Rogue dealers jam NSE
Alert system in offing
Blazing debut, exit in disgrace from UTI
Reckitt Piramal venture spiked
Eveready to sell Pabhoi tea estate for Rs 12.3 cr
Goenka sells Herdillia Chem to Schenectady
Drink tea campaign to kick off next week
Bonanza for private telecom operators
RBI panel proposes budget law
Foreign Exchange, Bullion, Stock Indices

 
 
ROGUE DEALERS JAM NSE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 4: 
The National Stock Exchange’s (NSE) nifty today zoomed by an eye-popping 424 points or 40 per cent after a series of manipulative deals in Reliance Petroleum and ACC shares. This forced the authorities to suspend trading for over an hour.

The spurt in tainted transactions over the past few days forced the Securities and Exchange Board of India (Sebi) to ask exchanges to verify the price and quantity when orders are for shares placed. The order applies to the 53 stocks listed on Bombay Stock Exchange (BSE) and the NSE, including 31 in which options trading was introduced on Monday.

According to senior NSE officials, a series of bogus order entries pushed prices of ACC and RPL shares above their previous closing after trading opened . ACC zoomed Rs 70 or 52 per cent to Rs 209.15 against Tuesday’s finish of Rs 138. In the case of RPL, a one-share deal sent the scrip to Rs 300 compared with Rs 46.95 a day back. This represents a whopping rise of 539 per cent or Rs 253.

These deals took the nifty index to 1494.60, a staggering 39 per cent leap over its previous close of 1069.80. Officials said they had to halt trading at 9:55 am as required under a Sebi regulation which requires index-based market wide filters to be clamped at three stages of movement in either direction — at 10 per cent, 15 per cent and 20 per cent.

The deals which sent the market into a tailspin were cancelled after trading members pressed for it. Since the index movement was not caused by genuine deals, the market reopened at 11:15 a.m. and the session continued till 4.00 p.m.

On Monday, over a million ACC shares were traded on the BSE at Re 1 each. The next day, Zee was traded at 50 paise on the NSE.

According to Sebi, exchanges have issued show-cause notices to members who are alleged to have struck deals at abnormal prices and quantities. Though these have been cancelled, penal measures, which includes deactivating the trading terminals of brokers concerned, is being considered.

   

 
 
ALERT SYSTEM IN OFFING 
 
 
BY ANIEK PAUL
 
Calcutta, July 4: 
Alarmed by the spate of spurious deals over the past few days, the Securities and Exchange Board of India (Sebi) today decided to introduce a warning system which can detect transactions at unusually high or low prices, without disrupting trading.

The mechanism, proposed as an alternative to circuit filters, will help exchanges zero in on deals that skew prices abnormally. The market regulator has asked exchanges to determine a trading range in terms of price and volume trends for the 53 scrips in which there are no circuit breakers. Bourses will fix the trading range for a stock on the basis of its normal price movements and volumes.

Speaking to The Telegraph, Sebi secondary and derivatives market chief Pratip Kar said: “This method will ensure that manipulative trades outside the range are detected instantly and examined, without suspending trading, as was the case with the circuit filter mechanism.”

“Exchanges will have to revamp their surveillance software so that whenever a trade takes place outside the stipulated range in a stock, the system flashes an alert. This will help the surveillance team to examine the genuineness of the deal,” he added.

The price range will be the same across exchanges, but the range of volumes will differ in tune with the depth of the market. For instance, volumes in Reliance Industries on the National Stock Exchange (NSE) far exceed those on the Calcutta Stock Exchange, and hence, the range on the two bourses will not be the same. Sebi is confident that the exchanges will develop the new alert system soon. “They have said they would be able to implement it within a few days,” Kar added.

The Sebi top brass today met representatives of NSE and BSE and the two depositories — National Securities Depository and Central Depository Services — before taking the decision.

Until the system is developed, the surveillance team on exchanges will have to keep a close eye on the market, and any trade which appears to be suspect will have to be probed. “Those who try to take advantage of the absence of the circuit breaker mechanism would be strongly dealt with,” Kar warned. Sebi has decided to do away with circuit filters in 53 stocks where derivative products are available. Of these, options trading has started in 31, while the rest are part of the sensex and the nifty, the two indices in which derivative trading has started.

   

 
 
BLAZING DEBUT, EXIT IN DISGRACE FROM UTI 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 4: 
P. S. Subramanyam, or ‘PSS,’ as he is known in banking circles in Mumbai, presided over the Unit Trust of India (UTI) during one of the most tumultuous periods in the mutual fund major’s history that saw the capital markets ride the crest of an infotech wave and heralded the arrival of new players on the scene like the foreign institutional investors (FIIs).

When he arrived at UTI from the Industrial Development Bank of India (IDBI), its flagship Unit Scheme 64 (US-64) was in deep trouble with its net asset value slipping below Rs 10, but PSS had a clean slate.

In fact, he was responsible for convincing the finance ministry to bail out the scheme with an infusion of over Rs 2000 crore and taking part of the burden of carrying PSU stocks in its portfolio. It was done after the Deepak Parekh committee made several recommendations to revive the flagging scheme.

Ironically, the last three people to head UTI were all erstwhile IDBI men — SA Dave, GP Gupta and now Subramanyam, with the US-64 proving to be the nemesis of the last two. In fact, both Gupta and Subramanyam were executive directors in IDBI before being promoted to the chairman’s post in UTI.

However, Gupta and Subramanyam were poles apart. Gupta was known to be low key, while Subramanyam was noted to be of the more flamboyant variety, partying away at the HFCL-Channel Nine bash till the wee hours of the night. Then, while Gupta preceded Subramanyam in UTI, he later reverted to IDBI as its chairman. However, the mess in UTI that spilled out during Subramanyam’s tenure did Gupta’s image no good.

In IDBI, PSS was known for his acumen in lending to small-scale industries and managing the IDBI treasury. He started his tenure at UTI in a blazing fashion, bringing to light the terrible state of affairs in the US-64 when his former IDBI colleague, G. P. Gupta was at the helm of affairs at UTI.

But later, he lost focus, investing heavily in dud stocks like HFCL and DSQ even as they bled.

Says Dhirendra Kumar of Value Research, “His tenure was a difficult one as it was a period of turbulence. Massive changes were happening in the capital market.”

Analysts say a conventional approach was not the correct strategy at these turbulent times which called for innovative measures. Subramanyam tried to adopt some unconventional methods like disbanding the Rajlakshmi scheme for the girl child in view of the falling interest rates. This caused a furore among the investors and UTI was slammed with a string of court cases across the country.

Moreover, the reason for Subramanyam’s exit, observers aver, was his failure to anticipate the public outcry caused by the freezing of US-64 purchases and sales.

In fact, Kumar says, in hindsight it has come as no surprise that UTI had to resort to a freeze in sales and repurchases.

“UTI had only two hard options before it,” he said, “either make it net asset value (NAV) linked or freeze the units. UTI opted for the second choice but failed to anticipate public sentiment.”

PSS, a keen player of bridge, failed to read the investor’s mind. The average investor felt cheated, first by the Rajlakshmi scheme, and again by the US-64 fiasco.

In the end, it was Subramanyam’s inability to shift the fund’s focus from equity to debt, even though US-64 in its original shape was an income-based fund and not an equity one, which extracted a heavy price. Subramanyam’s undoing was his strong belief in the power of equities to pull UTI out of the morass.

   

 
 
RECKITT PIRAMAL VENTURE SPIKED 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 4: 
Reckitt Piramal Ltd, the joint venture company between Nicholas Piramal India Ltd (NPIL) and Reckitt Benckiser (India) Ltd, has been disbanded and converted into a strategic alliance between the partners.

Explaining the rationale behind the restructuring exercise, Ajay Piramal, chairman, NPIL, said the partners felt the objectives set out at the time of forming the joint venture could be achieved much more cost effectively without the separate joint venture device.

Piramal added NPIL will continue to give doctor detailing support to Reckitt Benckiser brands such as Dettol liquid and Dispirin and distribute some of its brands on a need basis through pharma channels. Two major Reckitt brands, Gaviscon and Fybogel, already being marketed by NPIL, will continue to be marketed by the company. Some of the other brands sold through the venture will now be sold directly by the respective companies who owned these brands. However, Burnol, the brand directly under the venture, will be handled by Reckitt.

Moreover, with the restructuring of the equity-based venture into a strategic alliance, employees of Reckitt Piramal will now head back to their respective companies. The venture was formed in October 1997 to market over-the-counter formulations, with NPIL holding a 40 per cent stake, Reckitt Benckiser plc 40 per cent and Reckitt Benckiser India Ltd holding 20 per cent in the company. Reckitt Piramal had averaged a sales growth of 12 to 13 per cent in each of the last three years.

Sources however, pointed out though performance of the joint venture during the three years of its operations was satisfactory, sales through the venture were not getting reflected in the books of NPIL.

While speculations were rife since last year itself that the joint venture would be disbanded, NPIL officials had then vehemently denied such reports.

Meanwhile, Reckitt Benckiser plc is in the final stages of signing an agreement with NPIL to conduct clinical trials for some of its products at the Clinical Research Organisation (CRO) set up by Nicholas Piramal.

   

 
 
EVEREADY TO SELL PABHOI TEA ESTATE FOR RS 12.3 CR 
 
 
BY A STAFF REPORTER
 
Calcutta, July 4: 
Eveready Industries India Limited has decided to sell its Pabhoi tea estate in Assam to Narsinghpore Tea Company at a consideration of Rs 12.31 crore. Confirming the move, A. Chakravarti, director and secretary of EIIL said this garden belonged to Bishnauth Tea Limited before it was merged with EIIL.

The proceeds from the sale of the te estate will help the company to repay its debt which in turn would help it to reduce the interest burden.

The sale of this tea estate will reduce EIIL’s number of gardens to 31. EIIL had already sold four of its Darjeeling gardens, one in Assam and another one in Dooars. Towards the end of the last year, EIIL had announced that it would dispose of some of its unprofitable estates which were not giving adequate returns.

Bishnauth Tea on the other hand sold two estates in Assam earlier. EIIL, a B.M. Khaitan group company had amalgamated Bishanuth Tea with effect from April 1, 2000.

   

 
 
GOENKA SELLS HERDILLIA CHEM TO SCHENECTADY 
 
 
BY A STAFF REPORTER
 
Calcutta, July 4: 
G.P. Goenka, chairman of the Duncan Goenka group, has sold his 50.08 per cent stake in Herdillia Chemicals to Schenectady India Holdings, a wholly-owned subsidiary of Schenectady International Inc of USA. “This was on the cards. The chemicals business does not fit in my overall business portfolio, even though the company was earning profit. So I have sold my entire stake to the US company,” Goenka said.

Schenectady International, a $ 800-million firm, is into the production of alkyl phenol intermediates, electrical insulation products and performance resins. With this acquisition, Schenectady will have 24 locations in 13 countries. The US firm will, however, have to seek approval from the Foreign Investment Promotion Board (FIPB) for the deal.

Though Goenka is tight-lipped about the price at which Schenectady has acquired his stake, according to the prevailing price of the Herdillia scrip on the markets, the deal could have fetched him something between Rs 8-9 crore. The scrip was quoted at Rs 12.85 per share on the Bombay Stock Exchange on Tuesday and Goenka held 55.23 lakh shares in the company. “The price will be known when the company makes an open offer according to the Sebi takeover code,” Goenka said.

While the promoters hold 50.08 per cent in Herdillia Chemicals, 32 per cent is held by financial institutions, banks and mutual funds, and the rest 17.92 per cent is held by the public.

Schenectady is, however, interested only in the core chemical business of Herdillia Chemicals.

“According to the agreement entered with Schenectady, certain assets and associated liabilities that are unrelated to the core business will be transferred to a separate company through a demerger scheme,” Goenka said.

   

 
 
DRINK TEA CAMPAIGN TO KICK OFF NEXT WEEK 
 
 
BY A STAFF REPORTER
 
Calcutta, July 4: 
The much-awaited promotion campaign to build up an awareness about the health benefits of tea will be launched on July 12.

Addressing the 118th annual general meeting of Indian Tea Association (ITA), chairman R.S. Jhawar said: “If we can steer the campaign successfully over the next three years, even within the constraints of our small budget, we will be able to generate sufficient awareness about the advantages of tea, increase domestic demand and consequently improve returns for the industry.”

He said the industry’s greatest strength was the domestic market and that over the past few years it was losing ground to other beverages. The industry could not afford to lose the domestic market and would have to concentrate hard on not only maintaining it, but to increase it.

L.V. Saptarshi, additional secretary in the Union commerce ministry welcome the hard-sell drive but urged the tea industry needs to expand its focus by targeting younger generation to boost tea consumption at home as well as in international market.

“It appears that we lack new techniques and skills in marketing tea and have failed to attract the younger generation to it.”

Commerce secretary Prabir Sengupta said chalking out production strategies is not enough to boost demand at a time when tea is facing competition from several other beverages.

   

 
 
BONANZA FOR PRIVATE TELECOM OPERATORS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 4: 
The Telecom Regulatory Authority of India (Trai) today asked government-owned Bharat Sanchar Nigam Limited (BSNL) to extend the facility of reduced STD charges for short-distance calls— ranging from 50 to 200 kms—to private basic and cellular operators. The authority has directed BSNL/MTNL to implement the order by July 20 and report their compliance to Trai.

This will help all subscribers of private fixed-line and cellular operators. Earlier, these subscribers were paying old STD charges for a call from Pune to Mumbai while the subscribers of Mahanagar Telephone Nigam Limited were paying less due to the reduction in rates in the 50-200 km radius.

Trai has rejected BSNL’s contention that calculation for the interconnection charges (or access charges) should be based on ‘standard’ pulse rate specified in the Telecommunication Tariff Order 1999.

The regulator said the access charges should be computed on the ‘applicable’ pulse rate. Trai also directed that the amount paid by cellular subscribers for the STD leg of their calls should be the same as the STD charge for identical carriage of a long distance call made by a BSNL subscriber from the Point of Interconnect (POI) to the same destination.

BSNL had reduced the STD call charges from January 26, 2001 by extending the duration of peak pulse rates for distance categories falling within 50 to 200 kms. The revised pulse rates based on which tariffs were to be reduced, however, were made applicable to only “intra-circle” calls originated by the telephone subscribers of BSNL, and terminating in the basic service network”. The authority received representations from Cellular Operators’ Association of India (COAI) and Association of Basic Telecom Operators (ABTO) after the issue of the above tariff circulars.

They sought the authority’s intervention and requested that in the interest of a level playing field and demanded that the following should be applicable in respect of inter-network calls (calls conveyed on BSNL’s network and their network). The private operators demanded that the revised pulse rates (or tariffs) should apply also to calls from the fixed-line network to cellular network, as far as it related to the fixed leg of the call.

The operators sought that BSNL’s revised pulse rates should apply to the payment of terminating (access) charges for calls originating in a Basic Service Operators (BSOs) network and terminating in BSNL network, when the distance of carriage is equal to or less than 200 kms.

   

 
 
RBI PANEL PROPOSES BUDGET LAW 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 4: 
An advisory group constituted by the Reserve Bank of India (RBI) on fiscal transparency has called for more disclosures with regard to the Union budget, while suggesting that the basic principles of budget management be embodied in a general budget system law with constitutional status.

The group observed that although clear budget proposals have evolved over time, the country does not have any budget system law. Here, it recommended the Centre should consider amplifying the scope of the Fiscal Responsibility and Budget Management Bill (FRBM) to include the essential elements of a budget law.

Regarding areas in the budget where more transparency is essential, the group said a review of the current policy on disclosure of contingent liabilities is necessary, with the objective of moving towards fuller disclosure. Such contingent liabilities, it observed, could include government guarantees on dues to all LIC policy holders, liability risks arising out of issues such as India Millennium Deposits and the implicit burden for recapitalisation of public sector banks.

The group said while the absence of data on forward projections is a major drawback, the projection of major categories of expenditure and revenue, two years from now, is feasible and should be implemented.

It said the budget should also contain information on the government’s equity in public sector enterprises and outstanding loans to these enterprises.

On the issue of transparency at the state level, the group said fiscal practices here are behind the standards achieved at the central government level and there are gaps in comparison with the requirements of the Code on Fiscal Transparency.

Here, it said while some states have brought out a common budget format, these and others should disseminate more information on fiscal indicators that include revenue deficit, primary deficit, tax revenue, interest payments, subsidies and contingent liabilities including guarantees.

The group also noted that the most important deficiency relates to the prevalence of quasi-fiscal activities (QFAs) undertaken by the banking system and non-financial public sector enterprises, which are not transparently identified and quantified.

While the Fiscal Responsibility and Budget Management Bill proposes ending this practice at the end of three years, it said the most important QFA in this context is the operation of the oil pool account, which has allowed large deficits to pile up. If the oil pool account was not abolished for any reason later, the deficit incurred on this account should be reported in budget documents in the interest of transparency, it added.

On open budget preparation, execution and reporting, the group said there was no system of mid-year reporting to Parliament at present. However, this deficiency would be addressed by the FRBM Bill.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 47.11	HK $1	Rs.  5.95*
UK £1	Rs. 66.18	SW Fr 1	Rs. 25.85*
Euro	Rs. 39.84	Sing $1	Rs. 25.50*
Yen 100	Rs. 37.84	Aus $1	Rs. 24.05*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4450	Gold Std(10 gm)	Rs. 4390
Gold 22 carat	Rs. 4200	Gold 22 carat	N.A.
Silver bar (Kg)	Rs. 7200	Silver (Kg)	Rs. 7300
Silver portion	Rs. 7300	Silver portion	N.A.

Stock Indices

Sensex		3311.88		-  0.41
BSE-100		1558.09		-  8.26
S&P CNX Nifty	1067.95		-  1.85
Calcutta	 121.66		+  6.02
Skindia GDR	 580.38		- 13.34
   
 

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