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Talks of boost in government spending uplift Indian market sentiment
The Sensex gained 245 points from the previous day’s close, ending the day at 17,228, while the Nifty closed at 5,148, up 81 points.
Reliance Industries Limited (RIL) is reportedly in talks with more than a dozen banks to club together a war chest of $8 billion-$10 billion for the acquisition of LyondellBasell, the world’s third-largest petrochemical company that has filed for bankruptcy in the US. The stock rose 2%.
Tata Steel rose 2% after the company said its sales rose 34.5% to 498,000 tonnes in November 2009 over November 2008.
Larsen & Toubro rose 1% after the company said that it had received an order worth Rs844 crore from the Nuclear Power Corporation of India for construction work at an atomic power project in western India.
Kiri Dyes & Chemicals has executed a purchase agreement for acquisition of DyStar Group and its selective assets. The stock shot up 9%.
New Delhi Television has entered into a conditional agreement with Turner Asia Pacific Ventures for the sale of most of its indirect stake in NDTV Imagine, which is held through its subsidiary NDTV Networks Plc. The total transaction size is $117 million and involves a sale of 76% of NDTV Imagine for a consideration of $67 million together with the subscription to fresh shares in NDTV Imagine by TAPV for $50 million. The stock was up 3%.
Gammon Infrastructure surged 7% on reports that the company would buy 24% stake in Indira Container Terminal and would increase the stake to 50% over three years.
Mahindra Systech said that it would consolidate Mahindra Ugine, Mahindra Forgings and other unlisted companies. All five companies will be consolidated under one company. Mahindra Ugine gained 5% and Mahindra Forgings shot up 10%.
During trading hours, the government said that it will seek Parliamentary approval to spend an extra Rs25,725 crore ($5.5 billion) for the fiscal year to end-March 2010. The gross additional expenditure would be Rs30,943 crore, of which Rs5,217 crore would be met through savings, the government said.
The government will spend an extra Rs3,000 crore on fertiliser subsidies and Rs3,460 crore on food subsidies. The government would also spend Rs800 crore on an equity infusion in State-run carrier Air India.
According to finance minister Pranab Mukherjee, the government will complete share sales through public offers in three State companies by the end of March 2010. Divestment of 5% each in NTPC and Rural Electrification Corp and 10% in unlisted Satluj Jal Vidyut Nigam is under implementation and there is a need to adhere to fiscal prudence as early as possible, he said.
As per media reports, Reserve Bank of India (RBI) governor D Subbarao said that measures to control capital inflows into India could not be ruled out in case there was a surge in foreign funds that had to be contained. The RBI governor said that he was not willing to debate at this time on the instruments or timing, as this would depend on how the situation evolves.
Meanwhile, the government has partially lifted the ban on rice and wheat exports by allowing organic varieties of these grains for overseas sale, as per reports.
According to the Manpower Employment Outlook Survey, India Inc is all set to step up hiring in the last quarter this fiscal as employers are more optimistic than their counterparts in other nations. The survey said brisk hiring is anticipated by Indian employers during the upcoming quarter.
It further added that with 38% of employers expecting total employment to increase, 2% forecasting a decrease and 53% predicting no change, the net employment outlook is a robust 36% and once seasonal adjustment is added to the data, the outlook stands at 39%.
India’s employment outlook in January-March is better than bigger economies including Australia at 19%, Canada at 13%, China at 11% and the US at 6%.
During the day, Asia’s key benchmark indices in China, Hong Kong, Japan, South Korea, Taiwan and Indonesia fell by between 0.09%-1.18%, as US Federal Reserve chairman Ben Bernanke’s comments on the outlook for the economy prompted investors to stay cautious.
The Japanese government unveiled a 7.2 trillion yen ($81 billion) economic stimulus package.
On Monday, 7 December 2009, the Dow Jones Industrial Average was up 1 point while the S&P 500 and the Nasdaq Composite were down 3 points and 5 points respectively after Mr Bernanke said the economy faced “formidable headwinds.”
In premarket trading, the Dow was trading 16 points higher.
Both the BSE and NSE recently announced their own MF trading platforms, immediately after SEBI gave its nod for introducing stock exchange based trading platforms for MFs (first reported by Moneylife). This has come as a delight to the broker community as they now stand to gain from another revenue stream.
Interestingly, however, many brokers do not even have the mandatory qualifications to be eligible to deal in MF products.
Moneylife had earlier pointed out that, for brokers, switching over to the complexities of MF schemes will involve a huge learning curve, given that their expertise lies in dealing with equity instruments. MFs represent a broadly different line of business altogether. This gap can only be bridged by passing the necessary Association of Mutual Funds in India (AMFI) test that would make them eligible to buy and sell MF units on behalf of clients.
Chandrashekhar Layane, senior vice president, FairWealth Securities said, “I think almost all the brokers would qualify to trade MF units on behalf of their clients; it is not that difficult to pass the AMFI distribution module. It depends ultimately on the broker’s business model. Apart from equity and commodity business, if he finds good opportunity in this platform, then he will surely get it done to qualify.” He recalled that in the past, brokers were hesitant to pass the NCFM exam introduced by NSE to run authorised trader terminals at their branches or franchisee locations. Now it has become a practice and almost all employees of the brokers are NCFM qualified.
The success of an MF trading platform would hinge on the ability of brokers to give quality advice to clients, tailored to their specific individual requirements. In such a scenario, brokers’ lack of expertise in MF products would only further alienate an already miniscule retail MF investor base. Mr Layane is of the opinion that absence of AMFI certification won’t hinder the implementation of MF platforms. “Many of the brokers who don’t have the AMFI distribution module certification will hire those candidates who have passed this exam to qualify to trade in MF units,” he added.
It is the responsibility of the Securities and Exchange Board of India (SEBI) to ensure that all terminal operators possess the necessary qualification before giving them the green signal.
Ambiguity in the tax structure and inefficient functioning of the Limited Liability Partnership (LLP) portal are the two factors that have made it difficult for lawyers to register these arrangements
Despite lower cost of formation and reduced compliance requirements, the LLP Act—enacted in 2008—has not generated much interest among individual businessmen and lawyers. According to the data available on the LLP website, there have been only 426 registrations for LLPs till 30 November 2009.
Industry sources reveal that ambiguity in LLP laws have made it difficult for lawyers to register LLPs. “Although the Act was enacted in January 2008, the tax component was only clarified in June 2009. The law was in effect from
1 April 2009,” said Sharada Balaji, founder of NovoJuris Services.
“If clients approach us for registration of an LLP, we tell them to register as a private limited company because of the complicated procedure (involved in LLPs),” said Ashfaq Baig, company secretary, A Baig & Co, a firm of practicing company secretaries.
Another factor behind the low LLP registration figure is believed to be the inefficient functioning of the LLP portal. “We are finding it easy to register a private limited company compared to an LLP. The portal of the ministry of corporate affairs is more user-friendly compared to the LLP portal,” added Mr Baig.
An LLP is a partnership in which some or all partners have limited liability. It is useful for small and medium enterprises in the general and services sectors like professionals (lawyers, chartered accountants) and knowledge-based enterprises.
LLPs can lead to considerable savings and can avoid the cumbersome procedures involved in setting up private limited companies. LLPs, however, cannot raise funds from the public.
Ms Balaji added that there will be a growth in the number of LLP registrations once the awareness about the law spreads.