BSE, NSE tighten market surveillance further

Stock exchanges have stepped up the surveillance in a bid to curb excessive speculation in the overheated market.

The National Stock Exchange (NSE) has asked its members to collect permanent account numbers (PAN) of all their clients and provide them with details of unique client code (UCC). This measure will come into force from December 1, 2005.

In yet another step, the Bombay Stock Exchange (BSE) has decided to impose special margin of another 25 per cent on the buying and selling position of five stocks which have remained volatile and have gained in spite of tightening the margin requirement. This measure will come into effect from Monday, September 26. The special margins will be imposed on the basis of member-wise gross purchase or sale position (client-wise net).

BSE, in a notice to its members said, the rate of special margins have been revised on five stocks keeping in view the closing price of these stocks on last trading day (Friday). The five stocks are DCW, Era Construction, Mega Corporation, Megasoft and Prraneta Industries.

On Tuesday, the BSE had said 504 stocks, mostly belonging to the B1, B2 and S groups, will attract an upfront margin of 100 per cent with effect from September 26.

Both the BSE and the NSE have reduced the circuit filter cap to 5 per cent earlier this week. ‘‘These measures put a brake on the unbridled rise in penny stocks,’’ said a stock dealer.

The BSE Smallcap index closed in the positive on Friday, after three days of continous decline on the bourses. It gained 26 points to close at 5,605. The index lost a massive 758 points to close at 5,605.46 as investors dumped small-cap stocks in anticipation of a further fall in the prices of fundamentally weak stocks. The index had touched an all-time intra-day high of 6,394.2 on Monday, September 19.

No scam in Sensex: finmin

Indian Finance Minister Palaniappan Chidambaram said the country's stock market was well-regulated and there was no cause for concern despite a steep fall in share prices in the previous session.

India's benchmark BSE index fell more than 3 per cent on Thursday, its biggest fall in five months, as tax raids on some brokers and rumours of greater regulation caused investors to panic. The index has gained 24.5 per cent this year.
“It's a well-regulated market. So one should not be unduly worried when the market rises or falls rapidly,” Chidambaram told CNBC-TV18 business news channel in an interview aired on Friday.

“One has to ask, 'is the market well-regulated? Are P/E ratios in the comfort zone?' And I believe they are,” he said.

Chidambaram denied reports that the office of Prime Minister Manmohan Singh had been in touch with him over the stock market's movements and said “there is no scam” in the market.

Chidambaram said the upcoming fiscal second quarter earnings would be a good indicator of whether investors had gauged corporate performance correctly.

“We should wait for the second-quarter results if they turn out to be as good as the first-quarter results, then the conclusion is that the market anticipated the second-quarter results,” he said.

Sensex remains volatile, up by 35 pts in early trade

After the overnight mayhem, the Bombay Stock Exchange Benchmark 30-share Index (sensex) Friday made a strong turnaround after a firm start even as volatility had become order of the day on fairly good buying support from institutional investors.

The sensex opened remarkably higher at 8255.05 against Thursday's close of 8221.64 and later moved erratically in a range of 8327.35 and 8221.64 before being quoted at 8257.07 at 10.30 am, up by 35.43 points.

The market had crashed by a whopping 266 points or 3.13 per cent on panic selling triggered by raids on stocks brokers across the country by Income Tax authorities.

Fears of a probe into an unprecedented and rapid upsurge in stocks by the government and the financial market regulators also weighed heavily on the market sentiment.

Brokers said the market would remain volatile till the month end in view of the expiry of derivatives contract before which operators are likely to unwind long outstanding positions in the futures.

Foreign Institutional Investors (FIIs) were believed to be sellers in a number of counters.

FIIs reported inflows of Rs 731 crore in the first three days of the week.

Meanwhile, the stock exchanges have imposed hefty margins in several scrips and also reduced circuit breaker to 5 per cent in small-cap segments.

The market fundamentals are still strong and the sharp setback is considered as a necessary technical corrections, brokers added.

SEBI chief seeks to allay investor fears

"Capital market watchdog SEBI today sought to allay investor fears on Government agencies allegedlly investigating investments in stock markets saying most of the reports on the issue were baseless and there was no failure in the systems to warrant any panic.

'I think what has happened is that a number of baseless reports have come out. It talked about people (Joint Secretary in charge of capital markets in Finance Ministry) flying into Mumbai when they had come only for routine work in connection with board meetings elsewhere and not in SEBI,' Securities and Exchange Board of India (SEBI) chairman M Damadoran told a private news channel in New York.

'All I want to tell investors is that there is no need to panic. Most the reports if not all is completely baseless,' he said. Damadoran said SEBI and other agencies looking into the relentless rise in stock markets for two weeks (before the fall on Wednesday and Thrusday on reports of scrutiny by agencies like IB) was nothing unusual.

'Everytime there is an unusual movement in the market, in fact the time when the unusual movement takes place, we look at the trade that are done during that time and then we look at who did these trades,' he said.

'There is nothing new that is happening from our side that hasn't happened earlier. And that's why I believe that all these reports showhow seems to be baseless,' he said.

Damamodran said there was no systemic problem and 'I think our systems have measured up very well.'

'There is no reason for anybody to imagine that the systems will fail, it will not. At some levels of the market some people will enter, some people will exit. Our message to investors, especially the smaller one has been that you must take informed decisions,' he added. "

No scam in Market: Chidambaram

Finance Minister P Chidambaram believes there is no scam in the stock markets and said that there was no cause for worry. He, however, said that investors must exercise caution while venturing into the stock markets at all times.

The finance minister pooh-poohed allegations that there was manipulation in the market, saying that the Indian stock markets were amongst the best regulated in the world and there was no need to worry.

The Indian stock markets which had shot up into the stratosphere fell by an alarming 266 points on Thursday following talk of raids on brokers, greater regulations and probe by authorities.

In an interview with CNBC-TV 18, Chidambaram said: "One has to ask, 'is the market well-regulated? Are P/E ratios in the comfort zone?' And I believe they are."

Chidambaram denied that Prime Minister Manmohan Singh had been in touch with him over the stock market's movements.

Online News

Herbertsons, McDowell swap at 3:2

The board of directors of Herbertsons today approved the scheme of arrangement for amalgamation with McDowell and Company.

According to a release issued by Herberstons to the BSE today, three shares of the company will fetch investors two fully paid-up equity shares of Rs 10 each of McDowell and Company.

BSE's Do's and Don'ts for investors!

The Bombay Stock Exchange has warned investors to be careful before investing in the stock markets.

In a cautionary note, the BSE has said that with the stock indices touching new highs on the back of surging volumes, more investors are investing in the stock markets than ever before, making it imperative for them to be aware of the traps and dangers of investing in the stocks.

The Investor Protection Fund of the Bombay Stock Exchange Ltd has laid out certain Do's and Don'ts for investors to alert them to the attendant risks associated with trading in stocks.

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India needs further reform to maintain growth: IMF

Observing that India is "basking in the glow" of domestic business confidence, the IMF today said the country has been growing strongly but needs further reform to maintain or even accelerate the growth.

"India has been growing strongly and is basking in the glow of domestic business confidence and growing international interest," Raghuram Rajan, IMF economic counsellor, told a press conference here.

But to "maintain or even accelerate growth India will need further reform," he noted.

Rajan said that Indian economy is to be complimented for reaching the rate of growth it has achieved. But there are clear situations where reforms are needed and government is fully cognizant of it.

"The concern here is these reforms are not happening despite the best wishes of the government and that is why we are talking about political consensus," Rajan said.

The areas where reform is needed are well-known, he said, adding fiscal deficit is something the Finance Minister has repeatedly pointed out.

There are also other areas, for example pension reform and the energy sector where power is soon going to be a constraint, Rajan said.

"We are raising these issues when India is doing so well because the concern is about future. If these reforms are not implemented now, it will constrain growth which is needed even higher than it is right now. That is why we raised these issues not in anyway to detract from what has already been done

Reliance to shut Jamnagar units

Reliance Industries, a leading refiner and petrochemicals maker, on Tuesday said it would shut some major units of its Jamnagar petroleum and petrochemicals complex during the third quarter of the current fiscal.

The period of the shutdown, required to complete maintenance work, is expected to be about eight weeks, said a Reliance Industries statement issued to the Bombay Stock Exchange.

Reliance Industries said it would use the shutdown period to carry out its "value maximisation programme" that is likely to result in higher yields and productivity and increase the production of high-value products.

Companies & Industry

Hindalco Industries has approved an 1:4 rights issue today. Shareholders of the company will get one share for every four they held. The issue, which is expected to mobilise nearly Rs 2,500 crore, will part finance the company’s expansion.

The Hindalco board, however, did not decide the price of the offer. Going by ratio of the offer and the size of the fund it aims, market sources said the issue would be priced at Rs 108-110 a share.

The Hindalco stock today closed at Rs 160.80, 0.66 per cent higher than yesterday’s closing on the Bombay Stock Exchange.

Chairman Kumar Mangalam Birla said in a media statement that, “The company is at the threshold of its next phase of growth, and the planned expansion would transform the company into a global scale metal producer.”

Investors ride Indian stocks wave!

Last year, Smita Patel lost 500,000 rupees ($11,400) of her personal savings in a day on the Indian stock market.

Since then, not only has she recouped her loss but is in profit to the tune of 250,000 rupees ($5,700) due to a share market surge that shows no sign of slowing down.

"I have never made money in the markets, from the time I started investing more than 10 years ago. This is the first time I have made any profits and now I am happy to say I am a gainer."

India's benchmark Bombay Stock Exchange (BSE) achieved a historic high last week when it crossed the 8,000 mark. Since then, the BSE sensitive index (Sensex) seems to rewrite history every day by scaling new heights.


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Make money in a bear market

Seven tips to make money in a bear market!!

Everybody gains in a bull market but it’s difficult to sustain that growth in a bear market. By definition, a bear market is when the stock market falls for a prolonged period of time, usually by 10%-20% or more.

After touching an all-time high of 6,948.54 on March 11 in a post-Budget rally, the Sensex has lost almost 500 points. The most spectacular rally of last few months seems to be going through bumpy roads these days.

The reasons are many. The slowdown in FII inflows, rising oil prices and weak global markets have made investors jittery over their investments. Amidst the current uncertainty, there are some time-tested investment strategies.

In a bull market every penny stock (that is, stocks that are priced below Rs 10) rises significantly but when it comes to a bear market, these stocks are battered heavily. So what should be the strategy for a retail investor to overcome this bear market and make substantial gains?

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Japan fourth largest investor!!

Investor News:

"With over $1.9-billion FDI inflows since 1991, Japan has emerged as the fourth largest foreign investor in India. Along with FDI inflows, Japanese FII inflows have also have been pouring into Indian stocks in recent months and have played a major role in propelling the Sensex to the current heights. A close look at the trend of Japanese FDI flows shows that while approvals peaked during 1997, there has, in general, been a considerable lag in converting the approvals into investments."

Southern online Bio Technologies (IPO)

Issue details :

Bid/Issue opens on : September 14, 2005
Bid/Issue closes on : September 24, 2005
Offer Price : Rs 10 per equity (at par)
Minimum application : 500 equity shares and in multiples of 500 equity shares thereafter.
Maximum Retail Bid Amount : Rs. 50000

Pick of the Week!! Garden Silk Mills Ltd.

Garden Silk Mills Ltd.(GARSIL)

Garden Silk Mills (GSM) is likely to witness exponential growth in its profitability driven by increase in its commercial production of partially oriented yarn (POY) and chips at its new continuous polymerization plant. The company is expected to double its revenue for year ended June 06. GSM was marred by the rising raw material prices, which will result in discouraging growth in net profit for the financial year ended June 05. However, these prices have softened recently resulting in substantial gains to the top line & profits of the company.

The continuous polymerisation plant, which has commenced commercial production from August 2005, will meet in-house requirement and act as an additional revenue stream. The company is expected to register turnover of Rs.1350-1400 crore translating to an EPS estimate of Rs.28 per share for year ended June 2007.

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The Sensex FAQ!!

What is the Sensex?
It stands for Sensitive Index of the Bombay Stock Exchange. This is a statistical measure that serves as an indicator for the performance of 30 select companies registered for trading in the Bombay Stock Exchange.
Deepak Mohoni, a market strategist in India came up with the abbreviated term "Sensex" in 1990 and it has been used by almost everyone in India, ever since.

What does it mean when the "sensex" goes up/down?
Each of those stocks has a price. This mean is assumed to be normally distributed (as explained above).
When the mean, after trading, compared with that before trading is higher, that means the sensex has gone up. If it goes down, the opposite happens. Well, it is not this simple and a lot more mathematics goes into it - but this is the basic idea.

What does the term "Value Weighted Index" mean? Is there another index as well?
The above normal distribution and changes in it can be calculated in two ways.
1. Each company is given equal weightage and the changes in the curve are effected only by the price change - i.e. whether the company with the highest market capitalization gains a rupee or the one with the lowest among the 30 does, the index would increase by the same value. This is called a price weighted index - The American Dow Jones Industrial Average is an example of this.

2. Each company is weighted according to the market capitalization and changes in the curve are thus reflective of both the size of the company and price increase. BSE follows this method.

What is does market capitalization mean?

Market Cap = Total Number of Shares in the Market * Price of each share.

Is the Stock Market Index a perfect reflector of the health of the national economy?
No. As you can see, the index is a mere statistic that indicates demand for the ownership of 30 select companies. Assuming this would mean a bigger wallet for your family is stupid.

Does it have no relation to the economy at all?
Since the demand is shaped by the health of the companies and since the companies fall in a broad spectrum, it is one of the factors that "can" indicate that there is good overall demand in the local economy. Though generally true, good demand does not necessarily imply a great economy. And local demand alone does not lead to ownership of stocks.

Is the index an indicator of demand in the local economy alone?
No, Especially not in this era of 'globalized trade'. Demand for ownership in stock market in India is quite often driven up by FII.

Who/What are FII?
FII = Foreign Institutional Investors.
A typical example would be German Pension Funds investing in the Indian Stock Market. As a consequence of their investment, the index would obviously go up. Though the German investor’s act can be seen as a consequence of their reading of the Indian market, which would be no different from that of an Indian Pension Fund, the difference is that the supply/demand is not locally generated. Also, such FII's being who they are, happen to be big investors. Consequently, the effect of their decisions to withdraw is huge as well. This builds a lot of risk to the market - risk which is magnified.

Is the government justified in taking credit for high indices?
It is not the business of the government to bother about the ownership of individual citizens or private institutions. What is even more stupid is people(citizens) taking pride in such high numbers.