Stocks
Sensex, Nifty may correct and then resume its upmove: Tuesday closing report
The current upmove may have more steam left. Nifty likely to hit 6,000 
 
The Sensex and the Nifty on Tuesday recorded the highest percentage gain since 27 May 2009 on massive short covering after the rupee sharply dipped again. The Reserve Bank of India (RBI) measures in the past week and the US jobs data falling short of estimates have helped too. The indices ended positive for the fourth consecutive session. The BSE 30-share Sensex, which opened higher at 19,448 hit an intra-day low of 19,445. By the end of the session, Sensex breached the 20,000 level to hit an intra-day high of 20,013 and closed at 19,997 (up 727 points or 3.77%). The NSE Nifty, which opened at 5,739 hit a low almost at the same level, but went to hit an intra-day high of 5,905 before closing at 5,897 (up 216 points or 3.81%). The National Stock Exchange (NSE) recorded a marginally higher volume of 70.79 crore shares.
 
All indices on the NSE closed in the positive. The top five gainers were Auto (5.98%); FMCG (5.38%); Infra (4.91%); Consumption (4.74%) and MNC (4.55%). Of the 50 stocks on the Nifty, 41 ended in the green. 
 
The top five gainers on Nifty were Tata Motors (9.82%); Bharti Airtel (8.37%); Ambuja Cements (7.66%); Hero MotoCorp (7.19%) and ACC (7.02%). The top five losers were NMDC (2.27%); BPCL (1.50%); Bank of Baroda (1.35%); Cairn (1.28%) and Dr Reddy (0.86%).
 
RBI on Friday said that it would allow non-residents to buy stocks of listed domestic companies through the foreign direct investment (FDI) route. The new rule would make it easier for foreign promoters, who were earlier able to raise their stakes only through separate processes such as open market offers, to buy shares in listed companies.
 
The government is also set to announce more steps over the next few days to curb non-essential imports, with expectations growing for a hike in subsidized diesel prices that would ease concerns about the government's finances.
 
India's merchandise exports posted double-digit growth in the month of August, while imports were "contained", Trade Secretary SR Rao said on Monday. As a result, the trade deficit fell to $10.91 billion in August from $12.27 billion in the previous month.
 
India’s rupee rose as much as 5.6% in the past four days, the biggest gain since at least 1973 according to the biggest gain in data compiled by Bloomberg.
 
The US indices closed in the green on Monday. Non-farm payrolls in the US climbed 169,000 in August, official data showed on Friday 6 September, less than the 180,000 median estimate of a Bloomberg survey.
 
Russia on Monday proposed to work with Damascus to put its chemical weapons under international control, a move that President Barack Obama said could be "potentially positive". Asian indices ended in the positive. Jakarta Composite, the top gainer, was up 3.98%.
 
China's industrial output grew at the fastest pace in 17 months in August, adding to signs of a rebound this quarter that include a pickup in export gains. Factory production rose 10.4% from a year earlier, the National Bureau of Statistics said in a statement in Beijing today. Retail sales rose 13.4% in August higher than 13.2% gain in the previous month.
 
In France, factory output slid for a third month in July, underscoring the government’s struggle to revive growth. Oil fell on speculation Russia’s plan to get Syria to surrender its chemical weapons will help avert a US strike.
 
European indices were trading in the green. The US Futures too were trading higher.
 

User

Corporate governance: ‘Transparency was all but missing’ in NSEL
The managing director went on record to say that NSEL has sufficient stocks in warehouses to cover the entire open exposure and in the event of any default, stocks will be sold to fulfill payment obligations. The hollowness of this claim is an open secret now.
 
“The Company’s philosophy on Corporate Governance envisages adherence to highest levels of transparency, accountability, trusteeship and ethical corporate citizenship in all areas of its operations and all interactions with its stakeholders” says Financial Technologies group corporate governance policy. The words like ‘Transparency’,’ Accountability’ ,’ Ethical corporate citizenship’ sound so unreal and utopian in context of what happened in National Spot Exchange(NSEL) which is a group company. Transparency was all but missing in the entire episode. The managing director went on record to say that NSEL has sufficient stocks in warehouses to cover the entire open exposure and in the event of any default, stocks will be sold to fulfill payment obligations. The hollowness of this claim is an open secret now. The first payment itself was a default. What about accountability? Dismiss some employees and accountability is over. No accountability for the man running the show behind the corporate veil. 
 
Now, look at the one of the most important pillars of corporate governance called independent directors. What were they doing? Should these directors have asked questions on at least the basis compliance processes being followed in the company? After all, corporate governance policy of FT group says,” Financial Technologies believes that the management is responsible to the Board of Directors and the Board of Directors is in turn responsible to the shareholders. And by having these accountabilities demarcated drives the Company both performances wise as well as in enhancing shareholders value”. What happened to the concept of independence and accountability? In fact, this is very weak area in the entire process of corporate governance. India lacks a pool of really independent directors and those act as being independent, are not welcomed by the company.
 
But Financial Technology is not just an example in isolation. There are several companies in India for whom corporate governance has become a cut and paste approach. It is just one more document in a series of documents that a company publishes. Nicely drafted words to show how the company cares about corporate governance policies. Look at Gitanjali Gem’s corporate governance policy which says that the corporate governance policy of company is based on following principles: (a) Satisfy the spirit of the law and not just the letter of the law; and (b) Be transparent and maintain a high degree of disclosure levels.
 
How can a company, claiming to satisfy the spirit of law, find that the main promoter of the company is banned by the capital market regulator for activities which are completely unlawful? Where is the implementation of the tall claim about its corporate governance policy? Is there any understanding about the claim that the company has made about its corporate governance policy? But who cares. After all this is a policy document which just needs to be added as a part of the document and what you need is just redrafting of the policy words to make your own policy as a company. To these words legal acceptability, a certificate of compliance on terms contained in clause 49 is required to be signed by the director and auditor/company secretary of the company.
 
Every listed company makes tall claims about taking care of shareholders interest and value, but the modus operandi of the company refutes this claim. FT group policy says “The main purpose of the Shareholder Grievance Committee is to look into shareholder and investor complaints and redress them in the best possible manner at the earliest”. But look at the way FT has dealt with shareholders in terms of clarifying their doubts. The shareholders have been suffering in the process of the entire crisis with the value of the company’s shares taking a big hit.
 
The corporate governance approach needs to change from a tick box approach and mere documentation. Basically, the new approach towards corporate governance should provide enough indication to the investors and potential investors if a company is found wanting in implementation of corporate governance policy. Inability to follow corporate governance practices should have provision for severe monetary penalty for independent directors and board of directors in general. Also, if there is any significant breach of corporate governance is found in one company, the independent director should not be allowed to act as independent director in other companies.
 

User

COMMENTS

nagesh kini

4 years ago

The concept of CG is only for the records.
Despite the worse of practices, I've yet to see any auditors qualify their reports!
Why only NSEL?

KAVIRAJ B PATIL

4 years ago

In any other country having good governance, the company's board would have been facing lawsuits and a trial lasting around 6 months. In our country, even one year from now, the duped investors will still be found running for their money.

Railgate: Loss of Rs17,000 crore just tip of the iceberg?
The CAG discovered crores of rupees vanished at the Railways due to the twin-freight policy! There is a need to be practical in plugging loopholes in freight rate, which leads to such malpractices
 
The Comptroller and Auditor General (CAG) has discovered the tip of the freight iceberg when they carried out a test audit recently, according to media reports. Apparently, this has been going on for a couple of years now. Initial reports indicate that because of the existence of twin-freight rate policy, a large number of merchants have ‘managed’ to pay the lower rate on the pretext of supplies for domestic use, but actually used it for export shipments! The Railways charge lower rate for transportation of iron ore to domestic steel makers, and a much higher rate (three times actually) for export cargo. Incredible! India, at its worst!
 
This has been done without supplying mandatory documents, such as affidavits and indemnity bonds. According to CAG test audit, the recoverable freight dues, for actual export shipments effected, is estimated at Rs17,000 crore, which they suspect could be much more.
 
At the moment, multiple agencies of the Central Bureau of Investigation are working on this fraud on under invoiced freight (difference between export and domestic rates) that may show the recoverable freight could be in excess of Rs50,000 crore when the investigations are completed.
 
How the merchants of iron ore managed to get rakes and despatch the goods to its destination is a mystery and one can only surmise that this mammoth operation involving some 400 rakes, without ‘insider’ help, is just not possible.
 
CAG preliminary report indicates that a minimum of 126 parties obtained the rakes, without the proper documents and managed to lift and despatch the ore. This is only possible, thanks to the unstinted co-operation extended by railway staff in getting rake allocation, loading at site and moving the ore to its port destination for onward shipments.
 
Obviously, the whole bunch of staff at the port, from entry point to inspection, loading and verification of the required export documents have been in cahoots with merchants, for this to happen.
 
The CBI has been carrying out the investigations for sometimes now, and it will be a few months more before their findings are made public. CAG officials are firmly of the opinion that without the connivance of railway administration and the port staff, movement of such large quantity of ore is not possible.
 
At the moment, there is no export, due to the ban, but given the present state of affairs in relation to extremely difficult current account deficit (CAD) status, the Indian government may be forced to revive export, though the international market is also slack, but demand may begin to occur in the next few months.
 
Digressing for a moment, what will the CBI find? The most possible scenario is that many of the merchants may have simply vanished; companies have been sold to new owners; many may have benami owners; files and related documents missing at all important contact points and a few may eventually pay a fine or arrange for an ‘out of court’ settlement!
 
Railways need to pull up their socks. They need to be practical in plugging loopholes in freight rate, which leads to malpractices, such as these. First, we need to revive our export and it may be prudent to lower the transportation (freight) charges; second, our domestic industry is also in bad shape and needs revival and to encourage both to grow, why not average the freight rate so that there is no scope for this malpractice?
 
In addition, unless the mandatory documents are made available and bank guarantees are in place to cover the freight element, rakes should not be released and these again needs to be subject to surprise inspection and checks en-route and before entry to the prohibited port area. Such strict measures are likely to bring down the fraud that has now been discovered but the CBI must carry through their thorough investigations so that the guilty is severely punished.
 
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
 

User

COMMENTS

Vaidya Dattatraya Vasudeo

4 years ago

Now we know which files are to be burnt next.

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)