Posts Tagged ‘Bombay Stock Exchange’

Mid-cap and Small-cap Shares Outperformed Blue Chips in 2009

mid-cap and small-cap shares outperformed blue chips

2009 was a year when stock market minnows beat the big boys of Dalal Street.

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This year, mid-cap and small-cap shares outperformed blue chips, setting the momentum for 2010.

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Stocks of companies with medium and small market capitalisations shot up more significantly than the scrips with larger valuations.

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This was all happening when stock market  was witnessing a recovery across the board in the year.

Market experts said the smaller capitalization stocks do not need huge amounts of investments to rally and so managed to outperform their peers in the benchmark index, Sensex in the year.

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According to an analysis of the performance of mid-cap and small cap indices on the Bombay Stock Exchange, the small-cap index has given a return of as much as 115 per cent, while the mid-cap index has gained nearly 100 per cent so far in 2009.

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In comparison to the performance of its smaller peers, the 30-share benchmark index, Sensex, gave a return of 75.3 per cent to investors.

“The rally in the mid-cap and small-cap have been stronger than that of the large cap index of Sensex.

Mid-cap and small-cap indices comprise stocks require relatively smaller investment as they are available at cheap rates in the market,”

SMC Capitals Ltd Equity Head Jagannadham Thunuguntla said.

The mid-cap and small cap indices track the performance of companies with market capitalisations that are a fifth or tenth of that of blue chip firms.

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Bank deposits, BSE Sensex Move in Reverse Direction

The Bombay Stock Exchange (BSE) market capitalisation and bank deposit levels move in diametrically opposite directions. In an economy that is on shaky ground, bank deposit levels go up, but when there is optimism, market cap goes up, reveals a 34-month study conducted by New Delhi-based SMC Capitals.

The elements of fear and greed (which drive the capital markets) are clearly visible in the trends seen in the allocation of assets by
investors in terms of cash and stocks. An attempt to compare the BSE market cap levels (over the period starting January 2007), with the aggregate bank deposits in the banking system shows the relative measure of the entire market capitalisation of BSE as percentage of aggregate bank deposits in the entire banking system. This is a reflection of the level of risk appetite in the investor community.

For instance, in January 2007, BSE market cap at Rs 3,779,000 crore as a percentage of aggregate bank deposits was 152 per cent, which means BSE market cap was 1.52 times more than the entire bank deposits at that time, that was Rs 2,485,000 crore.

When the market started recovering since March 2009, the BSE market cap as a percentage of aggregate bank deposits crossed 100 per cent level and at present, these level is at about 138 per cent.

BSE market cap at the end of November was Rs 5,793,000 crore, while bank deposits stood at Rs 4,196,000 crore, data from SMC Capitals shows. Latest data on bank deposits is available only till November.

As the bull market cap kept racing ahead during 2007, these levels of BSE market cap, as a percentage of aggregate bank deposits, have kept rising. At the peak of the bull market, that is by December 2007, these levels reached 235 per cent.

Simply put, BSE market cap at Rs 7,169,000 crore was more than double the Rs 3,047,000 crore kept in bank deposits.

“What it means is that the deposits available with sche-duled banks put together can’t even buy half of BSE stocks. This was probably the sign of ‘excess optimism’ in the capital market,” said Jagannadham Thunuguntla, equity head of SMC Capitals.

However, by the time the bear market started in 2008, this level of BSE market cap as percentage of aggregate bank deposits has consistently kept falling. By the time the markets touched the bottom in February 2009, this level fell to 74 per cent.

This means that with the aggregate bank deposits available with the banking system, one can buy all the BSE-listed stocks and will still be left with 26 per cent of the deposits. This probably marked the sign of excess fear in the system, said Thunuguntla. By this time, the BSE market cap was to the tune of Rs 2,862,000 crore, whereas the aggregate bank deposits were to the tune of Rs 3,848,000 crore.

Company Insiders Sold Shares Worth Rs.15K Crores

Company Insiders Sold Shares Worth Rs.15 K Crores

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Company insiders, including top management and promoters, have sold shares in their firms worth about Rs.14,950 crore in the past three months.

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This was most perhaps done to cash in on the steep rise in prices during the recent rally and signaling that the market may be fully valued.

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“Insiders are cashing out some part of their shares.

That shows the market is no longer undervalued,” says Jagannadham Thunuguntla, head of research at SMC Capital Ltd.

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Since the Bombay Stock Exchange’s benchmark hit a low of 8,160 points on 9 March earlier this year,

the 30-stock Sensex, India’s most widely tracked index, has risen 103.81%

as foreign investors injected $15.42 billion (Rs 72,165 crore) into the markets, enticed by the prospect of economic growth.

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While major Western economies are barely emerging from a deep recession,

India’s economic output is expected to expand at least 6%, according to estimates by the Reserve Bank of India (RBI), making it the second fastest growing major economy.

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Insider sales include those by promoters, top management such as chief executive officers and chief financial officers, as well as sales of treasury stock.

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While insider trades are reported to the stock exchanges, only the number of shares is disclosed.

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Often, such sales take place over a period of time.

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SMC Capital has played a role in the compilation of the data.

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Insider transactions also include share purchases.

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On an overall basis, company insiders bought shares worth around Rs 5,194 crore during the same period, or around one-third of the Rs 14,950 crore of shares sold.

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A large part of these have happened in the last six months because people are still sceptical about the sustainability of the recovery.

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“No one has any conviction on how long this bull market will last,” said SMC’s Thunuguntla.

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Indeed, with the pace of economic recovery in the West still under question, a potential debt default by Dubai government-promoted entities rocked global markets last week,

sending the Sensex down 3.3% in just two days of trading.

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Dubai Debt News Sent a Shudder Throughout World Markets

Just a year after the global downturn  derailed  Dubai’s explosive growth, the  city is now  so  swamped  in  debt that  it’s  asking  for a  six-month  reprieve  on  paying  its bills.

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Dubai Debt Fears Grip World Markets

 

This has cast a shadow on a world only just emerging from the worst economic crisis since the 1930s,  knocking markets  from Sydney to Sao Paulo and raising questions about Dubai’s reputation  as a magnet for international investment.

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For India, which has tens of thousands of its citizens living  and working in the emirate,  the concerns are more direct:  thousands of its expats staring at job losses and  the economy, sharply reduced trade.

India, which gets nearly a quarter of the remittances from the United Arab Emirates and  has lakhs of laborers working in the region, could be worse off than most other nations  if the crisis escalates into a full-blown one  like the Russian or Argentinean crises of the past.🙂

India’s exports to the UAE stood at $23.92 billion in FY09.

It is very likely that we may see one more leg of job losses in Dubai.

The only consolation for the region is that Abu Dhabi is booming.

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Indian shares and the rupee fell in sync with other global markets where investors are fleeing for safety after Dubai debt trap concerns.

The Bombay Stock Exchange benchmark Sensex on Friday tumbled over 451.63 points to 16,403.30 points in the first ten minutes of trading on hectic selling by funds in line with weak global cues and concerns over Dubai’s debt.

Similarly, the wide-based National Stock Exchange index Nifty dropped by 140.50 points to 4865.05 points.

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Brokers said the selling focus was more on banking and realty stocks after Dubai’s debt problems revived concerns about the global financial system and rattled markets across Europe and Asia.

Indian rupee fell 24 paisa to 46.55 against the dollar.  The MSCI Emerging Markets Index lost 1.4%.

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Most European indices were about 2% lower after Asia tumbled.

The Shanghai Composite Index slumped 3.6%, its biggest drop since August, and Brazil’s Bovespa Index slipped 1.1%. U.S. markets were closed for the Thanksgiving holiday.

Credit-default swaps tied to debt sold by Dubai rose as much as 131 basis points to 571.

“Dubai isn’t doing risk appetite any favours at all and the markets remain in a vulnerable state of mind,” said Market analysts.

“We’re still in an environment where we’re vulnerable to financial shocks of any sort and this is one of those.”

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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.

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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 Investors’ 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.

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SEBI May Reduce the Trading Holidays at Bourses

SEBI May Reduce the Trading Holidays at Bourses

SEBI May Reduce the Trading Holidays at Bourses

Market regulator SEBI is looking into a proposal by several investors to allow fewer trading holidays on stock exchanges in line with the global practice.

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“SEBI is actively considering the proposal to reduce the trading holidays at bourses and is likely to take a decision on the matter soon,” an official close to the development said.


According to analysts, this move by Securities and Exchange Board of India (SEBI) will increase the trading volume in domestic bourses and would also attract foreign investors.


SMC Capitals Equity Head Jagannadham Thunuguntla said,

“From the global standards, India has more number of trading holidays. The reducing of holidays would increase the participation of investors, including the foreign ones, and would increase the trading volume,” he said.

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For 2009, the Bombay Stock Exchange has 19 listed trading holidays and these exclude the weekly Saturday and Sunday off.

In developed countries, the trading holiday at leading bourses are far less.

For 2009, there are only nine trading holidays on the New York Stock Exchange.

In European markets, there are just four holidays this year excluding Saturdays and Sundays.

Recently, Sebi opened gates for longer trading hours for stock exchanges, allowing the bourses to extend market hours by around two-and-a-half hours between 9 am and 5 pm.

The market regulator had further asked the bourses to reset their timings provided they have in place risk management system and infrastructure commensurate to the trading hours.

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Bharti Airtel’s Scrip Fell 6% Down !

 

 

Bharti Airtel’s scrip Friday fell 6.38 percent

Bharti Airtel’s scrip Friday fell 6.38 percent lower at the Bombay Stock Exchange (BSE)

Telecom major Bharti Airtel’s scrip Friday fell 6.38 percent lower than its previous close at the Bombay Stock Exchange (BSE) as investors dumped the stock because of disappointing second quarter results.

The scrip, which had fallen to an intra-day low of Rs. 290.30 from Thursday’s closing figure of Rs. 312.05, ended the day at Rs. 292.15.

Bharti Airtel said its net profit, according to US accounting rules, increased 13.4 percent to Rs. 2,321 crore (495 million) for the quarter ended Sep 30 from Rs. 2,046 crore in the like quarter of previous fiscal.

This was, however, a decline of 8 percent over the previous quarter of current fiscal.

Revenues were up 9 percent to Rs. 9,846 crore from Rs. 9,020 crore reported a year earlier.

“The industry is seeing entry of many players and this is bound to have a bearing on the fortunes of existing companies,” said Jagannadham Thunuguntla, equities head of brokerage and capital markets consultancy SMC Capital.

“In the short term, the stock could see some more pressure, though it is coming within range of a good buy, at least for the long term investor,” Thunuguntla added.

The Bharti scrip has lost as much as 30.2 percent over October and at current levels is the lowest in seven  months.