies," she said.

"But when countries fear that they might be temporary, there's also a concern in some countries about what that might do to the macro economy," the IMF spokesperson said.

"There is fiscal contraction and macro-prudential controls to strengthen the banking system and intermediation of these flows can be important," Ms Atkinson said.

"What I am trying to suggest is, the range of measures that countries may take, some of which are focused on the way capital comes into the country and whether it should be taxed if it comes on a short-term basis, and if a bank gets capital it should have higher reserve requirements to pay back the capital when it needs to," she said.

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