MUMBAI: HDFC, the country’s leading housing finance company, has said that interest rates will come down 25-50 basis points, if the Reserve Bank of India (RBI) does not raise interest rates or cash reserve ratio on January 29. The housing finance company said it would take a decision on rates after the RBI policy.
Speaking at a global trade and investment conference organised by the Indian Merchants’ Chamber here, HDFC Chairman Deepak Parekh said that a 25-50 bps fall in interest rates is expected, following the credit policy.
Incidentally, HDFC has extended a festival discount scheme, which was to end in December, till end-January. The company has also realigned interest rates in some categories, resulting in borrowers in the Rs 20 lakh to Rs 1 crore categories getting a 25-bps benefit in interest rates.
HDFC has been offering home loans at 10.25-10.5% as part of a festive offer, and the chairman’s recent comments indicate that these rates might continue for a while.
He added that the bank had seen a loan growth of 25% during the current quarter. “While property prices in the suburbs of Mumbai seem to have plateaued, rates in areas like South Mumbai and Delhi are not showing any such signs,” according to Mr Parekh.
Taking a cue from the Tatas’ latest people’s car, Mr Parekh said builders and the government needed to look at affordable housing as well. “With builders going in for more luxury housing, affordability seems to have been thrown out of the window. There is a need for disincentivising such builders by taxing them more,” he added.
Mr Parekh warned that the subprime crisis in the US might still have an impact on India. “India is resilient, but not immune to global events,” he said. A possible economic slowdown in the US could result in companies cutting down on their IT spends, thus impacting software development activities and outsourcing to India, he felt.
Speaking at the same event, Enam Securities chairman Vallabh Bhansali said, “The US is likely to go through a severe recession, and the domestic pressures resulting out of this will have some impact on the outward flow of dollars. However, on the flipside, the US could start saving more and rates could come down.”
However, a global slowdown will not affect the Indian economy as much as it will affect other Asian economies, including China, as India is not as dependent on exports, and has a significant domestic factor as well. The Indian markets will not see a flood of forex flows like in the past two years, with most investors booking their profits and there has not been a mobilisation of fresh funds, felt Mr Parekh.
The same view, however, is not held by Deustche Bank India CEO Gunit Chadha, who felt that the strong economic growth in the country indicates that forex inflows will continue to come in with the same pace as they have in the past.
Saturday, 12 January 2008
New stocks in mid, small-cap indices
MUMBAI: The Bombay Stock Exchange on Thursday said it had made replacements in the BSE mid-cap and small-cap indices, which will come into effect from January 14.
A total of 30 new stocks have been included in the mid-cap index, which would replace 33 existing companies, a BSE circular said.
The new inclusions in the mid-cap index include Ahluwalia Contracts, Ashok Leyland, Biocon, Central Bank of India, Corporation Bank, Gammon India, Lupin, Monnet Ispat, Mercator Lines, Oriental Bank of Commerce, Religare Enterprises, State Trading Corporation, Tata Tea, South Indian Bank and Walchandnagar Industries.
The exchange has also decided to make replacements in the small-cap index, wherein 66 new stocks have been included in place of 65 existing companies, the circular added.
Among the small-cap index the new entrants include Aksh Optifibre, Alembic, Asian Electronic, Bihar Sponge Iron, Eicher Motors, Dabur pharma, Cambridge Solutions, Nucleus Software, Polaris Software Lab, Sundaram Fasteners, Trent and Tube Investments.Stars may be aligning for ICICI brokerage IPO
Word out of Mumbai Monday has the bank's executives and investors mulling an initial public offering of its investment banking and brokerage arm in a move to capitalize that nation's growing economy and need for financial services.
There's plenty of competition in the brokerage business in India, with several foreign firms taking stakes in existing companies, but as the West's largest brokers continue to lick their subprime wounds, their ability to fund operations may be constrained.
That could provide further incentive and help sway a decision, by, in effect, giving ICICI a chance to grow its business while some major foreign competitors needed to husband their own capital at home.
ICICI shares rose about 40% in 2007, but those results lagged the government-run State Bank of India, whose share price grew about 90% over the same period.
Analysts who discussed the meeting earlier today in Mumbai with Reuters speculated that the bank and brokerage operations, if split, would unlock a lot of value.
With international investors looking for financial stocks, the ICICI offering would be compelling. The bank has already sold stakes of 10% each to two funds in Singapore, including the government-run Singapore Investment fund.
Adding to the appeal, and possible downside protection, analysts have predicted, correctly, that demand for financial services in India will grow at double-digit rates for the next several years.
And there's also demand for the stocks themselves. Traditionally, not many brokerages have been publicly traded in the country, but that's changing. According to reports over the last year, three brokerage firms went public in India in 2007, bringing the total of traded firms to 47.
How right might the time be then for ICICI to IPO the brokerage unit? Well, India's market bucked the global trend on Monday, rising to its third record since the new year began, driven by a more than 6% gain in ICICI.
There's plenty of competition in the brokerage business in India, with several foreign firms taking stakes in existing companies, but as the West's largest brokers continue to lick their subprime wounds, their ability to fund operations may be constrained.
That could provide further incentive and help sway a decision, by, in effect, giving ICICI a chance to grow its business while some major foreign competitors needed to husband their own capital at home.
ICICI shares rose about 40% in 2007, but those results lagged the government-run State Bank of India, whose share price grew about 90% over the same period.
Analysts who discussed the meeting earlier today in Mumbai with Reuters speculated that the bank and brokerage operations, if split, would unlock a lot of value.
With international investors looking for financial stocks, the ICICI offering would be compelling. The bank has already sold stakes of 10% each to two funds in Singapore, including the government-run Singapore Investment fund.
Adding to the appeal, and possible downside protection, analysts have predicted, correctly, that demand for financial services in India will grow at double-digit rates for the next several years.
And there's also demand for the stocks themselves. Traditionally, not many brokerages have been publicly traded in the country, but that's changing. According to reports over the last year, three brokerage firms went public in India in 2007, bringing the total of traded firms to 47.
How right might the time be then for ICICI to IPO the brokerage unit? Well, India's market bucked the global trend on Monday, rising to its third record since the new year began, driven by a more than 6% gain in ICICI.
Gujarat investors rush for demat accounts to boost IPO chances
Ahmedabad: The Rs11,700 crore Reliance Power Ltd’s initial public offering (IPO), which is to open on 15 January, appears to have had an impact on the opening of new dematerialized, or demat, accounts in Gujarat.
Such accounts are needed to buy or sell stocks and electronically hold an investor’s stocks.
“Till about a fortnight ago, we used to get about 10 requests daily for opening demat accounts. Ever since Reliance Power has announced its IPO, at least 100 people every day want to open demat accounts,” claims Nilesh Kotak of Ahmedabad-based Dhanvarsha Finvest, a small sub-brokerage and investment advisory firm, and a franchisee for broking house Khandwala Securities Ltd.
Wealth-conscious: A file photo of a ceremony when Gujarat’s mercantile community opens ledgers and new account books. Anil Ambani says at least two million of investors in his group companies are from this state.
Kotak is not alone. Anagram Securities Ltd director V.K. Sharma, too, says many people want to open demat accounts ahead of the IPO. “I have received phone calls from people who had never subscribed to any public float,” he says.
Kotak is not alone. Anagram Securities Ltd director V.K. Sharma, too, says many people want to open demat accounts ahead of the IPO. “I have received phone calls from people who had never subscribed to any public float,” he says.
Estimates vary but some brokers here claim 100,000 new demat accounts have been opened in the past fortnight alone.
Mint couldn’t independently confirm such claims. Nationally, the Central Depository Services Ltd (CDSL) has added nearly 80,000 demat accounts since 1 January. According to the data on its website, the total number of demat accounts held at the depository has gone up from 3.57 million as on 31 December to 3.65 million by 7 January. It is unclear how many of these might have been in Ahmedabad or Gujarat, traditionally a centre for trading in IPOs by small investors.
Investors in Gujarat have been in the forefront when it comes to opening demat accounts. In the past year, they opened 23% more demat accounts with two depositories—National Securities Depository Ltd and CDSL—and Gujarat accounts for about 15% of the total 11.5 million demat accounts in India.
Anil Ambani, chairman and managing director of Reliance Anil Dhirubhai Ambani Group, which owns Reliance Power, said in an Ahmedabad roadshow to market the IPO that at least two million of the total seven million investors in his group firms are from Gujarat.
“Expecting a surge in demand, we started distributing forms for demat accounts from some time back as we were aware that Ahmedabad will be on a holiday to celebrate kite-flying during the Makar Sankranti festival on the weekend beginning 12 January,” says an official in the local office of a Mumbai-based brokerage.
It takes a few days to open a new demat account because firms are required to do client verification under the “know your customer” norms. “With such a rush, it could take anywhere between 12 and 15 days,” the Mumbai broker says.
Purvin Patel, a long-time investor in the stock markets, wants to open three more demat accounts in names of his family members. “I want to invest as much as possible in this issue,” Patel says. Rajesh Shah, a businessman, too is opening demant accounts for his family members to apply for more shares. “I have opened an account for my wife, both my kids and my younger brother,” says Shah.
Gujarat makes up for about 15% of India’s total 11.5 mn demat accounts
Under the Securities and Exchange Board of India norms, retail investors are assured of 30-35% of stocks that are sold in the market but often, large public issues generate a huge response from retail investors and, as a result, individuals might not receive as many shares as they apply for.
Meanwhile, the “rental” fees for an existing demat account in the city’s grey market, which normally runs at Rs200-500 depending on the IPO, have gone up to Rs2,500 per account for the Reliance IPO. In recent months, Mundra Port and SEZ Ltd’s IPO, which was oversubscribed multiple times, saw rentals for demat accounts reaching Rs1,500 for an account.
The grey market, or koshtak, is an illegal market where applicants rent out their permanent account numbers and demat accounts for a fee. These applicants subscribe to IPOs but, even before the shares are allotted, hand over signed delivery instruction slips to the brokers with whom they had first struck the deal. Once the shares are allotted, the brokers transfer the shares to their own accounts, turning the legitimate demat account holders into middlemen who get a fixed fees.
The premium for the Reliance IPO, which has a price band of Rs405-450 a share, was ruling at Rs370-375 per share in the grey market on Wednesday, down from Rs440-450 on 7 January. Meaning, investors expect the shares to potentially trade as high as Rs825 a share. The grey market premium, many believe, is an indication of the performance of a stock on bourses and a guide for retail investors on which stock to apply for. However, signals from this market are not always correct.
For instance, the grey market premium on realty giant DLF Ltd’s shares was Rs30-40 a share, indicating a lack of confidence in the prospects of the issue. However, the DLF issue, priced at Rs525, got listed at Rs570.05 on 5 July and since then, it has risen by more than 105%. It closed Wednesday at Rs1,168.85 a share on the Bombay Stock Exchange.
Govt securities portfolio of banks under RBI scanner
The Reserve Bank of India is examining the government securities portfolio of both primary dealers and banks, triggered by concern of overleveraging and stocking of huge portfolios.
The government securities market has been rallying in the past few days after the finance minister hinted at rate cut by banks and the RBI.
The volumes in the government securities market had reached a high of 18,000 crore on Thursday and the yield on the 10-year benchmark security reached a low of 7.56 per cent. Till a few days ago, the yield on the 10-year benchmark paper was ruling in a range of 7.87-90 percent.
Bankers said the examination of the bank books by the central bank has been triggered by the concern that banks may be maintaining bonds of higher duration or maturity anticipating appreciation in the gilts portfolio once the RBI opts for rate cut in the forthcoming monetary policy review by the month-end.
If the rates are not cut, then banks would run into losses leading to a rush for borrowings in the money market to make provision for the market losses. Most of the banks are seen stocking up long-term of bonds of 30-year maturity and above since the extent of appreciation in the portfolio is always higher for longer maturity papers.
Primary dealers, on the other hand, are leveraging their capital base and maintaining huge positions in the government securities. These could also run in market losses if the interest rate position runs haywire.
The RBI also fears off-market deals in the government securities where the banks may have sold government securities to non-savvy investors such as pension funds, trusts who are aflush with funds after the government paid the interest on the special deposit scheme maintained by such trusts and funds. According to dealers, the banks have been bullish since there are no auctions slated to be held in the rest of the financial year. The government has already stretched itself by borrowing in excess in June 2007 for buying the shareholding of State Bank of India from RBI.
Therefore, the RBI may slash the quantum of the borrowing programme if not completely cancel it, which is scheduled to be held next month. Secondly, the yields on US treasury bonds have been falling tracking the recessionary trends in the US economy.
The yield on 10-year US treasury bonds has fallen from 4.60-4.70 per cent to 3.81 per cent. The liquidity, which has been a concern, has improved markedly with the RBI intervening in the market to buy dollars and releasing rupees. Since the RBI has cancelled market stabilisation scheme, there has been not supply in comparison to the m maturing T-bills.
The government securities market has been rallying in the past few days after the finance minister hinted at rate cut by banks and the RBI.
The volumes in the government securities market had reached a high of 18,000 crore on Thursday and the yield on the 10-year benchmark security reached a low of 7.56 per cent. Till a few days ago, the yield on the 10-year benchmark paper was ruling in a range of 7.87-90 percent.
Bankers said the examination of the bank books by the central bank has been triggered by the concern that banks may be maintaining bonds of higher duration or maturity anticipating appreciation in the gilts portfolio once the RBI opts for rate cut in the forthcoming monetary policy review by the month-end.
If the rates are not cut, then banks would run into losses leading to a rush for borrowings in the money market to make provision for the market losses. Most of the banks are seen stocking up long-term of bonds of 30-year maturity and above since the extent of appreciation in the portfolio is always higher for longer maturity papers.
Primary dealers, on the other hand, are leveraging their capital base and maintaining huge positions in the government securities. These could also run in market losses if the interest rate position runs haywire.
The RBI also fears off-market deals in the government securities where the banks may have sold government securities to non-savvy investors such as pension funds, trusts who are aflush with funds after the government paid the interest on the special deposit scheme maintained by such trusts and funds. According to dealers, the banks have been bullish since there are no auctions slated to be held in the rest of the financial year. The government has already stretched itself by borrowing in excess in June 2007 for buying the shareholding of State Bank of India from RBI.
Therefore, the RBI may slash the quantum of the borrowing programme if not completely cancel it, which is scheduled to be held next month. Secondly, the yields on US treasury bonds have been falling tracking the recessionary trends in the US economy.
The yield on 10-year US treasury bonds has fallen from 4.60-4.70 per cent to 3.81 per cent. The liquidity, which has been a concern, has improved markedly with the RBI intervening in the market to buy dollars and releasing rupees. Since the RBI has cancelled market stabilisation scheme, there has been not supply in comparison to the m maturing T-bills.
Friday, 11 January 2008
HOT STOCKS for 11-01-08
STATISTICS :
Markets yesterday had seen profit booking in the last hour of trade. Volatility continues for some time Nifty can trade between 6120 - 6240 levels. Nifty has a strong support level @ 6095 level, and a resisstance level @ 6210 once nifty closes above this level can see new highs.
Sector to watch out for today is steel companies which had been beaten in past few days could bounce back.
INTRADAY :
SAIL : buy for a tgt of 257+, sl @ 245
INFOSYS : buy for a tgt of 1650+, sl @ 1590
TISCO : buy for a tgt of 875+, sl @ 845
FUTURES :
SAIL : buy for a tgt of 259+, sl @ 247
ZEEL : buy for a tgt of 302+ , sl @ 290
IDEA : buy for a tgt of 145+, sl @ 137
INFOSYS : buy for a tgt of 1660+, sl @ 1590
IDFC : buy for a tgt of 220+, sl @ 207
OPTIONS :
IDFC : buy call 230 for a tgt of 10+, sl @ 2.75
IDEA : buy call 140 for a tgt of 7+, sl @ 3
INFOSYS : buy call 1800 for a tgt of 55+ can go to 60 levels, sl @ 16
Markets yesterday had seen profit booking in the last hour of trade. Volatility continues for some time Nifty can trade between 6120 - 6240 levels. Nifty has a strong support level @ 6095 level, and a resisstance level @ 6210 once nifty closes above this level can see new highs.
Sector to watch out for today is steel companies which had been beaten in past few days could bounce back.
INTRADAY :
SAIL : buy for a tgt of 257+, sl @ 245
INFOSYS : buy for a tgt of 1650+, sl @ 1590
TISCO : buy for a tgt of 875+, sl @ 845
FUTURES :
SAIL : buy for a tgt of 259+, sl @ 247
ZEEL : buy for a tgt of 302+ , sl @ 290
IDEA : buy for a tgt of 145+, sl @ 137
INFOSYS : buy for a tgt of 1660+, sl @ 1590
IDFC : buy for a tgt of 220+, sl @ 207
OPTIONS :
IDFC : buy call 230 for a tgt of 10+, sl @ 2.75
IDEA : buy call 140 for a tgt of 7+, sl @ 3
INFOSYS : buy call 1800 for a tgt of 55+ can go to 60 levels, sl @ 16
Infosys Technologies
Infosys Q3 cons net up at Rs 1231 cr
Infosys Technologies has announced its third quarter numbers. It has posted consolidated net profit of Rs 1231 crore for the quarter ended December 2007 as against Rs 1100 crore in previous quarter.
Net sales went up to Rs 4,271 crore from Rs 4,106 crore QoQ. Infosys numbers are higher than guidance.
The company has added 47 clients in the last quarter and net addition of employees were 8100.
Other income at Rs 158 crore versus Rs 154 crore QoQ.
Operating profit margin increased to 32.59% versus 31.27% QoQ.
Guidance for FY08
In dollar terms, FYO8 revenues of USD 4.17 billion versus USD 4.18 billion.
FY08 Revenues seen at Rs 16627 versus Rs 16651 crore YoY.
FY08 guidance assumes tax reversal of Rs 101 crore.
Q4 revenues seen at Rs 4477 crore versus Rs 4501 crore.
FY08 EPS seen at Rs 81.07 and Q4 EPS seen at Rs 21.38
Infosys Technologies has announced its third quarter numbers. It has posted consolidated net profit of Rs 1231 crore for the quarter ended December 2007 as against Rs 1100 crore in previous quarter.
Net sales went up to Rs 4,271 crore from Rs 4,106 crore QoQ. Infosys numbers are higher than guidance.
The company has added 47 clients in the last quarter and net addition of employees were 8100.
Other income at Rs 158 crore versus Rs 154 crore QoQ.
Operating profit margin increased to 32.59% versus 31.27% QoQ.
Guidance for FY08
In dollar terms, FYO8 revenues of USD 4.17 billion versus USD 4.18 billion.
FY08 Revenues seen at Rs 16627 versus Rs 16651 crore YoY.
FY08 guidance assumes tax reversal of Rs 101 crore.
Q4 revenues seen at Rs 4477 crore versus Rs 4501 crore.
FY08 EPS seen at Rs 81.07 and Q4 EPS seen at Rs 21.38
Securities in ban period for trade date January 11, 2008- F&O segment
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The derivative contracts in the below mentioned securities have crossed 95% of the market-wide position limit and are currently in the ban period. It is hereby informed that all clients/ members shall trade in the derivative contracts of said securities only to decrease their positions through offsetting positions. Any increase in open positions shall attract appropriate penal and disciplinary action in accordance with the Circular No. NSCC/F&O/C&S/365 dated August 26, 2004.
| Sr.No. | Symbol |
| 1 | ADLABSFILM |
| 2 | APTECHT |
| 3 | ARVINDMILL |
| 4 | BINDALAGRO |
| 5 | GMRINFRA |
| 6 | HINDOILEXP |
| 7 | HOTELEELA |
| 8 | IFCI |
| 9 | ISPATIND |
| 10 | IVRPRIME |
| 11 | JPHYDRO |
| 12 | NAGARFERT |
| 13 | PARSVNATH |
| 14 | RNRL |
| 15 | RPL |
| 16 | SRF |
Wednesday, 9 January 2008
HOT STOCKS for 10-01-08
STATISTICS :
Markets today will continue to be volatile and stock specific action can be seen. profit booking in selected midcap stocks can be noticed ahead of new IPO's coming this month. Nifty has a strong support @ 6245 level. and Resistance @ 6330. once nifty closes at this level can see new highs in coing days.
Sectors to watch out for today : IT stocks ahead of Infosys results can look good today.
INTRADAY :
INFOSYS : buy for a tgt of 1700+, sl @ 1640
IDFC : buy for a tgt of 228, sl @ 218
TATA MOTORS : buy for a tgt of 800+ , sl @ 760
DELIVERY :
SAIL : buy for a tgt of 310+ :: 1 month tgt
IDEA : buy for a tgt of 165+ :: 1 month tgt
POWERGRID : buy for a tgt of 160+ :: 1 month tgt
FUTURES :
INFOSYS : buy for a tgt of 1705+ , sl @ 1640
SATYAM : buy for a tgt of 440+ , sl @ 420
ZEEL : buy for a tgt of 325+, sl @ 299
TCS : buy for a tgt of 1030+, sl @ 985
IDFC : buy for a tgt of 229+, sl @ 220
IDBI : buy for a tgt of 172+, sl @ 165
OPTIONS :
IDFC : buy call 225 for a tgt of 13+, sl @ 8
IDEA : buy call 135 for a tgt of 9+, sl @ 4.5
INFOSYS : buy call 1800 for a tgt of 60+, sl @ 28
Markets today will continue to be volatile and stock specific action can be seen. profit booking in selected midcap stocks can be noticed ahead of new IPO's coming this month. Nifty has a strong support @ 6245 level. and Resistance @ 6330. once nifty closes at this level can see new highs in coing days.
Sectors to watch out for today : IT stocks ahead of Infosys results can look good today.
INTRADAY :
INFOSYS : buy for a tgt of 1700+, sl @ 1640
IDFC : buy for a tgt of 228, sl @ 218
TATA MOTORS : buy for a tgt of 800+ , sl @ 760
DELIVERY :
SAIL : buy for a tgt of 310+ :: 1 month tgt
IDEA : buy for a tgt of 165+ :: 1 month tgt
POWERGRID : buy for a tgt of 160+ :: 1 month tgt
FUTURES :
INFOSYS : buy for a tgt of 1705+ , sl @ 1640
SATYAM : buy for a tgt of 440+ , sl @ 420
ZEEL : buy for a tgt of 325+, sl @ 299
TCS : buy for a tgt of 1030+, sl @ 985
IDFC : buy for a tgt of 229+, sl @ 220
IDBI : buy for a tgt of 172+, sl @ 165
OPTIONS :
IDFC : buy call 225 for a tgt of 13+, sl @ 8
IDEA : buy call 135 for a tgt of 9+, sl @ 4.5
INFOSYS : buy call 1800 for a tgt of 60+, sl @ 28
Read between the lines on analyst-speak
This below explaination also holds good for indian markets also, so this is what big firms which suggest for the retail investors. Their recomendations for a particular share to buy or sell will come only after they trade in them, after their purchase they suggest to TV channels that one stock will go up and such bullshit so be carefull.
This is what a well known professor explains in the below lines, so do check it out and write your comments.
An analyst’s pessimistic outlook is more to be trusted than an optimistic view — Bijoy Ghosh.
Mr Siva Nathan, Associate Professor, Robinson College of Business, Georgia State University, US.
This is what a well known professor explains in the below lines, so do check it out and write your comments.
An analyst’s pessimistic outlook is more to be trusted than an optimistic view — Bijoy Ghosh.
D. Murali
With coverage of the stock markets expanding sharply, ‘analyst’ reports and recommendations are now widely available to every lay investor. But should investors take these sound bytes at face value?
Maybe not, observes Mr Siva Nathan, Associate Professor in the School of Accountancy of Robinson College of Business, Georgia State University, US. He feels that full service brokerage firms (firms that offer complete advice) have transported their US model to India and this brings with it several problems.
“The sell-side analysts working for these firms in India have the same conflict of interest problem that they had in the US before the regulations,” he cautions, during the course of an e-mail interaction with Business Line. “They are overly optimistic on the firms they cover.”
Mr Nathan — a commerce graduate from the University of Bombay, an MBA from the University of Rochester, and a Ph.D from the State University of New York at Buffalo — co-authored in 1995 a paper titled ‘The Effect of Investment Banking Relationships on Financial Analysts’ Earnings Forecasts and Investment Recommendations.’“The Indian stock market has been booming, but I am afraid much of this may be due to the over-optimism of these analysts,” fears Mr Nathan.
Mr Siva Nathan, Associate Professor, Robinson College of Business, Georgia State University, US.
A lot of the blame for the collapse of the Internet firms in the US was traced to the over-optimism of the sell-side analysts, he says.
Excerpts from the interview.
You have done research on US financial analysts. What were the important findings that your work yielded? Has much changed since then?
In the US, most sell-side analysts work for full-service brokerage firms (FSBFs) such as Merrill Lynch, Goldman Sachs, Morgan Stanley, etc. These firms have three major departments:
The research department, where the analyst works.
The investment banking (IB) department, which does the IPOs (initial public offers), bond issues, seasoned equity offerings (firm is already public but is issuing more shares), and M&A (merger and acquisition).
This department is very profitable and the dollars involved are huge.
The trading department, which buys and sells shares on behalf of the brokerage firm’s customers and earns brokerage commission.
My research focused primarily on the relationship between the research department and the investment banking department of the firm.
I found that sell-side analysts working for the firm were more optimistic about a company (relative to other analysts following the same company) both in terms of earnings forecasts and investment recommendations when their brokerage firm had an investment banking relationship with that company.
The analysts were optimistic because they were rewarded based on getting investment banking business for their firm.
The companies the analysts are following will give such business to that firm only if that firm’s analyst is optimistic about that company.
A lot of the blame for the collapse of the Internet firms in the US was traced to the over-optimism of the sell-side analysts working for brokerage firms.
In 2002, regulation was passed in the US prohibiting analysts from being compensated based on anything other than their performance with respect to earnings forecasts and investment recommendations.
In other words, they cannot be compensated based on bringing in investment banking business for their IB department or generating brokerage commission for their trading department.
Since this regulation was passed, sell-side analysts of the FSBF have become less optimistic and they are now issuing more sell recommendations. So I would say the US regulation has been effective.
What are the top traps we need to be cautious about?
In addition to the conflict of interest problem, in the US there was another problem pertaining to analysts. The management of a firm had its favourite analysts.
They would give private information to them (most of these analysts worked for the FSBF).
These analysts would pass on this information to their favourite clients, who would then trade on these stocks and make money. Management, of course, would release the same information publicly a few days later.
In 2000, the SEC passed ‘Reg FD’ (Regulation Fair Disclosure), which required that if management had information to disseminate, it will have to disclose it publicly to everyone at the same time.
sIn other words, releasing information privately to selected analysts beforehand is now prohibited. Again, research has shown that Reg FD has been very effective in curbing insider trading.
In India, I am sure management has its own ‘chela’ analysts to whom it gives private information. So this problem also needs to be fixed, again by SEBI.
Are there clear drivers behind any undue optimism on the part of the analyst?
Overall, an analyst has incentive to be optimistic for three reasons:
First, being optimistic keeps an analyst in the good books of management. Why would management talk to an analyst who is negative about the company?
Second, issuing buy recommendations generates more trading commission for the brokerage firm than sell recommendations.
Third, being optimistic generates investment banking (IB) business for the brokerage firm.
What are the implications for investors?
Investors need to read the research reports of multiple analysts for the same company. They need to find out whether the analyst’s brokerage firm has an IB relationship with the company.
You need to be very careful about the optimism of analysts.
An analyst’s pessimistic outlook is more trustworthy than his/her optimistic outlook.
Also, an individual investor should not try to trade based on information that has just been released, because it is too late.
That information has already been released privately and the market has probably adjusted before the individual investor can trade.
Demand for demat a/cs soars
MUMBAI: In an interview to this newspaper on Monday, Anil Ambani spoke of a broker who had jokingly called him ‘Demat Jockey’ — jockey in Gujarat being people who write examinations on behalf of real candidates. The broker couldn’t have been more precise. Close to two years after SEBI first unearthed the IPO scam and the process of opening demat accounts became stricter, demand for opening such accounts is soaring again. While some analysts are attributing the phenomenal rise to genuine interest in the Reliance Power IPO, others claim that brokers are merely hiring demat accounts for booking listing gains in the IPO. According to grey market sources, investors who already have demat accounts are being paid Rs 8,000 for ‘renting’ out their demat accounts. Under this arrangement, grey market brokers offer Rs 8,000 to a demat account holder, who then applies in the retail investor quota for Rs 1 lakh worth of shares. In fact, this commission is usually irrespective of whether listing gains are made or not. This investor signs a delivery instruction slip authorising transfer of shares from his account into that of his broker, and this transaction is effected on the day of the listing. The only difference between this arrangement and that used in the IPO scam is that these applications are not ‘benami.’ Demat accounts belong to actual people and not in the name of fictitious entities, as SEBI found was the case in the IPO scam. Reliance Power shares are already quoting a premium of Rs 400-420 in the grey market and hence the grey market operator is likely to realise a return of around 80% on his investment, even after paying the “rental charge” of Rs 8,000. Broking houses and banks have been falling over each other to lend money for investing in IPOs and this had led to a pick up in the pace of growth in demat accounts over the past few months. Overall bullishness in the market firing up stocks across the board, has also contributed to this trend. But depository officials said this level of frenetic demand is almost unprecedented. “If a male member in the family already has a demat account, he is opening another in the name of his wife and children,” said an official at a depository. India has two depositories (those that store stocks in the electronic form). Of the approximately 1.10 crore demat accounts, around two-thirds are with NSDL and the rest with CDSL. |
Securities Firms Set Eye on Central Asian Market
Securities companies are accelerating efforts to boost their global networks by setting up beachheads overseas in line with the Capital Market Consolidation Act.
Brokerage houses such as Daishin and Daewoo are lining up this year to set up offices in oil-rich Kazakhstan.
Daishin Securities said the Central Asian country is attractive because of its abundant energy reserves, and an increasing number of domestic companies are looking to expand there.
By setting up its base there ahead of others, it plans to increase its services to firms with the aim of becoming a global investment bank.
After making inroads into China, Vietnam and Indonesia, Daewoo Securities is also considering Kazakhstan as its next growth platform. It said it plans to set up a unit there to expand services in the Central Asian region.
Hyundai Securities, meanwhile, is aiming to launch a fund investing in energy companies in Kazakhstan by the end of this month.
Woori Investment & Securities, Korea Investment & Securities and Goodmorning Shinhan Securities are also considering expanding into Central Asia this year.
Mirae Asset Securities plans to open offices in India this year. The company with its sister firm, Mirae Asset Investments, plans to establish bases in the United States. Mirae Asset Group already has units in Hong Kong, China, Vietnam and the U.K. so far. Park Hyun-joo, the group chairman, noted in his New Year speech that it is time to ambitiously seek overseas markets for further growth.
Woori Investment is aiming to build up networks in Southeast Asia by launching its first global hedge fund operated in Singapore. It said the fund will invest in a variety of products such as equities, real estate and energy, targeting annual returns of 20 percent.
Brokerage houses such as Daishin and Daewoo are lining up this year to set up offices in oil-rich Kazakhstan.
Daishin Securities said the Central Asian country is attractive because of its abundant energy reserves, and an increasing number of domestic companies are looking to expand there.
By setting up its base there ahead of others, it plans to increase its services to firms with the aim of becoming a global investment bank.
After making inroads into China, Vietnam and Indonesia, Daewoo Securities is also considering Kazakhstan as its next growth platform. It said it plans to set up a unit there to expand services in the Central Asian region.
Hyundai Securities, meanwhile, is aiming to launch a fund investing in energy companies in Kazakhstan by the end of this month.
Woori Investment & Securities, Korea Investment & Securities and Goodmorning Shinhan Securities are also considering expanding into Central Asia this year.
Mirae Asset Securities plans to open offices in India this year. The company with its sister firm, Mirae Asset Investments, plans to establish bases in the United States. Mirae Asset Group already has units in Hong Kong, China, Vietnam and the U.K. so far. Park Hyun-joo, the group chairman, noted in his New Year speech that it is time to ambitiously seek overseas markets for further growth.
Woori Investment is aiming to build up networks in Southeast Asia by launching its first global hedge fund operated in Singapore. It said the fund will invest in a variety of products such as equities, real estate and energy, targeting annual returns of 20 percent.
FUTURE CAPITAL HOLDINGS LIMITED - the new IPO
Forthcoming Issue at NSE
FUTURE CAPITAL HOLDINGS LIMITED
Symbol - Series FCH EQ
Issue Period : January 11, 2008 to January 16, 2008
Issue Size : 6422800 Equity Shares
Issue Type : 100% Book Building
Face Value : Rs. 10/-
Price Range : Rs 700 to Rs 765
Tick Size :Re. 1/-
Market Lot : 8 shares
Minimum Order Quantity : 8 shares
Maximum Subscription Amount for Retail Investor : Rs.100000
IPO Market Timings 10.00 a.m. to 5.00 p.m.
Book Running Lead Manager Kotak Mahindra Capital Company Limited, Enam Securities Private Limited, JM Financial Consultants Private Limited, and UBS Securities India Private Limited
Syndicate Member Kotak Securities Limited, Enam Securities Private Limited, and JM Financial Services Private Limited
Categories FI, IC, VC, MF, FII, FVCI, SIDC, PF, PEF, MLA, BDFI, CO, IND, HUF, NRI, and OTH
No. of Cities with Bidding Centers 59
Inclusion in F&O Segment Not Eligible
Name of the registrar INTIME SPECTRUM REGISTRY LIMITED
Address of the registrar C-13, Pannalal Silk Mills Compound, LBS Marg, Bhandup (West), Mumbai 400 078 India
Contact person name number and Email id Contact Person Mr. Sachin Achar,Tel 91 22 2596 3838 ,Fax 91 22 2596 6969,Email fch.ipo@intimespectrum.com
FUTURE CAPITAL HOLDINGS LIMITED
Symbol - Series FCH EQ
Issue Period : January 11, 2008 to January 16, 2008
Issue Size : 6422800 Equity Shares
Issue Type : 100% Book Building
Face Value : Rs. 10/-
Price Range : Rs 700 to Rs 765
Tick Size :Re. 1/-
Market Lot : 8 shares
Minimum Order Quantity : 8 shares
Maximum Subscription Amount for Retail Investor : Rs.100000
IPO Market Timings 10.00 a.m. to 5.00 p.m.
Book Running Lead Manager Kotak Mahindra Capital Company Limited, Enam Securities Private Limited, JM Financial Consultants Private Limited, and UBS Securities India Private Limited
Syndicate Member Kotak Securities Limited, Enam Securities Private Limited, and JM Financial Services Private Limited
Categories FI, IC, VC, MF, FII, FVCI, SIDC, PF, PEF, MLA, BDFI, CO, IND, HUF, NRI, and OTH
No. of Cities with Bidding Centers 59
Inclusion in F&O Segment Not Eligible
Name of the registrar INTIME SPECTRUM REGISTRY LIMITED
Address of the registrar C-13, Pannalal Silk Mills Compound, LBS Marg, Bhandup (West), Mumbai 400 078 India
Contact person name number and Email id Contact Person Mr. Sachin Achar,Tel 91 22 2596 3838 ,Fax 91 22 2596 6969,Email fch.ipo@intimespectrum.com
Securities in ban period for trade date January 10, 2008- F&O segment
Securities in ban period for trade date January 10, 2008- F&O segment
The derivative contracts in the below mentioned securities have crossed 95% of the market-wide position limit and are currently in the ban period. It is hereby informed that all clients/ members shall trade in the derivative contracts of said securities only to decrease their positions through offsetting positions. Any increase in open positions shall attract appropriate penal and disciplinary action in accordance with the Circular No. NSCC/F&O/C&S/365 dated August 26, 2004.
The derivative contracts in the below mentioned securities have crossed 95% of the market-wide position limit and are currently in the ban period. It is hereby informed that all clients/ members shall trade in the derivative contracts of said securities only to decrease their positions through offsetting positions. Any increase in open positions shall attract appropriate penal and disciplinary action in accordance with the Circular No. NSCC/F&O/C&S/365 dated August 26, 2004.
| Sr.No. | Symbol |
| 1 | ADLABSFILM |
| 2 | APTECHT |
| 3 | ARVINDMILL |
| 4 | BINDALAGRO |
| 5 | BONGAIREFN |
| 6 | GMRINFRA |
| 7 | HINDOILEXP |
| 8 | HOTELEELA |
| 9 | IFCI |
| 10 | ISPATIND |
| 11 | IVRPRIME |
| 12 | NAGARFERT |
| 13 | PARSVNATH |
| 14 | RAJESHEXPO |
| 15 | RPL |
| 16 | SRF |
| 17 | TTML |
Rupee stopped in its tracks by RBI - dealers
MUMBAI (Reuters) - The rupee eased a tad on Wednesday after trading in a tight range, with the Reserve Bank of India (RBI) holding off the Indian unit from testing a 10-year high, dealers said.
The partially convertible rupee ended at 39.28/29 per dollar, softer than the previous close of 39.265/275.
The rupee hit a peak of 39.16 in November, its highest in almost 10 years, and suspected RBI intervention has repeatedly blocked attempts to test the level this week.
"The rupee is stuck around this mark, and there's very little anyone can do about it at the moment," said a dealer with a private bank.
The market seemed resolved to selling rupees to the RBI, that is said to intervene to reduce volatility and help defend exporters' margins, which were dented by the local unit's 12 percent rise in 2007.
The rupee received little direction from the benchmark share index, which ended flat in choppy trade after hitting a fifth record high of the new year.
With strong capital flows slated for a slew of initial share offerings expected to continue, the rupee is expected to gradually appreciate, dealers said.
Utility Reliance Power is set to raise up to $3 billion in an initial public offer next week, which would be India's biggest-ever IPO.
100 FIIs register with Sebi, after the November announcement
About 100 foreign institutional investors (FIIs) and twice as many sub-accounts have registered with the Securities and Exchange Board of India, or Sebi, since November, signalling foreign investors’ increasing appetite for Indian stocks as well as the Indian capital market regulator’s promptness in clearing applications.
Sebi had imposed restrictions on the use of participatory notes (PNs) to invest in Indian stock market in mid-October, but promised to ease the application process for unregistered entities participating in India’s capital market. This step, according to Sebi, was taken to increase transparency in Indian markets by monitoring the credentials of all foreign investors in the domestic market.
Participatory notes, a popular investment instrument among unregistered foreign investors, are contract notes. Registered FIIs issue these notes to their clients who wish to take exposure in Indian stocks without directly registering with Sebi. The FIIs purchase Indian securities through their account and then issue an offshore derivative of these securities to the clients for a fixed fee.
The number of FIIs registered in India toward the end of 2006 was well below 1,000. However, at the end of 2007, this number went up to 1,219, at least 20% increase. The registered sub-accounts of these FIIs also went up significantly to 3,644.
“We are still investing through participatory notes, but the capacity is constrained,” says Tarun Gandhi, an executive at investment fund house Spinnaker Capital Group, which received a FII license on 7 January.
According to Gandhi, his firm may continue to invest in India through PNs. “It takes away lot of administrative hassles,” he said. “On the other hand, investing yourself is a cumbersome process.”
This is because when a foreign entity or a hedge fund invests in India through PNs, all the paper work and settlement is taken care of by the PN issuer (mostly large brokerages), for a nominal fee. On the other hand, if these entities are to invest and maintain a portfolio under their own account, they have to take the onus of preparing the transaction-related documents.
According to the announcements made by Sebi after the clampdown on PNs, the time involved in processing an FII application was significantly reduced while also scrapping the practice of re-application by registered FIIs after a stipulated period to renew their account.
Anoop Sethi, Singapore-based executive of US-based hedge fund Indus Capital Partners, which focuses on investments in Asian stocks, says that though many foreign investors have registered with the Indian regulator, there is no real difference in the application process. Sebi cleared Indus’ application for FII status on 16 November.
“Many of these newly registered FIIs (after November) would have been eligible to get registered earlier as well, but they were investing through PNs because of convenience,” said U.R. Bhat, managing director of Dalton Capital Advisors (India) Pvt. Ltd, the Indian arm of a global hedge fund group. “Getting registered as an FII does not essentially mean that the firm will immediately start investing in India. When the PN window was closed, many firms chose to register to keep open the option of investing in India.”
Sebi had opened doors for FIIs to enter Indian stock market in December 1993. Since then, FIIs have invested $66.8 billion in Indian equities net of sale. In 2007, FIIs invested a record $17.2 billion (Rs67,596 crore) in Indian markets.
According to foreign fund managers, erstwhile PN investors are now rushing to get registered as FIIs but they have not started purchasing Indian stocks through newly registered accounts. In the first five trade sessions in 2008, they have invested a net $478 million in Indian equities.
Retail investors now controlling the markets !!!
MUMBAI: The small investor is back on the bus. Setting aside the constant refrain that the small investor has missed the bus in a bull run, data shows that during the latest 1,000 points rally, they remained net buyers every month starting October 2007. October was when the Sensex breached the 20,000 mark for the first- time ever.
As per BSE data, retail investors have bought equities worth more than Rs 1,700 crore since October 29, when the Sensex touched the 20,000 mark for the first time. What is interesting is that it comes at a time when foreign investors, often looked up to as the drivers of the bull run, have been reducing their India exposure. FIIs have sold stocks worth more than Rs 21,000 crore in the past couple of months.
Since October 29, 2007, the Sensex has gained around 4.50% to breach the 21,000 mark on Tuesday. However, market participants say that even as the benchmark index gave marginal returns in the past two months, small investors have remained bullish due to the surge in the second-rung counters.
This is clearly evident from the impressive rise registered by the BSE Midcap and the BSE Smallcap indices. “Small investors have more appetite for lesser-known stocks,” said a senior dealer with a domestic broking house. “The broader indices were gaining ground even as the Sensex moved in a range-bound manner and this attracted more retail money. Just take a look at the rise in the number of brokerage reports covering such stocks. Those reports are here because there are many takers”, he added.
While the midcap and smallcap indices lost heavy ground on Tuesday, the recent past has seen the two broader indices reflect robust returns. Since October 29, the BSE midcap index has gained more than 21%, while the BSE smallcap has appreciated by nearly 40%. These two indices together account for more than 750 stocks. As mentioned earlier, the Sensex has gained only 4.50% in the same period.
Stocks like EIH, Ispat Industries, Educomp Solutions, Exide Industries, CESC, Welspun Gujarat, Andhra Bank, Allahabad Bank and Usha Martin have all gained ground in the recent past.
Some of the second-rung stocks have also been on an acquisition and expansion spree, thereby making them prominent on the investment radar. Some analysts are of the view that retail investors remained bullish even while FIIs were selling, as reports clearly indicated that domestic financial institutions have been buying stocks.
According to BSE, domestic institutional investors have been net buyers at Rs 16,600 crore since October 29. The fact that institutions like LIC, along with major banks, are buying creates a lot of confidence in the minds of investors, they added.
As per BSE data, retail investors have bought equities worth more than Rs 1,700 crore since October 29, when the Sensex touched the 20,000 mark for the first time. What is interesting is that it comes at a time when foreign investors, often looked up to as the drivers of the bull run, have been reducing their India exposure. FIIs have sold stocks worth more than Rs 21,000 crore in the past couple of months.
Since October 29, 2007, the Sensex has gained around 4.50% to breach the 21,000 mark on Tuesday. However, market participants say that even as the benchmark index gave marginal returns in the past two months, small investors have remained bullish due to the surge in the second-rung counters.
This is clearly evident from the impressive rise registered by the BSE Midcap and the BSE Smallcap indices. “Small investors have more appetite for lesser-known stocks,” said a senior dealer with a domestic broking house. “The broader indices were gaining ground even as the Sensex moved in a range-bound manner and this attracted more retail money. Just take a look at the rise in the number of brokerage reports covering such stocks. Those reports are here because there are many takers”, he added.
While the midcap and smallcap indices lost heavy ground on Tuesday, the recent past has seen the two broader indices reflect robust returns. Since October 29, the BSE midcap index has gained more than 21%, while the BSE smallcap has appreciated by nearly 40%. These two indices together account for more than 750 stocks. As mentioned earlier, the Sensex has gained only 4.50% in the same period.
Stocks like EIH, Ispat Industries, Educomp Solutions, Exide Industries, CESC, Welspun Gujarat, Andhra Bank, Allahabad Bank and Usha Martin have all gained ground in the recent past.
Some of the second-rung stocks have also been on an acquisition and expansion spree, thereby making them prominent on the investment radar. Some analysts are of the view that retail investors remained bullish even while FIIs were selling, as reports clearly indicated that domestic financial institutions have been buying stocks.
According to BSE, domestic institutional investors have been net buyers at Rs 16,600 crore since October 29. The fact that institutions like LIC, along with major banks, are buying creates a lot of confidence in the minds of investors, they added.
Tuesday, 8 January 2008
SEBI gives go-ahead to Emaar-MGF IPO
Realty major Emaar-MGF's application to go public has got the stamp of approval from the Securities and Exchange Board of India (SEBI) to launch its Initial Public Offering (IPO). The IPO is expected to hit the market in the first week of February and raise between Rs 5,000-6,000 crores, making it the second largest realty IPO in the country till date. The company will offload 11 crore shares with the pricing expected to hover around Rs 500-600 per share.
According to sources, the go-ahead came on Tuesday, subject to compliance of observations. "The documents will be finalized in another day or two and filed by Friday or Monday. This is only a formality and we expect to get everything ready so as to launch the IPO in early February," says the source.
Emaar MGF Land, a joint venture between one of the world's leading real estate companies Emaar Properties PJSC of Dubai, and MGF Development of India, filed its Draft Red Herring Prospectus (DRHP) with SEBI in September last year to enter the capital market with its IPO of equity shares.
The global co-ordinators and book running lead manager to the issue are Enam Securities Private Limited and DSP Merill Lynch Limited. The Book Lead Managers are Citigroup Global Markets India Private Limited, Kotak Mahindra Capital Company Limited, HSBC Securities and Capital Markets (India) Private Limited, JP Morgan India Private Limited and Goldman Sachs (India) Securities Private Limited.
The company is engaged in the development of properties in the residential, commercial, retail and hospitality sectors. Its operations span various aspects of real estate development such as land identification and acquisition; project planning, designing, marketing and execution.
Some of the current projects under implementation include development of Palm Springs and Palm Drive in Gurgaon, Mohali Hills at Mohali, the prestigious Commonwealth Games village, Delhi and Boulder Hills, Hyderabad.
Many real estate companies launched their IPOs last year, but the largest of them all was the DLF offering in July 2007, which raised Rs 9187 crore.
According to sources, the go-ahead came on Tuesday, subject to compliance of observations. "The documents will be finalized in another day or two and filed by Friday or Monday. This is only a formality and we expect to get everything ready so as to launch the IPO in early February," says the source.
Emaar MGF Land, a joint venture between one of the world's leading real estate companies Emaar Properties PJSC of Dubai, and MGF Development of India, filed its Draft Red Herring Prospectus (DRHP) with SEBI in September last year to enter the capital market with its IPO of equity shares.
The global co-ordinators and book running lead manager to the issue are Enam Securities Private Limited and DSP Merill Lynch Limited. The Book Lead Managers are Citigroup Global Markets India Private Limited, Kotak Mahindra Capital Company Limited, HSBC Securities and Capital Markets (India) Private Limited, JP Morgan India Private Limited and Goldman Sachs (India) Securities Private Limited.
The company is engaged in the development of properties in the residential, commercial, retail and hospitality sectors. Its operations span various aspects of real estate development such as land identification and acquisition; project planning, designing, marketing and execution.
Some of the current projects under implementation include development of Palm Springs and Palm Drive in Gurgaon, Mohali Hills at Mohali, the prestigious Commonwealth Games village, Delhi and Boulder Hills, Hyderabad.
Many real estate companies launched their IPOs last year, but the largest of them all was the DLF offering in July 2007, which raised Rs 9187 crore.
Securities in ban period for trade date January 09, 2008- F&O segment
The derivative contracts in the below mentioned securities have crossed 95% of the market-wide position limit and are currently in the ban period. It is hereby informed that all clients/ members shall trade in the derivative contracts of said securities only to decrease their positions through offsetting positions. Any increase in open positions shall attract appropriate penal and disciplinary action in accordance with the Circular No. NSCC/F&O/C&S/365 dated August 26, 2004.
| 1 | ADLABSFILM |
| 2 | APTECHT |
| 3 | ARVINDMILL |
| 4 | BINDALAGRO |
| 5 | BONGAIREFN |
| 6 | GMRINFRA |
| 7 | HINDOILEXP |
| 8 | HOTELEELA |
| 9 | IFCI |
| 10 | ISPATIND |
| 11 | IVRPRIME |
| 12 | NAGARFERT |
| 13 | PARSVNATH |
| 14 | RAJESHEXPO |
| 15 | RPL |
| 16 | SRF |
| 17 | TTML |
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