Sebi raises circuit filter limit to 16%
Sensex sheds 132 points
Truce signs emerge in tea auction standoff
Tata stake in Telco creeps up to 22.6%
Diesel Accent at Rs 6.74 lakh
Insurance rules to be ready by mid-July
Foreign Exchange, Bullion, Stock Indices

Mumbai, June 21 
The Securities and Exchange Board of India (Sebi) today raised the circuit filter limit to 16 per cent from the existing 12 per cent to provide some succour to the languishing stock market. The relaxation will be effective from July 3 and will be applicable to all the 200 cash scrips as well as those under the rolling settlement.

Apart from raising the circuit filter limit, the capital market watchdog announced a slew of other incentives to pep up the market. This included withdrawal of additional margin of five per cent on the sale side imposed on April 16, rationalisation of additional volatility margins for cash scrips, doing away with additional volatility margins under the rolling settlement and relaxation of cash portion of broker margins.

These decisions were taken by the group on risk management for equity markets today. A sub-group met yesterday to discuss specific issues related to simplification and refining of the existing margin system. On price bands, Sebi officials said the group felt that there was a need to continue with these bands even in the rolling settlement.

However, in view of the experience of recent relaxation of price bands by four per cent beyond the originally prescribed level of eight per cent, it was felt that the present price bands could be further relaxed.

It has been decided that the relaxation by eight per cent with 30 minutes cooling period after the scrip has hit the initial price band of eight per cent would be applicable to all the scrips in the compulsory rolling settlement.

Thus the price band will be eight per cent followed by another eight per cent after a cooling period of half-an-hour. There are 163 stocks under rolling settlement now.

“The relaxation of circuit filters is intended to provide an exit route to those trapped and unable to square off their positions on a daily basis, particularly under the rolling settlement,” said D R Mehta, Sebi chairman to the reporters after the group met today.

Even exchanges were not comfortable with the lower circuit filters of 12 per cent in existence, he added.

The earlier procedure of half-an-hour cooling period after a scrip touches lower/upper price band of eight per cent, would, however, continue. But the next trigger for stopping trade in the scrip would be after it touches eight per cent, instead of at four per cent level earlier, he said.

The volatility margin will continue with this margin in the account period settlement.

As large number of scrips are attracting this margin, it is necessary to simplify the structure of this margin by reducing the number of slabs and the percentage of the margin.

Accordingly, while the threshold for applicability of this margin will be 80 per cent instead of the present 60 per cent, there will be three slabs instead of the present six.

Here a percentage margin of 10 per cent has been fixed for volatility of more than 80 per cent up to 100 per cent and 15 per cent margin for volatility beyond 100 per cent.

The new structure would be applicable from the account period commencing immediately after June 30. If the deliveries are covered by bank guarantees then the exchanges have been asked not to insist on any cash margin.

However, Sebi has stipulated that the trades cannot be squared up during the settlement period and must result in compulsory delivery.

The market regulator expects that this reduction in the cost delivery-based transaction will encourage higher delivery-based business.    

Mumbai, June 21 
Heavy unwinding in several ICE stocks paused the surge witnessed at the Bombay Stock Exchange (BSE) during the past five trading sessions as it brought the sensex down by more than 132 points to close at 4,731.57 today.

Market circles said that the condition of the sensex would have been worse had it not been for a two per cent rise in Hindustan Lever Ltd which closed at Rs 2,572. Barring HLL and a couple of other stocks, selling was rampant in most of the new economy and old economy counters.

The worst hit were the front-line index stocks such as Zee Telefilms, Satyam Computers, Infosys, HFCL and Silverline. Silverline’s scrip fell by 57.10 to close at Rs 580.85 at BSE today.

This is despite its ADS listing on the NYSE yesterday at $ 25 which hit $ 30.50 with a premium of 20 per cent over its offer price. Ranbaxy, Dr Reddy, MTNL, ITC and others faced similar situation.

“Many of these stocks had witnessed massive buying recently leading to huge outstanding positions in these counters. A technical correction was therefore in the cards,” said a broker while summing up the proceedings. Today’s fall came despite an overnight firm trend at Nasdaq which had resulted in the tech heavy index closing over the 4,000 mark.

Many old economy stocks at the BSE showed initial gains, belying fears that they would take a cue from the 100 points loss in Dow yesterday. Today selling was seen in many of the ICE counters at the BSE.

Apart from the local operators who were seen unloading huge quantities of these stocks, local institutions and mutual funds also booked profits in select software counters besides selling some Indian companies scrips. The BSE-30 share sensitive index opened relatively firm at 4,888.43, the day’s peak. It was confined to a narrow range up to midsession.

But unwinding of long overbought positions later pulled down the sensex to the day’s low of 4,723.57 before settling at 4,731.57, a sharp loss of 132.33 points or 2.72 per cent from overnight closing levels of 4,863.90.

Of the total 139 traded specified shares, 112 recorded sharp to moderate losses while 26 gained.

HFCL regained the first place among the highest traded securities and logged a turnover of Rs 668.06 crore in the total volume of business of Rs 5,035.79 crore. Other top traded shares were Satyam (Rs 546.50 crore), Global Tele-systems (Rs 492.38 crore), DSQ Software (Rs 489.30 crore) and Infosys (Rs 379.67 crore).

While HFCL slumped by 124.30 to 1,530.60, Global declined by 68.60 to 1,485.65, Infosys by 335.35 to Rs 8,439.25, Dr Reddy by 83.95 to Rs 1,328.35, ITC by 24.70 to Rs 725.05, MTNL by 12.30 to Rs 232.15, NIIT by 79 to Rs 2,368, Novartis by 22.70 to Rs 812.75, Ranbaxy by 77.95 to 600.40 and Zee by 53.30 to 495.95.    

Calcutta, June 21 
Buyers, sellers and brokers of the Calcutta tea auction are trying to hammer out a mutually acceptable formula which would ensure that there are no disruptions of the kind seen in the first week of last month.

As a part of a compromise, buyers have agreed to an increase — almost half of what the producers have been pressing for — in the size of purchases that will make them eligible for free samples. Traditional auction rules entitle brokers to free samples from producers to help them make a choice.

Under the new set of rules framed by the Tea Board, buyers will have to purchase 0.25 per cent of the amount sold at auctions, instead of 0.2 per cent earlier, to get free samples. Producers have been complaining that these samples are often misused.

Buyers have accepted the new sample-size norms in all cases, except small CTC tea in which, they say, the size should be kept at 30 gms. Sample sizes have been reduced to 25 gms for CTC and dust varieties, 60 gms to 50 gms for medium-sized tea and 90 gms to 75 gms for large-sized leaves.

Also, Tea Board’s new norms require a buyer to purchase 10 packages of tea, compared with 5 earlier, to allow a division of lots. “Allowing five packets of tea in a division of lots enables small buyers to get different varieties,” sources said.

Auctions came to a halt in early May after the Tea Board’s new auction rules recommended changes in three crucial areas: minimum qualifying percentage for free trade samples, size of free trade samples and division of lots. The new rules were based on the recommendations made by the Indian Institute of Management on auction system.

“All parties involved in trading tried to agree to a formula. However, the final decision to amend the new auction procedures rests on the Tea Board. We expect a decision to be taken at the board’s June 28 meeting. In any case, we would not like to hit tea trading,” senior industry officials said.

The fresh round of efforts to arrive at an agreement come after sale numbers 18 and sale 19 were disrupted due to a massive 22 per cent withdrawal of tea from the auctions.    

Mumbai, June 21 
The Tatas have consolidated their grip over their sprawling empire, having gradually raised their stake by 5 per cent each in Tata Engineering (Telco), Tata Steel (Tisco) and the three Tata Electric Companies (TEC) by using the creeping acquisition route which allows promoters to boost their holdings through open-market share purchases.

In Telco, the group’s holding has increased to 22.67 per cent in 1999-2000 from 17.7 per cent in the previous year while it has risen to 24.24 per cent from 19.72 per cent in Tisco.

In the three Tata Electric Companies (TEC) — which have now been merged into the Rs 3,146-crore Tata Power — the Tatas hold 26 per cent, up from 21 per cent in 1998-99. The figure excludes cross-holdings of 13 per cent between the TEC firms.

Stock market analysts say the Tatas have been astute in two ways. One, they bolstered their holdings by making the best of Sebi’s creeping acquisition regulations.

Two, and more important, is the fact that the holdings were raised usually when the share prices of group firms were subdued. This means they have paid much lesser than their estimates.

The stake-boost efforts have not surprised analysts though. Not when the chairman of the Tata group of companies is on record for having declared at several annual general meetings of shareholders in the past that the promoters would try to keep their shareholding close to 26 per cent.

However, this does meant the group has fixed an upper limit. According to sources, the Tatas will not hesitate in acquiring additional shares even if their stake in a group company rises above the 26 per cent threshold. “It will depend on the market price and the ground realities,” a source said.

Marketmen are of the view that the shares of key Tata group companies might have been picked up when they were quoting at their yearly lows, though there is little accurate information on when these could have been happened.

There is speculation is that the Unit Trust of India (UTI) — which has re-oriented its investment strategies in favour of ICE and other new-economy stocks — has been a major seller in times of a market slump.

It is believed that the mutual fund major may have offloaded a bulk of its old-economy shares, including those of many Tata group companies, to keep its portfolio focused tightly on promising technology names.

According to Tisco’s latest annual report, the voting strength of 14 Tata group companies has gone up from 19.72 to 24.24 percent in 1999-2000. This coincided with a reduction in UTI’s holding in the steel major 16.42 percent to 7.83 percent.

Other institutional shareholders, which includes banks financial institutions and insurance companies, have retained their stake in Tisco at 1998-99 levels.

Foreign institutional investors (FIIs) have, on the other hand, hiked their stake from a modest 1.03 per cent to 3.97 per cent in 1999-2000.

However, Tata Chemicals is one group firm where the promoters’ 30 per cent holding mirrors the pattern seen in earlier years.

Industry observers say the Tatas, like many others in the Indian corporate world, are only responding to takeover threats, and moves to raise their stake are an attempt to lessen their vulnerability against predators who may be on the prowl.

The Reliance and the Aditya Birla groups have also been steadily boosting their holdings to more comfortable levels to counter the less-favourable spin-offs of a globalised economy.

Until the last financial year, the Securities and Exchange Board of India had capped the creeping acquisition limit at 2 per cent. This was hiked to 5 per cent in the takeover code framed by the capital market watchdog.    

New Delhi, June 21 
Hyundai Motors India Ltd today introduced diesel variant of its mid size luxury car Accent.

Accent DLS would be available for Rs 6,74,432 (ex showroom Delhi), which is Rs 50,000 more than the petrol version. The Accent DLS is powered by TUD 5 engine from Peugeot. The engine offers a 57 BHP at the rate of 5000 RPM.

“We have always incorporated customers’ feedback and requirements into new product developments and launches. The introduction of diesel Accent is a step in the same direction,” said Y S Kim, managing director of Hyundai Motors India Ltd.

The diesel version will be available in the six existing colours with tilt and power steering, power windows, central locking and other features.

The company will accept orders from tomorrow and expects to start despatches by June 26 on a first come first serve basis at all Hyundai dealer outlets across the country.    

New Delhi, June 21 
The Insurance Regulatory and Development Authority (IRDA) is expected to put all regulations in place by the middle of July. Following this, the authority will call for applications from private insurance companies.

IRDA chairman N Rangachary said, “The rules should be ready by July 15-20 and we will call for applications.”

All suggestions regarding the drafts of insurance regulation should reach IRDA by the end of this month. So by July the final regulation would be fine tuned.

After a three-day meeting with members of the advisory committee, Rangachary said about 17 exposure drafts had been discussed which included regulations for re-insurance, investment norms, registration procedure, ethical standards to be followed while advertising, norms for agents, brokers and accounting standards.

The committee also considered issues vis a vis the accounting policy to be followed. Rangachary said internationally insurance companies were moving to a single accounting system.

At present, insurance companies have an accountants report and an actuarial report. Hence the IRDA will examine the possibility of having one set of accounts incorporating both.

The committee also discussed the policy holders’ rights. At present there is one paper for life insurance policy holder. Later another paper for the general insurance policy holder will be worked out.

The advisory committee suggested for a secured percentage of business from the rural sector. In the life insurance sector this could be a percentage of the number of policies issued and in the general insurance sector, it could be a percentage of the gross premium. For instance in LIC, about 54 per cent of the total policies issued go to the rural sector.

Regarding foreign equity, Rangachary categorically said that the 26 per cent cap would be strictly maintained. If the foreign company has stake in the Indian partner, its equity in the insurance venture would be proportionately brought down to maintain the 26 per cent cap.

However, the present set of regulations would not set rules on health insurance and divestment of capital. These, Rangachary said, would be incorporated later. The health insurance guidelines would be framed only after the new health policy is in place. “There is no immediate hurry for these regulations and they will be framed later,” he added.

FII stake in local firms

The IRDA is likely to allow foreign institutional investors (FIIs) to take equity stake in domestic insurance companies over and above the 26 per cent equity limit set for foreign companies.

“FIIs generally take equity for investment purpose and not for management control. We are inclined towards allowing FIIs to take equity stake in domestic ventures, Rangachary said.    

Foreign Exchange
US $1	Rs 44.64	HK $1	Rs 5.65*
UK £1	Rs 67.32	SW Fr 1	Rs 26.95*
Euro	Rs 42.30	Sing $1	Rs 25.40*
Yen 100	Rs 42.38	Aus $1	Rs 26.36*
*SBI TC buying rates; others are forex market closing rates


Calcutta		Bombay
Gold Std (10gm)	Rs 4630	Gold Std (10 gm)	Rs 4560
Gold 22 carat	Rs 4370	Gold 22 carat	Rs 4220
Silver bar (Kg)	Rs 7925	Silver (Kg)	Rs 7995
Silver portion	Rs 8025	Silver portion	Rs 7970

Stock Indices

Sensex	4731.57	-132.33
BSE-100	2385.41	-89.27
S&P CNX Nifty	1432.92	-7.50
Calcutta	126.65	-1.76
Skindia GDR	945.77	-0.45

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