Wednesday’s Market Preview: Range-bound opening expected

The local market is likely to witness a range-bound opening today as the Asian markets are trading with marginal gains in early trade while Wall Street closed in the green, supported by energy stocks due to the cold weather prevailing in the north-eastern region of the country. The SGX Nifty was down 5.50 points at 6,010.50 compared to its previous close of 6,016 on Tuesday.

Volatility is expected to continue today ahead of the futures and options expiry on Thursday.

The market opened with minor gains yesterday on the back of mixed global cues. Choppy trade resulted in the key indices dipping in and out of the red ahead of the futures and options (F&O) expiry. The market touched the day’s low in noon trade, but volatility continued amid low volumes on limited participation of institutional investors as the calendar year comes to an end. The market closed flat. The Sensex ended at 20,025.42, down 3.51 points or 0.02%. The Nifty settled 2.10 points (0.04%) lower at 5,996.

Markets in the US closed mostly in the green on Tuesday, supported by gains in energy stocks as cold weather prevailed in the north-eastern region of the country. In economic news, the Conference Board’s confidence index unexpectedly fell to 52.5, lower than analysts’ predictions. The S&P/Case-Shiller index of property values fell 0.8% in October from the same month in 2009, the biggest year-over-year decline since December of last year, the group said today. Besides, employers added 951,000 workers to payrolls in the first 11 months of the year, according to figures from the Labor Department. Despite the gains, unemployment was at 9.8% last month after finishing 2009 at 10%.

The Dow surged 20.51 points (0.18%) at 11,575.54. The S&P 500 added 0.98 point (0.08%) at 1,258.52. The Nasdaq shed 4.39 points (0.16%) at 2,662.88.

Markets in Asia were trading with marginal gains in early trade this morning as weak economic data from the US raised concerns about the pace of the recovery in the world’s largest economy. The strengthening Japanese currency dampened sentiments of the country’s exporters.

The Shanghai Composite gained 0.04%, the Hang Seng advanced 0.46%, the Jakarta Composite rose 0.64%, the KLSE Composite was up 0.40%, the Nikkei 225 added 0.17%, the Straits Times and the Seoul Composite surged 0.34% each. On the other hand, the Taiwan Weighted lost 0.12% in early trade. The SGX Nifty was down 5.50 points at 6,010.50 compared to its previous close of 6,016 on Tuesday.

The Telecom Regulatory Authority of India (TRAI) on Tuesday released a consultation paper seeking views of stakeholders for promoting research and development (R&D) and manufacturing of telecom equipment in the country.

The consultation paper aims at discussing, debating and finalising measures for promotion of R&D and creation of intellectual property as well as manufacture of telecom equipment and electronic components in India, TRAI said in a statement.


Khurshid releases book on study of constraints and solutions for IPOs

In his new book, investor-activist Virendra Jain discusses issues like the disappearance of companies after fund-raising and monitoring of companies, based on his study of public issues by 243 firms between 2001 and 2009

Salman Khurshid, minister of corporate affairs, yesterday released a book titled ‘Wealth Creation and Destruction through Initial Public Offerings (IPOs) in India 2001 to 2009’, by investor-activist Virendra Jain. Praising the book, the minister said that the book has invaluable information which can be of assistance in policy formation.

The book provides detailed information on a range of issues and factors affecting IPOs along with a comprehensive study of 243 IPOs during the period 2001 to 2009 that contributed to the creation and destruction of wealth. The aim of the study was to find out constraints affecting IPOs and their possible solution through a policy framework.

Speaking on the occasion, Mr Khurshid underlined the need to create a situation where investors would have confidence in the capital market. Asked about the issue of the end use of funds raised through IPOs that is discussed in the book, Mr Khurshid said, “This essentially is an overlapping area with SEBI and the Ministry of Finance and we are looking into it”.

The study looks at various facets of IPOs such as issue price, role of merchant bankers, the process of grading (mandatory as per guidelines of the Securities and Exchange Board of India), laws, the policy governing IPOs, along with statistical data and information such as price history, and comparison with the Sensex of these IPOs. The book includes IPOs of the companies from both public and private sector. The book also specifically gives details of over and under-performing IPOs.

The book comes up with some interesting facts. It states that the Rs 1,07,373 crore raised by the 243 IPOs is nearly equivalent to the amount raised by a single IPO in China. It reveals that one out of every two IPOs of private companies resulted in wealth destruction and three out of 10 quoted at less than half their issue price.

Mr Jain provides reasons why the Indian market failed to retain, attract and sustain retail investors, despite transforming from a paper-based to a paperless online system. One reason is vanishing companies, where companies in the 1990s vanished after raising public funds, leaving investors cheated. Following this the government appointed a joint coordinating and monitoring committee in 1999. The study states that “the process of monitoring of companies by stock exchanges is weak and not adequate to act as a preventive measure”.  The other prominent factors for low participation of retail investors are compulsory delisting, defunct stock exchanges, scams and reduction of shares earmarked for them in the IPOs.

The over-pricing of IPOs by corporates, which was not sustainable in the long run, eroded investors’ confidence, Mr Jain writes in the book. He says PSUs were an exception as they fixed reasonable and fair prices. Interestingly, the use of technology is also cited as one of the factors for the decline in the number of investors. It states that the hassle of opening and operating a demat account and various charges levied on the account have affected the participation of investors in the market.

Mr Jain offers some solutions to the problem of dwindling investor interest. He says that an increase in the minimum securities offered in IPOs would lead to an increase in the liquidity, curb price manipulation and enhance efficiency of the price discovery mechanism. He suggests that the minimum offer to be made to the public be increased to 25 % from the current 10% of the post-issue.

He also suggests strengthening the IPO grading system whereby the process and the grading agencies should be made accountable and transparent. Fees paid to the grading agencies should be de-linked from the issuer company and must be paid by the stock exchange or SEBI. The report calls for strengthening the process of disposing of objections in the draft prospectus received by SEBI prior to opening of the issue and the final decision to be put on the SEBI website, which would enhance the confidence of investors in the system.

Other suggestions such as monitoring the end-use of funds should be done by the authority to ensure that funds are used for the purpose as stated in the prospectus. Monitoring share prices after listing and allotments, monitoring companies after listing, are some other key solutions mentioned in the report.  It emphasises on compensation and empowerment of investors in the event of loss due to fraud, unfair trade practices, insider trading and so on. Lastly, the report appeals for the simplification of the processes for opening and operating a demat account.

The book ends on the note that PSUs through IPOs can revolutionise the security market and accelerate economic growth by following the pricing principle they followed from 2003 to 2008 which led to immense wealth creation.



R Balakrishnan

6 years ago

Surely, the world's thinnest book will be titled:
Rewarding IPO's from India in the 2000's.

Nagesh KiniFCA

6 years ago

In the 1990s many IPOs with great names went down under taking small investors - either they disappeared from the scene altogether or enjoyed the funds, milked the companies and abandoned them.
The Regulatory frame work should provide for stopping this by insisting on the promoters, in their personal capacity providing appropriate guarantees, proof of permanent residence as well as that of the legal advisors, auditors and company secretary to prevent them from scotting from some hole in the wall PO box Chor Bazaar address.

Onion prices steady; tomato, garlic rates ease

New Delhi: Onion prices were steady at Rs40-Rs50 a kg in the retail markets of all metros but Chennai where it soared by Rs20 per kg, even as rates of tomato and garlic fell sharply in Kolkata and Mumbai, reports PTI.

Fall in arrival of supplies led to the sharp surge in onion prices in Chennai, traders said, pointing that against 10 lorries yesterday only three lorries arrived in the wholesale market there today.

Delhi, too, saw wholesale rate of onion increase by about Rs3 a kg in Azadpur mandi, Asia's biggest wholesale market of fruits and vegetables, due to drop in arrivals owing to fog, but there was no pass through effect in retail prices.

The wholesale rate at Azadpur ruled at Rs12-Rs40 per kg.

Good news for households came from Kolkata and Mumbai where prices of tomato and garlic eased by up to Rs15 per kg and up to Rs100 a kg, respectively, today, although they remained unchanged in Delhi and Chennai at Rs40-Rs50/kg and Rs250-Rs300/kg respectively.

Besides a marginal rise in Delhi, wholesale rate of onion also rose in Pimpalgaon (by Rs8/kg at Rs46/kg) while it eased substantially (by Rs16/kg at Rs31/kg) in Lasalgaon (the largest onion market in the country).

Nashik-based National Horticultural Research Development Foundation director RK Gupta attributed today's onion price rise at Pimpalgaon to farmers' unhappiness over softening of rates.

"Some farmers in the area are unhappy over softening prices of the vegetable and hence are bringing less quantity to the purchasing centres," Mr Gupta told PTI over the phone.

Azadpur market-based Onion Merchants Association general secretary Rajendra Sharma said: "There has been substantial fall in number of vehicles arriving in the market today from Rajasthan, Maharashtra, Gujarat and Madhya Pradesh."

Only about 550 tonnes of onion reached Azadpur market today against 850 tonnes yesterday, Mr Sharma added.

In the national capital, state-run outlets such as Nafed, Kendriya Bhandar and NCCF were selling the edible kitchen bulb at a concessional rate of Rs35 a kg, while Mother Dairy was vending onions at Rs40 per kg.

"Onion continues to sell at Rs40 a kg from our outlets in Delhi today...the rate is monitored on a daily basis after watching the price trend in the wholesale market," Mother Dairy spokesperson Neha Banerjee told PTI.

Meanwhile, a team of agriculture ministry officials reached Nashik today to assess the extent of damage to the crop due to unseasonal rains in November-December this year, official sources said.

Onion had shot up to Rs70-Rs80 a kg in the last fortnight, prompting government to take urgent action including a ban on exports and abolition of import duty, while many state governments facilitated sale of onion at a concessional price.

As onion prices started easing following government intervention, prices of tomato and garlic had started surging.

A top agriculture ministry official said yesterday that there was no rationale behind the increase in rates of tomato and garlic, even though one could appreciate the spurt in onion on account of the damage to the crops due to rain.

In Mumbai today, tomato prices fell by Rs12 a kg at Rs48/kg from yesterday's level of Rs60/kg while it dipped by Rs15/kg at Rs25 per kg in the Eastern metropolis.

Garlic, which is used both as a kitchen spice and to make ayurvedic medicines, fell sharply in Mumbai and Kolkata by Rs100/kg and Rs50/kg respectively. It sold at Rs200/kg in the two metropolis from Rs300/kg and Rs250/kg respectively there yesterday.
An Empowered Group of Ministers on food headed by finance minister Pranab Mukherjee is meeting here in the backdrop of high prices of vegetables, especially onion, tomato and garlic.

A report from Lucknow said that prices of onions tumbled in the wholesale market today after the district administration opened 25 outlets for sale of the vegetable at Rs22-Rs24 a kg since yesterday.

Buoyed by the success of the outlets, the district administration plans to open 25 more outlets to sell onions at low rates, an official said.

Sources in Azadpur market claimed that in order to cash in on the exorbitant prices of garlic (at Rs300 a kg in retail and Rs120-Rs180/kg in the wholesale market), some traders were illegally bringing garlic from China into the country via Nepal.

India had banned import of garlic from China two years ago following the detection of fungus in consignments of Chinese garlic.

From the Himalayan states, it is being transported to Delhi, Chennai, Mumbai and Coimbatore through trains from Bihar, which shares a border with Nepal, they claimed.


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