The market is climbing a wall of worry. Watch 18,300 on the Sensex
The domestic market ended the week with a gain on positive global sentiments. Although the week stared with a subdued performance on the bourses weighed by the 'Bharat Bandh' called by the opposition parties; the market staged a sharp recovery the very next day. After settling lower on Wednesday, it posted huge gains on the last two days of the week. Finally, the Sensex and Nifty closed 2% higher on a weekly basis
The top Sensex gainers were Bharti Airtel (up 16%), Mahindra & Mahindra (M&M) (up 6%), Infosys Technologies, DLF and HDFC Bank (up 5% each. The top losers included ACC, Hindustan Unilever (HUL) (down 3% each), Reliance Infrastructure (R-Infra), NTPC and Jaiprakash Associates (down 2% each).
In the sectoral space on the BSE, the teck index gained 6% and consumer durables surged 5% while the oil & gas index shed 1%.
The Reserve Bank of India (RBI) last Friday (2nd July) raised interest rates earlier than expected, ahead of its 27th July policy review and days after the government freed fuel prices. Analysts expect another 25 basis points (bps) hike on 27th July, on concerns over inflation hovering above the 10% levels.
The finance ministry said that direct tax collections rose an annual 15.5% to Rs686.8 billion in the April-June period. Corporate taxes during the period rose 21.65% on the year to Rs434.4 billion.
US president Barak Obama said that the country is expected to double exports over the next five years. The White House Council of Economic Advisers estimates that rising US exports have added more than one percentage point to US growth in the last nine months.
China has tried to clear doubts over concerns on whether it will dump its huge stock of US bonds, stating that any increase or decrease in the holding of US bonds is a normal investment operation. China held $900.20 billion in US Treasuries at the end of April, according to US Treasury data released on 15th June.
In its latest analysis of the global manufacturing competitiveness index, Deloitte said that Asian giants China, India and South Korea led the current competitiveness index and were expected to retain their top three rankings over the next five years. In contrast, the dominant manufacturing superpowers of the late 20th century are expected to become less competitive. Other Western European nations will be similarly challenged, especially the Czech Republic, the Netherlands, Switzerland, Ireland, Italy and Belgium.
India's annual food inflation eased to 12.63% for the week ended 26th June from 12.92% in the previous week, but fuel inflation shot up to 18.02% after the hike in rates of petroleum products. Fuel inflation for the week under review rose sharply to 18.02% (from 12.90% in the previous week) after the impact of the fuel price hike. Prices of petrol and diesel were raised by up to Rs3.50 a litre, while that of liquefied petroleum gas (LPG) and kerosene were hiked by Rs35 per cylinder and Rs3 a litre respectively.
Industrial output is forecast to grow at 16% in May this year from a year earlier, lower than the annual growth of 17.6% in April.
India's car sales may go up by 12%-13% in 2010-11 to 1.7 million units as estimated by the Society of Indian Automobile Manufacturers (SIAM). In June this year, 1,41,184 cars were sold compared with 107,948 units a year ago, lower than the record 1,48,481 units sold in May. Sales of trucks and buses rose 44% to 52,211 units in June, while motorcycle sales rose by 30% to 715,985 units.
The Securities and Exchange Board of India (SEBI) on Wednesday relaxed the exposure margin requirement for stock derivatives, based on the feedback received from market participants.
European Central Bank President Jean-Claude Trichet dismissed the idea that the cost-cutting measures taken by the governments in various EU nations would bring about recession.
The International Monetary Fund (IMF) on Thursday raised its world output forecast for 2010, citing solid growth in the first half, especially in Asia. However, it expressed its concern over the downside risks flowing from Europe. The IMF revised its 2010 world gross domestic product (GDP) forecast to 4.6%, up from a previous forecast in April of 4.2%. The 2011 GDP forecast was unchanged at 4.3%. The multilateral lender also raised India's growth forecast for 2010 to 9.5%, stating that favourable financing conditions and robust corporate profits will accelerate economic expansion. It expects India's economy to grow 8.5% in 2011. South Korea's central bank raised its key interest rate from a record low amid prospects for growth in the country's economy.
Initial claims on State unemployment benefits dropped 21,000 to a seasonally-adjusted 454,000 in the week ended 3rd July, the lowest level since early May, the US Labor Department said.
India said that it will be committed to the Doha round of global trade talks and does not believe that bilateral and regional trade deals will affect the multilateral process. Trade minister Anand Sharma opined that an acceptable global trade agenda was the need of the hour for economic recovery.
Thousands of clients of ICICIdirect were left in the lurch on Thursday, as its trading site was nonoperational for more than 24 hours. Many customers are venting their anger through comments on Moneylife.in and other forums
The unavailability of ICICIdirect's trading portal during trading hours on Thursday has left many of its customers feeling let down and some of them are even looking at ways to initiate proceedings against the brokerage.
Several hapless customers have been venting their frustration on various forums on the Internet. One of the comments on our previous article reads, "They should pay a fine or forego their fees for the year when the site crashes for the whole day. Site not working for a short period is understandable, but a system where people are likely to have lost crores of rupees has to be accountable. How I wish I could sue them like in countries like the US."
A reader in his comment on moneycontrol.com has asked whether there is any way the Securities and Exchange Board of India (SEBI) can interfere, or if the Company Law Board can take some action. "How can the losses of the members of ICICIdirect services be compensated? Can we move the consumer court for a remedy?" the reader asked.
However, customers using online trading accounts cannot initiate legal proceedings against their brokerage for website malfunction. While opening an online trading account, customers sign an agreement, which clearly says that the brokerage cannot, and does not guarantee continuous, uninterrupted or secure access to the Internet, the website or linked site(s).
This is what the disclaimer on ICICIdirect.com says, "ICICI Securities Ltd (ISEC) along with its directors, employees, associates or other representatives and its Affiliates along with its directors, employees, associates or other representatives shall not be liable for damages or injury arising out of or in connection with the use of the www.icicidirect.com (Website) or its non-use including non-availability, compensatory, direct, indirect or consequential damages, loss of data, income or profit, loss of or damage to property, including without limitation loss of profits, loss or corruption of data, loss of goodwill, work stoppage, computer failure or malfunction, or interruption of business; under any contract, negligence, strict liability or other theory arising out of or relating in any way to the Website, site-related services, or any products or services and claims of third parties damages or injury caused by any performance, failure of performance, error, omission, interruption, deletion, defect, delay in operation or transmission, computer virus, communications line failure, theft or destruction or unauthorised access to, alteration of, or use of information, whether resulting, in whole or in part, from or relating to any of the services offered or displayed by ISEC on the Website."
On Thursday, Moneylife had revealed how the trading system as well as the phone-order service of ICICIdirect broke down yesterday, leaving numerous customers totally hapless. ICICIdirect is one of the largest trading portals in the country and its inability to set right the technical snags in its system is indeed appalling.
"Considering the number of account-holders on ICICIdirect and the position that ICICIdirect holds in the online trading business, this episode and the inadequate response of the company to it, reflects gross negligence on their part. I urge the authorities (SEBI and other regulatory bodies) to kindly investigate this failure and work out a mechanism by which the service provider is held accountable in instances of such failure to provide the services promised," read one comment on moneycontrol.com.
Usually, all the sites, especially those which deal directly with customers, have sufficient resources to fall back upon in case there is a technical problem. However, in the case of ICICIdirect's technical glitch, it appears that there was no backup available to handle such situations.
Despite our repeated attempts to know the exact reasons for the site crash, ICICIdirect and ICICI Securities were unable to provide any answer. This is what the spokesperson from both these entities has said: "We have resolved the technical glitch that we had faced yesterday. ICICIdirect.com is now completely functional and all our customers have been able to trade seamlessly on the site." There is neither any word on the brokerage's plan of action to avoid such situations in the future nor about any compensation to its customers who may have suffered losses.
According to Kirti Desai, a chartered accountant, this is not the first time a site of a brokerage has crashed. "The question is when SEBI does not allow any broker to stop trading, then how come such things happen time and again? I think there should be more transparency in the manner online sites of brokers operate," Mr Desai said.
With the advancement in technology - in terms of connectivity and infrastructure - online trading has reached a new high, where even delay of a second in placing an order can have significant financial impact. This exactly is the reason why more and more traders are opting for broadband or dedicated leased lines and trading terminals. However, since common investors are dependent on their broker's terminal or portal, they have no other option but to bear with the broker.
In addition, when the online trading portal of a reputed broker crashes then it may lead to irreparable damage for both the brokerage as well as its customers.
In his comment on moneycontrol.com, one reader even accuses the brokerage. The reader said: "My experience with ICICIdirect is whenever there is (a) big movement in (the) market, ICICI's site goes down due to reasons best known to them. There is nothing like 'technical error'. You can assume what is a big movement in markets on either side is beyond the control of ICICIdirect so they just hang up their system to prevent damage to their personal interests."
Echoing a similar feeling, one reader said, "I think SEBI should pitch in here. The quality of the website has been inconsistent. Some insiders say that ICICIdirect slows down when you need it the most. Not sure how true this is, but of late I have experienced trouble in modifying allocation on several occasions. The helpdesk is a paid-phone service that keeps (the) customer on wait for at least 5 minutes. To summarise, it is so unhelpful that one would rather keep to oneself than go to them."
In the war between Fortis Healthcare and Khazanah for Parkway, the Indian company will release its offer document to shareholders later this month. While extending its offer period, the Malaysian sovereign fund is busy scouting for money
Khazanah Nasional Berhad (Khazanah), the investment-holding unit of the Malaysian government, has preferred to go in for a 'wait and watch' mode in its battle with India Fortis Healthcare Ltd for controlling Parkway Holdings Ltd. In order to gain more time and knowledge, Khazanah has extended its offer period for Parkway to 26th July from 8th July.
According to a report by the Malaysian Reserve, Khazanah is seeking loans from five banks, which would enable the sovereign fund to increase its offer for Parkway. Khazanah has told Australia & New Zealand Banking Group Ltd, CIMB Group Holdings Bhd, DBS Group Holdings Ltd, Oversea-Chinese Banking Corp and United Overseas Bank Ltd that it may need to borrow at least one billion Singapore dollars (S$), the report said. Citing a person close to the developments, the newspaper said Khazanah will increase a planned sale of Islamic bonds to S$1 billion from S$500 million, in case it decides to offer more for the Parkway stake.
Last week, Fortis Healthcare, controlled by billionaire brothers Malvinder and Shivinder Singh, made a cash offer of S$3.8 per share to buy Parkway over Khazanah's S$3.78 per share offer.
On 27th May, Khazanah, which holds 23.8% stake in Parkway, made an open offer to increase its stake to 51.5% at S$3.78 per share. Fortis, on the other hand, holds 25.37% stake in Parkway, making it the largest stakeholder in the company. Fortis had bought stake in Parkway from US-based TPG Capital by paying S$959 million.
According to media reports, Khazanah is also waiting for Fortis to release offer documents to shareholders later this month before it takes a final judgement about its next move.
While Khazanah can make a partial offer to Parkway, the same is not true in case of Fortis. Under Singapore takeover laws, anyone who has bought shares in the past six months is forbidden from making a partial offer. This gives Khazanah an advantage over Fortis. While Khazanah can raise its price for partial offer, Fortis will have to make an offer for complete takeover, in case the bidding war breaks out.
This could potentially cost Fortis at least S$3.1 billion to buy out the remaining shareholders in Parkway. In other words, Fortis will have to shell out over S$4 billion, including the price it paid to TPG, for buying a company whose returns on shareholder's funds are just 7.7% for FY09. For 2009, Parkway's total revenues increased 7% to S$979.2 million compared with S$914.8 million a year ago. However, during the same period, its net profit increased 169% to S$124.9 million from S$43.4 million in the previous year due to better performance of its international operations. (See: http://www.moneylife.in/article/8/5766.html).
Last month, Morgan Stanley - the advisor to independent directors of Parkway Holdings - has said that Khazanah's offer price of S$3.78 is reasonable, but not compelling. This advice may compel Khazanah to sweeten its offer as well as put some pressure on Fortis as well.
In a circular sent out by Parkway's independent directors, Morgan Stanley said that five of Parkway's 17 directors are considered independent. Among the five, two plan to vote in favour of the bid and sell their shares, one does not plan to vote and will keep his stake, and two do not own shares in Parkway. Three other directors, Parkway's chief executive officer (CEO) Tan See Leng, former CEO Lim Cheok Peng and its vice-chairman Seow Yung Liang, will vote against Khazanah's offer and will not sell their shares, according to the circular.