Sebi to amend norms in Line with new companies Law

Securities and Exchange Board of India (Sebi) would seek board approval for revision in illustrative format of statements of assets and liabilities as well as profit and loss to be furnished by listed companies, sources said.

The board of capital market watchdog Sebi is expected to discuss changes in certain norms for listed firms to make them in line with the rules in the new Companies Act, during its meeting tomorrow. Securities and Exchange Board of India (Sebi) would seek board approval for revision in illustrative format of statements of assets and liabilities as well as profit and loss to be furnished by listed companies, sources said.

The proposal is expected to come up for discussion during the Sebi board meeting tomorrow in Mumbai. Amendments are being proposed to the Sebi (ICDR) regulations, 2009, to align the norms with that in the Companies Act, 2013. The changes would be in tune with the revised schedule VI of the Companies Act 1956/Schedule III of Companies Act 2013. It mainly relates to general instructions for preparation of balance sheet and statement of profit and loss of a company.

 The proposed illustrative format include disclosure of equity and liabilities, current and non-current liabilities as well as current and non-current assets. Besides, the board would discuss Action Taken Reports (ATRs) on various decisions, including those related to primary market reforms, taken by the board in the last two years, sources said. Meanwhile, Sebi is expected to soon announce more measures to improve the country's investment climate, including for foreign investors.

India has oil reserves to last just 20 days, says govt

Even as India gets ready to commission its first strategic oil storage facility in January, it currently has the lowest cover for crude oil among developing economies including China and Japan, government data showed on Thursday.

Building strategic crude oil reserves is considered a must since these stocks provide an insurance against any oil supply disruptions to economies that are heavily dependent on oil imports such as India.

Most developing nations are maintaining low crude oil inventory compared to developed nations such as the US that is maintaining a cover of 56 days, the report said.

While China has a 26 days cover, Japan has 25 days of crude oil inventory, while India is the lowest at 20 days.

India’s public sector units and joint venture refineries are expected to import around 777 million barrels of crude oil in 2013-14.

“Considering the current inventory levels, the existing crude oil stock will provide a 20-day cover,” a senior government official said.

The refinery throughput of China stood at 9,371 kilo barrels per day in 2012 according to latest estimates and its crude stock build is around 665,000 barrels per day. This is equivalent to an inventory level of around 2,42,725 kilo barrels and provides a 26-day cover.

In contrast, the refinery throughput of Japan is 3,400 kilo barrels per day for 2012. Japan’s crude oil inventory is 85,790 kilo barrels which has a 25-day cover.

In contrast, the US has the maximum strategic reserves compared to most nations. With a refinery throughput of 15,006 kilo barrels per day, the US’ crude oil inventory stood at 10,55,962 kilo barrels as on September 6, 2013.

Sensex ends flat; Realty, auto stocks jump

The Sensex and the Nifty ended the session flat amid weak global cues. The 30-share BSE index Sensex was up 17.84 points (0.09 per cent) at 19,919.91 and the 50-share NSE index Nifty was down 0.85 points (0.01 per cent) at 5,908.85.

On the BSE, realty, auto and metal indices remained investors' favourite and were up 1.89 per cent, 1.01 per cent and 0.63 per cent, respectively.

On the other hand, capital goods, power, banking and IT indices fell the most by 0.52 per cent, 0.5 per cent, 0.22 per cent and 0.07 per cent, respectively.

Hindalco, Coal India, Tata Motors, Maruti and Tata Steel were the top five Sensex gainers, while the top five losers were Dr Reddy's, Jindal Steel, L&T, ONGC and ICICI Bank.

European stocks were unchanged and Asian stocks were down as negotiations between US lawmakers on the federal budget and debt limit entered the fourth day.

Stoxx 50 was up 11.35 points or 0.39 per cent at 2,913.47, FTSE 100 was up 2.32 points or 0.04 per cent at 6,451.36 and DAX was down 0.67 points or 0.01 per cent at 8,597.24.

In the Asian trade, Japan's Nikkei fell 132.94 points or 0.94 per cent to 14,024.30, Hong Kong's Hang Seng shed 114.14 points or 0.49 per cent to 23,100.30 and Australia's S&P/ASX 200 was down 26.89 points or 0.51 per cent at 5,208.

The US Treasury had said that in case the political standoff leads to a default, it could have a catastrophic effect on not just financial markets but also on job creation, consumer spending and economic growth.

President Barack Obama had met Republican and Democrat leaders in Congress but reiterated in a speech that he would not give in to Republican demands to rollback his healthcare programme in exchange for reopening the government.

According to US Labour Department, jobless claims rose to 308,000 in the week ended September 28, from a revised 307,000. The US payrolls data will not be released as scheduled today because of the government shutdown.

Japanese central bank retains monetary easing measures

The Bank of Japan said on Friday it would maintain its aggressive monetary easing steps to overcome deflation and prop up the nation’s economy.

The central bank also maintained the nation’s economic assessment, saying the economy was still “recovering moderately.” The bank decided in April to introduce aggressive monetary easing measures to achieve 2-per-cent inflation within about two years in a country which has been plagued by 15 years of deflation.

Consumer prices rose 0.8 per cent in August from a year earlier for the third straight month of increase on higher electricity and other energy prices amid the yen’s decline. The consumer price index was the highest rise since November 2008.

Sobha Developers vaults post Q2 performance info

Shares of real estate company Sobha Developers Ltd vaulted nearly 12 per cent about 45 minutes before the trading was to close with the company, defying the gloom surrounding the realty sector, indicated that it was on course to achieve its guidance with regard to saleable area and revenue for the current year.

What has probably worked in its favour is its focus on the tech capital Bangalore city, whose real estate market is one of the few in the country to show demand and price stability.

Guidance for current fiscal

In a statement to the stock exchanges, Sobha Developers said that the company had set for the current fiscal a guidance of new sales area of 4.2 million sq.ft. valued at Rs 2,600 crore.

It appeared to be on course to achieve this target as it had registered new sales area of 1.92 million sq.ft. valued at Rs 1,235 crore at the end of the first half of this year.

The company said that in the second quarter ended September this year, it had sold 1 million sq.ft of new space worth Rs 632 crore and the average price realisation was Rs 6,304 per sq.ft.

QoQ growth

Sobha Developers said that though the sector had faced headwinds, its core market Bangalore continued to do well where it sold 0.67 million sq.ft. of new space in Q2 of 2013-14, a 12 per cent growth sequentially and 14 per cent growth quarter-on-quarter (QoQ).

In fact according to the new sales area data provided by the company, on a QoQ basis, it has shown sales growth in four of the seven markets in which it was operating, excluding Kozhikode, which was a new market and hence was not comparable.

In Bangalore, Chennai, Coimbatore and Mysore markets, sales in the last quarter was higher than that of the same quarter in the last financial year.

NCR region sales

But it was sales in the NCR region that took a serious knock as it came down to 30,892 sq.ft. in the second quarter of this year from 1,37,600 sq.ft. in the same quarter last year.

In Pune too, the fall was significant —to 12,716 sq.ft. in Q2 this year from 38,621 sq.ft in Q2 last fiscal. In Thrissur too, it was down but marginally — to 1,03,270 sq.ft from 1,18,306 sq.ft in the second quarter of 2012-13.

But Sobha’s foray into Kozhikode proved to be a winner with new sales of 56,661 sq.ft. in the September quarter this year.

Sales growth

The growth in new sales area recorded during the first half of this year was 8 per cent year-on-year.

Sales value in Q2 of this year was Rs 632.3 crore (Rs 527.4 crore) and the price realisation on an average was Rs 6,304/sq.ft. against Rs 5,575/sq.ft. in the same quarter last year.

However, on a sequential basis, while the sales value moved up compared to the first quarter this year (Rs 602.8 crore), the average price realisation per sq.ft. dipped marginally from Rs 6,548/sq.ft. in Q1 of this year to Rs 6,304/sq.ft. in Q2 of the current fiscal.

Sales value realisation

Sobha Developers said that the new sales value during the first half of this year was higher by 23 per cent year-on-year.

On QoQ basis, the new sales value was higher by 20 per cent and 5 per cent sequentially. The sales realisation was up by 14 per cent in H1 of this year compared to H1 of last year.

The company said that it was hopeful of achieving its guidance for the full year “despite the existing macroeconomic uncertainties of GDP growth, interest rates and inflation’’.

The company stock shot up to Rs 326.35, a gain of 11.99 per cent or Rs 34.95 with a trading volume of 7.79 lakh shares about 45 minutes before the trading is to close.

Crude oil futures decline to Rs 6,360 per barrel

Crude oil futures prices today fell further by 1.44 per cent to Rs 6,360 per barrel, as participants indulged in reducing positions, tracking a weak trend in the Asian region.

On the Multi Commodity Exchange, crude oil for delivery in October fell Rs 93 or 1.44 per cent to Rs 6,360 per barrel in 3,453 lots. Similarly, November delivery contracts moved down by Rs 86 or 1.33 per cent to Rs 6,389 per barrel in 206 lots.

Analysts said that the fall in crude oil futures was attributed to a weak trend in the Asian trade as traders concerns grew after lacking breakthrough in the US budget stand-off that led to government shutdown.

Meanwhile, West Texas Intermediate (WTI) crude for November delivery eased 15 cents to $103.16 a barrel on the New York Mercantile Exchange in the mid-morning trade today.

More gloom: Sept services PMI lowest in over 4 years

Index stood at 44.6 points in September, the lowest since March 2009

In a major setback, the services sector, which occupies the largest share in the Indian economy, contracted at the steepest pace since March 2009, according to the widely-tracked HSBC Purchasing Managers' Index (PMI) released today.

The services PMI continued to contract for third time in a row in September and stood at 44.6 points from 47.6 points in August, when it was the lowest since March 2009. In that month, the PMI services had stood at 43.7 points. The services PMI has been deteriorating since July this year.

Leif Eskesen, chief economist for India and the Association of Southeast Asian Nations at HSBC, said: "This was led by the sharpest contraction in new business since February 2009 driven by weaker order flows in renting & business activities, hotels & restaurants and financial intermediation"

This takes the average quarterly PMI servies to 48.5 points in the second quarter of 2013-14 against 52 points in the first quarter.

The composite PMI,  which takes into account manufacturing and services, fell sharply to 46.1 points in September from 47.6 points in the previous month. "The latest reading was consistent with a sharp contraction in business activity and one that was the fastest since March 2009", said Markit Economics, a financial information firm which compiles the PMI data.

A reading above 50 indicates  expansion, while one below 50 means contraction.

Five out of the six sectors covered by the survey posted lower output in September, exception being Post and Telecommunication.

"Incoming new work contracted sharply and at the quickest pace since February 2009, with panellists commenting on weaker demand and a difficult economic climate", said the firm.

The business sentiment was also the weakest since February 2009. However, there was some optimism on output growth in the coming year.

As a result of reduction in incoming form, the private sector firms cut their workforce numbers, Markit Economics said.

There were instances of rising prices of  raw materials, fuel, food and transport costs. "Despite the weak growth backdrop, inflation readings held broadly steady. This, in turn, supports RBI's stepped up efforts to better anchor inflation expectations”, said Eskesen.

Raghuram Rajan, in its mid-term policy review had stated that inflation remained a concern and due to which he had raised the repo rate by 25 basis points to 7.5%.

The manufacturing PMI released on Monday, although marginally up from the previous month, also contracted for the second consecutive month and stood at 49.6 points from 48.5 points in the previous month.

In the previous month, for the first time since March 2009 both services and manufacturing PMI contracted in the same month.

ONGC to commence commercial drilling for shale gas next year

State-run Indian explorer Oil and Natural Gas Corporation (ONGC) is reportedly planning to start commercial drilling for shale gas next year. Last month, the Cabinet Committee on Economic Affairs (CCEA) allowed ONGC and Oil India (OIL) to tap shale resources in blocks allotted to them on a nomination basis.

Of about 356 blocks held by ONGC and OIL, India’s upstream regulator has said 176 could hold shale resources.

Morgan Stanley buys 6 lakh shares of Gateway Distriparks for Rs 6.26 crore: Report

Morgan Stanley has reportedly bought 6 lakh shares or 0.55% stake of Gateway Distriparks through the open market route. The shares were purchased on an average price of Rs 104.48 valuing the transaction to Rs 6.26 crore.

Gateway Distriparks is engaged in the business of warehousing, container freight stations, providing handling and clearance of sea borne export-import trade in containerized form. The company operates CFS located at Dronagiri, Navi Mumbai, New Manali, Chennai, Vishakapatnam and Inland Container Depot at Garhi Harsaru (near Delhi) and Haryana.

Jet Airways flies higher as its deal with Etihad gets CCEA’s nod

Paving the way for the biggest foreign investment in the country's aviation sector, the Cabinet Committee on Economic Affairs (CCEA) after almost six long months of wait, finally gave its nod for $900-million (over Rs 5,300-crore) stake sale deal between Jet Airways and Abu Dhabi-based Etihad Airways on Thursday.

The deal entailing a 24% stake sale by Jet to Etihad, announced in April, had hit an air-pocket after the FIPB deferred the proposal in June citing concerns over the issue of 'effective control' in Jet Airways, especially over a proposal that aimed at the shifting of operations from Mumbai to Abu Dhabi. It’s only a month later that FIPB accorded its approval, but that was post the airline in its revised set of pacts restored the supremacy of the Jet board as the final authority.

However, the Union Cabinet has given a nod to the deal with certain riders, which among other things require Jet Airways and Etihad Airways to adhere to RBI policy guidelines and SEBI regulations, comply with all Indian laws and take prior FIPB approvals for any further changes in the shareholders agreement, commercial cooperation agreement, articles of association, investment agreement and shareholding patterns.

The Jet deal, will see Etihad picking up a 24% stake in Jet for $379 million (about Rs 2,060 crore). Apart from this, the Abu Dhabi-based carrier will hand out the Naresh Goyal-promoted airline $300 million as low-cost debt, and $150 million for a share in Jet's frequent flyer programme , besides paying $70 million for acquiring three slots of Jet at London Heathrow.

Nevertheless, this deal is now expected to result in wider international connectivity for domestic passengers, especially those flying from tier-II cities, as Jet plans to offer international connectivity from 23 cities in the country through the Abu Dhabi hub.

Godrej Consumer Products strengthens on plan to set up factories in Tanzania and Uganda

With a view of expanding its manufacturing footprints in Africa, Godrej Consumer Products is gearing up to set up factories in Tanzania and Uganda. Further, the company, which so far has made four acquisitions in Africa is in talks to take over some local firms in the continent.

Presently, the company has manufacturing facilities in four countries in Africa-South Africa, Mozambique, Kenya and Nigeria. Nevertheless, the company is betting big on the African market to drive its international sales, given that sales from African operations already account for 25% of total international sales.

Godrej Consumer Products is a leader among India's Fast Moving Consumer Goods companies, with leading Household and Personal Care Products. Its brands include Good Knight, Cinthol, Godrej No. 1, Expert, Hit, Jet, Fairglow, Ezee, Protekt and Snuggy, among others, which are household names across the country.

Jet shares rise Etihad deal gets cabinet nod

 Shares of Jet Airways rose Friday, a day after the cabinet approved a proposal for 24 percent stake sale in the Indian passenger carrier to Abu Dhabi-based Etihad Airways.

The company's scrip at the Bombay Stock Exchange (BSE) rose to 3.50 percent or 13.55 points around 10.30 a.m. at Rs.400.15 from its previous close of Rs.386.60 Thursday.

On Oct 3, the Cabinet Committee on Economic Affairs (CCEA) gave nod to the deal between the two airlines, paving the way for the first foreign capital by an international passenger carrier into a domestic one.
"The Cabinet Committee on Economic Affairs today (Thursday) gave its approval to the proposal of Etihad Airways for subscribing 2,72,63,372 equity shares of Jet Airways," the CCEA said in a statement.
"The Foreign Investment Promotion Board (FIPB) has recommended the proposal. The approval would result in foreign investment amounting to Rs.2,057.66 crore in the country."
The deal was announced on April 24, nearly eight months after the Indian government permitted international airlines to invest into domestic passenger carriers. Jet Airways had announced a 24 percent stake sale to Etihad Airways.

The deal also comes on the back of an approval given by the stock market regulator Securities and Exchange Board of India (SEBI), following an amended share holding agreement between the two airlines.
The deal is expected to garner around Rs.2,058 crore ($379 million) for Jet Airways, which will enable the company to service its debts and provide passengers better connectivity.
Facing tough operating conditions in India due to high interest and fuel cost coupled with a general economic slowdown, the company reported a net loss for the first quarter of 2013-14.
The Jet Airways reported a net loss of Rs.485.50 crore for the year ended March 31 as compared to a net loss of Rs.1,236.10 crore in 2011-12.

Markets fall as services PMI droops to 4-year low

The broader markets traded mixed with mid-caps falling 0.1 per cent and small-caps adding 0.3 per cent on the BSE.

Markets have shed their intra-day gains and are trading lower this Friday on back of selling pressure witnessed in infrastructure stocks.

Risk appetite got a hit after country’s services sector, which occupies the largest share in the Indian economy, contracted at the steepest pace since April 2009.

At 11:25AM, the 30-share Sensex fell 38 to trade at 19,861 and the 50-share Nifty declined 17 at 5,892 levels.

The services PMI contracted for the third time in a row in September and stood at 46.1 points from 47.6 points in August, according to the widely-tracked HSBC Purchasing Managers' Index (PMI) released today. The services PMI has been deteriorating since July this year.

The broader markets traded mixed with mid-caps falling 0.1 per cent and small-caps adding 0.3 per cent on the BSE.

The market breadth was nearly flat. Out of 1,795 stocks traded, 840 stocks advanced while 853 stocks declined on the BSE.


RUPEE

Rupee has erased the early losses on strong inflows and is trading firm now.

Yesterday, the rupee logged one of the sharpest gains in recent times which appreciated 1.16% against the dollar on portfolio flows and weak dollar across all major currencies.

At 11:25AM, the partially convertible rupee was trading at 61.44 per dollar against the yesterday’s close of 61.74 on the Interbank Foreign Exchange. The currency has touched 61.85 in early trades.


GLOBAL MARKETS

Asian stocks fell on US budget impasse that has shut down the federal government.

Japan’s Nikkei rose 0.3% to 14,116, Hong Kong’s Hang Seng declined 0.5% to 23,090 while Singapore’s Straits Times was flat at 3,144. Financial markets in China are closed for holidays until October 8.


STOCK MOVERS

Domestically, the key sectoral gainers were consumer durables, realty, IT, auto while power, metal, capital goods and FMCG sectors declined on the BSE.

The laggards were Tata Power falling 2%, Sesa Sterlite dropped 1.7%, ICICI Bank dropped 1.6%, Jindal Steel was down 1.5% on the BSE.


The gainers were Tata Motors rising 4.2%, TCS gaining 1.3%, Cipla added 1% while Mahindra & Mahindra was up 0.9% on the BSE.

Public sector banks to provide cheaper loans to consumers

In order to boost demand in key sectors in the festival session and to bring relief to the consumers, especially the middle class, public sector banks will provide cheaper loans for auto and consumer goods purchases. The government has agreed to provide additional funds to the PSU banks to enable them financing of products from select sectors such as two-wheelers and consumer durables. The government is of the view that this selective stimulus will give a boost to capacity addition, employment and production, helping spur growth that fell to a four-year low of 4.4% in April-June quarter of current fiscal.

The decision to increase the quantum of capital infusion to PSU banks was taken at a meeting between Finance Minister P Chidambaram, Economic Affairs Secretary Arvind Mayaram, and RBI Governor Raghuram Rajan. Lower interest rates will depend on the lending capacity of banks, therefore, the government will enhance capital support to banks from the budgeted Rs 14,000 crore to help them lower interest rates on select category of goods identified. However, the government did not disclose the quantum of additional capital infusion.

At present, the demand in two key sectors such as Auto and consumer durables are worst hit due to the prevailing economic slowdown. The output of the consumer durables sector declined by 9.3 per cent in July, compared to growth of 0.8 percent in the same month last year. On cumulative basis, Indian consumer durable sector witnessed a 12 percent decline in output in April-July as compared to 6.1 percent growth in the same period of previous fiscal. In Auto sector, the demand of vehicles is also adversely hit by the rising inflation and existing economic downturn. The two-wheeler sales recorded a flat growth of 0.72 percent in April-August period current fiscal, as against a growth of 6.8 percent in the corresponding period last year. The latest government’s move is expected to support these sectors by increasing demand during the festive season, starting with Onam and going on till Diwali, which is considered as a crucial time for consumer durables and auto industry sales. Festival season contributes almost 25-30 percent to the year's turnover for Indian consumer durable industry.

Alstom gains on bagging contract worth over €100 million

Alstom India has been awarded a contract worth over €100 million by GVK Power and Infrastructure to equip the 850 MW Ratle hydropower plant, which will be commissioned in 2017. The contract includes the supply of 4 Francis turbines of 205 MW each, and one Francis turbine of 30 MW. This contract is booked in the second quarter of the current fiscal year.

All equipment will be manufactured at Alstom’s Vadodara facility in Gujarat, one of the company’s largest hydro manufacturing hubs worldwide. The state-of-the-art facility has all the necessary resources to accommodate the growing hydro demands in India.

Alstom is a global leader in power generation, power transmission and rail infrastructure. Present in India since 1911, Alstom has strong capabilities in engineering, manufacturing, project management and supply of products and solutions for infrastructure.

Havells shines on plan to invest Rs 50 crore in new home appliance plant

Havells India is planning to invest Rs 50 crore in a new home appliance plant at Neemrana in Rajasthan. The facility will be operational from February next year. The company already has India’s first large scale lighting fixture plant at Neemrana and is now expanding into new products.

The company garners revenue of around Rs 7,248 crore from domestic market, while Rs 3,000 crore turnover came from overseas market during the last fiscal.

Havells India is engaged in selling products in Kerala for several years and the business has shown an upward trend in terms of turnover in a short span of time. It has 10 manufacturing facilities in India in various states, including Himachal Pradesh, Uttar Pradesh and Rajasthan.

Japanese stocks slide, Dollar pinned near 8-month low on U.S. worries

Asian stocks were pegged back on Friday, with Japanese shares hitting a near four-week low and the dollar languishing around an eight-month trough as the U.S. budget standoff dragged on, heightening fears it could have more serious repercussions for the world's largest economy.
Tokyo's Nikkei fell 0.4 percent in the morning session after shedding as much as 1.5 percent to its lowest since Sept 6, taking its cue from the U.S. S&P 500 (.SPX), which suffered its ninth loss in 11 sessions overnight.
"Market unease will likely remain while the fiscal struggle continues to dominate headlines, especially as the second, and more important, deadline of U.S. default gets closer," Credit Agricole said in a note to clients.
President Barack Obama met Republican and Democrat leaders in Congress but reiterated in a speech that he would not give in to Republican demands to roll back his healthcare programme in exchange for reopening the government.
The debt ceiling is far more important than a partial U.S. government shutdown, which began on Tuesday, since it could lead to an unprecedented default by the United States, an outcome the market assumes is unthinkable.

BNP Paribas analysts said it was increasingly possible that the standoff in Washington would continue until the debt ceiling deadline on October 17.
"Market reaction is likely to intensify going into that date however, with the dollar extending its slide versus yen, Swiss franc and the euro," they wrote in a note.
"The silver lining for the dollar is that it is already trading at a sizeable discount relative to short-term rates, suggesting that there will be plenty of scope for the dollar to rally on any positive outcome in Washington."
The shutdown has caused a delay in the release of the closely-watched nonfarm payrolls data, normally due out on Friday. The data is a key piece of information for the Federal Reserve to consider when deciding to scale back its stimulus.

Two senior Fed officials warned on Thursday of damaging consequences if the country defaults on its debt and said U.S. monetary policy is being kept easier to help offset the harm caused by the political wrangling in the Capitol Hill.
MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) eased 0.1 percent. Seoul shares (.KS11) slipped 0.3 percent, though Samsung Electronics Co Ltd added 0.6 percent after the index heavyweight estimated its July-September earnings rose 25 percent to a record $9.4 billion.
The dollar was also hurt by slower growth in the U.S. services sector in September.
EURO LOOKING UP
The euro was steady at $1.3630, not far from an eight-month high of $1.36465 touched on Thursday. The common currency was also aided by the European Central Bank's apparent lack of concern over the euro's recent strength and better-than-expected euro zone data.
"The euro has become an island of stability in global asset markets ... Peripheral yields are higher and more stable than in the U.S. and equity markets keep outperforming," Citigroup said in a report.
"However, we would emphasise the euro's rally as a function of improved capital market conditions, rather than fundamentals, and expect it will be fragile if these capital markets conditions change."

Against a basket of major currencies, the greenback (.DXY) was near an eight-month trough.
The dollar held at 97.19 yen, after hitting a five-week low of 96.93 on Thursday, as the Bank of Japan stood pat on monetary policy as expected.
The BOJ revised up its assessment on capital expenditure, encouraged by growing signs that the benefits of its stimulus policy are broadening.
Brent crude slipped 0.2 percent to around $108.8 a barrel, adding to a 0.2 percent decline overnight, as the slower service sector growth in September compounded worries about raw materials demand due to the U.S. budget crisis and government shutdown.

Sensex to open on a flat note

The indices have a tendency of astonishing the investors. The rise on Thursday may be welcome but it was unconvincing. Little wonder we may have some correction at open itself today. Market participants may choose to stay on the sidelines given the reputation that October has of being a Red month most of the years.

The opening is set to be a weak to flat start. Data to be watched for would be Services PMI, Composite PMI for September, by HSBC. The RBI Governor Dr. Raghuram Rajan and all deputy governors will brief the media after a central board meeting post market hours.

Global cues are weak.  There are not many positive news to boast about which could bring about a change in sentiment soon.  Asian markets are in the red. The U.S. budget standoff continues.  The next question is whether the US borrowing limit could get breached later this month.

Japan's Nikkei 225 index has shed around a percent and ditto with Hong Kong's Hang Seng index. The US indices too were weak. The Dow closed down 0.90%. The Standard & Poor's 500 Index was down 0.90% and the Nasdaq was down 1.07%.

Global rating agency Fitch has cautioned that fiscal slippage could have negative bearing on India's sovereign rating, which is at the lowest investment grade in view of weakening CAD and persistent inflationary pressure.

India’s relatively weak starting positions with high inflation and recent rises in current account deficits (CAD) suggest that credit profile has limited tolerance for policy slippage that saw their current account deficits and-or inflation rates stay high or rise further, Fitch said.

The cabinet has okayed the  formation of Telangana state; Hyderabad would be the joint capital.

Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said that partial shutdown of the U.S. government will hurt growth in the last quarter of this year.
Cognizant announced that it has been selected by the KBC group, an integrated bank insurance group and a top financial institution in Belgium, as a strategic partner to optimize service delivery and drive superior customer engagement. As part of the deal, Cognizant will acquire ValueSource NV, a subsidiary of KBC.  The terms of the deal were not disclosed.
Infosys  announced that it has signed a contract with Toyota Motor Europe for the provision of its Pan-European application support.

Wipro Ltd has announced the  organizational changes. The company announced the appointment of Senior Vice President Shaji Farooq as the global head of its Banking, Finance Services and Insurance (BFSI) strategic business unit. Shaji, who is currently leading the company’s Advanced Technologies Service Line and Go-To-Market transformation initiatives, will take over from Senior Vice President Soumitro Ghosh, who will now head Wipro Infotech, the India and Middle East business.

Tata Power, India’s largest integrated power company, jointly with Clean Energy Invest AS, Norway (Clean Energy) and IFC InfraVentures(IFC), announced the commencement of their first phase of 185 MW Shuakhevi Hydropower Project in Georgia.

Private Equity firms invested about $1,300 mn across 75 deals during the quarter ended September 2013, according to early data from Venture Intelligence, a research service focused on private company financials, transactions and valuations in India.
An overwhelming majority of middle and lower families will slash their festive budget by over 40% this Diwali season as they struggle to cope up with their monthly expenses due to rising inflation, less job opportunities and shrinking real wages reveals an ASSOCHAM quick survey.

IMF asks emerging economies to remove barriers to growth

The immediate priority of emerging economies like India and Brazil is to ride out the turbulence as smoothly as possible

Observing that immediate priority of emerging economies like India and Brazil is to ride out the turbulence as smoothly as possible, the IMF chief has said that currencies should be allowed to depreciate and asked them to knock down lingering barriers to long-term growth.

"Some countries also need to knock down lingering barriers to long-term growth, pushing ahead with infrastructure investment in places like India and Brazil, deepening financial markets, and opening up trade regimes," IMF Managing Director Christine Lagarde said yesterday.

"Liquidity provision can help deal with dysfunctional market behaviour. Looser monetary policy can also help, although there is less room for manoeuvre in countries with inflation pressures-such as Brazil, India, Indonesia, and Russia," Lagarde said.

In this vein, China needs to keep moving to a growth path based less on credit-which hit 180% of GDP this year-and more on higher productivity, higher incomes, and higher consumption, she said.

"Likewise, there is not much space left across many emerging markets for using fiscal policy, given high debt and deficits," she said in her address to the George Washington University.

This means liberalising interest rates, ramping up financial sector oversight, opening up protected sectors to private initiative, and further strengthening the social safety net, she added.

Stating that this emerging market transition will not be fast or easy, Lagarde said these countries will likely spend the rest of the decade adjusting to the new reality.

"As part of this adjustment, they need to keep cooperating-among themselves and with others. Again, international collaboration is the only way forward," she said.

In her address, Lagarde said today's emerging markets are much stronger than in the past, having come a long way since the crises of the 80s and 90s -with flexible exchange rates, higher reserves, and lower external debt.

For the past five years, they drove the recovery and kept the global economy afloat-accounting for three-quarters of total growth, she noted.

These countries are also facing a more challenging external environment, the IMF chief said.

"The ultimate goal of their transition is clear-living standards that are closer to the advanced economies. They can get there, but they face new obstacles in their way. Momentum is slowing, with growth 2.5% points lower than in 2010."

Over the past five years, capital flooded into emerging markets-partly due to loose monetary policy in the advanced economies. Bond inflows alone rose by over $1 trillion-more than 2% points of GDP a year for the recipient countries.

Sebi permits put & call options in M&A deals

Until RBI too validates the use, uncertainty could prevail say experts

The Securities and Exchange Board of India (Sebi) has permitted listed companies to use options, which give an entity the rights to sell or purchase a security at a future date, in M&A (merger and acquisition) transactions. Sebi has also allowed use of other popular preferential clauses such as ‘right of first refusal, tag along and drag along’.

The markets regulator on Thursday amended the Securities Contracts Regulation Act (SCRA), which originally prohibited use of these clauses.

Sebi’s move will permit India Inc’s long-awaited wish to incorporate put and call options clauses in their share purchase agreements.

Put and call options are the most popular exit mechanism in M&A transactions.

Earlier, the use of such clauses was turned down by Sebi on the ground that they weren’t perceived to be valid derivative contracts as they weren't traded on the stock exchanges.

Some of the famous instances where Sebi had objected to the use of put and call options is the Cairn and Vedanta deal, MCX-SX and the recent deal between Diageo and United Spirits.

Earlier this year, the law ministry had cleared a proposal by Sebi to allow put and call options by listed firms.

“Not only have call and put options been made valid, pre-emption rights such as right of first refusal, tag along right or drag along rights are also made valid without any restriction on the minimum period after which these rights can be exercised like in the case of call and put option,” said Lalit Kumar, partner, J Sagar Associates.

A right of first refusal in M&A deals give an entity the first right to purchase shares whenever they are offered for sale. Tag-along gives the right to a minority shareholder to sell if a majority stakeholder also sells its stake, while drag-along clause forces a minority shareholder sell stake with a majority shareholder. Experts have said the new norms will benefit both domestic and foreign corporates and institutional investors such as private equity (PE) and foreign institutional investors (FIIs). It will also ease the burden on IPO-bound companies. “These options were valid in private limited companies. However, when these companies were taken for IPO, specially to provide an exit to a PE, Sebi used to insist deletion of such clauses from the shareholders’ agreement. Now with this notification, these can continue and be enforced even after the company is listed after the IPO,” said Kumar.

Sebi said the put and call options to be exercised will have to be held continuously for at least one year from the date of the contract. Also, the pricing of the options will have to be in compliance with all the rules.

Experts, however, have said there could be some uncertainty till the time the Reserve Bank of India (RBI) also permits use of these clauses.

“The validity of put/call option arrangements as per Sebi's notification is subject to exchange control regulations and since RBI has expressed its discomfort with respect to such option arrangements in case of cross border deals, unless a similar notification is issued by RBI to validate these option arrangements, this relaxation may not provide adequate comfort to parties to a cross border deal,” said Nishchal Joshipura, partner M&A and private equity, at Nishith Desai Associates.

“Perhaps, just like SEBI, RBI will also clarify that put option exercised after one year from the date of the contract will be valid and not treated as external commercial borrowing,” said Kumar.

Experts said that the contracts entered prior to October 3 will not be affected or validated by Sebi's notification, which come into effect today.