Nifty may continue to move lower on Monday unless it manages to close above 5,925
The market pared its gains in late trade on selling pressure from rate-sensitive sectors, ending in the negative for the second day in a row. The Nifty may continue to move lower on Monday unless it manages to close above 5,925. The National Stock Exchange (NSE) reported a volume of 51.34 crore shares and advance-decline ratio of 591:798.
The market witnessed a flat opening on caution ahead of the release of the US jobs report, which is seen as a factor in determining the Federal Reserve’s action on the continuity of its stimulus programme. Markets in Asia were down in morning trade on a strengthening yen, which dampened the outlook for exporters from the region. Wall Street closed higher overnight as the dollar fell against major global currencies on speculations that the jobs data would be lacklustre, forcing the Fed to continue its growth boosting measures.
Meanwhile, the Nifty opened 21 points lower at 5,900 and the Sensex rose three points to resume trade at 19,522. Selling in metal, realty, banking and fast moving consumer goods shares saw the indices moving lower in early trade.
The benchmarks recovered from their lows on buying interest in IT, healthcare and oil & gas stocks. The gains enabled the market venture into the green in mid- morning trade. The benchmarks hit their highs in noon trade wherein the Nifty rose to 5,973 and the Sensex climbed to 19,712.
The market pared part of its gains and traded sideways in the remainder of the noon session amid volatile trade. The benchmarks slipped into negative terrain in the late session pressure from auto and banking sectors.
The selling pressure pushed the indices to their lows in the last half hour with the Nifty touching 5,871 and the Sensex falling to 19,398. The market settled near the lows and in the red for the second day in a row.
The Nifty closed 40 points (0.68%) down at 5,881 and the Sensex ended the day at 19,429, a loss of 90 points (0.46%).
In the broader market space, the BSE Mid-cap index declined 0.56% and the BSE Small-cap index fell 0.10%.
BSE IT (up 1.59%) and BSE TECk (up 0.72%) were the only gainers in the sectoral segment. The main losers were BSE Auto (down 1.39%); BSE Realty (down 0.36%); BSE Bankex (down 1.34%); BSE Power (down 0.32%) and BSE PSU (down 1.26%).
Out of the 30 stocks on the Sensex, eight settled higher. The top gainers were TCS (up 3.48%); Dr Reddy’s Laboratories (up 2.82%); Wipro (up 1.67%); Infosys (up 0.80%) and Tata Power (up 0.57%). The major losers were Bharti Airtel (down 2.40%); Mahindra & Mahindra (down 2.27%); NTPC (down 2.12%); Maruti Suzuki (down 2.04%) and Jindal Steel & Power (down 1.91%).
The top two A Group gainers on the BSE were—Mahindra & Mahindra Financial Services (up 4.07%) and TCS (up 3.48%).
The top two A Group losers on the BSE were—Adani Power (down 6.75%) and Jain Irrigation (down 4.97%).
The top two B Group gainers on the BSE were—Vikas Globalone (up 19.9%) and Cerebra Integrated Technologies (up 19.99%).
The top two B Group losers on the BSE were—Filatex Fashions (down 18.85%) and Pioneer Distilleries (down 16.42%).
Of the 50 stocks on the Nifty, 10 ended in the in the green. The main gainers were TCS (up 3.53%); Dr Reddy’s (up 2.68%); BPCL (up 1.45%); Lupin (up 1.02%) and Infosys (up .86%). The key losers were Jaiprakash Associates (down .30%); Axis Bank (down 3.25%); Bharti Airtel (down 2.69%); Bank of Baroda (down 2.61%) and Maruti Suzuki (down 2.36%).
Markets in Asia closed weak as the strengthening yen dragged the Nikkei lower. Other markets in the region also followed the Nikkei as the strengthening yen tapered the outlook for exporters.
The Shanghai Composite dropped 1.39%; the Hang Seng tanked 1.21%; the Jakarta Composite tumbled 2.725; the Nikkei 225 fell 0.21%; the Straits Times declined 0.28%; the Seoul Composite declined 1.80% and the Taiwan Weighted shed 0.01%. Bucking the trend, the KLSE Composite gained 0.34%.
At the time of writing, the key European indices were down between 0.16% and 0.50% and the US stock futures were trading lower.
Back home, foreign institutional investors were net sellers of equities amounting to Rs270.47 crore whereas domestic institutional investors were net buyers of shares totalling Rs298.08 crore.
Rating agency Standard & Poor’s (S&P) today cut its long-term credit rating on Core Education and Technologies Ltd’s (CORE) to ‘B’ from ‘B+’ with a negative outlook. S&P said, “We lowered the rating on CORE because we believed that the sharp fall in the company's equity prices could negatively affect its access to capital markets and bank funding.” The stock declined 4.63% to close at Rs38.10 on the NSE.
Multiplex chain operator PVR today said its board has approved the merger of Cinemax India and a wholly-owned subsidiary with the company. The board of directors of the company at its meeting held on 7 June 2013 approved in-principle the proposed amalgamation of Cinemax India, a Mumbai-based listed firm and Cine Hospitality Pvt Ltd, a wholly-owned subsidiary of the company, PVR said in a filing to BSE. PVR closed 3.52%) lower at Rs323.30 on the NSE.
Aban Offshore, the country’s largest offshore drilling contractor, has received a Rs1,050 crore-order from state-owned ONGC. The project is expected to commence during the fourth quarter of this financial year. Aban Offshore lost 0.32% to settle at Rs296 on the NSE.
Through his deals with his younger sibling, Mukesh Ambani is getting telecom infrastructure for RJio's 4G services at probably a fifth the rate of building his own network. Anil Ambani’s RCom on the other hand would be able to generate additional revenues from its infrastructure that can reduce debt of about Rs40,000 crore from its books
Mukesh Ambani-led Reliance Jio Infocomm (RJio) has signed one more deal with younger sibling Anil Ambani's debt-ridden Reliance Communications (RCom) for sharing telecom towers across the country. The aggregate value of the deal is over Rs12,000 crore and would help RCom to cut down its huge debt substantially.
As per the agreement, RJio would utilise up to 45,000 ground and rooftop based towers across RCom's nationwide network for accelerated rollout of its state-of-the-art 4G wireless broadband services, the company said in a release. These telecom towers carry RCom's CDMA and GSM network. While 75% of the towers are ground-based, the rest are rooftop based.
Today's agreement follows the inter-city optic fibre sharing agreement already signed in April 2013 as part of a comprehensive framework of business co-operation between RJio and RCom. This would result in RCom earning Rs1,200 crore over a period.
Both the deals, for sharing optical fibre network and the other for sharing telecom towers look like pure business deals. Well, at least on the paper. But more about it later.
The signing of agreement between RJio and RCom for telecom towers and optical fibre network (earlier in April) is beneficial for both the companies. Especially, RJio’s parent Reliance Industries (RIL) is a cash rich conglomerate (as of March 2013, it had cash balance of around Rs84,100 crore), while RCom is striving hard to reduce the debt level from its books. RCom had maintained its stance of selling stake in its tower assets, which might help in deleveraging the balance sheet and reducing debt. According to reports, RCom has a debt of about Rs40,000 crore as of March 2013.
Even during the quarter to end-March, RCom would have reported a loss, but for one time write back of provisions, which led to Rs550 crore extra other incomes. Its gross debt in rupee terms has increased Rs40,145 crore in FY13 from Rs36,917 crore in FY12.
In March 2013, RCom made yet another attempt to reduce its debt. In a regulatory filing, RCom, had said it was in talks with Bahrain Telecommunications Co (Batelco) to sell stake in Reliance Globalcom, its enterprise business unit. However, nothing has been finalised as yet.
According to a research report from ICICIDirect, RCom may strike a deal with Samena Capital for stake sale in Reliance Globalcomm. “For any meaningful reduction in debt, the company would have to sell a majority stake in its subsidiary. Though this would help prune down debt by a substantial amount, RCom’s EBITDA would be wiped off by a considerable amount as Reliance Globalcomm contributed 33.4% and 31.8% to consolidated topline and EBITDA, respectively,” the brokerage added.
Earlier on 9 March 2011, the Anil Ambani group company signed Rs8,700 crore loan facility with China Development Bank (CDB) for refinancing of 3G spectrum fees. The facility included Rs6,000 crore ($1.33 billion) for refinancing 3G spectrum fee payments by RCom and Rs2,700 crore ($600 million) for equipment imports from Chinese vendors.
In 2012, RCom had also withdrawn its $1-billion initial public offering (IPO) plans for its submarine cable unit Flag Telecom, citing unfavourable market conditions.
Coming back to the renewed love between the two Ambani companies, this is logical for both RIL and RCom to execute infrastructure sharing deals, provided the pricing and utilization benefits both.
While RJio would benefit from spending money and time for building infrastructure for its 4G network, RCom would be able to generate additional revenues from its existing telecom infrastructure.
RJio would be able to save cost of building optical fiber network (the cost to lay only fiber is from Rs4 lakh to Rs5.5 lakh per km, excluding the cost for rights of way that may go up to Rs10 crore in metros) and telecom towers (estimated to be between Rs1.3 crore to Rs3 crore each). Moreover, backhaul fibre would be needed to link the towers to the network, which could again be costly and time-consuming.
Telecom has always been a sector close to the heart of the RIL’s chairman and managing director, Mukesh Ambani. However, he had to give up Reliance Infocomm (which later became RCom) to Anil Ambani in 2005 when the Reliance empire was split.
Later in 2010, Mukesh Ambani-led RIL re-entered the telecom arena with a bang, announcing the acquisition of Infotel Broadband Services Pvt Ltd, which had emerged as the sole winner of pan-India broadband spectrum, for Rs4,800 crore.
Soon after signing the deal for sharing optical fibre network, Mukesh Ambani-led RIL parked more than Rs800 crore in various mutual fund schemes of younger sibling Anil-led Reliance Group. RIL’s investment in Reliance MF schemes, which has been made over a period of eight months, came as a clear departure of the oil-to-retail conglomerate’s earlier stance of parking surplus funds into almost all the mutual funds, expect on those run by the Anil Ambani-led group.
At the end FY2012, RIL had invested over Rs8,700 crore in various mutual fund schemes, including fixed maturity plans (FMPs), but they did not include any scheme of Reliance MF. In contrast, RIL has always figured prominently in the stock portfolios of various schemes of Reliance Mutual Fund.
At least 13 schemes of Reliance Mutual Fund had RIL as one of the biggest stock in their respective portfolios as on 31 March 2012 and together these funds held RIL shares worth well above Rs500 crore.
While the deals are being signed, big plans are being announced, there yet is no date being announced for the impending launch of RJio’s 4G services for reasons best known to Mukesh Ambani.
The capital market regulator has spent crores of rupees, twice, over sophisticated real time market surveillance systems to track stock price manipulation. Yet, it says it has no statistics on the surveillance!
In a shocking disclosure, the Securities Exchange Board of India (SEBI) says that it does not have information relating to its market surveillance system! This was in response to an RTI filed by Moneylife. Moneylife had filed an RTI on 9 April 2013, requesting information on SEBI’s surveillance statistics and had asked SEBI how many suspicious cases its sophisticated Integrated Market Surveillance System (IMSS) and Data Warehousing Business Intelligence System (DWBIS) had detected till 31 March 2013. Our questions were simple:
Well, it seems the regulator did not have such information with it! SEBI vide its reply no CPIO/AKS/AJ/325-2013/10853, stated, “It is informed that the information sought by you is not available with the concerned department of SEBI.” How is this even possible? If the surveillance department does not have such information, then who has it? Who is really in charge of monitoring the data captured by the surveillance department?
SEBI has spent over a whopping Rs50 crore in the so called “state-of-the-art” surveillance systems: IMSS and the more modern DWBIS. Earlier, SEBI had touted that the DWBIS project will “exploit the power of modern technology in terms of computation and speed of data analysis” and “host pattern recognition algorithms” to crack insider trading. Despite all this hype and talk and the enormous amount of money spent, stock manipulation still continues, right under SEBI’s nose.
Even now, Moneylife routinely comes across companies, mostly with poor fundamentals and past track record of transgressions, whose share prices brazenly manipulated, in no time, putting minority shareholders at a disadvantage. For instance, Moneylife wrote that Nucent Estates (Unquoted section of Moneylife issue dated 16 May 2013) went up a whopping 742% from just Rs1.28 to Rs10.78 in just one year. The company had earlier failed to comply with Bombay Stock Exchange (BSE) corporate governance norms. It even changed its name, a common tactic adopted by companies to disguise their past transgressions. Similarly, Kelvin Fincap (Moneylife issue dated 2 May 2013) rose 549% within a year after BSE had revoked its suspension! There are numerous cases which Moneylife has written about. Do check out the Unquoted section of the magazine and website (http://www.moneylife.in/?cx=012932029967637413115%3Aroup7yt0ras&cof=FORID%3A9&ie=UTF-8&q=Unquoted&imageField.x=-1150&imageField.y=-221). You will be alarmed and surprised at the ease of how company share prices can be manipulated. Moneylife even did a cover story on this (which can be accessed here: Stock Manipulation). Even stock exchanges such as National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) do little. So much for SEBI spending huge amount of tax payers’ money on this surveillance system!
Moneylife had found out that 48 staff members are posted in the Integrated Surveillance Department (ISD) of SEBI, which houses the IMSS and DWBIS system, as of 31 March 2013. The IMSS contract value was found out to be Rs20.55 crore, out of which Rs6.52 crore went towards “capital expenditure” between 2007 and 2010. HCL Technologies was the vendor.
Then SEBI adopted another system known as DWBIS, which came into existence from 2010 onwards, and the contract value was found to be Rs34.38 crore and Tata Consultancy Service (TCS) is the new vendor. Out of this amount, over Rs11 crore has gone towards “capital expenditure” in the last two years alone. This is collectively over Rs50 crore of taxpayers’ money.
This is a lot of taxpayers’ money and nobody knows if SEBI is truly looking at cases triggered by the systems, if at all, let alone punishing offenders and compensating minority shareholders. Nobody knows how effective SEBI’s surveillance system is either. It is even more shocking that the surveillance department of SEBI do not have the information with them.
Moneylife has filed a first appeal before the First Appellate Authority at SEBI.