Sensex, Nifty may attempt to move higher: Thursday closing report
If the Nifty manages to close above 5,790, it will be the first sign that the recent downtrend may be ending
After three consecutive days of weak opening on the Sensex, the index opened 98 points higher at 19,443 and soon hit a high at 19,569. The Nifty too opened 35 points higher at 5777 and hit a higher high of 5,809 in the early morning session. The NSE saw a huge volume of 76.82 crore shares.
However the indices couldn’t sustain the gains and soon slipped in the red, as panic about the operations of National Spot Exchange and Financial Technologies hit the market. The Sensex hit a low of 19,170 while the Nifty hit a low of 5,677, almost exactly the same level as yesterday. After a volatile session where the domestic indices moved on either side of yesterday’s close, Sensex closed at 19,317 (down 29 points, 0.15%) while the Nifty closed at 5,728 (down 14 points, 0.25%). The broader indices too settled lower. The BSE Mid-cap index fell 1.67% and the BSE Small-cap index fell 1.20%. Except for BSE Bankex (up 1.20%) all the other sectoral indices fell. The major losers were BSE Realty (down 3.98%); BSE PSU (down 2.76%); BSE Oil & Gas (down 2.60%); BSE Metal (down 1.84%) and BSE Auto (down 1.51%).
Out of the 30 stocks on the Sensex, 12 stocks settled higher. The main gainers were HDFC Bank (up 3.67%); HUL (up 3.37%); HDFC (up 2.18%); Gail (up 1.14%) and Jindal Steel (up 1%). The main losers were BHEL (down 4.80%); Mahindra & Mahindra (down 4.42%); Coal India (down 3.94%); ONGC (down 3.64%) and Hindalco Inds (down 3%).
The top two A Group gainers on the BSE were— Adani Ports (up 12.20%) and TV 18 Broadcast (up 8.29%).
The top two A Group losers on the BSE were— Financial Technologies (down 64.59%) and IRB Infrastructure (down 25.52%).
The top two B Group gainers on the BSE were— Baba Arts (up 20%) and Kalyani Investment (up 19.98%).
The top two B Group losers on the BSE were— Rainbow Denim (down 19.91%) and Virinchi Technologies (down 19.89%).
Of the 50 stocks on the Nifty, 19 ended in the in the green. The major gainers were Axis Bank (up 5.62%); HDFC Bank (up 3.85%); HUL (up 3.19%); Kotak Mahindra Bank (up 2.44%) and Power Grid (up 2.23%). The main losers were 
Jaiprakash Associates (down 9.82%); Bank of Baroda (down 8.61%); DLF (down 8.51%);  Ranbaxy (down 8.29%) and BPCL (down 6.19%).
Asian indices mostly ended in the green. Nikkei 225 gained the most, 2.47% while Taiwan Weighted was the only loser, lost 0.64%.
A privately compiled gauge of China's manufacturing activity sank to an 11-month low, the index's publishers HSBC and Markit said Thursday. The HSBC manufacturing Purchasing Managers' Index fell to 47.7, down from June's final reading 48.2. The result contrasted with an official version of the manufacturing PMI, which unexpectedly rose to 50.3 from June's 50.1. HSBC's PMI covers a smaller number of firms and focuses on smaller manufacturers, while the official PMI includes more of the large state-run firms.
Chinese leaders pledged at a Politburo meeting this week to maintain steady second-half growth while pressing on with economic reforms.
The rupee recovered and briefly turned positive after the RBI clarified that foreign investors who have issued participatory note can only hedge their currency risk if they receive a specific mandate from their customer. This move is likely to want to further curb speculation, making sure all P-note related derivative trades are done for genuine customer needs. 
Tech Mahindra’s Brazilian subsidiary has won two multi-million dollar contracts to deliver enterprise solutions for oil & gas and banking verticals. The deals have been signed by its subsidiary Complex IT with a bank and the Schahin Group.  Tech Mahindra rose 0.62% to close at Rs1,254 on the NSE. 
The Federal Reserve after a two-day policy meeting has maintained its bond-buying program at current levels yesterday. The Federal Open Market Committee, which has floated the prospect of reductions to its stimulus program should economic risks abate, said yesterday after a two-day long meet that while growth should pick up, persistently low inflation may hamper the recovery. Policy makers, however, expect inflation to move back toward its 2% objective over the next 18 months. The Fed said that that the world's largest economy was expanding at a "modest" pace. It had called the pace "moderate" in June. The statement came as data showed US gross domestic product expanded more than what the economists estimated last quarter.


PMS firms misinterpret SEBI rule and avoid disclosure
SEBI’s PMS circular asks for disclosure of PMS information on the companies’ website. Many companies like Alchemy Capital wrongly interpret this circular to limit to disclosure only to clients. Besides, what are they afraid of? And why is SEBI not clearer with its circular?
Moneylife’s crusade for greater transparency and disclosure of portfolio management services (PMS) has drawn a sharp reaction from Alchemy Capital Management (Alchemy). In an earlier story, we pointed out that Alchemy Capital Management was one of the companies which has not put up the disclosure document on its website, unlike many others which have indeed disclosed theirs. Our article was based on an interpretation of SEBI’s circular addressed to registered portfolio managers.
The SEBI circular IMD/DF/16/2010, dated 2 November 2010, states: “To ensure compliance with Regulation 14(2)(b)(iv) of SEBI (Portfolio Managers) Regulations, 1993, portfolio managers shall disclose the performance of portfolios grouped by investment category for the past three years as per the enclosed prescribed tabular format. Portfolio Managers shall also ensure that the disclosure document is given to all clients along with the account opening form at least two days in advance of signing the agreement. In order to ensure that the clients have access to updated information about the portfolio manager, portfolio managers shall place the latest disclosure document on their website, wherever possible.”
Alchemy has taken offence to the article based on the above circular and insists that it has complied with disclosure and transparency norms set down by SEBI. It wrote to us arguing that: “The circular expressly uses the words ‘the clients’ in the context of persons who should have access to the latest disclosure document. Clearly, so long as ‘clients’ (meaning those who have the relationship with the PMS company) can access the latest disclosure document, the PMS Company has met its obligations under this circular. On Alchemy’s website, its latest disclosure document is available to, and easily accessible by, all its clients and according Alchemy is in compliance with this requirement.” 
There are two issues here. Firstly, many PMS companies, unlike Alchemy, have put up the disclosure document for the public to inspect even without asking for it. Among these are Quantum Advisors, ING Investment Management, SBI Funds Management, Tata Asset Management, and many others. They are part of the 20 companies out of the 46 companies we chose to analyse. Anyone can see these documents, not just clients. We wrote to the remaining 26 companies requesting their disclosure documents. Eight of them agreed to email them, including Parag Parikh Financial Advisory Services, Motilal Oswal Asset Management and Reliance Capital Asset Management. Alchemy is part of the 26 companies, whose disclosure documents are not in the public domain. Of these, 17 including Enam Asset Management, Morgan Stanley India Financial Services, have not bothered to reply to our mail request. Alchemy, Avendus PE Investment Advisors and HDFC Asset Management argued that it is available to clients only. Are they right? 
This takes us to the second point, SEBI’s own interpretation of the PMS disclosure rule. The whole idea of disclosure document is for the public to make an informed decision, by comparing and contrasting portfolio management schemes before making a call. In fact, SEBI clearly had advised investors to ask for the disclosure document from any PMS company before investing in PMS.
Ms Maninder Cheema, who until recently oversaw PMS at SEBI, confidently told us sometime ago that companies offering PMS are supposed to disclose their performance and other details on their website. Indeed, Mr Aman Jain, AGM, SEBI, confidently argued before Satyananda Mishra, Central Information Commissioner (CIC), during an RTI hearing, on 17 January 2013, that each PMS company publishes disclosure documents in their respective website while also reporting to SEBI, on a monthly basis, and the public could always visit the respective website and find out about the information required. This was a lie, as we subsequently discovered. By the way, we won this RTI appeal that forced SEBI to disclose PMS information on its website. (Power of RTI: CIC directs SEBI to disclose all information related to PMS). 
Clearly, Alchemy had conveniently twisted and interpreted SEBI’S circular for its own good. Also, SEBI (Portfolio Managers) Regulations, 1993, clearly states: “The portfolio manager shall provide to the client, the Disclosure Document as specified in Schedule V, along with a certificate in Form C as specified in Schedule I, at least two days prior to entering into an agreement with the client as referred to in sub-regulation”. (emphasis ours) You can check the document for yourselves here on SEBI’s website. If we go by the above SEBI definition, does this mean an investor becomes a “client” BEFORE signing an agreement? Alchemy has found it convenient to use the textbook definition of client (i.e. once you’ve signed on the dotted line). 
Alchemy’s interpretation of the circular is convenient and wrong. If not, SEBI would have argued at the CIC hearing that there is no need to disclose PMS information to the general public. That leaves us with just one question: And what does Alchemy have to hide?
Look out for the next issue of Moneylife magazine which carries the first-ever in-depth analysis of PMS.
Other Moneylife articles on portfolio management services can be accessed below



Dr. Hari Dev Goyal

4 years ago

Will P.M. make any difference ind disclosing when SEBI's Chairman Mr. U.K.Sinha (whose appointment is under SC scrutiny since he became chairman by making false declaration and now getting emoluments of Rs. Four Crores per annum) and its full time member Mr. Prashant Saran openly refuse to honour SEBI Act, 1992 and RTI Act, 2005. Prashant Saran has replied to Shri S.N. Mishra, Chief Information Commissioner that he won't provide information to the investor and for his actions and decisions, SEBI does not keep noting on file. CIC Mr. Satya Nand Mishra has been made helpless and redundant by SEBI.

India's growth weak, price pressures rising, says Nomura

According to Nomura, the PMI, which fell to 50.1 in July from 50.3 in June suggest that, even as India's domestic demand remains weak, price pressures are rising

India's manufacturing PMI fell to 50.1 in July from 50.3 in June, due to a continued contraction in output and new orders. Overall, the PMI data suggest that, even as domestic demand remains weak, price pressures are rising and besides external sector stress, this is another reason for the Reserve Bank of India (RBI) to remain cautious, says Nomura Financial Advisory and Securities (India) Pvt Ltd.


The manufacturing PMI fell to 50.1 in July from 50.3 in June, its lowest level since April 2009 and just above the contraction/ expansion threshold of 50. The decline was due to continued weakness in the output and the new orders sub-indices.


Weaker demand:

Both domestic and external demand weakened in July. The new orders sub-index fell to 49.5 in July from 49.7 in June, reflecting weak domestic demand, while the new export orders index fell to 52.4 from 54.4. Sectoral data suggest the decline in new orders was mainly in the intermediate and investment goods sectors.


Output contracts, inventory lowered:

The output sub-index remained below the 50 threshold for the third straight month even as it rose to 49.8 from 49.1, which indicates that weak demand, increased competition and persistent supply-side pressures are forcing manufacturers to cut production. The new orders/inventory ratio reversed after seven straight months of decline and rose marginally to 0.99 from 0.97, as manufacturers lowered inventories - the finished goods inventory sub-index fell to 50.1 from 51.0.


Price pressures resurface:

The input price sub-index surged to 60.6 from 55.9, reflecting higher imported price pressures due to a weak rupee. More importantly, the output price sub-index, which has a lagged correlation with core WPI inflation, rose to 53.4 from 50.9, as firms attempted to pass on higher costs, albeit at a slower pace, which suggests margins are under pressure.


Nomura said, "We are negative on India’s economic outlook due to continued external sector pressures, tighter liquidity conditions, weak growth and political risks ahead of elections. In our baseline scenario (70% likelihood), we expect repo rates to remain on hold this fiscal year and GDP growth at a below-consensus 5.0% y-o-y in FY14 (year-end March 2014), the same as in FY13."


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