Rash of rumours routs sensex
SBI cuts deposit, short-term lending rates
RBI makes foreign acquisitions easier
HDFC set to raise FII stake to 49%
Service tax rate will be raised, says Sinha
RPG Cellular to invest Rs 40 cr in expansion
Foreign Exchange, Bullion, Stock Indices

Mumbai, March 2: 
Call it the Friday fright or a panic plunge, Dalal Street was sucked into a maelstrom which devoured the hard-won gains gathered after a bon-bon budget.

An explosive mix of rumours about an impending payments crisis and profit warnings from a global technology topgun ended a two-day surge and sent the BSE sensex to 4095.16 in a 176.49-point slide; the BSE-100 index also nosedived 117.30 points to 2021.59 from its previous finish of 2138.89.

According to sources, the selling spree was engineered by two foreign institutional investors (FIIs) and battered technology shares in what is being seen as one of the worst declines in recent months.

The situation was confounded by rumours that the Big Bull was being questioned by the crime branch of the city police in the Bharat Shah case, setting off fears that a major payment crisis loomed in shares where he has invested heavily.

A concerned BSE president Anand Rathi and an NSE official were forced to issue statements denying any payment problems. But, the reassurances were lost on a manic market.

After a volatile session, the sensex shed almost all the gains it had built up in the past two days, settling near the pre-budget levels.

The plunge was led by new-economy stocks. As the sensex scaled its intra-day high within minutes of the opening bell, soaring shares such as those of Himachal Futuristic (a Big Bull favourite) were shot down by what market watchers describe as a ‘strike’ by two FIIs.

Counters were besieged by sellers. Nervous dealers say the two FIIs were so desperate to get out of some stocks that they even refused to give any lower limits for selling. Among the stocks which took it on their chins in the sudden selling wave were Infosys, Silverline and Pentafour. Dealers said even petrochemical major Reliance was not spared.

FIIs, courted for long by industrial houses to ramp up share values, proved to be the nemesis of companies today.

The US-based Janus fund and the Government of Singapore were the major sellers who turned the strong post-budget fervour into a bearish sentiment. On Thursday, it was Morgan Stanley which had tried to play the Party Pooper.

Discounting all positive factors, including the industry-friendly budget proposals and strong signals that reforms will be pushed aggressively by the government, FIIs resorted to heavy selling after a profit warning by Oracle and more signs of slowdown in the US economy.

Rumours of some prestigious contracts being re-negotiated between Nortel and Infosys also brought the bears out of the woodworks.

“A technical correction is expected next week as values have plunged sharply in the past few days. When is the million dollar question?” Nikunj Modi of Refco Sify said.

FIIs that had made sizeable net purchases on Wednesday, were consistent and heavy sellers since then mainly in shares of Infosys, Satyam Computer and Zee Telefilms.

The crash could have been a historic one but for select old economy stocks that saved the day contributing considerably to contain the slide in the sensex.

The sentiment was affected adversely by reports of a losses earlier in the day on stock exchanges across Hong Kong and Japan.

In the specified group, Tata Elxsi, SSI, Zee Tel, Satyam, HCL Info, Global Tele, Aptech, Silverline, Tata Chem and Bombay Dyeing hit the 16 per cent lower price band at close with several others stuck in eight per cent lower circuit.

HFCL clocked the highest turnover of Rs 657.33 crore followed by Infosys (Rs 592.24 crore), Satyam Computer (Rs 470.53 crore), Reliance (Rs 451.31 crore) and Wipro (Rs 282.79 crore).

HFCL dipped by Rs 113.25 at Rs 604.80 while Infosys was down by Rs 742.85 at Rs 4939.85.


Mumbai, March 2: 
In line with the lower interest rate regime ushered in by finance minister Yashwant Sinha and the Reserve Bank of India, the State Bank of India (SBI) today revised its short-term prime lending rate (SBSTAR) and interest rates for domestic deposits with effect from March 5, while it left the PLR and medium-term lending rates untouched.

Loans under SBSTAR with maturities up to 180 days will be at the rate of 10.50 per cent per annum and for those exceeding 180 days but less than one year, the rate would be at 11 per cent per annum, the bank said in a press statement issued here today.

The bank has also cut the interest rate on deposits with maturities of three years and above by 50 basis points to 9.50 per cent.

For deposits above Rs 15 lakh and less than Rs 1 crore, with maturities above 180 days, it has been reduced by 50 to 100 basis points, while rates for Rs 1 crore and above have been cut by 25 to 125 basis points.

In the case of domestic term deposits of amounts less than Rs 15 lakh, the bank has revised the interest rate upwards by 25 basis points for deposits with duration of 15-45 days to 5.25 per cent and for 46-179 days to 6.5 per cent.

While the SBI had already brought down its PLR when the RBI earlier slashed the Bank Rate and CRR by 50 basis points in February 16 this year, the bank said that its PLR (State Bank Advance Rate) would remain unchanged at 11.5 per cent along with the medium term lending rate (SBMTLR) at 12 per cent.

BoB not to cut PLR further

Bank of Baroda (BoB) today said it will not reduce prime lending rate (PLR) further from the current 11 per cent despite the cut in the bank rate by another 0.5 per cent to seven per cent.

BoB chairman P S Shenoy told reporters in New Delhi that the lending rate has been already reduced to 10 per cent for 180 days, 10.5 per cent for 180-365 days and 11 per cent for over the one-year period, as compared to 12 per cent earlier.

BoB has also not reduced the deposit rates. The bank board would be meeting soon to decide on this issue.

Meanwhile, the Union Bank of India and Corporation Bank have also slashed their prime lending rates (PLR) by 100 basis points and 50 basis points respectively.


Mumbai, March 2: 
The Reserve Bank of India (RBI) today issued notifications to liberalise the capital account for acquisitions of companies and shares abroad, investment of funds raised overseas, two-way fungibility of ADR/GDRs and the hike in FII cap to 49 per cent.

The limit on annual investment by Indian companies in overseas acquisitions or joint ventures/wholly owned subsidiaries has been raised to $ 50 million. Firms can do so through the automatic route, and do not have to meet a three-year profitability condition. Earlier, only companies with a three-year profit run could invest a portion of it under the automatic route.

Companies have also been allowed to invest 100 per cent of the money they mop up through ADR/GDR issues. Earlier, they could use 50 per cent of the amount raised abroad to acquire foreign companies, besides direct investments in joint ventures and wholly-owned subsidiaries.

Profit-making firms which have exhausted the limit of $ 50 million available under the automatic route for investments abroad or buyouts overseas can now get more funds from a new Reserve Bank facility which makes fresh forex allocations.

These block allocations, the central bank said, will be sanctioned in advance. It will enable companies to negotiate and finalise their acquisitions and invest directly without prior RBI permission. However, these deals will have to be reported, post-facto, to the country’s central bank.

Any Indian company which has issued ADRs/GDRs may acquire shares of foreign companies engaged in a similar line of business up to $ 100 million or an amount equivalent to 10 times their annual exports, whichever is higher.

There is a condition that companies which make ADR and/GDR issues to acquire overseas firms must be backed by fresh issue of equity shares.


Mumbai, March 2: 
The Housing Development Finance Corporation Ltd (HDFC) has announced its intention to raise FII holding in the company to 49 per cent following the recent Budget proposals, making it the first domestic company to do so.

Senior officials said the board is likely to meet in the first week of May to take a decision on the issue. Presently, the FII stake in the housing finance company is around 38 per cent.

Some of the foreign players which hold a stake in the company include Warburg Pincus, Jardine Mathersons, Commonwealth Development Corporation and Singapore Investment Board.

Industry circles identified software giants Infosys Technologies and Satyam Computer Services as likely to hike FII holdings next.

However, while sources close to Infosys said the company will consider the issue later, officials at Satyam said the company had no plans to hike foreign holding at present. The FII holding in this company is believed to be around 31 per cent presently.

Apart from HDFC, Infosys and Satyam, other companies where FII holdings are currently near the 40 per cent level and which are expected to announce hikes in the near future include ABB, Pentamedia Graphics, Visual Soft Technologies, Silverline Technologies, Global TeleSystems and NIIT.

Though the hike in FII limit has been welcomed by market circles and companies, the latter may not be in a hurry to hike foreign investment as the present holding in many of these companies is yet to reach 40 per cent.


New Delhi, March 2: 
Finance minister Yashwant Sinha today indicated he would increase service tax rate and the number of services under this net in the not-too-distant future.

In an interview with The Telegraph, Sinha indicated that he planned to raise service tax rates after making it `VAT-able,’ a concept that will allow those who pay service tax to claim rebates based on it for excise or the income taxes they paid. “I expect to raise service tax rate once that is done,” he said. At present, the service tax is 5 per cent; many had expected the finance minister to double it to 10 per cent in the budget.

The minister also indicated that the number of customs duty rates could be further compressed. Sinha said the roadmap for reducing customs duties had been clearly set. “We will bring down the number of rates of customs duty (as well as ) bring down the peak rate to 20 per cent,” he said.

He had already indicated shortly in his budget that service tax would be made VAT-able. Confirming that an increase was on the cards in the second phase, he said this was necessary as the services sector had the largest share of the GDP — over 50 per cent — and contributed little to the taxation effort.

Currently it was under-taxed as it was disorganised, thus making it administratively difficult to collect taxes from it, he added. VAT-able benefits would be granted to make it attractive for service sector tax payers to declare their incomes and enter the tax net.

The finance minister said his tax collection projections of Rs 1,63,031 crore for the coming year, which is nearly Rs 20,000 crore or 14 per cent higher than this year’s collections, was actually “conservative”. He said next year’s growth calculations were based on low assumptions and the trend growth for taxes over the last 10 years had been far higher.

He said one major assumption in projecting higher taxes this year was the move to extend the one-by-six criteria for filing income tax returns to all urban areas.

“This will widen the tax net; we can expect buoyancy in tax collections,” Sinha said.

The finance minister also indicated that total dismantling of the administered oil price policy would be done soon. However, he added a caveat: “This will depend on how prices behave.” He added that once this was done, any subsidy on any fuel “will be borne by direct budgetary subsidies” and not by one fuel’s price subsidising another.

He indicated that pump-priming measures through big state spending was no longer the government’s favoured option to jump-start the faltering economy.

Faced with a cash crunch which has forced him to bargain with other government departments and cut plan spending, Sinha said: “I am not a great believer that it’s government spending that gives a push to GDP growth.” He indicated his budget’s strategy was to create a growth impetus. Instead he believes impetus from the private sector will be this year’s growth engine.

Sinha has in the run-up to the budget held a series of meetings with planning commission deputy chairman K.C. Pant, a votary of the big spending push theory, to convince him to take cuts in plan schemes. The finance minister managed to convince Pant to cut spending by as much as Rs 5,000 crore in the coming year.


Calcutta, March 2: 
RPG Cellular Services (RCS), the largest cell-phone service provider in Chennai circle, has decided to invest Rs 40 crore to double its switch capacity to 1.5 lakh and also to increase the number of base stations from the existing 50 to 70.

The move is aimed at catering to the increasing number of subscribers which currently stands at 65,000. The company expects to raise its subscriber base to over 1.2 lakh by the end of March 2002.

Chief executive officer of RCS, D. R. Mehta, said the investment will be made over the next three to four months.

“Ours is one of the fastest growing cellular outfits at present, with a net profit of over Rs 2 crore every month. By the end of the next financial year, we hope to be able to double our profitability,” says Mehta.

Commenting on the issue of the RPG group’s proposed divestment of stake in the company, Mehta said status quo was maintained now because of some government regulations.

While Mehta refused to make any further comment on the divestment issue, sources said the cellphone major Hutchison has already bought a 49 per cent stake in the company at an investment of $ 140 million.

Mehta said the RPG group will only sell 17 per cent of its stake in the company and retain management control.

“The RPG group is very keen on retaining a controlling stake in the company, which is growing at a very fast rate,” he added.

Rabobank, which has brokered the deal for RPG Cellcom in Madhya Pradesh, has been appointed for the Chennai circle as well.

The other two major shareholders in the cellular company are Vodafone Airtouch and Cell Phone. Both the companies, however, are in the process of making an exit from the venture, sources said. While Vodafone is the technology partner with a 22 per cent stake, Cell Phone of the UK is only a financial partner.



Foreign Exchange

US $1	Rs. 46.55	HK $1	Rs. 5.90*
UK £1	Rs. 68.21	SW Fr 1	Rs. 27.80*
Euro	Rs. 43.58	Sing $1	Rs. 26.30*
Yen 100	Rs. 39.24	Aus $1	Rs. 24.20*
*SBI TC buying rates; others are forex market closing rates


Calcutta			Bombay

Gold Std (10gm)	Rs. 4360	Gold Std(10 gm)	Rs. 4280
Gold 22 carat	Rs. 1115	Gold 22 carat	Rs. 3960
Silver bar (Kg)	Rs. 7375	Silver (Kg)	Rs. 7430
Silver portion	Rs. 7475	Silver portion	Rs. 7435

Stock Indices

Sensex		4095.16		-176.49
BSE-100		2021.59		-117.30
S&P CNX Nifty	1306.35		-51.70
Calcutta	133.92		-3.13
Skindia GDR	716.34		+13.78

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