Market sees dream run fuel in fundamentals
Investors warned of pitfalls
Nestle to raise stake in Indian arm
ABB to use IT for value-addition
Dunlop to reopen by March 11
Industry grows 6.2% in Apr-Dec
$125 m ICICI Bank ADR issue gets clearance
US firm takes 50% in IDBI subsidiary
Foreign Exchange, Bullion, Stock Indices

 
 
MARKET SEES DREAM RUN FUEL IN FUNDAMENTALS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb 11 
Champagne corks popped, brokers punched the air and the trading ring resembled a raucous bash as Dalal Street watched the screen flash a number that sent even the most phlegmatic investor into a delirium.

As the BSE sensex roared past 6,000, 6 minutes before 3 pm, the figure ceased to remain merely a measure of trading fervour. For movers and shakers of a market that is seen as one of the country’s best wealth-creating machines, it was a tryst redeemed, a long-cherished dream fulfilled and the best expression of confidence in a fast-recovering economy.

The 30-scrip index opened just a whisker below 6000, at 5985.05, remained range-bound between 6005.85 and 5917.04 but profit-taking towards the fag end of the session drove it to a close of 5933.56 in a 144.42-point (2.5 per cent) leap over Thursday’s finish of 5789.04. The BSE-100 index also flared up by 75.41 points to 3415.57 from its previous finish of 3340.16.

Foreign institutional investors (FIIs) poured in Rs 76.6 crore today, taking their total investment for the month so far to a staggering Rs 850.10 crore. Their total exposure in the country is now pegged at a mindboggling Rs 36,636.8 crore.

Is this boom for real? Broking circles are at pains to explain that it indeed is. They cite the presence of a pro-reforms government and the economy on an upswing as the factors fuelling this surge.

Not ready to take chances in an overheated market, Sebi swung into action by imposing additional cash margins on the top 25 brokers of BSE, National Stock Exchange, Delhi Stock Exchange (DSE) and the Calcutta Stock Exchange (CSE).

Sebi also directed the five major exchanges, including the Ahmedabad Stock Exchange (ASE), to take incremental additional capital and margins from their top 25 brokers in the form of cash or FDRs only, for the next four weeks and withdraw the existing facility of accepting additional capital/margins in forms other than cash.

DSE sources said ad hoc margins have been imposed on brokers while special margins have been levied on volatile scrips. The measure, which will be effective for a month from Monday, is believed to been prompted by BSE’s record run past 6000 points. Exchanges will select 25 brokers in terms of their gross exposure at the close of the third day of the trading cycle.

“These margins have been temporarily imposed for a period of one month,” Sebi chairman D.R Mehta said in Delhi. He dispelled fears of default by brokers and settlement risks. The Sebi chief said bourses have been asked to be vigilant on the volume of trading notched up by big brokers. An inter-exchange meeting on February 14 will review the measures.

However, he said investors must be careful while trading in the stock markets. “It is necessary for them to look through the fundamentals of companies before putting their money into them. One should not only go by trends and hearsay.”

Brokers, however, feel these margins would be an additional burden on them. According to an NSE broker, margins collected from them are sometimes are as high as 46.76 per cent. This includes a base margin cap of 11.76 per cent, gross exposure margins up to 15 per cent and volatility margins up to 20 per cent.

The regulator said big brokers should be subjected to ad hoc margins by stock exchanges. Exchanges can also consider scrip-specific measures, which could include the imposition of special margins on volatile scrips.

Analysts are also worried by the fact that while the indices have soared of late, the breadth of the market is not good enough. Today, only 367 scrips gained, while 654 took a tumble; seventy two remained unchanged.

Earlier in the day, sharp gains on the Nasdaq late on Thursday drove local players to scoop up infotech shares. Shares like Infosys, Satyam, ITC, BSES remained locked in their upper-end filters for most of the day. These companies attracted only buyers throughout the session. Then, the bulls sent the FMCG major and index heavyweight Hindustan Lever surging. However, both FIIs and speculators were harsh on economy stocks.

Sensing the buoyant mood, speculators piggybacked on heavy buying by foreign funds. They ignored the fact that the day was the last of the BSE’s current settlement, and spread their purchases across infotech, FMCG and telecom majors. Profit booking at the fag end shaved off the gains by over 70 points as a section of the speculators preferred to cool off for the weekend.

The BSE-200 index and dollex were quoted sharply up at 740.33 and 282.51 compared with their previous closing figures of 729.95 and 271.13. The BSE-500 index rose by 27.38 to 2214.22 from Thursday’s close of 2186.84.

In the specified group, twelve scrips including four software firms and six index heavyweights were locked in their upper circuit filters. However, Novartis, HDFC Bank, Titan Industries, Essel Packaging and Bausch & Lomb hit the lower price bands.

Zee Telefilms clocked the highest turnover of Rs 655.18 crore of BSE’s total volume of Rs 5450.54 crore, up from Thursday’s Rs 4130.09 crore. Other top traded scrips were Satyam Computers (Rs 528.75 crore), Himachal Futuristics (Rs 416 crore), Silverline (Rs 368.01 crore) and Reliance (Rs 326.04 crore).

Market leader Zee Telefilms edged up by Rs 2 to Rs 1,340. Satyam Computer jumped by Rs 269.75 to Rs 3642.15, Himachal Futuristcs by Rs 49.05 to Rs 1277, Silverline by Rs 56.65 to Rs 1169, BSES by Rs 19.75 to Rs 266.75, Lever by Rs 26.25 to Rs 2345, Hindalco by Rs 32 to Rs 867, Infosys Tech by Rs 737.95 to 9962.95, ITC by Rs 71.70 to Rs 968.60, Mahindra & Mahindra by Rs 45.65 to Rs 616.95, MTNL by Rs 28 to Rs 378.55, NIIT by Rs 51.15 to Rs 3050.15 and Ranbaxy by Rs 20.20 to Rs 935.

The day’s top losers included Reliance which fell by Rs 6.75 to Rs 357.50, Bhel by Rs 7.55 to 176, Grasim by Rs 19 to Rs 381, HPCL by Rs 8 to Rs 175, Novartis by Rs 90.65 to Rs 1043.10, Telco by Rs 13.95 to Rs 166.05 and Tisco by Rs 2.75 to Rs 138.75.    


 
 
INVESTORS WARNED OF PITFALLS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb 11 
Small investors beware ! Flirting with stocks at this stage, when share prices are shooting through the stratosphere, may be a short-cut for losing —not making — money.

While some software stocks are discounted reasonably on bourses, market mavens warn there are a quite a few fly-by-night-operators who have entered the fray in recent times looking for the fast buck. “The infotech tag may be a red herring,” they alert discerning investors.

“Investors should wait and watch. Even mutual funds with exposure to a narrow range of industries, or a few companies, should be avoided,” cautions K N Atma Ramani, managing director of Tata Mutual Fund.

Naming his stock picks in the current scenario, Atmaramani felt the infrastructure sector has room for growth. Steel, cement, heavy engineering and telecom can be good buys. MTNL, ABB, Gujarat Ambuja, L&T and Bhel can be purchased when their valuations are low. Echoing the view, Tushar Shah of KBS Securities, a prominent BSE brokerage, says: “One needs to be liquid before the Union budget. Any dip in the market is a buying opportunity.”

He suggests investors could . pick up cement and power stocks, . which have been ignored so far.    


 
 
NESTLE TO RAISE STAKE IN INDIAN ARM 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb 11 
Swiss multinational Nestle is raising its stake in its Indian subsidiary — Nestle India Ltd — to 56 per cent through the creeping acquisition route. At present, it hold a 51 per cent stake in the confectionery, beverages and foods unit.

Nestle stated its intention in a notice sent today to the Bombay Stock Exchange. This will make the Rs 1612 crore Nestle India the first Indian subsidiary where the foreign parent will be raising its stake through the creeping acquisition route which permits a promoter to buy up to 5 per cent of the floating stock from the market every year.

Sensing such a development, the Nestle scrip closed at a high of Rs 435.50 after it had opened at Rs 408. It later declined to an intra-day low of Rs 390. Market circles now expect heightened activity in the scrip. “This indicates an increase in the commitment of the parent towards the Indian subsidiary. Therefore, the scrip should do well in the coming days,” said a broker.

The financial institutions have a 17 per cent stake in the company, the Indian public around 19 per cent and mutual funds about 13 per cent. Nestle started its Indian operations in 1912 as a trading concern under the name of Nestle and Anglo Swiss Condensed Milk Company. While the company imported and sold condensed milk, in 1958-59, Nestle Product (India) Ltd was incorporated and took over the business of the erstwhile company. It started manufacturing condensed milk in the country from its Moga unit in Punjab after the government banned imports of all milk products.

Nestle’s Indian subsidiary is now a major player in dairy, coffee, chocolate, beverages and food products. Its other range of products include noodles, sauces, soup mixes, pickles and instant food mixes. Its market share in coffee is estimated at around 13 per cent (both loose and branded) and instant milk food at 77 per cent.

Nestle India’s domestic sales for the first half ending July 1999 have increased by 9 per cent to Rs 618.2 crore from Rs 565.5 crore in the corresponding period last year. Net profit in the first half rose by 40 per cent to Rs 49 crore.

The company, which posted a turnover of Rs 1612 crore in the full year ended December 31, 1998, has some recognised brands such as Nescafe, Milkmaid, Maggi noodles apart from others such as Lactogen, Cerelac, Everyday Daily Whitener, Sunrise, Polo, Milo and KitKat. During the previous year, the company had discontinued its soya range of products and milk based-confectionery.    


 
 
ABB TO USE IT FOR VALUE-ADDITION 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb 11 
Asea Brown Boveri (ABB) will now focus on knowledge-based and service businesses to provide integrated solutions to its customers and harness information technology, including e-commerce, to offer an array of value-added services.

ABB managing director K K Kaura predicted a 20 per cent growth in topline for the next three years as a result of the shift. “The company, after the change in strategy, will adopt a binary approach to its growth plan,” he told reporters here today.

Traditional businesses such as power transmission, distribution, industrial products would be powered by organic growth through strategic market focus and introduction of new products.

At the same time, the Rs 776-crore company intends to tap emerging opportunities by entering into new markets and enhancing business volumes through innovation and entrepreneurship, Kaura said. It could, for instance, advise companies on the privatisation of distribution, offer turnkey solutions and provide a wide range of energy services.

Explaining the concept of providing a service-based business, Kaura said his company, which earlier confined itself to supplying equipments to plants, would now offer services such as upgradation and maintenance. “We will capitalise on our large customer base and make a shift from traditional lines of activity to a larger, full-service concept.”

Explaining what is meant by plans to focus on the knowledge-based industry, ABB officials pointed out that ABB will not try to emerge as an infotech company. Instead, it will use infotech to offer value addition to its customers.

The power generation business of ABB was transferred to a new 50:50 joint venture with Alstom as part of a restructuring programme in the ABB group in the previous year.

As a result, ABB now has a presence in seven segments which includes transmission, distribution, automation, oil & gas, industrial products and contracting and financial services.

ABB chairman Narsim Shenoy told The Telegraph his company would move aggressively in the transmission sector after it is thrown open to the private firms. “We will certainly be interested in picking up an equity stake in transmission lines,” he added.

Net dips to Rs 37 cr

ABB posted a marginal decline in its net profit for the year ended December 31, 1999 at Rs 37.19 crore compared with Rs 37.73 crore in the previous year. However, for the quarter ended December 31, the profit was higher at Rs 19.38 crore as against Rs 18.08 crore in December 1998.

Net sales during this quarter declined to Rs 259.70 crore as against Rs 286.57 crore a year ago. Other income was also lower at Rs 10.59 crore (Rs 11.98 crore). For the year ended December 31, net sales declined to Rs 775.80 crore from Rs 869.24 crore for the entire calendar year of 1998.    


 
 
DUNLOP TO REOPEN BY MARCH 11 
 
 
BY A STAFF REPORTER
 
Calcutta, Feb 11 
The Sahagunj factory of Dunlop India Limited will be reopened before March 11, following eight hours of discussions between the management and the Citu union.

The Dunlop management said: “In the final solution that has emerged, a clause confirming that the union’s demand for arrear payment is not a pre-condition for signing the minutes has been included. Also included is that the unions will ensure along with the management that there is no loss of output over any issue once Sahagunj is operative and that they will ensure that peace and harmony is maintained in the factory.”

This puts an end to the impasse which arose due to the Citu-affiliated Dunlop Workers Union’s refusal to sign the minutes of the January 6 meeting. On January 6, a bipartite meeting took place between the management and the Citu and Intuc unions on re-opening both the Ambattur and Sahagunj factories. The management had then declared February 7 as the date of reopening.

Today’s meeting was also attended by the Intuc-affiliated Dunlop Rubber Factory Labour Union, who also signed the new minutes.

While the Ambattur and the Intuc unions signed the minutes, Citu, which was in favour of reopening the factory, had been pressing that the demand for arrear payment should not be kept as a pre-condition to the reopening of the Sahagunj unit.

The Citu union further demanded that the suspension of work should be lifted in the sales office, head office and at sales depots along with the two factories. They also demanded that the minutes should include the statement that the workers can discuss any issue with the management.

Dipankar Roy, general secretary of the Dunlop Workers Union said, “We are happy that the management has included all the clauses in the minutes and we have signed it. .”

In a press release, the management said: “As regards the lifting of suspension at the plant, as indicated earlier, owing to the loss of various high contribution orders, the entire product mix at Sahagunj will have to be reworked with a fresh break-even in mind. This would involve re-aligning of the target market segments and this could take some time. Also to be reactivated is the procurement material/spares for initial refurbishment of the plant. Our president M.D. Shukla has instructed critical members of the engineering and marketing team to return to Calcutta immediately to work on the plan realignment.”    


 
 
INDUSTRY GROWS 6.2% IN APR-DEC 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Feb 11 
Industry grew by 6.2 per cent during the first nine months of the current fiscal compared with 3.7 per cent in the corresponding period of 1998-99.

The spurt in growth was accounted mainly by the manufacturing sector which grew by 6.7 per cent compared with 3.9 per cent during the same period last year.

According to quick estimates of the index of industrial production (IIP) released by the government today, industrial growth in December was 5.2 per cent compared with 4.3 per cent in December, 1998.

The mining sector, in December, recorded a negative growth rate of 0.2 per cent while the electricity sector grew by only 5.2 per cent compared with 10.2 per cent in the previous year.

As per use based classification, capital goods growth plummeted to a negative 4.4 per cent in December compared with 11.9 per cent in December 1998, while basic goods grew at 4.1 per cent compared with 2.9 per cent in the same period last year.

Intermediate goods, consumer goods, consumer durables and consumer non-durables grew by 9.6 per cent, 5.5 per cent, 12 per cent and 3.9 per cent respectively in December 1999.

During December 1999, non-metallic mineral products have shown the highest growth rate of 25.4 per cent.    


 
 
$125 M ICICI BANK ADR ISSUE GETS CLEARANCE 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Feb 11 
The Foreign Investment Promotion Board (FIPB) has cleared foreign direct investment (FDI) proposals worth Rs 1,160 crore including ICICI Bank’s $ 125 million American Depository Receipt (ADR) issue.

Commerce and industry minister Murasoli Maran cleared ICICI’s proposal to issue ADRs worth about Rs 537.5 crore, an official release said. Following the issue, the stake of ICICI, which is the promoter of the bank, is likely to come down by about 10 per cent from the current level of about 75 per cent, sources said.

The minister also cleared the proposal of ailing domestic airline Modilluft to issue redeemable preference shares worth Rs 75.25 crore. The preference shares would carry an interest of 14 per cent, the release said.

South African Breweries International Asia BV, Netherlands, was given the go-ahead to set up a joint venture holding company in India, with a foreign investment of Rs 212.5 crore.

While South African Breweries would hold a 60 per cent stake in the company, NRIs would hold an about 25 per cent stake in the joint venture.

However, the clearance to South African Breweries will be subject to the condition that the company obtains prior approval for any subsequent downstream investment. The company would also need FIPB or government approval for giving franchises, bottling or contract manufacturing, the release said.

Maran also approved the proposal of the Indian subsidiary of Korean chaebol Samsung to channelise investment into various projects in data communication equipment, telecom systems and colour picture tubes.    


 
 
US FIRM TAKES 50% IN IDBI SUBSIDIARY 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb 11 
US-based Principal Financial Services will pick up a 50 per cent stake in IDBI Investment Management Company (Iimco) which is a 100 per cent subsidiary of IDBI.

Under the terms of the agreement signed between IDBI and Principal today, Principal will pay Rs 45 crore for the 50 per cent stake in Iimco.

In addition, IDBI and Principal would subscribe equally to a fresh equity issue of Rs 10 per share at a premium of Rs 80, raising the share capital of the company by Rs 10 crore.

In a joint news conference after signing the deal, IDBI chairman G.P. Gupta and Principal Financial group president Norman Sorensen said Iimco would set up IDBI Principal Asset Management Company which would be involved in the business of administration and management of mutual funds.

Iimco is also considering developing pension and pension products, long term savings and tax advantaged products targeted at businesses and individuals in India.

The six schemes of IDBI Mutual Fund would be restructured and transferred to the new company. Iimco currently manages these schemes.

Gupta said a new scheme would be announced before March 31.

In the asset management company (AMC), the CEO would be from the Principal group while the chairman and chief financial officer would be from IDBI.

Sanjay Sachdev has been named the new CEO of the AMC which has a eight member board.

Essar aid ruled out

IDBI today stuck to its stand on financial assistance to Essar Steel to redeem its floating rate notes (FRN), on which the company is facing a default, saying any bail-out package would be offered only after the company presents a more acceptable restructuring proposal.

Gupta said Essar Steel has sought a loan of $ 104 million (over Rs 450 crore) to redeem the FRNs, though there are large overdues to IDBI including Rs 200 crore as interest.

“All companies of the Essar group are in default,’’ Gupta said, adding that assistance to pay off the FRNs would be made after the company presents a comprehensive restructuring proposal.

In this regard, he pointed out that the group will have to clearly state as to when it would clear up its debt.

Apart from clearing the interest overdues, Essar is also required to ensure that UK’s Stemcor brings in further equity capital of Rs 70 crore into the Visakhapatnam-based Hy-Grade Pellets Ltd.    


 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 
Foreign Exchange
US $1	Rs 43.62	HK $1	Rs. 5.55*
UK £1	Rs 69.85	SW Fr 1	Rs. 26.40*
Euro	Rs 42.99	Sing $1	Rs. 25.40*
Yen 100	Rs 39.82	Aus $1	Rs. 27.05*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta		Bombay
Gold Std (10gm)	Rs 4800	Gold Std (10 gm)	Rs 4800
Gold 22 carat	Rs 4530	Gold 22 carat	Rs 4440
Silver bar (Kg)	Rs 8250	Silver (Kg)	Rs 8255
Silver portion	Closed	Silver portion	Rs 8270

Stock Indices

Sensex	5933.56	+144.52
BSE-100	3415.57	+75.41
S&P CNX Nifty	1756.00	+44.80
Calcutta	148.98	+2.91
Skindia GDR	NA	NA
   
 

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