Watch for Nifty to close above 5,450 for a possible short rally
The market opened positive, tracking gains across Asia. The Sensex started at 18,167, while the Nifty opened at 5,448, the identical opening level yesterday. A rise in commodity prices in the international market supported gains in metals and oil & gas stocks in early trade. Banking stocks were also in demand, after being down for two days following the dismal numbers by the State Bank of India. Market performance was range-bound and the indices stayed within Wednesday's high and low. The Sensex closed 55 points up at 18,141 and the Nifty closed eight points up at 5,428.
The market remained range-bound, even as weekly food inflation numbers for early May came in lower at 7.47%. Turnkey engineering major Larsen & Toubro's (L&T) better-than-expected numbers helped the company's stock take the top gainer's position on the Sensex, though the market seemed to overlook the development.
The intra-day movement on the Sensex was between 18,058 and 18,198 while the Nifty traded between 5,411 and 5,453. The Nifty will be strengthen for a few days only above 5,450.
The advance-decline ratio on the National Stock Exchange was 548:1142.
The broader markets underperformed the Sensex today, as the BSE Mid-cap index declined 0.70% and the BSE Small-cap index was down 0.54%.
In the sectoral space, BSE Capital Goods (up 2.82%), BSE Oil & Gas (up 1.16%) and BSE IT (up 0.34%) were the top gainers. BSE Realty (down 2.87%), BSE Metal (down 0.98%) and BSE Power (down 0.85%) were the main losers.
L&T (up 5.92%), Reliance Industries (up 1.45%), ONGC (up 1.20%), TCS (up 1.14%) and Mahindra & Mahindra (up 1.11%) were the top performers on the Sensex. The laggards were led by Reliance Communications (down 3.43%), DLF (down 3.35%), Hindalco Industries (down 3.14%), Tata Power (down 2.60%) and Hero Honda (down 2.31%).
Continuing on its downward trend, the country's food inflation slipped further to 7.47% for the week ended 7th May, from 7.70% in the previous week. This is the lowest rate of price rise in food items in the last 18 months, since separate data for food inflation started coming in. It is also the third consecutive week that food inflation has been lower.
Commenting on the decline, finance minister Pranab Mukherjee said, "Both in food inflation and overall Whole Price Index (WPI) inflation there is a declining trend."
Markets in Asia, which opened strong this morning, settled mixed on the decline in Japanese gross domestic product (GDP) in the March quarter. GDP fell to an annualised 3.7% in the three-month period, exceeding analysts' estimates, pushing the country into its third recession. South Korean electronics major Samsung Electronics declined 1.5% after Gartner reported the company's share of the mobile handset market slipped to 16.1% from 18% earlier.
Singapore's benchmark Straits Times closed up 1% on news that its economy grew 22.5% in the first quarter of 2011 on an annualized, seasonally adjusted quarter-on-quarter basis.
The Hang Seng gained 0.66%, the Jakarta Composite rose 0.51%, the KLSE Composite added 0.18% and the Straits Times surged 1%. On the other hand, the Shanghai Composite fell by 0.45%, the Nikkei 225 declined 0.43%, the Seoul Composite tumbled 1.89% and the Taiwan Weighted lost 0.58%.
Back home, foreign institutional investors were net sellers of equities on Wednesday, offloading stocks worth Rs379.44 crore. On the other hand, domestic institutional investors were net buyers of shares worth Rs27.46 crore.
Although prima facie, the Speak Asia case appears to be fit for trial under the Prize Chits and Money Circulation Schemes (Banning) Act, the question is since it is not registered in the country, how and where would the proceedings be initiated against the MLM company
Speak Asia (SpeakAsiaonline.com) has been collecting large sums of money by rapidly enrolling people with the promise of incredible payments for simply filling out online surveys. We learn from our investigation and this has been confirmed by Speak Asia officials, that the company is not registered in India and so cannot present any legal documentation. Now, a debate has been set off on whether Speak Asia and its multi-level marketing (MLM) scheme can be banned under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (PCMCSB Act).
Only two days ago, the Manipur state government used provisions of the PCMCSB Act to ban MLM companies. The state government said in a notification, "The MLM, though called by very attractive names, squarely falls within the definition of 'Money Circulation Scheme' under the Act and hence is prohibited by the Prize Chits and Money Circulation Schemes (Banning) (Manipur) Rules, 1978."
"This is to inform all the general public, government officials and others concerned that the specific provisions under Prize Chits and Money Circulation Schemes (Banning) (Manipur) Rules, 1978, relevant sections under cheating Section 420 of IPC, Drugs and Cosmetics Act 1940 by the Ministry of Health and Family Welfare, Drugs and Magic Remedies (Objectionable Advertisement) Act, 1954 are abundantly available to be invoked and effectively check and prevent progress of such dubious floated companies," the notification said.
"Section 3 of Prize Chits and Money Circulation Schemes (Banning) Act, 1978 bans prize chit and money circulation schemes, or enrolment as members to any such schemes, or participation in such schemes. Sections 4 and 5 are penal provisions and prescribe punishment. Section 6 deals with offences committed by companies. Section 7 authorises a police officer, not below the rank of officer in charge of a police station, to exercise power to enter and search premises and to seize things used for such scheme. Section 8 provides for forfeiture of newspaper and publication containing money circulation scheme. The Preamble of 1978 Act declares that it has been enacted to ban the promotion or conduct of prize chits and money circulation schemes and for matters connected therewith and incidental thereto," the notification said.
Not long ago, the Andhra Pradesh government also used the same Act to ban Japan Life, Amway and GoldQuest. Shyam Sundar Matham of Corporate Frauds Watch (CFW) says, "The Andhra Pradesh High Court stated in its judgement that the business model of Amway India attracts the provisions of the PCMCS Act, 1978 and it asked the police to continue the investigation and file the charge-sheet in six months. Now the case is pending in the Chief Metropolitan Magistrate's Court, Nampally, Hyderabad under the same enactment."
The PCMCSB Act prohibits any entity from promoting, conducting any prize chit or money circulation scheme, enrolling any member of any such chit or scheme, or participating in it otherwise, or from receiving or remitting any money in pursuance of such chit or scheme (Section 3 of the Act). Under the provisions of the Act, the state governments were initially required to frame rules in consultation with the Reserve Bank of India (RBI) for winding up of the companies, which were running in contravention of the Act.
Earlier, the RBI, after receiving a complaint or information, would examine whether there was any prima facie case under the provision of the PCMCSB Act. The central bank would then inform the police, advising investigation and appropriate action. This was done by using the opinion given by the RBI and SR Hegde, the then legal advisor of the central bank, in September 2001.
However, in February 2003, the RBI issued another circular saying that it had no role to play and that its legal opinion (provided in September 2001) should be considered null and void. In the second circular, the RBI said that the PCMCSB Act was to be used by state governments, through consultation with their legal advisors and not depending on the central bank.
This is fine with MLM companies who operate or have offices in a particular state. But, since Speak Asia does not have its own office and is not registered in India, the question is which state government would take action against it? This is why authorities in Uttar Pradesh have taken action against some franchisees, but not against Speak Asia. It is being suggested that the union government, through the Enforcement Directorate (ED) and the Income Tax department (I-T) could initiate proceedings against Speak Asia. (The company says that it has remitted Rs325 crore to Singapore and distributed about Rs250 crore to its agents in India, for filling surveys, without deducting any tax.)
According to media reports, the Ministry of Corporate Affairs (MCA) has started an investigation on Speak Asia and is working together with the RBI and the Securities and Exchange Board of India (SEBI). Last month, Moneylife Foundation sent a letter to Murli Deora, minister of corporate affairs, RPN Singh, minister of state for corporate affairs, the Secretary MCA and other officials, informing them about Speak Asia. (Click to read the letter)
Nowadays, many media organisations are even using our reports on Speak Asia in their stories and correspondence, without acknowledging Moneylife. Its a different story that they all want to take credit for exposing Speak Asia now, purposely forgetting that the content they are using has its origin on the Moneylife website.
The Bharatiya Janata Party's national secretary, Kirit Somaiyaa, who has filed a case against Speak Asia with the Economics Offences Wing (EOW), in Mumbai, too has used Moneylife reports almost verbatim in his correspondence with the finance ministry, SEBI, RBI and EOW.
Frankly, as long as it serves the purpose we do not mind anyone taking any credit for anything. Our humble request is at least acknowledge Moneylife, which would boost our efforts in the fight against frauds.
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Sponge iron makers Welspun Maxsteel and Ispat had challenged Reliance's move to cut gas supplies. However, the oil ministry has ordered natural gas supplies from RIL's KG-D6 fields be first allocated to core users, asserting that it is competent to take such a decision
New Delhi: Rejecting the plea of steel makers, the oil ministry has ordered natural gas produced from Reliance Industries' KG-D6 field to be first allotted to core users in power and fertiliser sector, asserting it is competent to take such a decision, reports PTI.
"...the fact that production from KG-D6 fields is presently below expectation, the supply to non-core sector, on whom cut has been imposed, cannot be restored at the cost of the core sector," the ministry said in a order dated 18th May.
Reliance had on 8th May cut supplies to sponge iron makers, refineries and petrochemical plants so that its falling output can meet full demand of core users like fertiliser and power.
The move was challenged by sponge iron makers Welspun Maxsteel and Ispat in the Bombay High Court and Essar Steel in Delhi High Court. The Bombay High Court asked the ministry to hear the petitioners and yesterday's order was issued following that hearing.
"The ministry of petroleum and natural gas is competent to take decision on gas supply within the Gas Utilisation Policy laid down by Empowered Group of Ministers (EGoM)," it said rejecting the steel makers' plea that such a decision can only be taken by EGoM which had originally allocated the KG-D6 gas.
The EGoM had in 2008 and then in 2009 allocated KG-D6 gas among users in fertiliser, LPG plants, power units, steel makers, refineries, petrochemical units and city gas firms.
The oil ministry's curtailment order last month followed drop in production at KG-D6 fields to less than 50 million metric standard cubic meters per day (mmscmd). Against this, Reliance had signed firm contracts for 57.15 mmscmd and needs another one mmscmd for the East-West pipeline that ferries the gas.
Core sector users have signed up for 47.6 mmscmd and the ministry wanted their demand to be met first and any gas left after this to go to users in steel, refineries and petrochemical sector.
The order stated the ministry's "directions was in furtherance of EGoM's decisions and has been issued to ensure higher supply to those customers, who were given high priority by the EGoM in its allocation decisions".
"In view of the recent shortfall in KG-D6 production, the contractor (Reliance) has been directed vide ministry's letter dated 30th March and subsequently dated 21st April to supply KG-D6 gas in full to fertiliser, LPG, power and city gas distribution (domestic and transport) sectors, apart from gas needed for pipeline operation, in larger public interest.
"If there is a shortfall in meeting the firm demand of the remaining sectors, pro rata cuts should be imposed on them. It is also made it clear that if production from KG-D6 fields increase, then the supply to various non core customers would also increase. So supply is fully dependent on production," the order stated.