Sensex, Nifty continue to head higher: Wednesday closing report

Only a close below 6,270 on the Nifty tomorrow would mean a reversal of the trend

Although the Indian stock market opened Wednesday in the positive, it went into the red two hours later. After trading in the red for about an hour the benchmark made a gradual recovery and closed almost at the level at which it had opened for the day.


The BSE 30-share Sensex opened at 21,280 and moved in the range of 21,176 and 21,333 and closed at 21,277 (up 67 points or 0.32%) while the NSE Nifty opened at 6,328 and moved between 6,288 and 6,336 and closed at 6,329 (up 31 points or 0.49%). The NSE recorded a higher volume of 62.50 crore shares.


The Election Commission has announced the dates for 2014 Lok Sabha elections. The polls will be held between 7 April 2014 and 12 May 2014 on nine days.


Private sector output across India rose for the first time in eight months during February. The seasonally adjusted HSBC India Composite Output Index posted 50.3 in February 2014, higher than 49.6 in January 2014, indicating a fractional rate of expansion. Adjusted for seasonal influences, the headline HSBC Services Business Activity Index rose from 48.3 in the previous month to 48.8 in February. This was consistent with a slight rate of contraction, and one that was the slowest in the current eight-month period of reduction, Markit Economics said. Sector data indicated that four of the six monitored categories recorded falling business activity, with the fastest decrease noted in Financial Intermediation.


India's exports will not be able to achieve the target of $325 billion in the current fiscal and will fall short by about $10 billion, Federation of Indian Exports Organisation (FIEO) said. The country's merchandise exports would touch $312-315 billion by the end of this fiscal, ending March 31. Finance Minister P Chidambaram in the interim budget speech had said that India's exports are foreseen to grow by 6.3% to $326 billion during the current fiscal.  "The government should not fix annual targets for exports. We should fix a target for five years and work accordingly," FIEO President Rafeeq Ahmed says.


State-run banks' bad loans are anticipated to be slightly higher by March-end from a year earlier, Finance Minister P Chidambaram said on Wednesday after reviewing their quarterly performance. He added that banks recovered bad loans worth Rs18,933 crore during April to December 2013.


US indices closed sharply higher on Tuesday. The US economy will grow this year at its fastest pace since 2005, helping reduce the annual average unemployment rate for a fourth straight year even as market borrowing costs rise, the Obama administration predicted. Gross domestic product will expand 3.1% in 2014 after rising 1.9% last year, the administration said in forecasts accompanying its 2015 budget plan released in Washington. The jobless rate will average 6.9% this year, compared with 7.4% last year, and average 6.4% in 2015, according to estimates based on information as of mid-November.


Except for Shanghai Composite (down 0.89%) and Hang Seng (down 0.34%) all the other Asian indices closed in the green. Jakarta Composite (1.26%) was the top gainer.


The HSBC China services Purchasing Managers' Index rose to 51 in February from 50.7 in January, HSBC Holdings PLC said on Wednesday.


European indices were trading in the red while US Futures were trading marginally in the green.


UK services expanded for a 14th month in February as an index of employment rose and confidence increased to the highest level since September 2009.


A Purchasing Managers’ Index was 58.2 compared with 58.3 in January. Manufacturing and construction both grew in February and Markit said today that those reports, combined with today’s services reading, indicate the economy is expanding at a pace of about 0.7% in the first quarter. In the Euro area, services output expanded faster than initially estimated in February, as Germany boosted growth to the strongest in almost three years. Markit’s index for the region rose to 52.6, compared with a provisional reading of 51.7. The gauge was 51.6 in January. A composite index of manufacturing and services increased to 53.3.


Does the election expenses limit have any meaning?

The election commission has upped the expense limit for Lok Sabha elections from Rs40 lakh to Rs70 lakh per candidate in big states. But 129 or 30% out of 437 MPs spent Rs14.62 lakh or 59% of the expense limit during the last general election

The Indian government has cleared a proposal by Election Commission to increase the expenditure limit for Lok Sabha elections to Rs70 lakh from Rs40 lakh per candidate in big states. But does it have anything to do with the reality? During the last general election, about 129 members of Parliament (MPs) declared election expenses of less than 50% of expense limit. This raises a question on the need to increase expenditure limit without taking into consideration the blatant misuse of black money in elections.


According to an analysis by Association for Democratic Reforms (ADR) and National Election Watch (NEW), out of 437 MPs who submitted their election expenditure statements, on an average MPs spent of Rs14.62 lakh or about 59% of the average expense limit in 2009.


Professor Trilochan Sastry, founder of ADR, said, “Raising the ceiling does not address the real issues. We need more transparency in the funding and source of funding, along with penalties for not being transparent. Everyone knows about the huge amount of black money in elections. We need to curb this blatant misuse of black money in elections. In summary, none of the major concerns are addressed by the Cabinet decision to raise the ceiling.”


The government has raised the expenditure limit to Rs70 lakh for each Lok Sabha constituency in bigger states like Maharashtra, Madhya Pradesh, Uttar Pradesh, West Bengal and Karnataka, and to Rs54 lakh from Rs22 lakh in smaller states like Goa on par with other hilly and north eastern states. The government also cleared the proposal to raise expenditure limits for assembly elections, with a maximum of Rs28 lakh and a minimum of Rs20 lakh in North Eastern and hill states.


The election expenditure statements submitted by MPs include details of expenses on public meeting and processions, campaigning through electronic and print media, expense on campaign workers, expenses on vehicles used and expense on campaign materials.


1. Less than 50% of the Limit: Candidates have constantly claimed that the election expenditure limit set is very low. However, based on the election expense declarations of 437 MPs analysed from Lok Sabha, 2009 to the Election Commission, 129 MPs (30%) have declared election expenses of less than 50% of the expense limit in their constituency.


2. Average Election Expenses: Based on the election expense declarations of 437 MPs from Lok Sabha 2009 to the ECI, the average amount of money spent by them in the elections is only about Rs14.62 lakh, which is 59% of the expense limit.


3. Election Expenses funded by Political Parties: 317 MPs (73%) declared that in the expenditure incurred by them, none of it was funded by the political party which fielded him/her. 120 MPs (27%) declared that a part of their election expenditure was funded by the political party and out of these, 15 MPs (3%) declared that all of their expenditure was funded by the political party which fielded him/her.


4. Party-wise Election Expenses funded by Political Parties:  Among the MPs who were funded (partially or fully) by political parties, 35 MPs from BJP had declared an average funding from the political party of Rs5.08 lakh (36% of their average election expenditure). 30 MPs from INC have declared an average funding from the political party of Rs5.61 lakh (36% of their average election expenditure).


5. Expenditure more than the Expense Limit: Two MPs declared election expenditure more than the prescribed expense limit. Premdas of SP from Etawah Constituency, Uttar Pradesh declared an election expenditure of Rs57.39 lakh (230% of the expense limit) and Akhilesh Yadav of SP from Kannauj Constituency with expenses of Rs26.73 lakhs (107% of the expense limit).


6. State-wise Average Election Expenses:  The highest average election expenditure declared in a state is Tripura (two Lok Sabha constituencies analysed) with an average election expenditure of Rs18.79 lakh (75% of the expense limit) followed by Jharkhand (Seven Lok Sabha constituencies analysed) with an average election expenditure of Rs18.73 lakh (75% of expense limit), Uttarakhand (five Lok Sabha constituencies analysed) with an average election expenditure of Rs18.49 lakh (74% of expense limit) and Assam (14 Lok Sabha constituencies analysed) with an average election expenditure of Rs17.77 lakh (71% of expense limit).


7. Party-wise Average Election Expenses: The party wise average election expenses shows that the average spending for 161 MPs of Indian National Congress (INC) is Rs14.38 lakh (59% of the average expense limit), for 91 MPs of BJP is Rs14.43 lakh (59% of the average expense limit), for 21 MPs of SP is Rs19.48 lakh (78% of the average expense limit) and for 19 MPs of BSP is Rs14.72 lakh (59% of the average expense limit).


8. Top 3 MPs with highest Election Expenses: The maximum expense of about Rs57.39 lakh (230% of the expense limit) has been declared by Premdas of SP from Etawah constituency, Uttar Pradesh followed by Akhilesh Yadav of SP from Kannauj constituency, with an expense of Rs26.73 lakh (or 107% of the expense limit) and Yashbanta Narayan Singh Laguri of BJD from Keonjhar constituency, Orissa with an expense of Rs24.97 lakh (or 100% of the expense limit)


9. MPs with lowest Election Expenses: The minimum expense of about Rs1.31 lakhs (or 5% of the expense limit) has been declared by CM Chang of NPF from Nagaland constituency. He is followed by Ravneet Singh of INC from Anandpur Sahib constituency, Punjab with election expenses of about Rs1.75 lakh (or 7% of the expense limit) and Muhammed Hamdulla Sayeed AB of INC from Lakshwadeep constituency with expenses of Rs2.02 lakh (or 20% of the expense limit).


10. Expense on Public Meetings and Processions: Out of the 437 MPs analysed, 33 (8%) MPs have declared that they have not spent ANY amount on public meetings, processions etc.


11. Expense on Campaigning through electronic/print media: 123 (28%) MPs have declared that they have not spent ANY amount on campaigning through electronic/print media.


12. Expense on Campaign Workers: 418 (96%) MPs have declared that they have not spent ANY amount on campaign workers.


13. Expense on Vehicles used: 22 (5%) MPs have declared that they have not spent ANY amount on vehicles Used.


14. Expense on Campaign Materials and Erection of gates, arches, banners etc.: 21 (5%) MPs have declared that they have not spent ANY amount on Campaign Materials and erection of gates, arches, banners etc.



MG Warrier

3 years ago

Ceilings on election expenditure may not make sense, so long as the monitoring mechanism is weak. Still, like the Railway Timetable in olden days helped to know how much late trains were running, the aam aadmi gets a feel of the relationship between money and ‘winnability’.
Last Parliament Election was during VISHU festival season in Kerala. We received a glossy VISHU GREETINGS from a candidate, with a humble request for votes. Small print on the ‘document’ read: “Printed and circulated by XYZ. 25,000 copies” XYZ was not the candidate. Someone explained, the small print helps in getting the expenditure on printing cost excluded from election expenditure!

M G Warrier


3 years ago

But 129 or 30% out of 437 MPs spent Rs14.62 lakh or 59% of the expense limit

129 members of Parliament (MPs) spent less than 50% of expense limit

please make up your mind - which % is correct?


3 years ago

Election Expendiditure is most confusing.Usually candidates spend in Crores ,some mostly Rs.10 Crores for MP.If Party's Expenditure Election Anounced Date is taken into Account and Cross verified with Candidates Declarations,Then Realistic Picture can Come Out.

Gopalakrishnan T V

3 years ago

The parties and leaders have enough of black money and what is prescribed as ceiling would be adequate enough to satisfy the election Commission. The very fact that the date for withdrawal of Rs 500 and Rs 1000 notes printed prior to 2005 has been extended up to January 2015 is only to facilitate the black money holders and politicians to take care of the election related expenditures comfortably.



In Reply to Gopalakrishnan T V 3 years ago

As rightly said by Gopalakrishnan TV even for an small corporation ward member election the expenditure ranges from one crore to five crore this for an ward taken for an MlA and that for Mp election its all an eye wash of rs 70 lakhs as rightly said by former Election commission the money power and muscle power are major bottleneck in geuniness of indian election which cannot be curbed as long as the giver is there would be reciver inorder to be loyal to their receiver the vote would casted as such this 70 lakhs and all the restrictions is just like how the indian law is framed and how is it broken is similar case we expect each Mp would be spending not less than Rs 100 crores to Rs 500 crores that amount of black money they have earned this applicable to all party as the country is having many lobbies in all the lobbies all the mp are bribed whether they might be BJP or congress or samjwadi any party they are heftily bribed that is reason when the Govt signed our Nuclear treaty with US when all party was shouting and once they shut by paying money even the vote of cash account where one of the channel brought the live shows but that channel director and members where threatened hence that was fizzled out that is pathetic state of our country after the advent of Shri MamMohan Singh and Sonia as Prime Minister the corruption have found the root in all walks of the life so its very diffcult as such these restriction in the good intention the EC had framed neither nor even the GOD from Heaven cannot save india from giving and black money would syphoned out and it would be poured as water so its is name sake

Why investors are crying foul about Maruti's deal with Suzuki

Investors feel that handing over a critical and highly profitable project to a 100% subsidiary of Suzuki instead of Maruti Suzuki is neither fair nor in the interest of carmaker and its about 44% minority shareholders

Several investors of Maruti Suzuki India Ltd (MSIL) have raised objections over the carmaker's proposal to enter into contractual arrangements for expansion with a 100% subsidiary of Suzuki Motor Corp (SMC). SMC is majority shareholder in MSIL with 56.2% stake. This is the second time in past 10 years SMC is trying to establish its own manufacturing plant in India.


The shareholders said they were concerned that the contract for the plant in Gujarat meant the Japanese carmaker rather than Maruti would reap the benefits of rising domestic sales, at a time when India is tipped to become the world's third largest auto market by 2020. Minority shareholders hold 43.79% stake in Maruti Suzuki.


Seven fund houses, including ICICI Prudential MF, Reliance MF and UTI MF, which hold 3.93% stake in Maruti Suzuki are planning to approach market regulator Securities and Exchange Board of India (SEBI) after the car maker failed to address their concerns.


Some of the prominent shareholders holding more than 1% of the shares as of 31 December 2013 are:


Mutual funds are opposing Suzuki’s move to make the proposed Gujarat unit its wholly-owned subsidiary as the deal would transform MSIL into a distribution company from a manufacturing one.


While SEBI is yet to hear officially from the fund houses, it is already looking into the matter on suo motu basis.


According to the new corporate governance norms, this deal can be construed as related party transaction requiring approval from public shareholders, but these new regulations are yet to come into force and would be effective from 1st October.


Earlier, in a press release, the carmaker had said, "The price of the vehicles to MSIL would include cost of production by the 100% subsidiary and adequate cash to cover incremental capital expenditure requirements. The return on this investment for SMC would be realised only through the growth and expansion of MSIL’s business. The subsidiary will always remain a 100% subsidiary of SMC."


According to the investors, the initial installed capacity of the Gujarat Suzuki plant is for 250,000 cars per annum at an investment of about Rs3,000 crore. The final capacity of this plant would be 1.5 million (15 lakh) units. "Assuming a 15% CAGR for the Indian car industry, particularly give the low base of past few years, and a constant market share for MSIL, implies that the Gujarat plant will have to reach the 1.5 million cars per annum output by FY2021 itself," the investors said.


Number of vehicles (in million)




FY 14

FY 15

FY 16

FY 17

FY 18

FY 19

FY 20

FY 21

FY 22

FY 23

FY 24

FY 25

Total MSIL+Guj













Haryana (MSIL)

Cap full











Gujarat Suzuki












Outsourced from GSL (%)













Source: Letter from investors to MSIL


Investors feel that the expansion of Gujarat Suzuki plant to 1.5 million by FY2021 implies an incremental capex requirement of additional Rs12,000 crore (assuming 20% lower capex compared with the first phase on a per car basis).

"If the cash flows of the Gujarat plant have to fund the incremental capex (as mentioned in the MSIL release), this implies that the initial investment of Rs3,000 crore by Suzuki in phase I will be valued at Rs15,000 over the next six years (FY15-FY21) at cost itself. This implies an internal rate of return (IRR) of nearly 30%."


"Thus, while Suzuki is not taking cash or dividends, and the cash flows are being utilised to increase capacity, the IRR on Suzuki's phase I investment is very high and much higher than the cost of capital of both MSIL and Suzuki itself," the investors said.


Investors of MSIL are also worried about fresh investment requirement of the Gujarat Suzuki plant. They said, "It needs to be noted that the capex of Rs15,000 crore for 1.5 million cars is only for assembly. Fresh investment may be needed in engine and transmission capacity once the surplus capacity in Maruti's existing facility in Haryana is exhausted, which can further potentially increase the IRR."


"Moving this critical and highly profitable project into a 100% subsidiary of Suzuki instead of MSIL is neither fair not in the interest of carmaker or its shareholders and will lead to significant erosion of value for MSIL shareholders," the investors said.


Similarly, Bengaluru-based InGovern Research Services also had advised shareholders of Maruti Suzuki, to vote against the country’s largest carmaker's proposal to enter into contractual arrangements for expansion with a 100% subsidiary of Suzuki, the dominant shareholder in the company.


According to InGovern, this is not a simple contract manufacturing arrangement, as the dominant shareholder of MSIL is 'the contract manufacturer' and can dictate the terms of any contractual arrangement.


According to the proxy voting advisory firm, the positives stated by Maruti Suzuki that the company benefits from the interest expense of not investing is not tenable as the carmaker is a net cash flow unit and incremental cash generated would be better utilised for capital investment for this expansion.


"There is no compelling business logic for such an arrangement when MSIL has the necessary capital raising ability to make investments. It looks like the SMC subsidiary will enjoy the benefits of no business risk with assured vehicle offtake by MSIL and assured return on investments, while MSIL will bear the business risk of cyclical vehicle sales, competitive pressures, pricing and cost pressures. Inventory levels, car pricing and discounts, cost increases, dealer network management, post-sale servicing, brand management  would all be risks  that will continue to be  borne by MSIL, while the 100% SMC subsidiary enjoys an assured vehicular offtake at pre-determined prices," InGovern said in its advisory.


Earlier, in 2004, SMC announced that it would set up independent manufacturing plants in India for diesel engines and two wheelers. At that time, the union government took a tough stand on the proposal of SMC to pump in Rs1,000 crore in India to set up a new company for car assembly with a production capacity of 250,000 units. The government had said that it would not allow any competition from the Japanese carmaker which would hurt Indian shareholders of Maruti. This forced SMC to call for a truce. This resulted in the Indian government getting 70% stake in the new venture with SMS holding the rest.


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