Posts Tagged ‘Steel Authority of India Ltd.’

Weekly Update 11th – 15th October 2010

Beside Indian market all global markets closed in green in the week gone by on the expectation of policy easing by developed nations. Central banks resorting to purchase of debt and currency intervention in developedeconomies is flooding markets with liquidity and funds are flowing to Asia for higherreturns. Fed Chairman Ben S. Bernanke has signaled that Fed may announce thepurchase of more Treasuries as soon as their next policy meeting in November in aneffort to boost growth and reduce an unemployment rate.

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The Bank of Japan said this week it will establish a 5 trillion yen ($61 billion) fund to buy government bondsand other assets. It also cut its benchmark overnight interest rate for the first timesince 2008, dropping it to a range of zero to 0.1 percent. Joining the league European Central Bank President Jean- Claude Trichet too said that ECB policymakers are in the “same mood” as a month ago and for now remain committed tophasing out their unlimited lending program.With the economic activity gaining pace, it is believed that Indian market wouldcontinue to see overseas buying. Moreover Indian government plans to raise $8.9billion in the year ending March 31 selling state assets including Coal India, Steel Authority of India Ltd. and Indian Oil Corp. thereby giving more investment opportunities to investors.

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While many developed nations are intervening in the currency markets in order tostem the appreciation in the currency, Indian Finance minister is of the opinion thatthe situation has not gone to an extent at which there is a need to restrict portfolio or foreign direct investment. As a matter of fact Indian rupee gained 4.5 percent inSeptember. Finance Minister said “We should try to engage the countries innegotiations and build up a consensus through which the matter can be resolved andit cannot be resolved through confrontation.” The International Monetary Fundraised its 2010 economic growth forecast for India to 9.7 percent from 9.4 percent,citing strengthening local consumer demand.

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Since we have already seen a huge run up in the broader indices meaning moreparticipation coming from large cap stocks so now going forward we may expectmore activity in mid and small cap stocks. The result season is starting in the comingweek and corporate would give their guidance for the rest of the year which wouldset the future undertone of the markets. Nifty has support between 5950-5870 and Sensex between 19640-19200 levels.What a stunning rally gold has enjoyed recently on fear of inflation. It has hit many records in fewer days.

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Silver was not behind, it made life time high of `34898 on MCX and breached the mark of `35000 in spot market. Talk of quantitative easing by US and rate cut by BoJ are creating anxiety over currency devaluation and long-terminflation is keeping gold and silver on remarkable run up. After witnessing the bigswings of both side, we can say that trend of crude oil is little bit in indecision mode.However, bias should be on upside. Michigan Confidence, CPI and advance retailsales data of US may further provide the direction to metals and energy. Industrialmetals which have made upper trading range last week, are likely to trade up onweakening dollar index.

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India May Trigger $39 Billion of Share Sales With Ownership Cap :)

India Shines

India may trigger as much as 1.9 trillion rupees ($39 billion) in stock sales, equivalent to five years of equity offerings, with a proposal to limit stakes of controlling shareholders.

🙂

Prime Minister Manmohan Singh’s government is considering a plan that would require at least 25 percent of a company’s stock to be traded.

🙂

The rule would prompt equity sales in 560 of Mumbai’s 3,335 most-active stocks, such as NMDC Ltd. and Steel Authority of India Ltd., according to data compiled by Bloomberg.

🙂

The changes may encourage foreign investment by bringing Indian regulations in line with the U.S., U.K. and Hong Kong.

🙂

The 25 percent minimum would be good for the long-term Indian market. There are many very attractive companies with small floats that investors would like to be able to invest in.

🙂

The rule change would require the government, whose constitution embraces socialism, to reduce dominant stakes in key industries such as steel making, oil and electricity supply.

The top 10 companies that would have to sell stock are state- run, accounting for about 80 percent of the total by value.

🙂

Sensex Surges :

The Bombay Stock Exchange’s Sensitive Index, or Sensex, has climbed 61 percent this year, the eighth-best performer among 89 measures tracked by Bloomberg.

🙂

Growth in Asia’s third-largest economy may accelerate to 7.75 percent after the government initiated stimulus plans to bolster banks’ capital and spur consumer spending, according to the finance ministry.

🙂

International funds have bought 357.5 billion rupees of Indian stocks this year through Aug. 11, compared with record net sales of 530 billion rupees for all of 2008, according to data on the Securities and Exchange Board of India Web site.

🙂

The government plans to boost funding for a rural jobs program by selling shares in some state-run companies.

🙂

No Minimum :

Rules allow companies with a free-float worth at least 1 billion rupees to have as little as 10 percent traded, while there is no minimum for state-run enterprises, the ministry’s Web site says.

🙂

The Sensex has returned 192 percent over the past five years, second in Asia only to Indonesia.

Since 2005, companies have raised 1.89 trillion rupees in share sales, including 116 billion rupees in January last year by Mumbai-based Reliance Power Ltd. that marked the country’s biggest initial public offering.

New Delhi-based DLF Ltd., India’s largest real estate developer, sold 92 billion rupees of stock in June 2007.

🙂

Government Control :

India’s government plans to sell 8.38 percent of NMDC, the nation’s largest iron-ore producer.

The stake would fetch 120 billion rupees at current prices.

The government holds 98.4 percent in Hyderabad-based NMDC, and 85.8 percent of New Delhi-based Steel Authority of India, the nation’s second-biggest producer, according to Bloomberg data.

🙂

“The sheer magnitude of offloading involved may result in an overhang on the secondary capital markets,” Jagannadham Thunuguntla, the head of equities at SMC Capitals Ltd. in New Delhi, said in an interview.

“The capital market may find it difficult to absorb such heavy equity” he added.

🙂

The Securities and Exchange Board of India advocates “a phased approach, as companies may need time” to sell shares, N. Hariharan, a Mumbai-based spokesman for the market regulator, said in an e-mail Aug. 7.

🙂

‘Phased Manner’

The proposal “should be positive for markets if introduced in a phased manner,”

🙂

Such a change is a welcome one.

Ensuring a reasonable minimum float would help avoid share price manipulation, scams, abuse by majority shareholders, etc. This would constitute a positive structural change.

🙂

India may trigger as much as 1.9 trillion rupees ($39 billion) in stock sales, equivalent to five years of equity offerings, with a proposal to limit stakes of controlling shareholders.

Prime Minister Manmohan Singh’s government is considering a plan that would require at least 25 percent of a company’s stock to be traded. The rule would prompt equity sales in 560 of Mumbai’s 3,335 most-active stocks, such as NMDC Ltd. and Steel Authority of India Ltd., according to data compiled by Bloomberg.

The changes may encourage foreign investment by bringing Indian regulations in line with the U.S., U.K. and Hong Kong, said Anshul Krishan, the Mumbai-based head of Goldman Sachs Group Inc.’s India financing group. The sales, equal to about 4 percent of India’s $1 trillion stock market, probably won’t affect prices if they’re staggered over time, said Purav Jhaveri, senior investment strategist at Franklin Global Advisers.

“The 25 percent minimum would be good for the long-term Indian market,” Seth Freeman, chief executive officer of EM Capital Management LLC in San Francisco, which advises investors on emerging markets and runs the EM Capital India Gateway Fund, said in an e-mail response to questions. “There are many very attractive companies with small floats that investors would like to be able to invest in.”

The rule change would require the government, whose constitution embraces socialism, to reduce dominant stakes in key industries such as steelmaking, oil and electricity supply. The top 10 companies that would have to sell stock are state- run, accounting for about 80 percent of the total by value.

Sensex Surges

The Bombay Stock Exchange’s Sensitive Index, or Sensex, has climbed 61 percent this year, the eighth-best performer among 89 measures tracked by Bloomberg. Growth in Asia’s third-largest economy may accelerate to 7.75 percent after the government initiated stimulus plans to bolster banks’ capital and spur consumer spending, according to the finance ministry.

International funds have bought 357.5 billion rupees of Indian stocks this year through Aug. 11, compared with record net sales of 530 billion rupees for all of 2008, according to data on the Securities and Exchange Board of India Web site.

Finance Minister Pranab Mukherjee said in his July 6 budget speech that a rule requiring a public float of at least 25 percent for listed companies should be enforced uniformly, even for state-run enterprises that had been exempted. The government plans to boost funding for a rural jobs program by selling shares in some state-run companies.

No Minimum

Rules allow companies with a free-float worth at least 1 billion rupees to have as little as 10 percent traded, while there is no minimum for state-run enterprises, the ministry’s Web site says.

“The average public float in Indian listed companies is less than 15 percent,” Mukherjee said. “Deep, non-manipulable markets require larger and diversified public shareholdings.”

The Sensex has returned 192 percent over the past five years, second in Asia only to Indonesia. Since 2005, companies have raised 1.89 trillion rupees in share sales, including 116 billion rupees in January last year by Mumbai-based Reliance Power Ltd. that marked the country’s biggest initial public offering. New Delhi-based DLF Ltd., India’s largest real estate developer, sold 92 billion rupees of stock in June 2007.

Government Control

India’s government plans to sell 8.38 percent of NMDC, the nation’s largest iron-ore producer, Steel Secretary Pramod Rastogi said Aug. 5. The stake would fetch 120 billion rupees at current prices, he said. The government holds 98.4 percent in Hyderabad-based NMDC, and 85.8 percent of New Delhi-based Steel Authority of India, the nation’s second-biggest producer, according to Bloomberg data.

“The sheer magnitude of offloading involved may result in an overhang on the secondary capital markets,” Jagannadham Thunuguntla, the head of equities at SMC Capitals Ltd. in New Delhi, said in an interview. “The capital market may find it difficult to absorb such heavy equity.”

GMR Infrastructure Ltd., based in Bangalore, scrapped a $500 million international sale on June 30 as at least 40 companies announced plans to sell more than 350 billion rupees of shares, mostly to foreign institutional investors.

The Securities and Exchange Board of India advocates “a phased approach, as companies may need time” to sell shares, N. Hariharan, a Mumbai-based spokesman for the market regulator, said in an e-mail Aug. 7.

‘Phased Manner’

The proposal “should be positive for markets if introduced in a phased manner,” Franklin’s Jhaveri said in an e-mail response to questions. Franklin Templeton Investments in San Mateo, California manages $482.4 billion worldwide, including more than $3 billion in Indian stocks.

The Finance Ministry sought public comment on the plan on its Web site July 9. Singh’s administration plans to take up the issue after completing 100 days in office, Junior Finance Minister Namo Narain Meena said in a written statement to parliament in New Delhi on Aug. 4. Singh was sworn in on May 22.

The changes are important for protecting shareholders in India, said Andrew Foster, who oversees $2 billion in assets, including Indian securities, at Matthews International Capital Management LCC in San Francisco.

“Such a change is a welcome one,” Foster said in an e- mailed response to questions. “Ensuring a reasonable minimum float would help avoid share price manipulation, scams, abuse by majority shareholders, etc. So I think this would constitute a positive structural change.”