Ashish Rukhaiyar & Mehul Shah
Mumbai, 20 April 2011
After a lull of nearly a month, the primary market is witnessing some action. While gold loan provider Muthoot Finance opened its Rs 900-crore initial public offer (IPO) yesterday, the near future will see quite a few large and mid-sized issues hitting the market. The government is also expected to start its divestment programme within the next couple of months.
According to investment bankers, many companies are now expediting the process of getting regulatory approvals in place to be ready to launch their IPOs as soon as possible. Data from the Securities and Exchange Board of India (Sebi) clearly shows a marked increase in the number of companies filing draft documents for public issues. In March, 14 companies did so, the highest in a single month since October. In February, only seven unlisted entities filed papers with the capital market regulator.
The coming weeks would see a number of IPOs. Kishore Biyani’s Future Ventures plans to raise up to Rs 750 crore from a share sale offer on April 25-28. Smaller ones — Paramount Print Packaging, Innoventive Industries, Servalakshmi Paper, Vaswani Industries and Galaxy Surfactants — are coming out with issues in the next few days. Navin Jindal’s Jindal Power is likely to come out with a Rs 7,000-crore IPO in May, according to bankers familiar with the matter.
TIMING SEEMS RIGHT
"Markets have been stable for a couple of weeks and that has made companies confident of launching their IPOs," says Sanjay Sharma, head (equity capital market), Deutsche Equities India. "The performance of companies that have opened their issues will be closely watched. There is enough appetite for issues that come at the right price and at the right time. Many companies have filed their draft document with Sebi to prepare themselves for public issues."
The current calendar year has not seen many large-sized IPOs, as companies and bankers were wary on the fate of the issues. Nine companies completed their IPOs and six of those raised less than Rs 100 crore each. The largest IPO this year has been that of PTC India Financial Services, that raised around Rs 440 crore. While Tata Steel raised Rs 3,477 crore in January, it was a follow-on public offer (FPO).
"Since March, we have started seeing positive flows in the market, and with completion of state-level elections by mid-May, the timing for IPOs should be right," says Indraneil Borkakoty, head (equity capital market), Nomura India.
A section of investment bankers, however, feel it cannot be said that all issues would sail through, even if the investor sentiment looks promising. In 2008, the high-profile issues of Emaar MGF Land and Wockhardt Hospitals had to be withdrawn, though the markets had just about started to fall on account of the initial signs of a sub-prime crisis.
“The IPO market will remain challenging,” said Atul Mehra, managing director and co-CEO, investment banking, JM Financial. “However, issues from quality companies at reasonable pricing and valuation will go through. Others will have to wait.”
The next two months would also see the government launching some of the much-awaited divestment offerings, including Power Finance Corporation, ONGC, SAIL and Hindustan Copper. Government approval is already in place for these four issuances.
While PFC is expected to raise around Rs 7,000 crore, SAIL's issue size is pegged at Rs 8,000 crore. State-run Oil & Natural Gas Corporation’s Rs 11,000-plus crore FPO is slated to hit the market in June.
Monday, 19 December 2011
UID number could be used for market transactions
Ashish Rukhaiyar
Mumbai, 12 April 2011
Market intermediaries, who are constantly on the lookout for avenues to reduce overhead and compliance costs, have found a new tool. The Unique Identification number or UID can be used to cut down processes and costs involved in completing the Know Your Customer (KYC) formalities, they say.
A suggestion to this effect has already been made to the Securities and Exchange Board of India (Sebi) through brokerage representative bodies. It is believed the suggestion also has the backing of other market participants, including depositories and stock exchanges.
UID or Aadhaar is a 12-digit unique number that will be allotted to Indian residents. It will eliminate all possibilities of a duplicate number as it will be linked to the individual’s biometrics. Currently, PAN (Permanent Account Number) serves as the identification number in stock market transactions.
Market players are of the view that since the UID process involves basic due diligence while registering the applicant’s details, including identity and address proof, some of the overlapping requirements in the KYC norms can be done away with.
Currently, brokers have to get details such as name, father’s name and date of birth from the individual apart from the prescribed documents for address and identity proof. They also have to conduct in-person verification as part of the KYC norms.
“The regulator has for long been talking about revisiting the KYC norms and the UID could just be the right platform,” said a person privy to the development.
“The suggestions have been made, though it would be a too early to decide on anything as UID allotments are still on,” he added.
This is, however, not the first time that the capital market regulator will evaluate the practical implementation of UID in the securities market. In December last year, Nandan Nilekani, who is heading the UID project, along with other officials had met the entire Sebi brass, including then chairman C B Bhave, and made a presentation on how UID could be incorporated in all market transactions.
Another person who was part of the deliberations said there was a view among market players that overlapping features of the KYC process could be done away with. “The broker can validate the information provided by the client from the UID database,” he said.
As the government has clarified that the UID numbers will be stored in a central database, market players feel it will help the regulator, too, in tracing the audit trails of transactions they find suspicious.
The government, incidentally, has already notified the Aadhaar number can be used as the “officially valid document” to satisfy the KYC norms for opening small bank accounts.
Mumbai, 12 April 2011
Market intermediaries, who are constantly on the lookout for avenues to reduce overhead and compliance costs, have found a new tool. The Unique Identification number or UID can be used to cut down processes and costs involved in completing the Know Your Customer (KYC) formalities, they say.
A suggestion to this effect has already been made to the Securities and Exchange Board of India (Sebi) through brokerage representative bodies. It is believed the suggestion also has the backing of other market participants, including depositories and stock exchanges.
UID or Aadhaar is a 12-digit unique number that will be allotted to Indian residents. It will eliminate all possibilities of a duplicate number as it will be linked to the individual’s biometrics. Currently, PAN (Permanent Account Number) serves as the identification number in stock market transactions.
Market players are of the view that since the UID process involves basic due diligence while registering the applicant’s details, including identity and address proof, some of the overlapping requirements in the KYC norms can be done away with.
Currently, brokers have to get details such as name, father’s name and date of birth from the individual apart from the prescribed documents for address and identity proof. They also have to conduct in-person verification as part of the KYC norms.
“The regulator has for long been talking about revisiting the KYC norms and the UID could just be the right platform,” said a person privy to the development.
“The suggestions have been made, though it would be a too early to decide on anything as UID allotments are still on,” he added.
This is, however, not the first time that the capital market regulator will evaluate the practical implementation of UID in the securities market. In December last year, Nandan Nilekani, who is heading the UID project, along with other officials had met the entire Sebi brass, including then chairman C B Bhave, and made a presentation on how UID could be incorporated in all market transactions.
Another person who was part of the deliberations said there was a view among market players that overlapping features of the KYC process could be done away with. “The broker can validate the information provided by the client from the UID database,” he said.
As the government has clarified that the UID numbers will be stored in a central database, market players feel it will help the regulator, too, in tracing the audit trails of transactions they find suspicious.
The government, incidentally, has already notified the Aadhaar number can be used as the “officially valid document” to satisfy the KYC norms for opening small bank accounts.
PSU stocks set to yield more amid divestment
Ashish Rukhaiyar
Mumbai, 6 April 2011
New IPOs and FPOs likely to rub off on already listed PSUs; rally underway.
With the new financial year kicking in and the equity markets showing signs of stability, the government is expected to soon initiate its divestment programme with renewed vigour. Finance Minister Pranab Mukherjee has already pegged the divestment target at Rs 40,000 crore for the current financial year.
Market experts say this could be the right time for investors to look at stocks of public sector undertakings (PSUs) which would rally on the back of the government’s ambitious pipeline. With both initial public offers (IPOs) and follow-on public offers (FPOs) lined up, a positive rub-off effect on already listed PSUs cannot be ruled out, they say.
Interestingly, if the recent data is anything to go by, then the rally in PSU stocks has already begun. In the last one month, when the Sensex gained a little over 6 per cent, there have been many PSU stocks that have outperformed the benchmark index by a wide margin.
Stocks like BPCL, Oil India, Chennai Petroleum, Coal India, BEML, GMDC, HPCL, MTNL, Mangalore Refinery & Petroleum, Neyveli Lignite Corporation, NHPC, NMDC and ONGC all outpaced the benchmark 30-share Sensex. Most of the public sector banks also fared better than the Sensex in the last one month.
The coming months would see the government diluting its stake in big companies including Power Finance Corporation, ONGC, SAIL and Hindustan Copper. The government approval is already in place for these four issuances. Apart from these, reports suggest the government would also off-load a part of its equity in entities such as IOC, National Buildings Construction Corporation, MMTC and Rashtriya Ispat Nigam.
“The pricing is important as investors look at the post-listing gains,” says Mayank Shah, business head, Edelweiss Financial Advisors. “We had a couple of instances last year when the pricing was not good and stocks did not react. There is enough liquidity this time and we are seeing value buying in stocks with the right valuation,” he says.
The performance of the BSE PSU index, however, is almost on a par with that of the benchmark Sensex if one compares the 1-month or 3-month movement. A longer time horizon, however, changes the picture completely with the Sensex outperforming the PSU index by a wide margin. Experts, however, say the index comparison is not the best way to judge the returns of the state-owned companies as the PSU index comprises more than 60 constituents.
A section of analysts also feels that while the new financial year has kicked in, the government will wait for some time before hitting the market with divestment issues.
“It will happen when the markets attain a fair amount of stability, so my sense is the first three months will see some issuances from the private sector space and maybe in the second half of the current calendar year, divestments will start to happen. It (divestment) is positive in terms of direction and speed at which it happens. It is just that the onus is a lot more on the government this time around since it will be really driven by the value at which the issue opens,” says Nikhil Vora, managing director, IDFC Institutional Equities. A lot of divestment that happens from here on will depend on policy decisions, which have been at a standstill, he added.
The recent past has also seen foreign institutional investors (FIIs) taking an aggressively bullish stance on the Indian markets. After remaining net sellers in January and February, FIIs have bought Indian shares worth nearly Rs 6,900 crore.
Mumbai, 6 April 2011
New IPOs and FPOs likely to rub off on already listed PSUs; rally underway.
With the new financial year kicking in and the equity markets showing signs of stability, the government is expected to soon initiate its divestment programme with renewed vigour. Finance Minister Pranab Mukherjee has already pegged the divestment target at Rs 40,000 crore for the current financial year.
Market experts say this could be the right time for investors to look at stocks of public sector undertakings (PSUs) which would rally on the back of the government’s ambitious pipeline. With both initial public offers (IPOs) and follow-on public offers (FPOs) lined up, a positive rub-off effect on already listed PSUs cannot be ruled out, they say.
Interestingly, if the recent data is anything to go by, then the rally in PSU stocks has already begun. In the last one month, when the Sensex gained a little over 6 per cent, there have been many PSU stocks that have outperformed the benchmark index by a wide margin.
Stocks like BPCL, Oil India, Chennai Petroleum, Coal India, BEML, GMDC, HPCL, MTNL, Mangalore Refinery & Petroleum, Neyveli Lignite Corporation, NHPC, NMDC and ONGC all outpaced the benchmark 30-share Sensex. Most of the public sector banks also fared better than the Sensex in the last one month.
The coming months would see the government diluting its stake in big companies including Power Finance Corporation, ONGC, SAIL and Hindustan Copper. The government approval is already in place for these four issuances. Apart from these, reports suggest the government would also off-load a part of its equity in entities such as IOC, National Buildings Construction Corporation, MMTC and Rashtriya Ispat Nigam.
“The pricing is important as investors look at the post-listing gains,” says Mayank Shah, business head, Edelweiss Financial Advisors. “We had a couple of instances last year when the pricing was not good and stocks did not react. There is enough liquidity this time and we are seeing value buying in stocks with the right valuation,” he says.
The performance of the BSE PSU index, however, is almost on a par with that of the benchmark Sensex if one compares the 1-month or 3-month movement. A longer time horizon, however, changes the picture completely with the Sensex outperforming the PSU index by a wide margin. Experts, however, say the index comparison is not the best way to judge the returns of the state-owned companies as the PSU index comprises more than 60 constituents.
A section of analysts also feels that while the new financial year has kicked in, the government will wait for some time before hitting the market with divestment issues.
“It will happen when the markets attain a fair amount of stability, so my sense is the first three months will see some issuances from the private sector space and maybe in the second half of the current calendar year, divestments will start to happen. It (divestment) is positive in terms of direction and speed at which it happens. It is just that the onus is a lot more on the government this time around since it will be really driven by the value at which the issue opens,” says Nikhil Vora, managing director, IDFC Institutional Equities. A lot of divestment that happens from here on will depend on policy decisions, which have been at a standstill, he added.
The recent past has also seen foreign institutional investors (FIIs) taking an aggressively bullish stance on the Indian markets. After remaining net sellers in January and February, FIIs have bought Indian shares worth nearly Rs 6,900 crore.
Q&A: Pratik Gupta, Deutsche Equities (India)
'Inflation, oil biggest worries for India'
Ashish Rukhaiyar
Mumbai, 5 April 2011
Pratik Gupta, head of equities at Deutsche Equities (India) — ranked second in sales and research in the December 2010 Greeenwich Asia Survey — talks to Ashish Rukhaiyar about the recent trends in equity markets and the outlook. Edited excerpts:
The Reserve Bank of India (RBI) is trying to fight inflation by raising interest rates. What will be the impact on growth and equity markets?
We believe RBI will continue with its gradual approach. We expect increase of another 75 basis points in policy rates. However, with domestic liquidity easing, the impact on lending and deposit rates may not be as much. We expect a modest slowdown in GDP growth to 8.5 per cent in FY12. However, this is when we assume that crude oil prices stay under control, we have a normal monsoon and there are no major external shocks. In such a scenario, we expect the market to do better in the second half, with the May state assembly elections a potential catalyst for further progress in economic reforms and market sentiment.
Global markets have been hit by the crisis in Japan and India has been no different. Are the markets through with the repercussions?
India has not been affected much by the crisis in Japan. However, if the radiation leak leads to a bigger disaster, it will once again affect the risk appetite and emerging-market equities, including India.
Are institutional investors worried about the recent political developments, including the spate of corruption-related issues that hit the market in quick succession?
On the domestic front, the biggest worry concerns inflation (mainly, energy and food) and political developments. Some investors are worried if these would lead to political unstability and affect decision-making. In general, the biggest worry has been the uncertainty over oil and the impact it will have on inflation and therefore, on interest rates and the overall growth of the economy.
What is the range of crude price India will be comfortable with?
In our view, we can just about manage with the current level of crude price, which is around $100-$110/bbl. Anything beyond that will start hurting the economy badly — both in terms of inflation and subsidy burden — and hence, interest rates and growth rates.
In your strategy report, you talk about a lot of short-term headwinds apart from crude.
Crude is clearly the biggest one, the second being the policy inertia which has been going on for the last few months. Another concern we are beginning to hear from investors — though a bit premature — is the risk of a poor monsoon, especially as it would exacerbate the problem of inflation if we were to face crop failure this year. The third is regarding the flows from emerging markets to the developed ones — “is the market rally of the last few days a short-term blip or would we see FII flows going out again?” In our view, April/May will prove to be an inflection point for the equity market as these concerns get digested and/or are addressed. Investors need to get ready for a potential 2H rally in that case.
How have the macro factors changed over the last year? Your latest India strategy report is quite similar to last year’s, which talked of short-term headwinds and strong long-term prospects.
With no India-specific negative factors, last year was perfect. Global flows were supportive towards emerging markets, India, in particular. This year, we do have some India-specific factors. While high oil prices affect everybody, India is disproportionately impacted. Countries like Korea, Japan or China will not be as badly impacted as India. We import 70 per cent of our oil requirements. Thus, oil is something that wasn’t there last year. Second, we saw a reversal of foreign flows from emerging markets to developed ones this year. In contrast, India was the biggest recipient of foreign inflows last year. Also, the earnings growth seemed quite good last year, as against the relatively weaker outlook for FY12.
'Inflation, oil biggest worries for India'
Ashish Rukhaiyar
Mumbai, 5 April 2011
Pratik Gupta, head of equities at Deutsche Equities (India) — ranked second in sales and research in the December 2010 Greeenwich Asia Survey — talks to Ashish Rukhaiyar about the recent trends in equity markets and the outlook. Edited excerpts:
The Reserve Bank of India (RBI) is trying to fight inflation by raising interest rates. What will be the impact on growth and equity markets?
We believe RBI will continue with its gradual approach. We expect increase of another 75 basis points in policy rates. However, with domestic liquidity easing, the impact on lending and deposit rates may not be as much. We expect a modest slowdown in GDP growth to 8.5 per cent in FY12. However, this is when we assume that crude oil prices stay under control, we have a normal monsoon and there are no major external shocks. In such a scenario, we expect the market to do better in the second half, with the May state assembly elections a potential catalyst for further progress in economic reforms and market sentiment.
Global markets have been hit by the crisis in Japan and India has been no different. Are the markets through with the repercussions?
India has not been affected much by the crisis in Japan. However, if the radiation leak leads to a bigger disaster, it will once again affect the risk appetite and emerging-market equities, including India.
Are institutional investors worried about the recent political developments, including the spate of corruption-related issues that hit the market in quick succession?
On the domestic front, the biggest worry concerns inflation (mainly, energy and food) and political developments. Some investors are worried if these would lead to political unstability and affect decision-making. In general, the biggest worry has been the uncertainty over oil and the impact it will have on inflation and therefore, on interest rates and the overall growth of the economy.
What is the range of crude price India will be comfortable with?
In our view, we can just about manage with the current level of crude price, which is around $100-$110/bbl. Anything beyond that will start hurting the economy badly — both in terms of inflation and subsidy burden — and hence, interest rates and growth rates.
In your strategy report, you talk about a lot of short-term headwinds apart from crude.
Crude is clearly the biggest one, the second being the policy inertia which has been going on for the last few months. Another concern we are beginning to hear from investors — though a bit premature — is the risk of a poor monsoon, especially as it would exacerbate the problem of inflation if we were to face crop failure this year. The third is regarding the flows from emerging markets to the developed ones — “is the market rally of the last few days a short-term blip or would we see FII flows going out again?” In our view, April/May will prove to be an inflection point for the equity market as these concerns get digested and/or are addressed. Investors need to get ready for a potential 2H rally in that case.
How have the macro factors changed over the last year? Your latest India strategy report is quite similar to last year’s, which talked of short-term headwinds and strong long-term prospects.
With no India-specific negative factors, last year was perfect. Global flows were supportive towards emerging markets, India, in particular. This year, we do have some India-specific factors. While high oil prices affect everybody, India is disproportionately impacted. Countries like Korea, Japan or China will not be as badly impacted as India. We import 70 per cent of our oil requirements. Thus, oil is something that wasn’t there last year. Second, we saw a reversal of foreign flows from emerging markets to developed ones this year. In contrast, India was the biggest recipient of foreign inflows last year. Also, the earnings growth seemed quite good last year, as against the relatively weaker outlook for FY12.
MFs expect more sympathy from new Sebi chairman
Ashish Rukhaiyar & Chandan Kishore Kant,
Mumbai, 5 April 2011
The mutual fund industry has reason to hope for some relief soon from the various strict guidelines of the Securities and Exchange Board of India (Sebi).
U K Sinha, the new Sebi chairman had, in an interaction with its MF division, made his view clear on the need for some moves to spur overall development for the sector, persons familiar with the development said.
Relaxations related to caps on the usage of funds or even a reduction in regulatory or compliance costs could be announced soon. Officials have been told to look at areas where the costs of asset management companies (AMCs) can be lowered, without diluting prudency norms for safeguarding the interest of investors.
This would be welcomed by the MF industry. It has been keeping its fingers crossed since Sinha assumed office in mid-February. He is aware of the nuances in operating an AMC, having managed Rs 65,000 crore worth of assets under management (AUM) of UTI Mutual Fund as its chairman and managing director. He was also chairman of the Association of Mutual Funds in India (Amfi), the umbrella body of 40-odd fund houses.
“Increasingly, we are getting a hint that whatever regulation had to be done has been done. Now, Sebi is focusing on development of the mutual fund industry,” said the chief marketing officer of a domestic AMC with assets of well over Rs 40,000 crore.
WHAT TO DO
Amfi has also planned to take up this issue with the regulator. “We will go and meet the Sebi chairman in the first week of April,” says H N Sinor, chief executive officer. “At the moment, he (Sinha) is reviewing what things are there internally. We cannot expect a series of measures from his side, as he is settling down. How to grow the market is the key focus now. By and large, the regulation part has been taken care of.”
Industry players, interestingly, feel the regulator should reward performance. They feel if the fund management fee could be linked to performance of the fund, then it would make managers work harder.
“Internationally, it is an established practice but in India, the industry cannot charge such fees from investors. Fund houses have internally thought about this but the regulator has some issues with it. If the regulator comes up with this kind of change, it would help industry grow and will also be good for the investors,” said Sinor.
Another fund manager, speaking on condition of anonymity, said the regulator should look at doing away with caps or limits that, at times, hamper the growth of innovative products. “For instance, the regulator has put caps on derivatives-based products. If these caps are removed, I believe industry can function aggressively, which will help us grow and develop the industry further,” he says.
It is believed that Sebi is also revisiting the KYC (Know Your Customer) regulatory norms that must be met before a person can start trading in MFs. Industry players feel there is still a lot of room to rationalise the costs involved in following the KYC norms.
Early this month, the regulator clarified on how AMCs could utilise the money in the load account. The balance can now be used by the fund houses for marketing and selling expenses, including distributor and agent commissions. There is a catch, however. “Not more than one-third of load balance as on July 31, 2009, shall be used in any financial year, including the current financial year,” said the Sebi note.
Mumbai, 5 April 2011
The mutual fund industry has reason to hope for some relief soon from the various strict guidelines of the Securities and Exchange Board of India (Sebi).
U K Sinha, the new Sebi chairman had, in an interaction with its MF division, made his view clear on the need for some moves to spur overall development for the sector, persons familiar with the development said.
Relaxations related to caps on the usage of funds or even a reduction in regulatory or compliance costs could be announced soon. Officials have been told to look at areas where the costs of asset management companies (AMCs) can be lowered, without diluting prudency norms for safeguarding the interest of investors.
This would be welcomed by the MF industry. It has been keeping its fingers crossed since Sinha assumed office in mid-February. He is aware of the nuances in operating an AMC, having managed Rs 65,000 crore worth of assets under management (AUM) of UTI Mutual Fund as its chairman and managing director. He was also chairman of the Association of Mutual Funds in India (Amfi), the umbrella body of 40-odd fund houses.
“Increasingly, we are getting a hint that whatever regulation had to be done has been done. Now, Sebi is focusing on development of the mutual fund industry,” said the chief marketing officer of a domestic AMC with assets of well over Rs 40,000 crore.
WHAT TO DO
Amfi has also planned to take up this issue with the regulator. “We will go and meet the Sebi chairman in the first week of April,” says H N Sinor, chief executive officer. “At the moment, he (Sinha) is reviewing what things are there internally. We cannot expect a series of measures from his side, as he is settling down. How to grow the market is the key focus now. By and large, the regulation part has been taken care of.”
Industry players, interestingly, feel the regulator should reward performance. They feel if the fund management fee could be linked to performance of the fund, then it would make managers work harder.
“Internationally, it is an established practice but in India, the industry cannot charge such fees from investors. Fund houses have internally thought about this but the regulator has some issues with it. If the regulator comes up with this kind of change, it would help industry grow and will also be good for the investors,” said Sinor.
Another fund manager, speaking on condition of anonymity, said the regulator should look at doing away with caps or limits that, at times, hamper the growth of innovative products. “For instance, the regulator has put caps on derivatives-based products. If these caps are removed, I believe industry can function aggressively, which will help us grow and develop the industry further,” he says.
It is believed that Sebi is also revisiting the KYC (Know Your Customer) regulatory norms that must be met before a person can start trading in MFs. Industry players feel there is still a lot of room to rationalise the costs involved in following the KYC norms.
Early this month, the regulator clarified on how AMCs could utilise the money in the load account. The balance can now be used by the fund houses for marketing and selling expenses, including distributor and agent commissions. There is a catch, however. “Not more than one-third of load balance as on July 31, 2009, shall be used in any financial year, including the current financial year,” said the Sebi note.
FIIs fancy India again
Mehul Shah & Ashish Rukhaiyar
Mumbai, 23 March
After huge net Jan-Feb outflows, this month has seen second-highest flows into India among Asian markets. Foreign institutional investors (FIIs), bearish till recently on the Indian equity market, seem to be having a change of heart.
After selling Indian shares in the first two months of the current calendar year, the post-Budget period has seen them turn positive. Till date this month, India has seen the second-highest FII inflow among leading Asian markets for which data is available, after Japan.
Attractive valuations after the recent correction, impressive domestic growth potential, enhanced policy clarity and a robust long-term story seem to have turned the tide in India’s favour, say market players. Data available with the Securities and Exchange Board of India (Sebi) show that post-Budget, the direction of FII flows shifted.
Foreign investors put in $304.6 million (Rs 1,370 crore) in March. This comes after net outflows of more than $2 billion (Rs 9,000 crore) in January and February. Some of the biggest participants from abroad on the street — Deutsche, Morgan Stanley, Citi — have all sounded optimistic in their recent India strategy reports.
“While we remain cognizant of the escalating tensions in the MENA (Middle East and North Africa) region, inflating oil prices and a potential worsening of the post-earthquake nuclear crisis in Japan, we believe that many of the India-specific macro risks (slowing industrial momentum, sharp rise in current account deficit, worries of escalated FII outflows and policy inertia) which drove the first bout of sharp underperformance since January are now either well discounted or abating,” said Abhay Laijawala and Abhishek Saraf, strategists at Deutsche Bank, in a note to clients.
According to Bloomberg data, only Japan has been able to attract higher FII flows ($2.2 bn) in March when compared to India. South Korea has registered a net outflow of $1.33 bn. Taiwan and Indonesia have seen $1.9 bn and $561 million, respectively, being taken out in March. The data for China was not available.
“We see upsides on the market from here and a more aggressive portfolio/market mix, moderately better macro, slightly higher valuations and a largecap over midcap bias,” said Aditya Narain of Citi, in a client note of March 18. Citi has a December 2011 Sensex target of 22,000.
Similarly, on March 15, Ridham Desai of Morgan Stanley, said: “From a pure India perspective (not taking into account relative dynamics), Indian equities look attractive and seem to be priced and positioned for a lot of the negatives on the horizon.”
With the exception of oil prices and a potential runaway increase in already elevated commodity prices, Deutsche Bank strategists expect to see a slow but certain recovering in the domestic macro situation heading into the second half of calendar year 2011. “Our view is that investors must begin to position portfolios for a steady market recovery,” they say.
Mumbai, 23 March
After huge net Jan-Feb outflows, this month has seen second-highest flows into India among Asian markets. Foreign institutional investors (FIIs), bearish till recently on the Indian equity market, seem to be having a change of heart.
After selling Indian shares in the first two months of the current calendar year, the post-Budget period has seen them turn positive. Till date this month, India has seen the second-highest FII inflow among leading Asian markets for which data is available, after Japan.
Attractive valuations after the recent correction, impressive domestic growth potential, enhanced policy clarity and a robust long-term story seem to have turned the tide in India’s favour, say market players. Data available with the Securities and Exchange Board of India (Sebi) show that post-Budget, the direction of FII flows shifted.
Foreign investors put in $304.6 million (Rs 1,370 crore) in March. This comes after net outflows of more than $2 billion (Rs 9,000 crore) in January and February. Some of the biggest participants from abroad on the street — Deutsche, Morgan Stanley, Citi — have all sounded optimistic in their recent India strategy reports.
“While we remain cognizant of the escalating tensions in the MENA (Middle East and North Africa) region, inflating oil prices and a potential worsening of the post-earthquake nuclear crisis in Japan, we believe that many of the India-specific macro risks (slowing industrial momentum, sharp rise in current account deficit, worries of escalated FII outflows and policy inertia) which drove the first bout of sharp underperformance since January are now either well discounted or abating,” said Abhay Laijawala and Abhishek Saraf, strategists at Deutsche Bank, in a note to clients.
According to Bloomberg data, only Japan has been able to attract higher FII flows ($2.2 bn) in March when compared to India. South Korea has registered a net outflow of $1.33 bn. Taiwan and Indonesia have seen $1.9 bn and $561 million, respectively, being taken out in March. The data for China was not available.
“We see upsides on the market from here and a more aggressive portfolio/market mix, moderately better macro, slightly higher valuations and a largecap over midcap bias,” said Aditya Narain of Citi, in a client note of March 18. Citi has a December 2011 Sensex target of 22,000.
Similarly, on March 15, Ridham Desai of Morgan Stanley, said: “From a pure India perspective (not taking into account relative dynamics), Indian equities look attractive and seem to be priced and positioned for a lot of the negatives on the horizon.”
With the exception of oil prices and a potential runaway increase in already elevated commodity prices, Deutsche Bank strategists expect to see a slow but certain recovering in the domestic macro situation heading into the second half of calendar year 2011. “Our view is that investors must begin to position portfolios for a steady market recovery,” they say.
Performance may get Sebi retirees an extension
Ashish Rukhaiyar
Mumbai, 11 March
Bureaucrats and capital market veterans wanting to become whole-time members of the Securities and Exchange Board of India (Sebi) might have to wait longer than expected. While there are still some months left before two of the three members retire, the industry is already abuzz with talk that they might get an extension.
The three-year term of two whole-time members, M S Sahoo and K M Abraham, will end this July. Both were appointed by the Central government in 2008. While the appointment is for three years, the government can give an extension.
According to sources, the ministry of finance is satisfied with Sebi’s functioning in the past two years, and is not in a mood to revamp the brass in one go. U K Sinha was appointed chairman only last month and it is believed two new members in such a situation isn’t desirable.
Things will be cleared by the end of this month, as the selection process, if initiated, has to be begin three to four months before a term ends. The selection process of a whole-time member is similar to that of a chairman, with the final nod coming from a Cabinet committee.
“If one looks at the last few years, Sebi has come out with some of the biggest orders against high-flying corporate entities,” said a person on condition of anonymity. “It is widely said that the quality of Sebi orders and investigations has improved after Sahoo and Abraham came on board. Also, some of the initiatives taken to improve market efficiency have not gone unnoticed.”
Sahoo is in overall charge of derivatives and new products, legal affairs, enforcement and regulation, and supervision of market intermediaries. He shares a rapport with Sinha, having worked together at the finance ministry. Abraham handles corporate finance, investigations, vigilance and integrated surveillance, among other things. The third member, Prashant Saran, assumed office in May 2009.
The work done by the two members has definitely caught the attention of bureaucratic circles of Delhi. According to a person privy to the developments, at a recent conclave of bureaucrats, some actions of the Sebi members were discussed with great appreciation.
“The conclave was attended by over 20 IAS (Indian Administrative Services) officers of joint secretary and director level. Everyone kept talking about Sebi’s good work in the last couple of years. The sense that one got was that the two members would get an extension, though there are many eyeing that position,” said this person, who attended the conclave.
Interestingly, G Anantharaman is the only former whole-time member who has the distinction of spending more than three years at Sebi, having worked with the regulator from December 2004 to March 2008. He was appreciated for his investigations and orders related to disgorgement and the IPO irregularities scam.
Mumbai, 11 March
Bureaucrats and capital market veterans wanting to become whole-time members of the Securities and Exchange Board of India (Sebi) might have to wait longer than expected. While there are still some months left before two of the three members retire, the industry is already abuzz with talk that they might get an extension.
The three-year term of two whole-time members, M S Sahoo and K M Abraham, will end this July. Both were appointed by the Central government in 2008. While the appointment is for three years, the government can give an extension.
According to sources, the ministry of finance is satisfied with Sebi’s functioning in the past two years, and is not in a mood to revamp the brass in one go. U K Sinha was appointed chairman only last month and it is believed two new members in such a situation isn’t desirable.
Things will be cleared by the end of this month, as the selection process, if initiated, has to be begin three to four months before a term ends. The selection process of a whole-time member is similar to that of a chairman, with the final nod coming from a Cabinet committee.
“If one looks at the last few years, Sebi has come out with some of the biggest orders against high-flying corporate entities,” said a person on condition of anonymity. “It is widely said that the quality of Sebi orders and investigations has improved after Sahoo and Abraham came on board. Also, some of the initiatives taken to improve market efficiency have not gone unnoticed.”
Sahoo is in overall charge of derivatives and new products, legal affairs, enforcement and regulation, and supervision of market intermediaries. He shares a rapport with Sinha, having worked together at the finance ministry. Abraham handles corporate finance, investigations, vigilance and integrated surveillance, among other things. The third member, Prashant Saran, assumed office in May 2009.
The work done by the two members has definitely caught the attention of bureaucratic circles of Delhi. According to a person privy to the developments, at a recent conclave of bureaucrats, some actions of the Sebi members were discussed with great appreciation.
“The conclave was attended by over 20 IAS (Indian Administrative Services) officers of joint secretary and director level. Everyone kept talking about Sebi’s good work in the last couple of years. The sense that one got was that the two members would get an extension, though there are many eyeing that position,” said this person, who attended the conclave.
Interestingly, G Anantharaman is the only former whole-time member who has the distinction of spending more than three years at Sebi, having worked with the regulator from December 2004 to March 2008. He was appreciated for his investigations and orders related to disgorgement and the IPO irregularities scam.
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