HOT STOCKS for 07-03-08

STATISTICS :

Market will follow global ques can see a gap down opening of 50 points in nifty. Nifty will be rangebound and very volatile, trades between levels 4750- 4980 levels. Nifty has some support @ 4800 levels if it closes below this level can see nifty @ 4700 levels in a few days. Nifty has some resistance @ 4950 levels,

INTRADAY :

REL : buy for a tgt of 1500+

DELIVERY :

Nagarjuna FERT : buy for a tgt of 65+ in short term
long term tgt is 140+

IFCI : buy for a tgt of 70+ in short term
long term tgt is 125+

FUTURES :

NIFTY : sell for a tgt of 4800, sl @ 4950

REL : buy for a tgt of 1540+

ICICI Bank : buy below 945 for a tgt of 990+

IDBI : buy for a tgt of 114+

ZEEL : sell for a tgt of 258, sl @ 272

OPTIONS :

NIFTY : buy call 5000 below 100 for a tgt of 200+, sl @ 60

IDBI : buy call 110 for a tgt of 10+

Nagarjuna fert : buy call 50 for a tgt of 3.5+, sl @ .90
HEDGE CALLS :

1> ...Nifty : buy 1 lot futures @ 4800 levels for a tgt of 5100+

.......Nifty : sell 1 lot 4800 put @ 150+ .

New IPO's Gap for listing time to be reduced says SEBI

Capital market regulator SEBI said on Wednesday it has slashed the fees payable by various market players by up to 80%. The regulator will also reduce the gap between opening of an issue and the listing of securities on the bourse and make the registration norms for foreign institutional investors (FIIs) more flexible.

The fee payable by mutual funds, custodians and those who file offer documents has been cut by as much as 80% from April 1, 2008, SEBI chairman CB Bhave told reporters here after a meeting of the regulator’s board. It has also slashed the fee for offer documents for buyback of securities and the registration fee for venture capital funds.

The fee for filing offer documents for a public issue and mutual funds has been lowered from 0.03% of the amount raised to 0.005%. While the cap on fee for a public offer is Rs 3 crore, for mutual fund, it is Rs 50 lakh. The annual registration fee for custodians has been slashed from 0.001% to 0.0005% of assets under custody.

SEBI has reduced the registration fee for venture capital funds from Rs 10 lakh to Rs 5 lakh. The fee for rights issue offer documents has been slashed from 0.05% to 0.005%, subject to a maximum of Rs 5 lakh, Mr Bhave said. The fee for filing an offer document for buyback of securities has been reduced from 0.05% to 0.125%, subject to a maximum of Rs 3 crore.

Mr Bhave said SEBI has set up a panel to examine how to compress the IPO process. “Institutional investors tend to argue that they put in a lot of money that cannot be locked in for such a long time. Secondly, some people have raised the issue of funds that remain with the banks. That issue will also be automatically addressed once we reduce the gap. Although no time frame has been given, the panel will work expeditiously,” said Mr Bhave.

Foreign institutional investors (FII) can look forward to a more liberal registration regime in India. SEBI is making the FII registration norms announced last October more flexible. "We have not notified it so far because we want to make the process more flexible so that more and more FIIs can easily get registered, " SEBI whole time member T C Nair said. SEBI board had on October 25 agreed to certain changes in the registration criterion for foreign investors.

A large number of investors who were investing into India through participatory notes and wanted to register directly have been keenly waiting for the norms to be notified. Mr Nair said about 200 foreign institutional investors have registered to buy shares in India since the regulator tightened rules on investments using offshore derivatives in October.

SEBI's board also decided on Wednesday that a three-member panel headed by National Judicial Academy director Dr Mohan Gopal would oversee regulatory proceedings against the National Securities Depositories Limited. Mr Bhave had requested that he be recused from the proceedings as he was in charge of NSDL earlier. SEBI also approved in principle that Madras Stock Exchange members could be allowed to trade on NSE's platform.

Reliance Energy plans buyback at Rs 1,600/share

Anil Ambani’s Reliance Energy (REL) said on Wednesday that it would buy back shares worth up to Rs 2,000 crore at a price of up to Rs 1,600 a share, a 9.6% premium over Wednesday’s closing price.

With the fund allocated for buyback, the company could purchase around 1.25 crore shares from the open market, which would raise promoter’s stake by 1.5% to 37% on a reduced equity base, said a senior company executive.

The REL board, which met on Wednesday, has decided to complete the buyback in two phases. The company will release Rs 800 crore in the first tranche, while the remaining Rs 1,200 crore will be allotted in the second phase, subject to shareholders’ approval. The buyback is to “reduce short-term volatility in the company’s share price and deter speculative activity” in the stock, the company said in a statement.

The promoters’ equity in the power distribution company stands at 35.5% after they scaled up their holding by 2.5% in past one year through creeping acquisitions. The REL stock quadrupled in 2007, making it one of the top performers in the stock market. The share has fallen over 30% so far this year, more than the BSE index’s 18.5% drop. Ahead of the buyback announcement, the REL share closed 3% lower at Rs 1,459.45 on the BSE on Wednesday.

“REL, which has a cash reserve of almost Rs 11,000 crore and a net worth of Rs 10,000 crore, is undervalued in the market. The buyback will reduce the equity base, resulting in an increase in the earnings per share (EPS) since the shares bought back will be extinguished. This, in turn, will increase the promoters’ stake on a reduced equity base. Also, it is expected to set a floor price and restrict the downside,” said an analyst with a local brokerage. REL’s fully diluted equity capital is Rs 279.53 crore, while its market capitalisation is over Rs 42,000 crore.

The move, which aims to bolster investor confidence, came soon after REL arm Reliance Power announced three bonus shares for every five shares held by its investors. Reliance Power slumped 17% on its debut in February after raising Rs 12,000 crore through the country’s largest IPO.

Post-announcement of the bonus issue, the Reliance Power stock crossed the issue price of Rs 450. But it came down by 4.1% on Wednesday to close at Rs 376.25. The bonus shares will bring down the cost of acquiring Reliance Power shares to Rs 269 for retail investors and Rs 281 to others. The Reliance Power shares were sold at Rs 450 through the IPO, which offered Rs 20 discount to retail investors.

This is the second time REL is going for a buyback after the Reliance group had acquired the erstwhile BSES. Earlier, in June 2004, before the demerger of the Reliance group, it had bought back shares worth Rs 350 crore. It had paid a maximum price of Rs 525 per share, which represented a 12% premium to the low of Rs 463 on May 31, 2004, the day on which the notice to consider buyback of shares was issued to the stock exchanges.

Terror taking rural bank route: RBI

A hitherto unknown corporate entity was found depositing Rs 1 crore in a rural bank in remote Punjab on a daily basis for over a month and taking it out at the end of the day as loan.

In a similar case, in an urban cooperative bank in western Uttar Pradesh in 2006, an individual was found to have deposited more than Rs 250 crore over a period of time and having taken it out at the same time.

Such cases could have easily passed off as suspect money laundering transactions allegedly involving local traders and businessmen but after intelligence agencies arrested two associates of Hurriyat leader G M Bhat in November last year, suspicious transactions in cooperative and rural banks have attracted heightened security concern.

The government has warned regional rural banks (RRBs) and urban cooperative banks (UCBs) to be on guard against tainted money finding its way into their depository with the probability of terror outfits misusing such accounts to fund terror activities. In a notification issued to all RRBs and UCBs, the Reserve Bank of India said all banks should develop suitable mechanism for enhanced monitoring of accounts suspected of having terrorist links and report all such transactions to the Financial Intelligence Unit (FIU).

Jamali Khan and Danish Anwar — who were detained in Udhampur in November 2007 while they were ferrying a consignment of Rs 50 lakh to the Valley from Delhi allegedly at Hurriyat leader Bhat's instructions — had been working together in the Ajmer branch of a cooperative bank.

Investigations had revealed that Jamali, when he was posted in the bank's Daryaganj branch in Delhi in 1985-86, used to convert dollars into Indian currency for Bhat and had in the process converted up to $800,000 for the Hurriyat leader who also had an account in the same branch. Later, Jamali left the bank job and worked as fulltime hawala operator for many terror outfits.

Though the recent RBI guidelines of keeping an eye on suspicious transactions are part of an old ‘know your customer' norm, reiteration of the fact through a fresh notification comes at a time when many enforcement agencies have warned the government of huge money being laundered through these RRBs and UCBs and many having suspect terror links.

Banks have been advised to carry out risk categorisation review of customers once in six months and introduce a system of periodic updation of customer identification data (including photographs) after the account is opened. Even in the case of low risk category customers, the periodicity of such updation should not be less than once in five years, the RBI has said.

At the same time, the bank has asked RRBs and UCBs not to deny account opening facilities to unsuspecting customers. "It is clarified that, in such cases, banks can obtain an identity document and a utility bill of the relative with whom the prospective customer is living along with a declaration from the relative that the said person (prospective customer) wanting to open an account is a relative and is staying with him/her,” the RBI note said.

NHPC IPO likely in July-August

Having missed the opportunity last year to hit the market, power sector giant NHPC is likely to approach market regulator Sebi by May for its Initial Public Offer (IPO).

"We are waiting for the appointment of independent directors... We hope to have them on the board soon as the names have already been forwarded and are under process. The government has extended all support," NHPC Chairman and Managing Director S K Garg told PTI.

"We should be hitting the market around July-August this year and submit revised draft prospectus with Sebi, based on current fiscal's financial performance on March 31," he added.

NHPC, which has a paid up capital of Rs 11,500 crore, is likely to come out with a public offer of 167 crore shares, which would add 10% as fresh equity besides 5% disinvestment. The shares would be face value of Rs 10 each.

The proceeds from IPO would be used to part finance the Rs 28,000 crore expansion plan of NHPC, which has set an ambitious target of becoming a 10,000 MW power generation company during the 11th plan period.

This will be the biggest IPO in the power sector with 167 crore shares on sale, officials said.

Asked about the premium the company was expecting, Garg declined to comment, saying it was too early to comment but exuded confidence of investors' faith on the PSUs as it happened in case of Rural Electrification Corporation (REC), whose IPO was over subscribed by more than 30 times despite uncertainty in the stock market, especially on IPO front.

Will RBI join the giveaway party?

RBI governor Y V Reddy. Yet again, the bill for the party will end up on his desk. Given the pile-up of other issues that require the governor’s full-time attention, the additional cost of reining in the after-effects of finance minister P Chidambaram’s budget jamboree is sure to extract a heavy toll.

Sure, the FM has done what he had to, given the circumstances. Some may even argue that his hand was probably forced to a certain extent by a party diktat. The Rs 60,000-crore farm loan waiver and his petulant response to repeated questions about it betray some of the occupational hazards of framing a budget during election times.

But, to his credit, he has still tried to focus on the larger issue at hand — keeping the economy humming and trying to insulate it, as far as possible, from the shock waves of an impending global slowdown. This he has tried to achieve through two measures — trying to ensure that consumption growth in the economy continues apace and that the engine of industrial production does not slow down. At this stage, he is keen to achieve these ends with the help of some fiscal stimulus.

Look at what the FM is up against — the average growth of industrial production has dropped from 11% at the end of the last fiscal year to a monthly average of 9% till November. In December, it was only 7.6% and, if the average industrial production growth rate tends to stay between 5-7% in the second half of the year, the average rate for the year is likely to be below even 9%. That’s a sharp drop from the previous year. The main items dragging the index down have been consumer durables and the auto sector.

The Economic Survey also forecasts that the year is likely to end with an overall real GDP growth of 8.7%, a full 100 basis point lower than the previous year’s 9.7%. Add to this the fear of the unknown — no fix on the extent of the subprime damage in the western economies and the resultant economic slowdown, or the degree to which this event will impact the Indian economy.

So, how will the finance minister achieve the twin objectives? For the consumer, he has done two things — made goods cheaper by cutting excise duty and providing them with more spending power by restructuring income tax slabs. With an eye to the industrial production index in particular, he has reduced excise duty on small cars and two-wheelers (sales of which had been hit the hardest).

He has also cut the median excise duty rate to spur consumption of daily household items. Given that a large part of the growth impetus during past few months, in the face of slowing down consumption, has been predicated on investment, the FM has introduced some policy changes in the budget to keep the momentum going — removed some long-standing glitches to facilitate higher trading volumes in corporate bonds, promised to develop a bond and currency derivatives market, extended tax breaks for construction of hospitals and hotels

Sebi bid to curb stock tips from insiders

Watchdog's insider trading norm amendment draft says anyone getting such tips will be penalised.

If the Securities and Exchange Board of India’s (Sebi’s) draft guidelines are cleared in its current form, people who receive stock tips from company insiders could be penalised. However, market participants say, it will be tough to implement such regulations.

FEE FOR ALL

# Ad valorem fee for filing of offer document by a mutual fund reduced from 0.03 per cent to 0.005 per cent, subject to a maximum of Rs 50 lakh. Annual registration fee from custodians reduced from 0.001 per cent to 0.0005 per cent.

# Ad valorem fee for filing of offer document for public issue reduced from 0.03 per cent to 0.005 per cent, subject to a maximum Rs 3 crore.
# Ad valorem fee on offer document for rights issue reduced from 0.05 per cent to 0.005 per cent, subject to a maximum of Rs 5 lakh.
# Ad valorem fee for offer document for buyback of securities and draft letter of offer filed under Sebi Substantial Acquisition and Takeover Regulations is reduced from 0.5 per cent to 0.125 per cent, subject to a maximum of Rs 3 crore. n Registration fee for venture capital fund reduced from Rs 10 lakh to Rs 5 lakh.
The market watchdog had on Tuesday put out a consultative paper on amendments to Sebi (Prohibition of Insider Trading) Regulations, 1992. The draft said that “the language of the regulation may be improved by way of clarification to specifically penalise a tippee of information from trading.”

“It is very difficult to nab insider traders. Everyone knows informally that all tips originate from the management. But it remains to be seen how these regulations, once final, will be enforced,” said S P Tulsian, investment advisor.

It is an open secret that investment bankers themselves “leak out” in the grey market the premium at which shares will be traded when companies are raising money through initial public offers.

This they do so that demand for the company’s shares goes up. “At the very least, the management is not unaware of whatever rigging happens in a company’s stock,” said a broker.

Sebi’s draft regulations also propose to bring the derivatives segment within its purview. Derivative trading was not available in India when the insider trading rules were drafted in 1992.

Earlier, anyone who got a tip could act on it, using derivatives, by buying or selling the shares without physically trading in those stocks. Similarly, one can easily create synthetic securities with the same (or higher) economic impact as an equity share of a company often with a high leverage.

To solve this problem, Sebi proposes to re-classify shares into “securities” for the purpose of disclosure, thereby eliminating the problem because securities are defined to include equity, quasi-equity, derivatives and any combination of the three.

Sebi proposes to exclude pure debt instruments from disclosure regulations, while they would continue to be included in the substantive violation provisions of Regulations 3 and 4.

“Thus an insider holding debt, and while aware of a problem in the solvency/rating of the company, sells such debt securities would continue to be liable under the prohibition,” said the paper.

“Once final, these regulations will act as a deterrent for anybody who would want to take advantage of the system. However, Sebi should prepare a watertight case before it sends a show-cause notice to the people concerned,” said a corporate lawyer with a top Mumbai-based firm. While no convictions have happened so far, there have been several close cases, he pointed out.

In India, one can go to jail for 10 years for violating simple or process oriented provisions, but Sebi now proposes to change that by “rationalising the proportionality attached to violations by restricting them to monetary penalties.”

The paper also proposes to make insider trading regulations more reasonable and effective. Measures include harmonising provisions with takeover regulations so that there is no increased burden on an insider in terms of disclosure.

The regulator also proposes to exempt “harmless” acts such as issue of bonus/rights issues, which are not price sensitive, from the purview of insider trading rules.

In January, Sebi had put out a paper proposing that an insider in a company should surrender profits made in any equity-based securities transactions of the company, if both the buy and sell side of the transaction are entered into within six months of the other.

Termed “short swing profits”, the proposed guidelines would check insiders having greater access to price-sensitive company information.

In a statement to the Rajya Sabha on Wednesday, finance minister, P Chidambaram said, “During the last two years, Sebi has initiated actions in 39 cases for insider trading.”

A recent instance of a company being fined for insider trading was Infosys, which was fined by the American regulator, Securities and Exchange Commission (SEC).

Chief Executive Officer (CEO), Kris Gopalakrishnan was fined for failing to notify the company the change in his shareholding, within one business day, after he inherited 12,800 equity shares from his mother on December 24, 2007.

In the US, insider trading is a serious offense that is dealt with through appropriate disclosure systems.

For instance: In 2001, Sam Waksal, CEO of ImClone Systems was sentenced to seven years and three months for breaking insider trading laws.

He had learnt from his brother, the chief operating officer of the company, that the Food and Drug Administration would reject an application for the company’s leading drug and acted upon it.

HOT STOCKS for 04-03-08

STATISTICS :

Market will tend to bounce back to 5000+ levels, but profit booking can be seen on every rise, so trade cautiously, Nifty will be range bound within levels 4900 - 5060, Nifty is now currently trading below its 200 DMA so support comes only when Nifty trades above 5050 levels. So watch out for this and trade cautiously. Nifty is week if it trades below 4900, it can tend to move to 4750 levels once if it closes below 4900 levels.

INTRADAY :

ADLABS : buy for a tgt of 770+, sl @ 720

IDBI : buy for a tgt of 113+, sl @ 107

IDEA : buy for a tgt of 107.5+, sl @ 103

DELIVERY :

BHARTI : buy for a tgt of 900+ in a month

RCOM : buy for a tgt of 660+ in a month

FUTURES :

IDBI : buy for a tgt of 120+, sl @ 104 :: tgt is within 10 days

BHARTI : buy for a tgt of 820+ :: in 2- 3 days

Nifty : buy for a tgt of 5000+ :: in 2 days, can go to 5300+ by expiry.

NAGARJUNA FERT : buy for a tgt of 54+, sl @ 45 :: in a week

RNRL : buy for a tgt of 136+, sl @ 118 :: in a week

OPTIONS :

Nifty : buy call 5000 for a tgt of 285+, sl @ 60

RCOM : buy call 600 for a tgt of 30+, sl @ 5

RNRL : buy call 130 for a tgt of 20+, sl @ 4

HEDGE CALLS :

1 > RCOM : buy 1 lot fut for a tgt of 630+

......buy 1 put 560 at CMP sl @ 8

2> RNRL : buy 1 lot fut for a tgt of 139+

...... sell 1 lot put 120 above 10

Change in BSE, NSE trading timings from 04 - 03 - 08

Trading timings of the Bombay Stock Exchange and the National Stock Exchange will be revised from Tuesday till March 18, as the sun's position may disrupt connectivity, causing difficulties in receiving data via satellites.

There would be sun outage from March 4 to 18 between 11.45 am to 12.25 pm, during which traders and investors may face loss of connectivity.

Trading on the bourses would start at 9.55 am and close at 4.15 pm local time owing to the sun outage, the exchanges said. The two exchanges would stop trading between 11.45 am and 12.25 pm and resume trading from 12.30 pm, a stock exchange circular said.

A sun outage is a distortion of geostationary satellite signals caused by interference from solar radiation. Generally, sun outages occur during February, March, September and October. The effects of a sun outage can include partial degradation, an increase in the error rate, or total destruction of the signal.

Both the BSE and NSE use VSATs (Very Small Aperture Terminal) for members to connect to their trading systems. Both the bourses get affected by sun outage as VSATs depend upon satellites for connectivity between the terminals or systems.

New derivatives get timing wrong

Both the stock exchanges couldn’t have found a more inopportune time to introduce new products on the derivatives side. At a time when the market is rolling downhill and most traders have fled the futures segment, the BSE and NSE are planning to introduce long-dated options.

The exchanges said on Monday that the three-monthly rolling and fixed contracts would now be a reality — in addition to five semi-annual contracts. “At any point in time there would be options contract with up to three years tenure available,” the release explained. It was more peaceful times, when a Sebi appointed committee had recommended this move to deepen the equity markets.

Most players had then welcomed the move saying that cheaper hedging tools would now be a possibility for long-term players. But after the selloff in January, most traders — retail and institutional — seem scared to try their hand at near month contracts. Still, most financial experts say that it is too premature to write an obituary about these contracts or even question the timing of exchanges.

They say that rolling over single month options is a very expensive way to hedge one’s stock exposure and these long-term dated options would prove very useful and cheaper in the course of time. However, they opine that for volumes to pick up, exchanges should consider introducing market makers in certain options.

Budget duty hike dashes hopes of ITC investors

Till a few days ago, punters were still clinging on to their positions in the ITC stocks, hopeful that the ‘restructuring story’ would regain favour with the market shortly. But the excise duty hike proposal in the Budget seems to have thrown a spanner in their works. And a flood of downgrades by leading brokerages is unlikely to help matters. UBS Securities, CLSA and Merrill Lynch have downgraded their ratings on the stock, expecting volume sales to drop. Citi appears to be the lone supporter of the stock, and is of the view that the worst is over for ITC.

HOT STOCKS for 03-03-08

STATISTICS :

Today can see a gapdown opening, due to weak global ques and recession fears with slowdown in US can impact our market, this can be witnessed today. Nifty is rangebound which will trade between 5000 - 5200 levels. Gapdown opening can be around - 100 points in nifty. Nifty has a support @ 5040 and resistaince @ 5135, so watch out for this level, Sensex can trade between 16700 - 17300 levels

INTRADAY :

TTML : buy for a tgt of 39+, sl @ 32

ADLABS : sell for a tgt of 802, sl @ 843

DELIVERY :

TTML : buy for a tgt of 44+

IDEA : buy below 105 for a tgt of 120

NAGARJUNA FERT : buy below 50 for a tgt of 60+

FUTURES :

Nifty : sell for a tgt of 5040 , sl @ 5200

RNRL : sell for a tgt of 126, sl @ 134

ADLABS : sell for a tgt of 800

IDFC : sell for a tgt of 189

TTML : buy for a tgt of 40+, sl @ 32

OPTIONS :

NIFTY : buy put 5200 for a tgt of 340+, sl @ 200

NIFTY : buy call 5200 below 125 for a tgt of 200+, sl @ 90

IDBI : buy call 110 below 7 for a tgt of 15+, sl @ 3.9

HEDGE CALLS :

1 > .Nifty : buy 1 lot in futures below 5050 for a tgt of 5260+

....Nifty : sell 1 lot 4800 put above 165.

2> . IDBI : buy 1 lot in futures below 114 for a tgt of 125+,

....IDBI : sell 1 lot 110 put above 5.5.

Explosive surge in prices, volatility likely

The overall trend remained bullish during the week except on Friday when the market closed sharply down in a reaction to the Budget proposals. The price action in the recent weeks has led to a considerable drop in volatility. This typically is followed by a sharp expansion in volatility triggered by a sharp explosive move in price.

Given this backdrop, a sharp move in prices appears to be on the cards. Though the rally to 18,800-19,000 is the favoured view, it would be prudent to wait for the price action in the next few days to indicate the direction of the breakout. A close above 18,200 would indicate that the index is headed towards higher levels while a close below 17,000 would lead to a test of the support zone at 15,300-15,000.

With the Budget and option expiry behind us, the market could get into a decisive trending phase soon. As observed last week, the daily trend is still bullish and there is a case for a short-term rally. That quite a few index heavyweights are trading in the oversold region lends credence to the short-term bullish view. From a trading perspective, it would be safer to wait for confirmation, in the form of breach of crucial levels, before committing funds.

Nifty (5,223.5)

After a sharp rally in the first two trading sessions of the week, the action turned choppy since Wednesday. Though the index closed on a weak note on Friday, the recent price action has not negated the short-term bullish view expressed in recent weeks. A rally to 5,580-5,630 is the preferred view and would remain so, till such time the bearish trigger-level of 4,940 is not breached.

As observed in earlier weeks, a test of the key support zone at 4,450-4,600 is the favoured view from a medium-term perspective. A fall to this support zone is likely to be preceded by a short-term spike to 5,580-5,630. The immediate support zone is at 5,030-5,060.

Long positions may be considered on weakness with a stop loss at 4,940. Investors may either reduce or hedge their long positions on a move past 5,545. stocks such as Mahindra & Mahindra, BHEL, Larsen & Toubro and SBI appear promising from the large-cap space

BSE Auto Index (4,887.17)

The index has been in a broad trading range since May 2006. Though there is a possibility of the next major uptrend having commenced at the recent low of 4,495, there is no confirmation as yet. The short-term outlook is bullish and a move to 5,150-5,200 appears likely. A close above 5,400 would be an early indicator that the index is in the early stages of the next major upward move.

Key pivotals

Dr.Reddy's Labs (Rs 583)

After a steady downtrend, at least a temporary low appears to be in place at Rs 501. The stock could seek higher levels and a move to Rs 610-615 appears likely. Fresh long positions may be considered on weakness with a stop loss at Rs 535. Short-term traders may take profits on evidence of weakness at or beyond Rs 615 as the stock would then get into an overbought region.

Reliance Petroleum (Rs 175.2)

The short-term outlook is bullish and the stock could move to the immediate resistance zone at Rs 195-200. The bullish view would be invalidated on a close below Rs 161. Long positions may be considered with a stop loss at Rs 161. A close above Rs.202 could lead to a rally to Rs 215-220. Going by the recent price action, a rally to Rs 215 is the favoured view.

Axis Bank (Rs 1019)

The stock has displayed amazing resilience amidst the sell-off witnessed in the banking sector in the recent weeks. The short term view is bullish and a move to Rs 1,100-1,125 appears likely. Stop loss for long positions may be placed at Rs 950 on daily closing basis. A trailing stop loss may be used use in the event of a rally past Rs 1,125.

stock off the week

Ashok Leyland (Rs 37.5)

After a sharp sell-off in the recent weeks, the stock is in a consolidation phase in the past few days. There is case for a short-term upward move to Rs 44-45. This view would be valid till such time the stop loss at Rs 34 is not breached. Stop loss for long positions may be placed at Rs 34 on closing basis.

RBI unveils IT vision for 2008-10

Information Technology will continue to play a dominant role over the next three years in streamlining operations in the financial and banking sector, already the largest user of IT and ITES, in customer centric operations.

Visualising a higher degree of IT usage by the sector, the RBI in its IT vision document for 2008-10 said the move would be towards centralisation of the system for greater customer service delivery, benefitting Banks in terms of facilities such as Customer Relationship Management (CRM), Customer Profiling and Differentiation and for improved customer service, the Apex bank said in its document IT vision for 2008-10.

The Central bank said IT usage by banks in India had come of age with the financial sector becoming more IT savvy and the banking sector, emerging one of the largest users of IT and IT enabled services.

During the next phase, RBI said the role of technology service providers and intermediaries would gain greater significance in the context of increased outsourcing; for the banks and financial institutions, the complexities in handling in vendor management as part of outsourcing need to be addressed so as to ensure the risks arising out outsourcing were minimised.

RBI, which had played a substantial role in ushering in Technology based banking in the initial period and for largescale computerisation, subsequently said it would gradually move away and take a participatory role as the financial sector had attained the level of maturity required for this changed focus.

As a move aimed at better Governance, one of the major changes planned would be that the Reserve Bank would not perform the dual role of a service provider and a regulator. This would be achieved by hiving off of service delivery functions wherever feasible.

The Apex bank said IT usage by banks would continue to exist in substantial scales. The Reserve Bank would also be leveraging on the facilities available through IT for improved functioning of the central bank, commercial banks and the financial sector as a whole.

Govt readies for surge in dollar inflows

Budget raises provision for market stabilisation bonds.

The finance ministry is preparing for huge dollar inflows next year as well, going by the provision for market stabilisation bonds (MSS) in 2008-09.

The MSS issuances budgeted for 2008-09 are Rs 2,55,806 crore, significantly higher than the estimate of Rs 1,41,135 crore in the 2007-08 Budget, and marginally lower than the actual issuance of Rs 2,71,903 crore in the financial year on account of equity investments by foreign institutional investors (FIIs) and overseas borrowings by companies.

Finance Minister P Chidambaram told Business Standard in an interview on Saturday that he does not know “which way the cat will jump” (meaning, whether there will be dollar inflows or outflows), so he is merely providing for the eventuality of inflows.

“If the interest rate differential remains large, more capital could flow into India. If there are payment obligations back home, capital could flow out of India. So we are just making sure that we are prepared to meet either eventuality,” the finance minister said.

Subir Gokarn, Chief Economist, Standard and Poor’s (Asia Pacific), said the higher MSS provision for 2008-09 reflects the government’s readiness to deal with an elevated level of capital inflows.

It also shows that the government is ready to check a sharper appreciation of the rupee, he added.

The rupee has appreciated around 14 per cent against the dollar in the past year. The finance ministry has, however, maintained that the appreciation has been around 6 per cent on a real effective exchange rate basis in 2007.

The MSS issuances are currently capped at Rs 2,50,000 crore, with Rs 2,35,000 crore set as the threshold for a review of the ceiling. The ceiling was raised four times in 2007-08 from less than Rs 1,00,000 crore at the beginning of the year. Total MSS bonds outstanding on February 22, 2008 stood at Rs 1,76,018 crore.

Money received through the MSS bonds issues is placed in an escrow account. The balances in this account are used only to redeem the bonds on maturity. The interest cost is borne by the government.

At the beginning of 2007-08, the budgetary allocation for interest payments on the MSS bonds was Rs 3,700 crore. The allocation was raised to Rs 8,351 crore. For 2008-09, the finance minister has made a provision of Rs 13,958 crore for such interest payments.

Rupa Nitsure-Rege, chief economist at Bank of Baroda, said: “At some point, overseas investors will have to look at China, India and other high-growth Asian economies for investments as developed economies face slowdown”.

Capital inflows have created difficulties in monetary management for the Reserve Bank of India which has struggled to defend the rupee and contain inflation.

Higher foreign exchange inflows have to be absorbed by the central bank to check the rupee from strengthening and this has to be followed by measures to absorb the resultant rupee liquidity to contain inflation.

In August 2007, the Reserve Bank of India (RBI) had restricted the end-use of overseas borrowings. This apart, fresh overseas borrowings above $20 million were restricted only for foreign currency expenditure.

In the first six months of the current financial year, gross external commercial borrowings (ECBs) rose, year-on-year, by 81.1 per cent to reach $14 billion.

Total portfolio flows into India — including proceeds of depository receipt issues and investments by FIIs — during April-December 2007 amounted to $32.8 billion against $7 billion in the whole of 2006-07.

Turbulent times in US, but Infy is in comfort zone

With the ongoing uncertainty over IT spending by clients in the US, the fact that Infosys has a significant cash pile over $2 billion in cash and cash equivalents becomes extremely important and gives it confidence, said Infosys MD & CEO S Gopalakrishnan.

While clients’ IT budgets remain the same or go up slightly from previous years, there is an unwillingness to spend the money, which could lead to a quarter or two of slow growth, he said.

We are in close contact with our customers and trying to get more clarity on how they plan to spend their budgets.

While the IT budgets are closed, there is some hesitation when it comes to discretionary spends and new projects. When it comes to maintenance and support, it’s business as usual,” said Mr Gopalakrishnan.

With a sizeable cash pile, the market expects Infosys to either buy companies or return some of it to shareholders through dividends. Mr Gopalakrishnan insisted that cash is extremely important. “In a high-risk, technology business like ours, we must have sufficient cash. In times when there is concern about the US economy, cash gives you a lot of confidence, he said.

While Infosys has identified India, China, Australia and Japan as among its key emerging markets, verticals like utilities, healthcare and pharma are where it aims to increase its presence.

We look at acquisitions as a way to accelerate entry into some of these areas (markets and verticals). We want to acquire if we find the right company at the right valuation which is willing to be acquired, he added.

While 30-40% of its hiring requirements for the next fiscal have already been met through campus recruitment, Infosys can adjust its hiring from the market, if need be, Mr Gopalakrishnan said, adding it will decide in April its people requirement for fiscal 2008-09.

Salary hikes for Infosys employees will continue to be in the 13-15% range as last year. The shortage of people is not going away.

Transaction cost, a big worry

When broking houses across the world are giving away freebies in terms of zero brokerage, free account, free advices, what should be the ideal cost they incur for doing all these activities and how do they recover them? This is the question customers ask to broking houses without any clear answers.

The answer, perhaps, lies in technology and how the firms reduce cost per transaction in a way that benefits customers and the broking houses. “It is not true that there are hidden charges behind our offering of free services. In fact, we are one of the world's most cost-effective mechanisms,” said Sudip Bandyopadhyay, CEO of Reliance Money.

However, India remains one of the most expensive markets in terms of transaction costs, according to a survey conducted by global financial consultancy Elkins/McSherry. It says that the average brokerage charge for delivery-based trades in India is around 30 basis points, while the total transaction cost is about 51 basis points, including charges like stamp duty and service tax.

Now if you add the client servicing in a way that satisfies the client, the cost becomes much higher. The survey also says that average commission in India is 30.06 basis points which is higher than other BRIC countries Brazil (23.92), Russia (14.84) and China (22.2). The markets costlier than India include Venezuela, Peru, Philippines, Egypt, Indonesia, Colombia and Chile.

“With internet and mobile broking giving the advantage of quick delivery, people's approach to transactions is fast changing,” says Rajan Varghese, ED and chief technology architect of Microsign Technologies Pvt Ltd. He adds that the time has come where customers are the king and they dictate what the companies should do. “They are demanding more accessibility and convenience in their day-to-day broking.

Choosing an option has become easier for them,” added Varghese whose SaaS (Software-as-a-Service) model, which provide end-to-end solutions, is growing at a rate of 20-25% yearly. And he has valid reasons too. Online trading community is on the increase. Major players like Reliance Money and ICICIdirect.com are taking away a major chunk of the traditional broking house investors to their kitty.

Figures tell the story. ICICIdirect.com alone has 13 lakh customers and is growing at an amazing pace of over 40 per cent. With traditional broking ways hitting a roadblock, the advantage lies in brokerage institutions' quick reflexes and flexible operations.

ICICI Bank Opens New York Branch

ICICI Bank Limited , India's second largest bank by assets and largest private sector bank, today inaugurated its New York branch in midtown Manhattan. This is consequent to the bank's approval from the U.S. regulators to commence operations as a Federal branch in New York City.

To view the Multimedia News Release, go to: http://www.prnewswire.com/mnr/icicibank/32055/

The New York branch, subject to applicable guidelines, will offer a suite of banking services including working capital, acquisition finance, trade service and treasury solutions to corporates and savings products to qualified individuals.

Mr. K. V. Kamath, Managing Director and CEO, ICICI Bank Limited, said, "India's growth momentum and its trade relationship with U.S. has reached an inflexion point. ICICI Bank's entry into the U.S. market provides it with a great opportunity to service the various opportunities arising from this paradigm shift."

Mr. Sonjoy Chatterjee, Executive Director, responsible for Corporate & International Banking, at ICICI Bank Limited said, "The New York branch completes our strategy to be present across all major financial centres. Our initial focus will be on corporate cross border opportunities and the local banking needs of Indians coming to work in the U.S. This is an exciting period for the Bank as it pursues its aspiration to be a truly global bank".

The branch is well positioned to channel investment activities of Indian companies in the U.S. and vice-versa of U.S. companies in India. The bank is simultaneously planning to leverage its presence in New York to significantly ramp up its India based NRI services to Non-Resident Indians (NRIs) residing in the U.S.

About ICICI Bank Ltd: ICICI Bank Limited is India's largest private sector bank and the second largest bank in the country, with consolidated total assets of about USD 115 billion at December 31, 2007 and a market capitalization in excess of USD 30 billion. ICICI Bank's subsidiaries include India's leading private sector insurance companies and among its largest securities brokerage firms, mutual funds and private equity firms. ICICI Bank's presence currently spans 19 countries including the U.S.

Except for the historical information contained herein, statements in this release, which contain words or phrases such as 'will', 'would', etc., and similar expressions or variations of such expressions may constitute 'forward-looking statements'. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to our ability to obtain statutory and regulatory approvals and to successfully implement our strategy, future levels of non-performing loans, our growth and expansion in business, the adequacy of our allowance for credit losses, technological implementation and changes, the actual growth in demand for banking products and services, investment income, cash flow projections, our exposure to market risks ICICI Bank undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date thereof. ICICI Bank and the "I man" logo are the trademarks and property of ICICI Bank.

Possibility of volatility in securities` trading

What is special about an annual Budget exercise and what is the value addition that a business lawyer derives from following the Budget announcements. Part A is of no real consequence to the business lawyer, with the focus on the agricultural and educational sectors. A quick look at Part B shows that direct tax rates have not been raised, lawyers continue to remain outside the service tax rate net, no change in applicable withholding taxes, the changes in the taxable income threshold don’t really affect most lawyers anyway.

But this is a micro view of the lawyer’s turf remaining intact. The Budget perception differs for the taxpayer, the businessman, the politician and media. The initiatives and changes in the financial scenario require the lawyers to evaluate the impact on the client’s business, which is why business lawyers were quick on Friday night to summarise the essentials and mail them out.

Major policy changes do not find place in the Budget any longer, since the intention to change labour laws a few years ago had to be backtracked. Pre-Budget wishlists included a crying need for a revamped legal framework for M&A transactions. The delay in the implementation of a proper Competition law and the inability to have a new Companies Act in place, are slow downs in the M&A process. Perhaps the Budget is not the right forum, but a nudge in this direction would have not been unwarranted.

What is disturbing from the legal perspective are the market initiatives.The increase in short-term capital gains tax is perceived as an obstacle to trading outside stock exchanges. The proposal to treat the Securities Transaction Tax (STT) as a deduction against business expense and not as a set off against other taxes will also adversely affect short-term trading. STT is currently levied on all transactions in the secondary market effected through the stock exchange. Therefore, either way there is the possibility of slowdown in volatility in buying and selling of securities. The requirement of PAN for all securities transactions, and not just mutual funds, may exclude small players. The threshold limits of exemptions are critical, as this could create roadblocks otherwise.

The introduction of Commodities Transaction Tax on the lines of the STT on options and futures, appears to be a hasty step, as the two markets are very different. There are no attendant incentives or benefits which have been announced, whose absence will only increase the transaction cost for the buyer. This requires reconsideration as a template will not simply work, particularly in an inflationary context.

On the initiative undertaken for corporate debt structuring, this is an area which requires attention as a vibrant corporate debt market is essential, particularly for the infrastructure sector. The Budget has announced that various types of financial instruments are to be structured and investors will be able to separate the embedded equity option from the convertible bond, for trading and instruments issued in demat form listed on recognised stock exchanges will be exempted from withholding tax. There is no clarity on who would regulate the corporate debt market, and this issue has been mulled over the last three years on how the responsibilities will be shared between the Sebi and RBI. While the broad consensus has so far been that Sebi will be responsible for primary and secondary markets (public issues as well as private placement by listed companies) RBI would regulate repo/reverse repo transactions. Regulation of trading of unlisted securities and derivatives on other corporate debt is still undecided. This framework has to be in place to make the market operative. However, Sebi had put in place framed Draft Regulations on Issue and Listing of Debt Securities and posted the same on its website along with a consultative paper for Public Comments. Salient features of the draft regulations include rationalisation of disclosure requirements, enhanced responsibilities of merchant bankers for exercising due diligence and mandatory listing of private placement of debt. The paper also makes provisions for e-issuances of corporate debt and proposes introduction of rationalised listing requirements for debt of a listed issuer.

Tax structures also have to be revisited which promise has been made in relation to stamp duties. Present tax incentives relating to infrastructure are profit-related and hence focus on equity investment in infrastructure. The incentives should also cover debt investment.

Bottom line — gains for some, bad news for some others and no change for most.

Sebi puts brakes on speed-reading

If you watch television, you just cannot miss the colourful, new fund offering (NFO) advertisements by mutual funds talking about India’s growing economy and how investing in them is likely to fetch great returns. But what you are likely to miss is the disclaimer — “Mutual fund investments are subject to market risks, read the offer document carefully before investing” — which is read out at a breakneck speed.

As per the Securities and Exchange Board of India (Sebi) rules, this disclaimer is a must for every mutual fund product advertisement.

And, while following the stipulation, the advertisers apparently try to keep the public from hearing it by resorting to speed reading.

However, a Sebi circular issued today is set to change all that. Sebi has mandated that with effect from April 1, 2008, the time for display and voice over of the standard warning be enhanced to five seconds in audio visual advertisements. In case of audio advertisements, the standard warning shall be read in an easily understandable manner over a period of five seconds.

“The rapid-fire manner in which the standard warning is recited in the audio visual and audio media renders it unintelligible to the viewer/listener,” the regulator said today, pulling up the mutual fund industry.

This is the first investor-friendly move by Sebi after C B Bhave took over as its chairman on February 18.

Currently, the disclaimer takes around two or three seconds in a 10 or even a 20-second spot.

An average mutual fund advertisement is about 10 to 30-second long.

Mutual funds say that the Sebi move is likely to push up fund marketing costs of asset management companies (AMCs) by 20 to 50 per cent since half of the time in a 10-second ad and one-sixth of the time in a 30-second ad will be devoted to the mandatory disclaimer from April 1.

For instance, if a 10-second ad costs Rs 1 lakh, Rs 50,000 would be spent on making the disclaimer.

“While the move is in the investor’s interest, we feel that there should be a level-playing field between banks, insurance companies and mutual funds. In a 10-second advertisement, if 5 seconds are for the disclaimer, then what will it communicate?” said Jaideep Bhattacharya, chief marketing officer, UTI Mutual Fund.

Interestingly, insurance companies use “Insurance is a subject matter of solicitation” to market insurance products that also include unit-linked insurance plans.

There are no rules mandated by the Insurance Regulatory and Development Authority (Irda) on its duration. “Even the Hindi version of the line that insurers use is short. This order of Sebi is further making us uncompetitive,” pointed out the marketing head of another fund house.

However, the advertising fraternity does not think that the Sebi circular will affect advertising revenues.

“This measure does not bring down the ad spends of mutual funds since the financial services sector is booming right now. Creatives will have to be well-crafted to make sure there is no monotony,” said Pratap Bose, Chief Executive Officer, Ogilvy and Mather India.

Advertising preferences will also remain unchanged despite the cost factor since each kind of media targets a particular market but the 10-second advertisement may become unviable for mutual funds.

“Mutual funds have been advertising on television because they get value for money and, as such, this will have no impact on advertising revenues derived from mutual funds,” said Joy Chakraborty, Network Sales Head, Zee Network.

It was in 2005 that the capital markets regulator came out with a circular which asked mutual funds to carry the disclaimer along with advertisements in all media.

Sebi had then said that the disclaimer “shall be displayed on the screen for at least two seconds in a clearly legible font size, covering at least 80 per cent of the total screen space and accompanied by a voiceover reiteration.

The remaining 20 per cent space can be used for the name of the mutual fund or logo or name of the scheme, etc.”

The above statement shall be displayed in black letters of at least 8 inches height or covering 10 per cent of the display area, on white background,” Sebi had said.

Reliance Life Insurance launches Reliance Wealth + Health Plan

Life insurance major Reliance Life Insurance has launched the first-of-its-kind Reliance Wealth + Health Plan, a unit linked plan coupled with health benefits.

The launch was announced by Mr. P. Nandagopal, CEO, Reliance Life Insurance. The Reliance Wealth + Health Plan is the first wealth creation product that also offers comprehensive health coverage as a key differentiator in the domestic insurance market.

"The unique proposition of this plan is that it offers complete investment flexibility to grow wealth by investing in different plans and funds and also provides the financial support for managing health expenses. It is in line with our strategy to offer best-in-class products to our customers" said Nandagopal while launching the product.

The plan offers the convenience of cashless payments, cover for the entire family under one plan and the option to increase life cover to provide additional security.

"With annual premium as low as Rs 10,000 to Rs 12,000 per annum, the insured can get health and saving benefits and protect himself/herself against high or unexpected medical bills. The plan provides lumpsum benefit to take care of hospitalization expenses, which include daily hospitalization expenditure, intensive care unit expenses and post-hospitalization spending in the form of recuperation benefits", he said.

The plan offers enhanced health coverage against life threatening illnesses and major surgeries, with all insured having an option to cover themselves against untoward incidents as well. Likewise that the amount towards medical expenses can be availed a number of times in a year and up to 95 per cent of the fund value can be withdrawn during the policy period.

"The policyholder can avail all the benefits with all features of ULIP for maximum flexibility and liquidity, minimizing risk, maximizing returns and averaging cost of units. The plan also contains coverage's with a bouquet of riders available for all lives under the policy and has significantly lower charges and free switches for best risk appetite fund. This is the only plan that provides such additional value with a maturity benefit at the end of the policy term" said Mr Nandagopal.

The product is expected to contribute 35-40% of the total sales of the January-March quarter, 2008.

''We expect a significant business growth on the back of this product, as so far people have not been provided with adequate choice of quality insurance products,'' he added.

Dollar Falls to Record Low Versus Euro as Fed Signals Rate Cuts

The dollar fell to the weakest ever against the euro and to a three-year low versus the yen after Federal Reserve officials signaled they will keep cutting interest rates to support the economy.

The U.S. currency dropped 2.4 percent this week against the euro, the most since December, after Fed Chairman Ben S. Bernanke said he ``will act in a timely manner'' to spur growth and cited the weaker currency's role in improving the trade deficit as a ``positive'' for the economy. The U.S. Dollar Index, which tracks the currency against six major counterparts, sank to the lowest since its start in 1973.

``U.S. policies are pointing to a weaker dollar,'' said Axel Merk, who helps manage the $294 million Merk Hard Currency Fund in Palo Alto, California. ``People don't have confidence in the dollar.''

The dollar ended yesterday at $1.5179 per euro, after touching $1.5239, the cheapest since the common currency's inception in 1999. The U.S. currency tumbled 3.2 percent this week to 103.74 yen, and touched the weakest since March 2005.

The U.S. currency lost 2.1 percent against the euro last month, the most since September. The euro is 30 percent above its debut level of about $1.17 in 1999, and is up 84 percent from an all-time low of 82.30 U.S. cents in 2000.

After trading between $1.43 to $1.49 per euro since November, the dollar decline gained momentum when Fed Vice Chairman Donald Kohn said on Feb. 26 that credit-market turmoil posed a ``greater threat'' than inflation. The comments drove the euro above $1.50 for the first time.

`Some Improvement'

The dollar fell past $1.51 on Feb. 27 after Bernanke told a House panel policy makers said the Fed is ready to act to insure against ``downside risks'' to the economy. The U.S. currency continued its slide the next day after Bernanke told a Senate panel the dollar's decline has resulted in ``some improvement'' in the trade deficit. Treasury Secretary Henry Paulson reiterated on Feb. 28 he favors a strong dollar.

``The Fed is breaking new ground in expressing indifference to the U.S. dollar's decline,'' analysts led by Daniel Tenengauzer, New York-based head of global currency strategy at Merrill Lynch & Co., wrote in a research note yesterday. Merrill forecasts the euro to ``peak'' at $1.57 around the end of March.

The U.S. currency has dropped 13 percent versus the euro in the past year as subprime-mortgage losses, the worst housing market in 25 years and soaring credit costs spurred the Fed to cut rates five times since Sept. 18.

Manufacturing Contracts

Reports next week may show U.S. manufacturing contracted last month, while the jobless rate rose. The Institute for Supply Management's manufacturing index probably fell to 48, from 50.7 the previous month, the Tempe, Arizona-based group will say on March 3, according to the median forecast in a Bloomberg News survey. The unemployment rate probably rose to 5 percent in February, from 4.9 percent in January, according to the median forecast in a separate Bloomberg survey.

The chances of a 0.75 percentage point Fed cut to 2.25 percent on March 18 rose to 72 percent yesterday, from 2 percent a week earlier, according to futures on the Chicago Board of Trade yesterday. The balance of bets is on a half-point reduction.

The European Central Bank will keep its main interest rate at 4 percent, the highest level since 2001, at its policy meeting on March 6, according to the all 54 economists in a Bloomberg News survey. ECB President Jean-Claude Trichet said on Feb. 28 ``price stability is a necessary condition'' for ongoing economic expansion.

At 1.64 percent, the two-year U.S. Treasury yielded 1.52 percentage points less than the same-maturity German government bund. The gap was the most since 2002.

Australian Dollar Gains

The Australian dollar climbed to 94.98 U.S. cents on Feb. 28, the strongest since 1984. The Reserve Bank of Australia will probably raise its benchmark rate a quarter-percentage point on March 4 to 7.25 percent, according to the median forecast in a survey by Bloomberg News.

The New Zealand dollar rose to 82.13 U.S. cents on Feb. 27, the highest since the currency was allowed to trade freely in 1985.

The U.S. Dollar Index traded on ICE Futures in New York, which tracks the currency against six major counterparts, declined to 73.56 yesterday, the lowest since it started in 1973.

Latin American currencies also surged this week, with Brazil's real reaching the highest in almost nine years.

Buffett's Currency Investments

Billionaire investor Warren Buffett's Berkshire Hathaway Inc. said yesterday its only ``direct'' currency investment last year was in the real against the dollar. Direct currency positions generated $2.3 billion of pretax profits over the past five years, the company said.

``We will attempt to further increase our stream of direct and indirect foreign earnings,'' the Omaha, Nebraska-based company said in its annual report.

The U.S. currency's decline has made U.S. goods cheaper abroad, boosting exports to a record and shrinking the nation's trade deficit last year for the first time since 2001. It can also make it less attractive to hold onto U.S. assets. Foreign holdings of U.S. stocks, notes and bonds rose a net $56.5 billion in December, slowing from an increase of $90.9 billion in November, Treasury Department data showed last month.

Weekly wrap: Sensex edges up amid high volatility

There were events galore during the week ended February 29, 2008. First, it was the Railway Budget on Tuesday (February 26) for Year 2008 - 2009. The Economic Survey for fiscal 2008 was tabled on Thursday followed by the Union Budget for 2008 - 2009 on Friday, the final session of the week. The derivatives expiry was the other major event during the week under review.

All these had their fair share of contribution to the market's expectations and volatility. Auto, capital goods, metal, oil, power and pharma stocks saw some hectic buying during the week. Reduction in customs duty for two, three and four wheelers saw automobile stocks bucking the weak trend on the Budget day. Pharma stocks also had a fairly good run in the positive zone on Friday afternoon.

Realty stocks had their moments in the positive zone during the week but failed to garner sustained support. Information technology stocks were hampered by the rupee's progress and also due to lack of any significantly positive measures for the sector from the budget. FIIs and domestic mutual funds remained net buyers for the major part of the week.

While the 30 share BSE sensitive index ended the week with a gain of 229.65 points or 1.32% at 17,578.72, the broader 50 stock Nifty index of the National Stock Exchange settled with a gain of 112.75 points or 2.2% at 5223.50.

Among the sectoral indices, BSE Healthcare finished with a handsome gain of 4.91%. BSE Auto advanced by 3.81%. The Oil & Gas and PSU indices moved up by 3.37% and 3.35% respectively. BSE Metal (2.26%), Power (2.7%) and CG (2.96%) closed with strong gains and the FMCG index also ran up smartly to end 1.94% up.

The Bankex eased marginally by 0.36%. The Realty index ended lower by nearly a per cent. The IT and Teck indices slipped by 1.42% and 1.54% respectively while the Consumer Durables barometer, which suffered the most, dropped down by 3.9%.

Notwithstanding some sharp losses posted on a couple of sessions, midcap and smallcap stocks saw a fair amount of buying during the week. While the Midcap index surged 1.13%, the Smallcap edged up by 0.34%.

The Sensex notched up a gain of over 300 points on Monday thanks to a firm global trend. Expectations of market friendly measure from the Budget and short-covering ahead of expiry of February series derivatives contracts also contributed to the rise in stock prices. The 3:5 bonus announcement from Reliance Power played a stellar role as well in buoying up the sentiment.

The Railway Budget's thrust on infrastructure development and low freight rates kept the sentiment buoyant on Tuesday and the BSE barometer recorded a gain of around 155 points. The Nifty added nearly 70 points to its Monday's tally of around 90 points.

Heavy selling during the final hour of trade resulted in the Sensex ending flat on Wednesday. Information technology stocks were among the ones that dragged the market down from higher levels. It was another flat close for the barometer on Thursday as participants chose to tread a cautious path ahead of the budget. Slower economic growth and rising inflation had an impact on the market that day.

Proposals to increase spending on agriculture and education, the reduction in customs duty on specified drugs and project imports, cut in excise duty on automobiles, increased allocation for Bharat Nirman Programmes, subsidies on Fertilizers and waiving off of outstanding loans of the farmers were some of the positives to emerge from the Union Budget 2008-2009 that was tabled on Friday.

But the proposal to hike short-term capital gains tax to 15% stumped market participants and sent stock prices into a tailspin in afternoon trade. Weak global markets also dampened the mood to a marked extent. Though the market staged a fairly strong recovery later on, the Sensex still ended the session with a big loss of 246 points on Friday.

Maruti Suzuki (up 13.1% to Rs 867.20) was the biggest gainer from the Sensex last week. BHEL moved up by 10.8% to Rs 2282. Mahindra & Mahindra rallied 10.2% to Rs 692.80. HDFC and Ranbaxy Laboratories notched up 8.9% and 8.7% respectively.

Hindalco, Hindustan Unilever, Cipla, Grasim Industries, Ambuja Cements, Wipro, Larsen & Toubro and ACC gained 2% - 6%. NTPC, ONGC, Reliance Industries and ITC finished with modest gains while Tata Motors and Reliance Energy edged up marginally.

Realty stock DLF eased by 5.8%. Bharti Airtel and Reliance Communications, the telecom majors, lost 2.9% and 1.3% respectively. Among IT stocks, Tata Consultancy Services and Infosys Technologies lost 2.6% and 2.1% respectively while Satyam Computer Services eased by a little over a per cent.

Banking sector heavyweights HDFC Bank (down 1.5%), ICICI Bank (down 0.8%) and State Bank of India (down marginally) closed lower. Bajaj Auto and Tata Steel ended with small losses.

Nifty stocks GlaxoSmithKline Pharma (16.5%), Nalco (11.5%), Sun Pharmaceuticals (11.1%), Cairn India (10.8%), Reliance Petroleum (9.7%), BPCL (9.5%), GAIL India (8.8%), Dr. Reddy's Laboratories (8.1%), SAIL (6.6%), Hero Honda (5.7%) and Tata Communications (5.7%) ended on a strong note. Sterlite Industries, Punjab National Bank and Tata Power also moved up sharply.

HCL Technologies and Idea Cellular finished with modest gains. Siemens, Suzlon Energy, ABB, Unitech and Zee Entertainment closed lower.

Corporate bond market: Ball once again in Sebi court

The move by the Union finance minister (FM) to develop the corporate bond market along with the launching of exchange-traded currency and interest rate futures has once again put the ball in the capital market regulator Securities and Exchange Board of India (Sebi)'s court.

Presenting the General Budget for the year 2008-09, Union finance minister Palaniappan Chidambaram said that he planned to enhance the tradability of domestic convertible bonds by putting in place a mechanism that will enable investors to separate the embedded equity option from convertible bonds and trade them separately.

“I intend to encourage the development of a market-based system for classifying financial instruments based on their complexity and implicit risks,” he said. He said that these proposals were in line with his earlier Budget announcement in 2006 announcing that the RH Patil Committee report will be implemented and an exchange-traded market for corporate bonds be created.

Reacting to the Budget proposal on the debt market, RH Patil, chairman of Clearing Corporation of India (CCIL) said that the finance minister’s announcement was a welcome step. “Now, Sebi has to act to make these proposals a reality,” he said.

In line with the finance minister and Patil, Sebi also seems to have geared up to intensify its attempts to spearhead the corporate debt market.

TC Nair, whole-time member, Sebi, working on the corporate bond market said, “The move by the FM in his Budget will definitely see the Indian bond market taking off in the next eight to 12 months. The last hurdle of differential rate of stamp duty with different states will also be tackled as FM has requested empowered committee of state finance ministers to closely work with the Centre to develop truly pan-India bond market."

However, there is mixed response among market participants on the Budgetary proposal. One section is of the opinion that the talk on developing corporate bond market has been going on for a long time. Sandeep Bagla, CIO, fixed income, AIG Investments, said that one can come to know about the impact of these proposals on the debt market and mutual fund industry only once these proposals become a reality.

However, the bond market rallied by four basis points following the Budget announcement because the government’s borrowing numbers are lower than market expectations.

On the other hand, Sandesh Kirkire, CEO, Kotak Mutual Fund said that the Budget proposal on the corporate bond market and other related issues were an indication of a move to deepen the debt market. He said, “Bringing liquidity in the bond market is very important for the success of the debt market.”

These initiatives can be further strengthened if the RBI makes the corporate bonds repo-able, he added. Making them repo-able will mean borrowing and lending of the asset could be done in the market

Stock market turnover expands 4 times since 2004: Economic Survey

BSE and NSE, India's two premier stock exchanges, have quadrupled in size during past four years with the combined turnover of spot and derivatives segments jumping to over Rs 166 lakh crore in 2007.

According to the Economic Survey, the turnover of the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) surged by 286 per cent to Rs 1,66,69,410 crore in 2007 as compared to Rs 43,09,692 crore in 2004.

"The spot market turnover (one way) for NSE and BSE amounted to Rs 45,08,709 crore. In the derivatives market, the turnover of these two exchanges added up to Rs 1,21,60,701 crore during 2007, showing a quantum growth over previous year," the survey said.

During 2004, the spot market turnover for NSE and BSE stood at Rs 17,03,781 crore, while in the derivatives market it was Rs 26,05,911 crore.

In terms of institutional players, both FIIs and mutual fund leveraged their activity in the equity market during the year, it noted.

The net investment by FIIs in both spot and derivatives markets witnessed a quantum jump during 2007, while the corresponding gross buy and sell by FIIs increased significantly as well.

Last year, FIIs net activity constituted 17.3 per cent of the spot market and nine per cent of the derivatives market.

Besides, the assets managed by mutual funds grew by 1.7 times from Rs 3.23 lakh crore in 2006 to Rs 5.5 lakh crore in 2007.

BUDGET 2008 - 2009 at a Glance

	Budget 2008-09 at a Glance Income Tax Individual Positive Income Range Proposed Tax Rate Up to Rs.1,50,000 Nil Rs.1,50,001 to 3,00,000 10% Rs. 3,00,001 to 5,00,000 20% Rs. 5,00,001 and above 30% Personal income tax exemption slab for women raised to Rs 1.8 lakh Personal income tax exemption slab for Senior Citizens raised to Rs 2.25 lakhs Corporate Neutral No change in corporate tax No change in rate of surcharge on tax. Other Tax VAT Production of seeds added to VAT list STT Governmentt to introduce STT on commodities derivatives Levy of STT on option premiums. Capital Gains Tax Short-term cap gains hiked to 15% Sectors Automobile Positive Excise duty on small cars cut to 12% Excise duty on hybrid cars cut from 24% to 14% Excise duty on buses & chassis cut from 16% to 12% Excise duty on 2-wheeler, small cars cut from 16% to 12% Excise duty on three wheelers cut to 12% Banking Neutral Banks will get the support from government in lieu of waiver of Rs 60,000 cr on farm debt 288 PSU Bank Branches to be opened in backward areas by March 2008 Financial Market Negative Asset management service under mutual funds, services by stock exchanges to be brought under Services Tax net. PAN requirement extended to all financial markets Short-term cap gains hiked to 15% Cement Negative Excise duty on bulk cement at Rs 400/tonne or 14%, which ever is higher Excise duty on clinker increase to Rs 450 per tonne from Rs 350 per tonne Construction/Civil Sector Positive Bharat Nirman Programme gets allocation of Rs 31,280 cr Engineering/Capital Goods Positive Growth in capital goods still healthy at 20.2% Customs duty on project imports cut to 5% vs 7.5% Fertilizers Positive Government proposes move to nutrient based fertilizer subsidies scheme Fertilizer subsidies to continue Customs duty exemption on Naphtha withdrawn, except for that used for making fertilizers Seed companies to get 150% deduction on R&D expenses Production of seeds added to VAT list FMCG Positive Special purpose tea fund to get Rs 40 cr in FY09 Perpetual fund for rubber, cardamom in FY09 Rs 18 cr allocated for coffee in FY09 Filter, non-filter cigarettes to be taxed at par Food Processing Positive Duty cut on food processing machinery Excise duty exemption on food mix and Biscuits Excise duty reduced to nill from 16% on packaged coconut water, tea & coffee mixes & puffed rice. Health Care Positive Allocation of Rs 16,534 cr for health in 2008-09 National Rural Health Mission allocation hiked by 15% Rs 1,042 cr allocated for Polio eradication in UP, Bihar Health cover of Rs 30,000 for every worker in BPL category Customs duty on few bulk drugs cut to 5% vs 10% Excise cut on all pharma goods at 8% vs 16% 5-year tax holiday for setting up hospitals in non-urban cities Information Technology Positive To allot Rs 100 cr to IT Ministry to link knowledge institutes Few IT, hardware components exempted from customs duty Education Positive Government to set up 3 IITs; one each In AP, Bihar, Rajasthan To set up 3 IISCs in Bhopal and Trivandrum Allocation To JNURM Hiked To Rs 6,866 Cr From Rs 5,482 Cr 16 central universities to be set up 20% higher outlay for Education Media & Entertainment Positive No duty on set-top boxes Steel/Aluminum Positive Customs duty on steel scrap cut to 0% vs 5% Customs on steel melting, aluminum melting cut to 0% vs 5% Oil & Gas Positive Coal regulator to be established, more reforms in coal, electricity NELP-VII to attract upto USD 8 bn investment Customs duty on crude/unrefined sulphur cut to 2% vs 5% Imported naphtha for polymer will attract duty Power Positive Urge To Open Bidding For Five More UMPP´s National fund for power transmission, distribution Plan Rs 800 cr for accelerating power reform in FY09 Special Countervailing Duty on power imports. Set up of new T&D fund Paper Positive Excise duty on some paper types cut to 10% from 12% Telecom Positive CENVAT reduced from 16% to 14% on all goods Textiles Positive 30 integrated textile parks approved Rs 450 cr provision for textile parks Allocation for TUF at Rs 1090 cr up from Rs 911 cr Tourism & Hospitality Positive 5 year tax holiday for 2, 3 and 4 star hotels in NCR regions till March 31st 2010. Tourism infrastructure to get an allocation of Rs.520 crore as against Rs.423 crore last year. Agriculture Positive Agriculture estimated to grow at 2.6% in FY08 Agriculture credit target at Rs 2.8 lakh cr for 2008-09 75% farm credit by Scheduled Commercial Banks Aim to hike farm contribution to GDP to 1.6% in 11th PlanFY09 Irrigation outlay seen at Rs 20,000 cr Vs Rs 11,000 cr 24 major, 750 irrigation projects in FY09 Irrigation resources finance to have Rs 100 cr capital National agriculture insurance plan to get Rs 64 cr in FY09 Market Reaction Indices Open At 1:00 PM Change (%) Sensex 17,779.54 17,439.45 -2.16 BSE Auto 4,830.17 4,849.83 0.41 BSE Bankex 10,021.76 9,856.57 -2.16 BSE Capital goods 16,577.45 16,169.71 -2.59 BSE Consumer Durables 4,789.24 4,743.12 -1.08 BSE FMCG 2,248.81 2,263.61 0.43 BSE Healthcare 3,918.59 3,888.70 -0.94 BSE IT 3,965.45 3,873.30 -2.37 BSE Metal 16,923.65 16,550.96 -2.48 BSE Oil & Gas 11,113.94 10,822.71 -3.06 BSE Realty 9,845.50 9,651.01 -1.85 BSE Power 3,330.31 3,256.28 -2.41 Markets reacted negatively; lost 2.16% around 1:00 PM The Indian markets opened lower at 17,779.54 down tracking weak global cues as U.S. markets ended in red and Asian indices too were trading lower with the exception of Shanghai Composite. Also, the news that Citigroup India arm is on cost cutting exercise after feeling the pinch of sub prime losses raised worry among investors. The markets were down till mid day trade as market participants were in wait-n-watch mood. The markets gave up soon after the budget speech started and plunged to 17,439.45 down by 385.03 or 2.16%. Proposal of hike in short term capital gains tax to 15% from 10% and to levy STT on commodities derivatives has triggered selling pressure. Automobile industry has welcomed the Finance Minister decision of excise cut. Consequently,Mahindra & Mahindra rose 1.15% to Rs 688, Eicher Motors up 1.07% to Rs 284 and Maruti Suzuki rose 1.83% to Rs 850.25. Fertilizer sector has reacted negatively as subsidy continues to farmers only and no subsidy has been provided to producers. Tata Chemicals down 1.88% to Rs 324, Rashtriya Chemicals down 4.73% to Rs 84.60, National Fertilizers down 4.95% to Rs 66.30, Deepak Fertilizers down 5.88% to Rs 135.30, and Coromandel Fertilizers down 8.08% to Rs 123.50.