Stock market likely to be only news-driven post 16th May

If the exit polls are indeed accurate, the market would then begin to focus on the next catalyst. Given that it is a 'hope and expectations' rally, the catalysts at least over the next 4-6 weeks are likely to be news-driven, says Credit Suisse

The broader Indian market is up 17% year-to-date (YTD) in US dollar terms and 12% in rupee terms while Nifty FY15 earnings per share (EPS) is down 1.4%. The price-to-earnings ratio (P/E) re-rating suggests optimism about a future recovery in fundamentals despite the absence of earnings drivers in the near term. Such re-rating driven rallies were caused by flow of funds, about $6 billion in equities YTD and news, says Credit Suisse in a research note.

It says, "Uncertainty on the final election results remains, but beyond 16th May too the market is likely to be news driven. A fundamental turnaround in the investment cycle is several years away, but near-term volatility is likely around some key events".

According to the report, cabinet formation by 19-20th May and portfolios allocation probably by 27-28th May would drive perception of reform potential in economically relevant ministries. The onset of the monsoon may affect sentiment too. The budget would be the first major policy document and would throw light on public sector banks, recapitalisation, real estate investment trust (REIT) , Goods and Services Tax (GST) and Direct Tax Code (DTC) roadmap and govt's priorities, especially for defence, rural development, taxation and subsidies.

"We continue to believe that uncertainty on the final election results remains. But if the exit polls were indeed accurate, the market would then begin to focus on the next catalyst. Given that it is a hope and expectations rally, the catalysts at least over the next 4-6 weeks are likely to be news driven," the report said.

Credit Suisse says, the news flow has indeed been encouraging with exit polls confirming a potential change in government that is considered reformist. The global environment for equities has also been supportive. Equity markets globally, and, in particular, emerging market equities have done well, it adds.


Sahara case: Justice Khehar recuses himself from hearing

Justice Radhakrishnan, who retired on 14th May, has gone on record saying that the bench was under immense pressure in the Sahara case

In a sudden twist in the Sahara Group case, Justice JS Khehar from the Supreme Court has recused himself from hearing the matter following which a new bench has been constituted.


In a release, Rakesh Sharma, Deputy Registrar of the Supreme Court said, a “communication dated 6 May 2014 received from Justice JS Khehar was placed before the Chief Justice of India on 7th May. On 7th May itself, the CJI has been pleased to constitute another bench to hear the matter relating to Sahara Group...”


The release, read out by the official at a press conference in New Delhi, said that Justice Khehar had written a letter the day when he and Justice KS Radhakrishnan decided a petition filed by Sahara Group chief Subrata Roy.


Justice Radhakrishnan, who retired on 14th May has gone on record saying that the bench was under immense pressure in the Sahara case.


The official from the apex court, however, did not disclose the details of the new bench, which will now hear the petitions relating to Sahara Group.


The bench of justices KS Radhakrishnan and JS Khehar in its 6th May judgement had upheld its order jailing Subrata Roy and rejected his claim that rules of natural justice were not followed in the case.


The 65-year-old Roy, who has been in jail since 4th March for non-refund of over Rs20,000 crore to depositors, was asked by the court to make a fresh proposal for paying Rs10,000 crore to get bail.


The Court had passed the order on a petition filed by Roy challenging the constitutional validity of its order passed on 4th March by which he was sent to jail for not complying with its order to deposit around Rs20,000 crore of investors money with SEBI.


The bench in a strongly-worded judgement had come down heavily on the Group for “systematically” frustrating and flouting all its orders with impunity on refunding investors’ money.


It had said the Group “adopted a demeanour of defiance constituting a rebellious behaviour, not amenable to the rule of law” and justified its decision to send Roy along with two promoters of two Sahara companies to jail.




3 years ago


Why didn't Justice Radhakrishnan take contempt of Court proceedings against the persons who pressured him in Sahara Case?


Nagesh Kini

In Reply to MOHAN 3 years ago

Can he not initiate proceedings even now?

Nayak Panel report gives new opportunity for banking reforms

The Nayak Panel report is yet another opportunity for the Indian government to dispose of its holdings on state-run banks and make them practically free of its control. This is also a golden opportunity for RBI to consider if applicants for the new bank licence can be offered first direct investment in these banks

A panel of experts headed by PJ Nayak, the former chairman of Axis Bank set up to examine and recommend how these institutions can function more effectively, without much hindrance, submitted its report, which, Reserve Bank of India (RBI) governor Dr Raghuram Rajan has called as "candid".This panel looked into the working of 26 public sector banks (PSBs), and the report says that these institutions "suffered due to several externally imposed constraints, like dual regulation by RBI and the Finance Ministry" besides external vigilance by agencies such as Central Vigillance Commission (CVC) and Comptroller and Auditor General (CAG), among others.

The recommendations made by this Panel may have far reaching implications, such as reduction of government holdings to less than 50%, including certain executive measures, and eliminate the constraints, if these were accepted and implemented. The Panel report says that it would be necessary to repeal the Bank Nationalization Acts of 1970 and 1980 together with SBI Act and SBI (Subsidiary Banks) Act. In fact, it suggests that all Banks should be incorporated under the Companies Act and a Bank Investment company should be established where the government holdings in all the banks should be transferred. This committee is critical of Bank Boards, including the selection of directors, which is "likely" to be compromised.

Further, it says that the solution to the problems lie with the need to radical reforms being implemented by the government, not on a piece-meal basis and non substantive reforms, warning that "the fiscal cost of inadequate reforms will be steep".

Additionally, the Panel recomends that the present holding restriction of 5% be replaced by a new category of investors, to be termed as "authorized bank investors" who should be permitted a 20% equity stake without approval and a 15% limitation if it has a seat on the Bank board. Rest of the financial investors should be permitted upto 10%, according to the report.

The RBI governor is reported to have said that as the Nayak Panel report has a number of suggestions it has to be taken as a whole and then examined, debated and considered.

In studying this issue briefly, we may mention, that in the early part of our Banking history, we had the presence of five scheduled banks, known as 'the Big Five' in the financial world. But in the past few decades, many things have happened, after the nationalisation and continuous developments taking place in this sector.

Recently, it may be recalled that as many as 26 applicants sought to obtain new banking licence and RBI, eventually, has issued to only two approvals, though, now, any institution desiring to obtain a banking licence may apply and obtain it, identifying the specific service or operations that they may wish to cater. RBI will consider such application on its merits.

In the last few weeks, working results and balance sheets have began to appear in the leading newspapers. Taken in random, the results of the following can be of interest to readers:

Serial No

Name of Bank

Paid up capital (Rs crore)

Reserves (Rs crore)


State bank of Hyderabad




State bank of Travancore




State bank of Mysore




Canara Bank




Syndicate Bank




Corporation Bank




Union Bank




Dena Bank




Bank of Maharashtra




Allahabad Bank




Bank of Baroda



Some of these may have non-performing assets (NPAs), but on the whole, they have healthy balance sheets and good reserves and are generally considered as blue chip institutions.

In light of the recommendations made by the Panel, headed by PJ Nayak, it would be interesting if the new Government can review and consider following radical approach:

a) bring down the government holdings, if necessary, over a 5 year span, to 26%

b) offer the balance of the government holdings, or at least a substantial part of it, to the "authorised bank investors"

c) the "authorized bank investors" to include the balance of the 23 applicants for the new bank licence, who were "unsuccessful" in their attempt

d) ensure that the Board of Directors are positions that need to be offered to those who have atleast 10-15 years actual banking or experience/knowledge of financial institutions (not as a resting place for a "cushy" job for retiring government officials, politicians and their friends and relatives)

e) the Panel's recommendation of "10% holdings" to all investors should include NRIs/OCIs

Such a move by RBI would be welcome change if the government at the Centre approves all

(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.)



Kamla Srinivas

3 years ago

Though, the banks are loaded with NPA's,that does not mean that the banks require a major surgery.The Public Sector banks that includes even State bank of India & its subsidiaries operate in remote rural areas financing and educating the farmers.Whereas the, private sector banks donot operate in rural areas as their main focus is on profit.We cannot say that all private banks are in pink of health.we Know what happened to ICICI bank few years bank and also to Global Trust Bank.What the PSB's require immediately is that government should not interfere in the functioning,and also in appointments in PSB's.The entire control of PSB's should be left to RBI.The PSB's have well trained,educated,and committed staff.The mounting of NPA's should not be attributed solely to the PSB's.The Government of India is also partly responssible as they cater to all sections of society.The government of India should own a minimum of 51% in all PSB's. However, the GOI can reduce the holding where they have 80% and even 70% holdings in stages.If we require inclusive growth,the PSB's have to play a major role which cannot be done by private banks as they perform class banking. The PSB's does mass banking.

Nagesh Kini

3 years ago

Yes,in deed it really is 'candid'.
It ought to consider public comments and suggestions from those with long hands on exposure banking like retired executives as well as auditors.
My critique that follows says it all.

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