Sensex hits 5,500 milestone
Broking houses in limelight
Centre wields axe on state plan allocations
Videocon switches on Bengal unit
India to push for tariff trade-off
Multinationals give state power board legal shock
Intel solution to log high growth in India

 
 
SENSEX HITS 5,500 MILESTONE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan 4 
After a momentous Monday, it was a tumultuous Tuesday as investors returned to the trading ring to complete the unfinished job of taking the Bombay Stock Exchange (BSE) sensitive index (sensex) past the 5,500-milestone.

The 30-scrip index raced to its intra-day peak of 5534.01 minutes after trading started, powered by a bull charge that has almost made 6,000 points look less like a fantasy and more like a safe prediction for the next few days.

Only two trading sessions into the new millennium, and the sensex has gained a staggering 485 points (370 points on Monday) and added billions to shareholder wealth.

Today, the market capitalisation of all scrips listed on the BSE zoomed by Rs 14,655 to a mind-boggling Rs 10,01,520 crore.

The sensex opened strong with a sharp increase of 158.87 points over its previous close. However, it later plumbed its intra-day low of 5376.43 due to profit-taking in a few select scrips but recovered to close a whisker below the 5,500 mark at 5491.01 in a 115.9-point leap over Mondays finish of 5375.11.

For the second straight day, shareholder gains soared into the stratosphere as prices vaulted on the back of sustained buying, largely by domestic institutions and operators.

Foreign institutional investors (FIIs) did make purchases in select counters but marketmen say it was the expectation that they would step up their purchases in the next few days that drove local operators into a buying binge.

Meanwhile, concerned over the volatility witnessed in the markets, the Securities and Exchange Board of India (Sebi) today directed stock exchanges to consider imposing additional measures, including a one per cent to 10 per cent hike in volatility margins.

The market regulator suggested that stock exchanges increase the existing daily and carry forward margins imposed on volatile shares by another 5 per cent. It also called for the imposition of higher special/ad hoc margins on scrips which have a relatively small floating stock, and the reduction of gross exposure limit by a minimum of 10 per cent.

While the reduction in exposure limits may not be made applicable to brokers who have exposures up to Rs 3 crore, exchanges have been asked to implement specific measures for operators who have taken large and concentrated positions. This, Sebi said, could be done by asking them to reduce exposures, imposing higher margins and laying down early pay-in requirements.

Market operators said Sebi’s directives, if enforced by bourses, is likely to erode the gains recorded in the past two days. “Several operators who have built up sizeable positions may rush to liquidate their holdings if fresh margins are imposed. This could bring down the markets,” a broker said.

Information technology titan Infosys Technologies kept up its sizzling performance on bourses as the scrip zoomed to a new record of Rs 16,931.65. The spurt was fuelled by reports that the company’s ADS hit a record $ 375 on the Nasdaq. It slipped briefly to Rs 16,000 on a bout of profit taking but rebounded to Rs 16,910.20 at close.

Brokers said the buying interest today was largely concentrated in traditional favourites like software, pharmaceuticals and select cement shares such as Larsen & Toubro but even cyclicals like Hindalco notched up smart gains.

The losers in a late-session selloff by profit-hunters were Hindustan Lever, Gujarat Ambuja, Bhel, Telco, ACC, and Grasim.

Though losses outweighed gains, 23 scrips, including eight infotech stocks, hit the upper-end circuit filters after exhausting their daily limits. Zee Telefilms continued to be the top traded scrip with the highest turnover of Rs 514.59 crore on a total volume of Rs 4,444.14 crore.

Other active shares were Satyam Computers (Rs 506.47 crore), Reliance (Rs 304.49 crore), Ranbaxy (Rs 279.60 crore) and Pentafour Software (Rs 246.89 crore).    


 
 
BROKING HOUSES IN LIMELIGHT 
 
 
FROM SATISH JOHN
 
Mumbai, Jan 4 
If it’s good times for investors, can it bad for brokers? As the sensex goes from peak to peak, the share prices of premier Bombay Stock Exchange broking outfits are spurting.

While part of the upsurge may be attributed to speculation, analysts say the stocks are being re-rated in the market place following a revival in investor sentiment.

DSP Merrill Lynch, which was quoted on December 3, 1999, at Rs 470, has almost doubled to Rs 944.65 today. The shares of JM Share and Stockbrokers, which was stagnating at Rs 10.60 on December 3 is now quoting at Rs 21.30.

Shares of LKP Merchant Finance, Nucleus Securities and HB Stockholding which were exchanged at Rs 12, Rs 13 and Rs 4.75 respectively even some time back, have shot up to Rs 35.95, 21.90 and Rs 12.25 respectively. It is much the same story for Khandwala Securities, Action Finance and Mukesh Babu.

Analysts say the improvement in investor sentiment is the main reason why the share prices of these broking outfits have risen sharply in the span of a few weeks.

Says Priya Agarwal of Triumph Research, a premier equity research outfit in the city, “With traded turnover jumping, income from broking fees is expected to increase.”

With foreign institutional investors showing a greater interest in the country’s stock markets, the valuation of stockbroking firms is only going to go up.

Already, the cost of acquiring a BSE membership card has rocketed upwards. Recently, BSE had announced that it had accepted two bids for broking cards at Rs 2.51 crore and Rs 2.52 crore. It had invited bids for recovering dues from two defaulting brokers. It is a big improvement over bids made in early-1999 when broking cards were available at a little over Rs 1 crore.

Moreover, the broking outfits, during the lean times, diversified by entering into areas like merchant banking and financial services. This has paid off as mergers and acquisitions among Indian companies will be on the rise as firms restructure themselves.

According to Agarwal, some of the broking outfits have also been investing in stocks which have risen sharply of late. She feels this has also been reflected in the upswing of share prices.

Analysts also say with exchanges corporatising themselves, the true value of the broking outfits is bound to be realised as bourses get listed. Moreover, with internet trading starting soon on the leading stock exchanges, the savvy broking outfits will see an increase in business as non-resident Indians take benefit of the development.

Sebi executive director D. Raval has said, “In this millennium there is going to be integration of exchanges and more electronic methods of trading.”    


 
 
CENTRE WIELDS AXE ON STATE PLAN ALLOCATIONS 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, Jan 4 
At a crucial meeting held here today, finance minister Yashwant Sinha and Planning Commission deputy chairman K.C. Pant have decided to cut the size of plan allocations to states by 10 per cent to 15 per cent.

For the coming fiscal, though plan funds to states will go up by at least 20 per cent, compared with the sum given in 1999-2000, this amount will be lower by 10 per cent to 15 per cent from what was promised at the start of the Ninth Five Year Plan. The decision to cut the plan size will lead to shortage of funds in states which may be forced to curtail its development expenditure, creating waves of resentment against the Centre which the ruling BJP-coalition may find difficult to check.

While states, under the Ninth Five Year Plan, are due to get around Rs 90,000 crore in 2000-1 as central assistance, it will actually get between Rs 77,000 crore and Rs 80,000 crore for this period.

In the first three years of the plan, states have been given Rs 1,87,700 crore—the total allocation to states for the five year period is Rs 3,74,000 crore—against a promised sum of Rs 2,01,960 crore for this period. The Centre should have made good the shortfall in the remaining two years of the plan but has, instead, shrivelled the plan size.

Finance ministry officials said Planning Commission members at the meeting had suggested states be allocated Rs 90,000 crore in the coming fiscal and Rs 96,000 crore next year, to maintain Ninth Plan growth targets. The proposal was, however, shot down by the finance secretary who was present at the meeting.

The Centre was forced to make such drastic cuts in plan allocations by the poor health of state finances. While revenue growth has been dismal, expenditure is burgeoning and is expected to go up by 15 per cent to 16 per cent by the end of this fiscal. Tax revenue growth might be just 10 per cent compared with the target of 21 per cent.    


 
 
VIDEOCON SWITCHES ON BENGAL UNIT 
 
 
BY A STAFF REPORTER
 
Calcutta, Jan 4 
Fears of a showdown between rival Citu unions over Videocon’s control of Philips’ Salt Lake colour tele vision unit were squelched today as more than 200 employees trudged to work in the factory’s inaugural shift under a new management.

The components required to manufacture CTVs reached here last night from Videocon’s Aurangabad factory. To send the impression that it is in full control of the unit, the new management has decided to roll out at least 100 sets today.

Despite the row over the factory’s handover, the employees appeared to be satisfied at the turn of events. “We are happy that the factory has reopened after five months. Of the 346 employees, 200 have already arrived. The management has asked us to join by January 7. I think more people will join in the next three days,” said S.N. Roychowdhury, a senior representative of Philips Workers’ Union.

Videocon International vice-president S.S. Nabar allayed workers’ fears and asked them to begin work on a clean slate. “We want all employees to join the factory by this month. If they fail to do so, we may have to take legal action. I urge workers to start work with a clear mind and without any apprehension.”

The Salt Lake factory has been taken over by Kitchen Appliances India (KAIL), a wholly-owned subsidiary of Videocon. The Kitchen Appliances management presented wrist watches to employees who completed 25 years of service at a function organised to mark the inauguration.

Gautam Sengupta, general manager of KAIL, said: “We have set a target of manufacturing 1,000 television sets per day by March compared with Philips which used to make 600 sets daily.”

“By July, we would like to make 1,800 units per day. This will include CTVs, black and white sets and audio systems. We also plan to manufacture air-conditioners in May,” Nabar, who unveiled KAIL’s plan through a video presentation, said.

Kitchen Appliances, he said, will import integrated television lines from Singapore, printed circuit board testing-lines from Belgium, and radial machines as part of its plan to upgrade the Salt Lake factory. The company plans to invest Rs 280 crore in the unit over a period of three to five years.

Televisions will be manufactured at the unit under Videocon, Sansui, Toshiba, Akai and Kenstar brand names. “In the first three months, we will concentrate only on television manufacturing,” Sengupta said. The Salt Lake factory will cater largely to the demands of eastern India, Bangladesh, mid-east and far east countries.

“The West Bengal government has already allotted 15 acres to KAIL in Joka. We also have a five-acre plot adjacent to the Salt Lake factory. The company has plans to manufacture kitchen appliances like dishwashers, microwave ovens, white goods like refrigerators and washing machines at the planned units,” Sengupta said.

The trouble-free resumption of operations at the Salt Lake unit was not a foregone conclusion because of the bitter animosity between two warring factions of Pieco Workers’ union.

The group owing allegiance to union general secretary Sunil Ghosh had drawn up plans to hold demonstrations against the transfer of the Philips’ unit to the Videocon subsidiary. The other camp, led by president Sankar Karmakar, was trying to drum up opinion among workers in favour of the new management under Kitchen Appliances.    


 
 
INDIA TO PUSH FOR TARIFF TRADE-OFF 
 
 
FROM R. SASANKAN
 
New Delhi, Jan 4 
India will press for a reduction in peak tariff rates and abolition of tariff quotas at the Unctad-X to be held in Bangkok in the second week of February.

India is of the view that in the case of agricultural commodities bound at zero tariffs, there is a case for raising the tariff rates suitably to protect domestic production. Officials say the Uruguay Round negotiations focused on tariff liberalisation but left out the issue of slashing tariff peaks on a number of products which affect the interests of developing countries.

The agreement on agriculture entailed conversion of all non-tariff barriers into equivalent tariff barriers and reduction in tariff rates in a time-bound manner. However, the ‘tarrification of quotas’ and introduction of new non-tariff barriers have reduced the real market access for agriculture exports from developing countries.

Textile and clothing — the two key exports of many developing countries — are subject to quantitative restrictions up to 2005. In the case of agricultural commodities, India has gone ahead with the reduction in tariff barriers, much below the bound rates of duty under the Uruguay round agreement.

Market access to exports from developing countries is affected by non-tariff barriers imposed by developed countries. They use issues such as quality testing and labelling requirements, investigations relating to subsidies and the use of child labour in manufacturing and application of anti-dumping provisions to block exports from developing countries.

India will highlight the fact that agricultural exports from industrial countries are often subsidised. Such measures are adopted to blunt the comparative advantage of low labour costs enjoyed by developing countries. India will support the idea of setting up of an internationally financed regional, or sub-regional certification institutions, to help developing countries adapt themselves to higher standards in their exports to industrialised countries. It is felt that UNCTAD can play a positive role in these matters.

The provision on special and differential treatment in favour of developing countries contained in the various agreements under the Uruguay rounds should be reviewed in the light of the experience in implementing these agreements.    


 
 
MULTINATIONALS GIVE STATE POWER BOARD LEGAL SHOCK 
 
 
BY OUR SPECIAL CORRESPONDENT
 
Calcutta, Jan 4 
Multinational power equipment giants Siemens and Daicker Hoff have taken the West Bengal State Electricity Board (WBSEB) to court in two separate cases, accusing it of violating global tender norms.

German major Daicker Hoff, facing rejection in the Rs 509-crore civil works contract for the Purulia project, wants to revise its bid. Siemens, the lowest bidder for the Rs 350-crore transmission package, is challenging the delay in awarding the contract.

Leading a consortium which comprises Dragados of Spain, Shimuzu of Japan and Patel Engineering of India, Daicker Hoff has emerged as the second-lowest bidder for the civil works contract with a Rs 1,000-crore bid as against Tai Sai Corporation’s Rs 710 crore.

The MNC has argued in its petition before the Calcutta high court that it should be allowed to make crucial corrections in the bid, a demand rejected by WBSEB.

Siemens, the lowest bidder for the state transmission and distribution project, has sued the board over the delay in awarding the Rs 350 crore lot 3 & 4 contracts even though it emerged as the lowest bidder.

However, WBSEB has failed to take any action because the Overseas Economic Cooperation Fund (OECF), the agency financing the project, has shut out Siemens.

“Daicker Hoff made a mistake in quoting its rate. Its bid, as a result of the error, stands at Rs 1000 crore. As the second lowest bidder, it wants WBSEB to reduce the figure. Legally, that is not possible and is clearly mentioned in the rules,” a source said.

If the state power board were to concede the demand, Daicker Hoff’s revised quote would decline to Rs 650 crore. This will make it the lowest bidder, better than Tai Sai corporation’s Rs 710 crore.

The case will again come up for final hearing on January 7 till which time the board is free to process the project documents. The civil works project for Purulia appears jinxed. In March last year, the state government had to cancel the price portion of the global tender.    


 
 
INTEL SOLUTION TO LOG HIGH GROWTH IN INDIA 
 
 
BY A STAFF REPORTER
 
Calcutta, Jan 4 
Intel, the world’s largest chip manufacturer with a turnover of $ 26 billion, has set a 50 per cent annual growth target for its Indian operations.

Avtar Saini, director (South-Asia) of the company, said Intel had identified four key areas—networking, telecom solutions, e-commerce and education—to achieve the growth, besides its core business of manufacturing chips and motherboards for computers. However, he refused to disclose the size of the company’s Indian operations in terms of value.

Saini said the company was very enthusiastic about India where the potential for information technology had remained largely untapped. “We have already made a blueprint to achieve the growth target and we are sure of our success,” Saini said.

Speaking to The Telegraph, Saini said the company will continue to focus on its core areas of businesses. But the areas, where the company is diversifying into, have a great potential, he added.

Intel has already initiated its education venture by embarking on what it calls ‘Project Vidya’ in collaboration with the National Science Centre. “The idea of this project is to move away from computer education to computer for education,” he says.

On networking business, he said the company was making substantial investment globally as it would be ‘the business’ of tomorrow.

While Saini avoided any comment on the company’s present and future investment plans in India, he said Intel’s corporate business division was weighing every option to expand its presence.

“Currently, we have presence in 10 Indian cities through our channel partners and we hope to increase the number by at least 10 times within the next two to three years,” he said.

Intel has already launched a development centre in Bangalore which is the fifth outside the US. The centre is currently working on graphic designing and developing e-commerce solutions. Saini said the operations in this centre would be substantially expanded in the next few years.

In order to make inroads into the telecom sector, Intel recently acquired two US firms—Dialogic and Level-One Communication. Saini said telecom had a great growth potential and the company is going to make an all-out effort to tap the opportunities.

Asked whether the company would set up any chip manufacturing outfit in India, Saini said it was premature to have a unit here which needed at least $ 1 billion investment. “But if the situation demands, the company may take such a decision,” he added.

Saini, however, ruled out the possibility of the company’s coming out of the business of manufacturing chips for personal computers. “Chips and motherboards for PCs are core products and will continue to be so at least for the next few years,” he said.

He was, however, critical about the import duty structure in India.

4-way eBusiness pact

Global market leaders in information technology—Intel, Compaq, I2 and PricewaterhouseCoopers—have joined hands to provide what they term “intelligent eBusiness” solutions.

The move by the four organisations is aimed at forming a global alliance to weed out competition in the e-commerce sector, which provides “tremendous business potential” in the coming years.

Launching a ‘Centre of Excellence’ here today, the four organisations have formalised the alliance. The centre, which will be dedicated completely to developing eBusiness solutions, will enable clients to evaluate the mechanism that could transform their organisations into high velocity enterprises.

“The centre will showcase some of the most innovative solutions that are available. This knowledge base will provide clients with insight on how their businesses can be competitively positioned in the web area,” said Roopen Roy of PwC.    

 

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