SEBI chairman said the market regulator is going to take some measures so that there is some pre-check in orders, in pricing and there are some other checks also introduced for protecting investors against flash crashes on the bourses
Mumbai: Market regulator Securities and Exchange Board of India (SEBI) on Friday said it will soon announce measures to protect investors against stock crashes on the bourses, reports PTI.
Last month, the National Stock Exchange (NSE) witnessed 'flash crash', when the Mumbai-based brokerage Emkay Global Financial Services sent the exchange index tumbling as much as 15.5% in just a few seconds, creating a panic among traders. The crash was the result of erroneous trades worth $126 million, placed by Emkay Global.
"We are going to take some measures so that there is some pre-check in orders, in pricing and there are some other checks also introduced. We are looking at avoiding similar incidents," SEBI Chairman U K Sinha told reporters on the sidelines of a securities market conference here.
"We are going to announce some measures based on experts views. Lapses on part of any intermediaries will be looked at separately and actions will be taken," Sinha said.
He assured the regulator is acting on both the fronts -- systematic improvement and action for lapses.
Commenting on regulator's decision to discontinue mini-derivatives contracts, SEBI Chairman Sinha said as a measure of experiment, SEBI allowed mini derivatives contracts, but data show that trading in mini contacts constitutes only a minuscule and it was felt that there might be certain amount of misuse and mis-selling happening in those contracts.
"Therefore, as a measure to provide safety to small investors we have taken the decision to discontinue mini contracts," Sinha said.
Derivatives contracts first started with a minimum ticket size of Rs2 lakh in the country. But earlier this week, the regulator banned it.
Replying to a query on call-data records, Sinha said, at his meeting with the government officials, they assured him that they are going to find a way on how to provide that data.
"The difficulty on the part of the government is that there is a judicial pronouncement about how conversation can be shared or intercepted. I was given to understand that keeping that sensitivity in mind -- that privacy of all are respected -- at the same time providing some rule whereby regulators like SEBI can get access to call data records.
"They are thinking of amending the rules. I am not talking of law, but the rules. I believe the rule making process is on and hopefully it will be ready soon," Sinha said.
This Sunday, Finance Minister P Chidambaram had told PTI in an interview that SEBI would be allowed to access call records on a case-to-case basis from the designated government agency but could not on its own tap phones.
A Moneylife analysis of 1,099 companies shows a lot of them have increased profits, helped by lower commodity prices even though sales growth has slowed down
The 1,099 companies in the Moneylife database clocked aggregate sales of Rs11,77,846 crore when compared to Rs10,39,595 crore recorded in the same quarter last year, or 13% higher on a y-o-y basis. Both operating profit and net profit grew 32% y-o-y and 68% y-o-y, on an absolute basis, to Rs1,76,911.5 crore and Rs1,07,255.4 crore respectively. Out of the 1,099 companies, nearly half of the companies reported net profit higher than last year despite even as roughly two-thirds of the companies saw their net sales increase on a year-on-year (y-o-y) basis. This shows that companies have been able to keep cost under control even as inflation continues to worry the Reserve Bank of India (RBI) and companies.
Furthermore, a more important measure is margins. On an overall basis, operating profit margins have expanded by more than two percentage points, y-o-y, to 15.02% while net profit margins have expanded by nearly three percentage points, y-o-y, to 9.11%. This is impressive and shows that topline is not all. This also shows that companies have exuded far more cost control than before in the face of slackening demand, mainly helped my lower commodity prices. Last year, operating profits declined by 10% (when compared to September 2010). This year, however, companies have managed to grow operating profit by 32%, a significant number. Considering that global situation is far more difficult today than last year, companies have managed to do well.
If you look at the aggregate net sales and profit figures, net sales have hardly increased (only by 13% y-o-y) while profit increased by 68% y-o-y. Sales have been subdued because of lack of demand. Higher interest rates, lack of liquidity due to a hawkish stance by the Reserve Bank of India (RBI) have forced consumers to cut down on spending. Net sales slowed down even on a y-o-y basis, by seven percentage points. As demand slows down, companies are forced to cut down on capital expenditure and spend only once demand picks up. This has kept operating profit up. This is one of the cornerstones of cost management. Some companies are waiting for the opportune moment to invest, especially that raw materials are now cheaper to produce items. During difficult times, it is the only controllable variable companies can do to keep profits stable keeping in mind shareholder interests. And in this realm, they have done well, considering that RBI has taken a hawkish stance and not resorted to monetary easing nor have their done any open market operations (OMO).
Whether the third quarter results will be good is in doubt as America prepares to tackle the fiscal cliff while there seems no end in sight to the Eurozone crisis. Several Bills are due to be passed in the parliament in the winter session of the parliament, including the landmark Foreign Direct Investment (FDI) in retail and FDI in aviation, which could be game changers and possibly stimulate the market, at least in the short-term. But all this is uncertain as political wrangling continues and this could affect companies’ decision making on investment matters. Companies are on wait and watch mode and striving for consistency in cost management.
You can check out our similar analysis we’d done on previous quarters below:
Previous day’s low on the Nifty continues to be the crucial level to watch
The market, which was in the green for a major part of today’s session, pared part of its gains in late trade on profit booking. Yesterday we mentioned that a close above 5,640 on the Nifty may add strength to this weak upmove. Today although the index managed to cross this level it ended a bit lower. A strong close above 5,655 may bring more momentum to the uptrend, however, a previous day low on the Nifty continues to be the crucial level to watch. The National Stock Exchange (NSE) saw a volume 53.12 crore shares and an advance decline ratio of 749:677.