Archive for the ‘Clearing Services’ Category

Market Experts Expect IT Stocks to Do Well During 3rd Quarter

Market Experts Expects IT Stocks to Do Well During 3rd Quarter


With IT Biggy Infosys showing up with better-than-expected results and revenue guidance, IT stocks have turn out to be hot picks.


This is owing to the factor that market participants are now anticipating good third quarter results on improved global demand scenario.


Month-to-date, the BSE IT index has returned 4.16 per cent against a marginal 0.51 per cent advance in the BSE Sensex.


Where IT biggies have climbed as much as 5 per cent during the period, mid-cap and small-cap IT stocks have followed the cues even better.


โ€œThe Infosys numbers have set the tone for the IT sector. The numbers posted by the sector for the third quarter of financial year 2009-10 are encouraging and even the guidance is optimistic.

The analysis shows that revenue visibility has gone up,โ€ said Jagannadham Thunuguntla, head of research at SMC Capitals.


Financial Technologies shot up 20.55 per cent. Tech Mahindra climbed 14.77 per cent.

Patni Computer jumped 7.20 per cent followed by Polaris Software, Rolta India, MindTree and MphasiS, which climbed 4.67 per cent, 4.11 per cent and 0.33 per cent respectively.


However, MphasiS and Redington India inched down 0.41 per cent and 0.45 per cent respectively.


โ€œWe expect IT service companies to be more optimistic regarding the macro environment compared with the stance in the previous few quarters.


While 2010 IT budgets are likely to be flat with a positive bias, managements might not provide significant clarity on them,โ€ the brokerage added.


The years 2009 and 2010 underline a significant recovery in business optimism and economic conditions.


Thunuguntla feels signs of recovery have also started appearing in the US and in the global financial sector, which was the genesis of the financial crisis.


In such a situation, there is no reason why the Indian IT sector shouldnโ€™t do well during the third quarter.


Understandably, the sectorโ€™s fortunes are linked to the value and fluctuation in the dollar.


A strengthening dollar can put pressure on the profitability margins of IT companies.

But, IT volumes still remain strong, and sector should see healthy performance.



Global Slowdown Caused Slump in Growth Rate of the Demat Accounts

Global Slowdown Caused Slump in Growth Rate of the Demat Accounts


Despite the blistering pace kept by the equities market in the past 10 months, the rise in the number of new retail investors has slowed down.


According to the data from National Securities and Depositories Limited, the growth rate of demat accounts has declined to 6 per cent, compared with 13 per cent last year.

Experts attribute this to the overall slowdown in the economy.


As per experts a prolonged, dull phase in 2008 made investors jittery about investing in the equities market.

Also, as many individuals were scared of losing their jobs, so they did not intend to invest more.

There has been an average growth of 14.75 per cent in investors opening demat accounts till 2008.


Financial intermediaries such as broking companies, whose fortunes are directly linked to the markets, have witnessed subdued sentiments in the equity space from retail investors.

Experts cited 2008 market crash and the global financial meltdown as the reason for this negative development.

Moreover recession of last year had demotivated and scared the retail investors good enough to drive them away from the further investing.

This caused enormous loss for Financial intermediaries and most of the brokerage houses had to shut shop and retrench many staff too.


โ€œThe confidence of the retail investors is yet to be restored. Even in the case of new initial public offerings, only the institutional part is getting oversubscribed,โ€ said Jagannadham Thunuguntla, head of research at SMC Capitals.


SEBI Allows Auctions for QIBs in FPOs :)

SEBI Allows Auctions for QIBs in FPOs

Market regulator, SEBI has introduced a significant change in the way institutional bidders invest in follow-on public offers by allowing allotments through auctions.


The Securities and Exchange Board of India (Sebi) has amended the Issue of Capital and Disclosure Requirements Regulations (ICDR) to allow pure auctions for qualified institutional investors (QIBs) in follow-on public offerings to begin with.

The method may be later extended to initial public offerings.


Under the new method, bidders will be free to bid at any price above the floor price.

At present, allotments are made at the floor price.

Retail investors, however , will be allotted shares at the floor price.


The board also decided that the issuer is free to place a cap either in terms of the number of shares or percentage to issued capital of the company so that a single bidder does not garner all the shares on offer, ensuring a wider distribution of shareholding.


Jagannadham Thunuguntla, Equity Head,ย  SMC Capitals, said this means an institutional investor can continue to bid above the floor price and the QIB allotment will be made to the highest bidder.

โ€œThe intent is to enable companies to mop up more funds. Earlier, even when there were huge subscriptions and huge demand for an issue, the company could not get more money. This becomes more relevant in the context of the recently announced divestment plans and FPOs by the government for public sector units,” he said.


Auction for QIBs is welcome as it would allow risk-taking entities and not just the promoters to be a part of the price discovery process, other analyst said.

A SEBI release issued after the board meeting also said the minimum market capitalisation required by listed firms to sell shares in follow-on offerings has been halved to Rs.5,000 croresย  from Rs 10,000 crore.


Moreover, the market regulator has also made it a mandatory that all listed companies would have to furnish audited or un-audited balance sheets on a half-yearly basis within 45 days from the end of the quarter instead of the current yearly basis.


This would imply that Indian companies will be required to disclose balance sheet items.

Shareholders would be able to access the statement of assets and liabilities of the company and its solvency position on a half-yearly basis.

Shareholders would receive immense help in making informed investment decisions now and would be in better position to assess the financial health of the companies, with the implementation of this SEBI regulation of mandating frequent disclosure of the asset-liability position of companies by companies.


Govt Not to Impose Restrictions on Foreign Borrowings

Govt Not to Impose Restrictions on Foreign Borrowings


The government ruled out limiting companies from borrowing money from overseas market stating that the rise in foreign money is not a matter of concern at present and there is no such proposal.


However, companies are permitted to raise $500 million annually under the automatic route while infrastructure firms under the approval route can remit up to $100 million for rupee expenditure and for other companies the cap on approval route remittance is set at $50 million.


Meanwhile, capital inflows reached record levels as investors borrow cheap from advanced countries and invest in high-yielding assets in developing countries while this led to speculations that government may put in place a system of auctioning ECBs.


In India, foreign inflows through foreign institutional investors (FIIs), ECBs and foreign currency convertible bonds (FCCBs) have been on the rise, while FDI is not picking up as fast.


On the other hand, on a quarterly basis, the funds raised through ECBs and FCCBs increased by 70% in the September quarter to $4.61 billion while FIIs have put in a record over Rs 71,900 crore in the equities market.


BSE and NSE all Set to Improve Arbitration and Appeal Mechanism

NSE BSE Mechanism

BSE and NSE all Set to Improve Arbitration and Appeal Mechanism

Both the BSE and NSE will soon be adopting the best practices in the other to improve the investor grievance redressal mechanism where the NSE is considering putting in place an appeal mechanism similar to the one at BSE.


However, BSE is looking at scrapping the arbitration fees to be paid by the investor for claims below Rs 10 lakh while efforts are on to provide investors with help from a representative of Investor Associations (IA).

Meanwhile, at present, there is a two-level arbitration process in BSE whereas, in NSE, there is a single-level arbitration meaning if you lose your case in arbitration in NSE you shall have to appeal in the High Court.

Further, in BSE, you can appeal against an unsatisfactory verdict to an appellate panel of 5 arbitrators before taking the matter to court while if the arbitration claim amount is less than Rs 25 lakh on the NSE and less than Rs 10 lakh in case of the BSE, a single arbitrator hears the case.

But, if the arbitration claims are higher than this amount then a panel of 3 arbitrators will decide the case while NSE agreed to the appeal mechanism subject to the Arbitration Act.

In addition, on the BSE, an investor seeking redressal has to file an application with the exchange at Investorsโ€™ Grievance Redressal Committee (IGRC) comprising of a former justice of high court and a broker member trying to resolve the dispute at the IGRC level itself.

However, if no mutually agreeable settlement is reached, the parties are advised to go in for arbitration while another proposal, when executed, will be beneficial to investors like the BSE levies arbitration fees of approximately Rs 4,000 whereas on the NSE, for claims of up to Rs 10 lakh, only the brokers have to pay the arbitration fees.


Points to Remember while Selling Stocks โ€“ Part 2

Hello Friends here we come up with an extension of our previous blog, โ€œPoints to Remember while Selling Stocks Part 1โ€.


Points to Remember while Selling Stocks

Points to Remember while Selling Stocks

In previous Blog we had touched upon few points related to selling stock tips.

In this blog lets get to know more of valuable points in this regard.:)

Major points when to sell your stocks ( starting from 4th..three already being discussed in Blog 1)

4. Stock is Over Valued:

During bull market, high quality stocks appreciate value.

But more importantly, with so much hype around the stock, they are often set up for a fall.

Therefore, investor may use the strategy of selling them first and buy at lower price.


5. Need Some Cash-

Certain unexpected circumstances may affect the time when to sell stock.

It is not wrong to sell stock to solve your financial emergency, especially the underperforming one.

However, it is advisable to have some emergency cash funds.

After all, basic investing rules is to start investing if you have enough money.


6. A Change in Monetary Policy-

The Central Bank, RBI changes monetary policy if it perceives that inflation is heating up.

By raising interest rates, it contracts the money supply and slows down the financial system.

It is generally seen that stocks normally react negatively against the action, and some time markets become more volatile.

If you are not happy with this type of risk then you should move a portion of your portfolio into stocks that will not be as affected with such changes.


7. A Company Suddenly Cuts Dividends or Lower Income Estimates-

This event should be investigated carefully before making any judgment to sell.

For good reason, the board of directors might want to retain more of their earnings for internal growth, rather than paying them out in dividends.

Sell a companyโ€™s stock if the performance is down.

Investors must never sell the stock of a fine company if its price goes either ways significantly โ€“ up or down.

Falling earnings margins and slowing earnings must be treated as a warning signal.

Lastly, I would like to say that always do your homework (Research) well while selling a companyโ€™s stock; you can use either the top-down approach or the bottom-up approach.

Markets are often full of rumors. You cannot make money in the market by acting on market rumors.

Always listen to the stories, but remember you should do your own researchโ€“and do it thoroughly.

Make your buy or sell decision based on your analysis of the company, not on what others tell you to do.


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RBIโ€™s Monetary Policy – Analyst View

Hello Friends, last month we witnessed loads of action with the RBIโ€™s monetary policy being laid down.

Just an extension of our previous blog โ€œRBIโ€™s Monetary Policy Stance โ€“ Part 3โ€.



Analyst View RBI policy

RBI Monetary Policies and Projections Part 4


In this Blog we would read the Analyst views with respect to the monetary point of view.

Analysis from the Analyst from monetary point of view:

Though there is a hike in SLR to 25 % but we think it will not have much more impact because the total investment book of commercial banks is already at 30.4% of total NDTL.

Although key rates of CRR, reverse repo and repo rates have been left unchanged, special repo facilities have been withdrawn.

Real estate loans provisioning are set to become more expensive.

NPA norms for banks have been tightened while liabilities of scheduled banks arising from transactions in CBLO with Clearing Corporation of India Ltd. (CCIL) will be subject to maintenance of CRR.


The RBI is thus attempting to withdraw liquidity from areas where excess liquidity had reached a point it was more than comfortable with, while also targeting better quality management of credit.

Another point is that in the policy stance, RBI has given first priority to keep a vigil on trends in inflation and to be prepared to respond swiftly and effectively through policy adjustments to stabilize inflation expectations.

Second, it will monitor the liquidity situation closely and manage it actively to ensure that credit demands of productive sectors are adequately met while also securing price stability and financial stability.

Lastly, RBI will maintain a monetary and interest rate regime consistent with price stability and financial stability, and supportive of the growth process.


In conclusion, it bears emphasis that the Reserve Bank is mindful of its fundamental commitment to price stability.

It will continue to monitor the price situation in its entirety and will take measures as warranted by the evolving macroeconomic conditions swiftly and effectively.


To conclude all the factors it seems that with the withdrawal of special liquidity measures together with an imposition of CRR in borrowing in CBLO market, RBI has taken a first to step towards controlling liquidity.


With prioritizing inflation it is expected that the next step of RBI could hike in CRR as it has also reduced the indicative growth of Broad money to 17% from 18%.


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