Gold falls on sluggish demand; silver up

Gold prices fell by Rs 200 to Rs 31,500 per ten grams in the national capital on Monday on sluggish demand while silver climbed by Rs 470 to Rs 54,000 per kg on increased industrial offtake.

Traders said sluggish demand at prevailing higher levels amid a weak trend in Asian region mainly led to decline in gold prices while increased industrial demand helped silver to trade higher.

Gold in Singapore, which normally set price trend on the domestic front, fell by 0.27 per cent to USD 1,394 an ounce.

BSE Sensex gains; Sesa Goa surges

The benchmark BSE Sensex is up 0.7 percent, while the broader Nifty is up 0.6 percent, heading towards their third consecutive day of gains.

Larsen & Toubro Ltd
gains 2 percent after Barclays upgrades the stock to "overweight", citing a potential recovery in earnings and valuations.

Sesa Goa Ltd gains 8.7 percent ahead of its inclusion in the BSE Sensex on Tuesday.

Hexaware Technologies Ltd gains 6.63 percent after Baring Private Equity Asia agreed to buy a controlling stake in the Indian outsourcing service provider for about $420 million.

Traders however remain wary about foreign flows after overseas investors sold about $720 million of shares in the previous six sessions through Friday, ahead of June quarter GDP data and the expiry of August derivatives contracts this week.

Why IDFC shares have fallen over 9% today

IDFC shares plunged over 9 per cent on Monday after the infra lender reduced the threshold for foreign institutional investor (FII) holding from 74 per cent to 54 per cent.

The current FII holding in IDFC is 53.7 per cent, slightly lower than the new cap, but the move will bring down IDFC's weightage in the MSCI benchmark. IDFC has around 1.1 per cent weightage in the MSCI index. MSCI may also remove the stock from its global benchmark.

In both cases, passive funds are likely to sell the stock, and hence the correction.

IDFC's decision to reduce FII holding seems to be in preparation for a banking license. According to Reserve Bank guidelines, FIIs can hold 49 per cent in banks.

IDFC was the top Nifty loser and traded 8.15 per cent lower at Rs. 95.60 as of 12.55 p.m.

Sensex gives up day's gains, trades flat

Indian stock markets gave up nearly all of their gains in the afternoon trade as rupee extended its loss. A flat opening in most of the European markets and profit-taking after sharp gains on Thursday and Friday also weighed on the Sensex.

At 13: 26 pm, the Sensex was trading at 18,538.06, up just 18 points and down nearly 190 points from its day's high of 18,728.19. The Nifty was trading flat at 5,474.14, down nearly 55 points from its day's high.

In the broader markets, 1,146 stocks were up on the BSE while 948 were lower.

Among the Sensex stocks, Hindalco and JSPL added to its recent gains after positive industrial activity data from China. Hindalco was up nearly 3 per cent while JSPL rose 1.9 per cent. IT stocks were also among gainers as rupee weakened on Monday. Wipro was up 2.7 per cent while TCS rose 1.8 per cent.

Elsewhere, Hexaware shares were up 6.25 per cent to Rs 128.30. In a deal announced on Friday, Baring said will buy 27.7 per cent from Hexaware founders and 14.1 per cent from General Atlantic at a price of Rs 126 or 135 a share, with the higher price payable should the private equity firm manage to acquire 50 per cent or more.

NSEL to reconstitute board after slew of resignations

Announcement expected very soon

After a slew of resignations from the board of NSEL (a spot exchange floated by Financial Technologies) following the payment crisis, a new board will be announced very soon.

NSEL (National Spot Exchange of India Ltd) had 7 members on the board including a chairman. After resignations, including that of chairman Shankarlal Guru over a week ago, only two members remain on the board. Sources say that the new chairman and board members will be announced very soon.

Just before the exchange announced a new payment schedule on 14 August, Shreekant Javalgekar, who is MD of FT group’s commodity futures exchange  - the Multi Commodity Exchange (MCX), resigned from the NSEL board on 13 August.

After that the chairman Guru, B D Pawar and Ramanathan Devarajan had left the board.

The exchange had removed its MD and CEO Anjani Sinha last week.

Now only Jignesh Shah, who is FT group CEO &  vice chairman of NSEL, and Joseph Massey, who is MD of the group’s stock exchange MCX-SX, have remained on the board.

The resignations followed the crisis, which began when the consumer affairs ministry wrote to NSEL in the second week of July, asking it not to launch any fresh contracts and settle all contracts on maturity. This, saw the exchange announcing suspension of trading. But this in turn resulted in a payment crisis and later I-T survey of all 24 buyer parties who failed to make payment on maturity.

Forward markets commission (FMC) has been given powers to resolve the crisis and it has already threatened the NSEL board of stricter actions.

India's iron ore imports set to rise 67% in FY14

The production of iron ore in India is likely to remain around 140 million tonnes this year due to ban in Goa, slow progress in resumption of mines in Karnataka and cap in Odisha

The domestic steel industry, which is facing acute shortage of iron ore, is likely to increase its dependency on imported iron ore for this year as well. The continued ban in Goa, delay in accordance of environment and forest clearances for several mines in Karnataka and cap on iron ore mining in Odisha have resulted in a drastic decline in iron ore production.

The steel industry imported 3.05 million tonnes of iron ore during 2012-13, mainly for port-based steel mills. On account of reduced iron ore production and regional shortages of iron ore last year, major steel units like Essar Hazira, Bhushan Steel and JSW Ispat had to resort to imports of iron ore.

Compared to 0.97 million tonnes of iron ore imported in 2011-12, the imports in 2012-13 have gone up by 3.1 times. However, during the current fiscal, ion ore imports are likely to go up by 67% to around 5 million tonnes. This is mainly due to lower production of iron ore domestically, the steel industry sources said.

The country was the third largest exporter of iron ore till 2011 and lost its position owing to various factors. According to Federation of Indian Mineral Industries (FIMI) very high export duty of 30% coupled with higher freight rates on iron ore meant for exports by the Railways, iron ore exports have come down sharply during the last fiscal.

Production of iron ore has come down from 218 million tonnes in 2008-09 to 140 million tonnes in 2012-13 due to enforcement of strict environmental and other regulatory measures. The country had seen a surplus of almost 110 million tonnes in 2008-09 and 2009-10. However, this has come down to a level of just 17 million tonnes in the year 2012-13.

“The production of iron ore is expected to remain at the level of 140 million tonnes due to the cap in production in Karnataka, ban in Goa and strict enforcement of environmental regulations in Odisha. However, domestic steel industry requirement is more than 145 million tonnes in the current fiscal, and the industry is forced to import iron ore, which is not economically viable,” Sajjan Jindal, chairman and managing director, JSW Steel Limited said in his recent representation to the Prime Minister.

In Karnataka, subsequent to the order of the Supreme Court for opening of mines, the iron ore supply is not yet normalised. Out of 57 mines as approved by Central Empowered Committee, presently only 14 mines are operating with an annual production rate of 13.77 million tonnes against the total annual demand of 32-35 million tonnes.

Hexaware: Open offer a good opportunity to exit

Ending about one and a half year of speculation on stake sale by promoters and General Atlantic, Hexaware announced sale of the 41.8 per cent to Baring Private Equity Asia (Barings) late Friday. Not surprisingly, Hexaware stock has outperformed the Sensex in this period and was up about 6 per cent on Monday as well.

Hexaware has been able to bag more number of larger, long term deals thus providing improved revenue visibility in the past two years. However, this deal flow is largely driven by higher mining of its existing customers. Hence, the sustainability of these clients post the ownership change will be a key fuel for future growth of the company. Given that the current management team will continue unchanged, the deal is unlikely to have an impact on Hexaware's operations atleast in the medium term.

The last big acquisition in this sector was the takeover of Patni promoters’ stake of 83 per cent by iGate for $1.22 billion. This deal priced Patni at a Price to earnings ratio of 10.8 times. Hexaware deal too is valued at 11 times CY13 and 9 times CY14 estimated earnings - in-line with the Patni deal. Notably, Hexaware has traded at a one-year forward price/earnings band of 5-13 times historically. The deal value is higher than its average price/earnings multiple of 9 times, implying limited upsides from here on. The open offer (to garner additional 26 per cent stake) price of Rs 135 per share implies 12 per cent premium over Friday's closing price of Rs 120.

“Hexaware has seen mixed revenue performance in the past 2-3 quarters. While September quarter guidance is better, we would look for changes in growth trajectory with new ownership in place. We believe the stock is fully valued and advise investors to tender shares in the open offer”, says Rumit Dugar, IT analyst at Religare Capital Markets.

Out of the 13 brokerages polled by Bloomberg since August 23rd 2013, 7 are buyers while 5 have a Neutral view on the Hexaware scrip. Their average target price of Rs 131 per share though implies limited upsides from current levels. Investors should thus subscribe to the open offer.

At Infosys, Narayana Murthy overturns CEO Shibulal’s move to decentralise decision-making

 InfosysBSE 1.32 % Technologies under Chairman NR Narayana Murthy is centralising decision making, several senior executives said, in a development that has implications for the time the company takes to respond to client needs or market changes.

The chairman's office — the new power centre created after the return of retired cofounder Murthy — has to sign off on key decisions related to large technology contracts, such as pricing or the way a deal is structured that might expose Infosys to future risks, at least three senior executives told ET on the condition of anonymity.

"For all practical purposes, Murthy is the chairman, CEO, COO all rolled into one," said one of the executives.

Centralisation Drive

Before Murthy's return, Chief Executive Officer SD Shibulal was in the process of decentralising decision-making, especially those related to negotiating and signing contracts.

The intention was to empower client-facing sales executives who are aware of moves by competitors and other considerations critical in negotiating and winning large outsourcing contracts. Under that model, a business unit head would be empowered to close large deals.

For Infosys, which gets the lion's share of its over $7-billion (Rs 42,000 crore) revenues from corporations in the US and Europe, this could mean longer decision cycles when it comes to large contract negotiations.

Industry experts said the Murthy led centralisation could be an interim measure while the 67-year-old puts in place a structure for executing his plan. Murthy has said Infosys will refocus on bread-and-butter business, including managing large computer networks for corporations as well as writing and maintain software applications.

"Maybe Murthy wants to put in place people and processes before he lets go of centralised decisionmaking," said an industry analyst who did not want to be named because his firm's policy does not permit commenting on individual companies.

Murthy was recalled in June as executive chairman by the board of directors after nearly two years of industry underperformance at Infosys. For several years before that, the Bangalore-based company used to set the pace for Indian software exporters both in profitability and pace of growth. Senior executives, especially sales staff, however, are not very sure.

"It is like our hands are tied," said a senior client-facing executive about the ability of sales personnel who must now wait for information to be relayed back to the headquarters and wait for a response before they can take any decision on closing deals. "From where I sit, it looks like NRN is trying to turn the clock back," said another US-based senior executive.

Murthy returned with his son Rohan as his executive assistant and set up the chairman's office. He has been populating it with his trusted executives as he sets in motion a plan he claims will make Infosys "desirable" again.

According to a senior executive, Rohan's primary responsibilities are to raise productivity and quality of work at Infosys. However, despite this being the first job in his career, his induction at the level of a vice-president — typically attained after around a decade of professional experience — has raised eyebrows among company executives.

The fact that Rohan is engaging with senior executives and business unit heads directly and asking questions despite being brought in to assist his father is also being seen as curious. Infosys has seen some senior client-facing executives leaving the company in the recent past, especially in the banking and financial services vertical.

The latest to exit was Sudhir Chaturvedi, vice-president and North America head for financial services. Chaturvedi joins others such as senior vice-president Shaji Farooq and Balaji Yellavalli from the same vertical who left Infosys within the last one year to join rival WiproBSE 2.56 %.

Last week, Infosys elevated three senior executives to its executive council, to drive "cost-rationalisation" and "new global delivery model" initiatives from the chairman's office. Ranganath D Mavinakere, Binod Hampapur Rangadore and Nithyanandan Radhakrishnan were appointed to the council that comprises the senior-most members of the management team.

BHEL shines on emerging as lowest bidder for 1000 MW NLC unit tender

Bharat Heavy Electricals (BHEL) has emerged the lowest bidder for 1000 MW Neyveli lignite Corporation (NLC) unit tender. The 1000 MW Neyveli lignite project cost is seen at Rs 5907 crore. Further, the company is also planning to bid for NTPC’s 1600 MW Darlipali, Orissa project.

Backed by a vast experience and expertise of over three decades in Power Electronics & System integration, BHEL is one of the few leading players in the field of Solar Photovoltaics, having capabilities from manufacturing of Solar Cells to System Integration of Solar PV Power Plants in India.

Govt decides to give surplus gas supplies to power plants until March 2016

Giving some respite to gas-starved power sector, the Empowered Group of Ministers (EGoM) headed by defence minister AK Antony decided that any surplus natural gas left after meeting the needs of urea plants would be supplied to fuel-starved electricity generating stations. Additional gas above 31 million standard cubic metres per day received by the fertiliser sector will be given to power projects until March 2016,

The government's move will benefit projects with a combined capacity of over 7,800 MW. The power sector would get around 12-14 mmscmd of gas in the next three years. Till now, gas-based fertiliser plants remained the government’s topmost priority in the allocation of gas, followed by LPG-extraction units, power projects, city gas, steel and refineries.

After a drop in output at Reliance Industries' KG-D6 block led to reduced domestic supplies, the power ministry had sought parity for electricity utilities with fertiliser units in the allocation of gas. Earlier, in March, electricity-generating stations stopped getting gas from KG-D6 block.

The EGoM also cleared new bidding norms for setting up ultra mega power projects (UMPPs) having capacity to produce 4,000 mw or more of electricity. As per the new norms, the ownership of UMPPs will remain with distribution companies, while qualified bidders will be contractors, and developers will be barred from importing equipment for the projects.