Stocks gain on PM’s reforms talk

Bank shares surge on assurance that the government’s stimulus measures would continue into the next fiscal

The Indian stock market gained for the fourth consecutive session on Monday, on the back of strong global cues and prime minister Manmohan Singh’s assurance on Sunday that financial reforms would be accelerated and the government’s economic stimulus measures would continue into the next fiscal year. The Sensex closed at 16,499, gaining 340 points, while the Nifty rose 102 points to 4,898.
Banking stocks were among the top gainers on Monday as the prime minister asserted that growth in the next fiscal year, assuming a normal monsoon season, was expected to be more than 7.0% compared with a 6.5% forecast for the current year. State Bank of India (SBI) rose 5%. Bank of Baroda (BoB) and Punjab National Bank (PNB) were up 3% and 2%, respectively, on news that they have entered into an agreement with T Rowe Price to sell a 6.5% holding each in UTI Asset Management Company and UTI Trustee Company.

Sensex heavyweight Reliance Industries (RIL) was up 3% on reports that the firm is planning to acquire some of the assets of US petrochemical major LyondellBasell, which is undergoing reorganisation under the protection of a US court.

Telecom stocks fell on worries that the ongoing price war would result in a sharp fall in revenues and profits. Reliance Communications was down 2% while Bharti Airtel declined 4% after chairman Sunil Mittal told the media that the company was not actively seeking acquisitions, after talks for a tie-up with South Africa’s MTN collapsed recently.

On Sunday, the prime minister had stated that the government would push through legislative changes in the insurance sector to attract more foreign investment. He added that the government would push through stake sales in profitable state-run firms, implement measures to deepen the corporate bond market, strengthen the insurance and pensions sectors and improve the futures market for better price discovery and regulation.

By December 2009, the government plans to introduce bills proposing to raise the foreign stake limit in insurance companies to 49% from the present 26% and to open up the pension sector to private and foreign firms. It will also propose a law to cut its holding in top lender State Bank of India to 51%. 

The timing of the withdrawal of the economic stimulus measures would be decided when it becomes clear the economy is recovering, but there will be no fresh stimulus, finance minister Pranab Mukherjee said on Sunday.

Asian markets ended in the green on Monday on strong global cues. The key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan were up by between 0.28%-2.25%. Praising China’s economic performance in the past year during the global financial crisis, Moody’s Investors Service raised the outlook on China’s A1 rating to positive from stable. The agency said the country’s strong credit fundamentals would resume its improving trend as the economy emerged from the effects of the global recession.
— Swapnil Suvarna [email protected]


Piramal Life Sciences delays first drug discovery expectations
Dr Swati Piramal, director of Piramal Life Sciences, has been quoted in the media as saying that Piramal expects to launch its first drug by 2011-12. She further said that “the company would not hazard a guess on when it can break even because even after launch drugs can fail.” That gives a sense that the entire money spent on this drug could be wasted.
Dr Piramal’s statement substantially differs from what Ajay Piramal had said two years back in July 2007 in a national business magazine. Mr Piramal had said that the company expects a new molecule discovery in 2010-11. A delay in drug research is very common. Many pharma companies spend huge amounts on drug research and show impressive clinical advancement in phase I, phase II and phase III studies but then fail at the final stage.
Piramal Life Sciences has apparently already spent Rs600 crore on drug research and plans to spend another Rs200 crore in the next two years. The published report says that one molecule (a head and neck cancer drug) and four phythopharma molecules are at the phase II trial stage. That means that these are yet to enter into phase III trials on large number of patients before they turn out to be a success or failure. It’s going to be a long while before Piramal Life Sciences is able to declare any signficiant success on its drug research.
– Dhruv Rathi [email protected]


The real estate jinx: Carpet or super built-up?
Real estate developers are back to their old game, maybe this time with a vengeance. Not only are many of them planning to raise money from the capital market, but many are also offering properties on a super-built up area basis which is more than 50% of the carpet area. In many cases carpet area is not revealed even with persistent questioning.
“Most of the builders have inflated figures for super built-up area. Barring a few, none of the builders are ready to sell on a carpet area basis. If a developer offers you 800 sq ft area then mostly 400 sq ft is the actual area of the flat and the rest are the common amenities (stair cases, lobby, lift and other common areas),” said Pankaj Kapoor, founder and chief executive officer, Liases Foras, a property research firm.
These common areas should not be individually charged to the prospective buyer—they should be collectively paid for by all residents of the housing complex. The buyer should be aware of the amount he is forking out for these common spaces. 
Kapoor also explained that prior to 2000, the super built-up area used to range between 18% - 20% plus carpet area. But now the scenario has changed. Between 2003- 2004 the super built-up area was approximately 35%, between 2004-2005 it went up to approximately 40%, in 2006 it went up again by approximately 5%, that is 45% and after 2008 it is beyond 50%.
Kapoor believes that it should be made mandatory to sell by carpet area rate basis and strict laws are required to enforce this stipulation. Government and banks are now coming together and are planning to make this rule—selling on carpet area basis— compulsory for all developers. A few developers—like Mayfair, Cosmos and Mantri—have started selling on carpet area basis.
Pallabika Ganguly [email protected]


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