Bears maul stocks, sensex dips 230
Merger of strong banks favoured
RBI to set cap for fund raising by FIs via bonds
Close tabs on end use of IPO funds
Hyundai unveils zippy Santro
India to make things better for Philips
Foreign Exchange, Bullion, Stock Indices

Mumbai, May 8 
Dalal Street was overrun by bears yet gain. Less than a week after finance minister Yashwant Sinha�s budget bonanzas ignited a stock flare-up, the Bombay Stock Exchange (BSE) sensex slid back into negative territory, suffering a decline of 230.48 points on renewed fears that the losses will continue over the next few days.

Just as the market began a crucial week looking for signs of permanence in last week�s rally, its hopes were dashed when bears crawled out of the woodworks to launch an offensive that was brutal on infotech and cement shares. When trading wound up for the day, the 30-scrip index had slumped 230.48 points to close at 4463.40.

Today�s decline almost made the gains of the last few sessions look like a mirage in the drought-ravaged district of Gujarat and Rajasthan. �The sops announced by the finance minister last week may have perked up the market, but only a fool should expect things to become hunky dory once again,� a dealer said.

�It�s a bear market. We�re in for a rough time,� said a fund manager as bears resumed their attacks on what many believe are overvalued ICE stocks, including index heavyweights such as Infosys Technologies.

Marketmen say Infosys chief N R Narayanamurthy�s acknowledgement that infotech companies face difficult times ahead left the company�s scrip vulnerable to bear onslaughts

�It is the beginning of a long bearish phase,� rued Ramesh Damani, a leading BSE stock broker. Others in the broking fraternity say Zee and Infosys were hammered because leading foreign institutional investors (FIIs) and a handful of local institutions sold heavily in these companies. Though there were no confirmed reports, fingers were pointed at Morgan Stanley for having started the wave of selling.

There were some who felt the slump presents bargain-hunters a good opportunity to buy good infotech scrips, just as investors and funds use every rise in values to get out of second-rung software stocks.

Marketmen are bracing themselves for a long week of convulsions, stocks gyrations in a narrow range and unusually slim volumes. Mutual funds are feeling the pressure with even mutual fund major UTI reported to be selling at higher levels, said a dealer affiliated to a leading institutional brokerage.

The drought in the western states has forced analysts tracking the cement industry to do a rethink. Already, reports of the fall in prices have rocked the industry. April was the harshest when the demand and prices tumbled.

�The coming days will see share prices moving in a narrow range. It will test the lower levels,� a dealer said. Grasim was hit hard, as were Infosys, Reliance, Mastek, NIIT, Satyam Computer, Rolta, DSQ Software, Wipro and Digital Equipments. On the other hand, Global Telesystem and Himachal Futuristics clocked impressive gains.

Meanwhile, the board of Zee Telefilms is meeting tomorrow. The company saw its scrip fall sharply as FIIs and local institutions started selling the stock in huge volumes.

Adding to the discomfiture was the fact that more than 180 scrips were dumped into the rolling settlement category. Operators were worried because stocks cannot be carried forward to another day in the rolling segment system.

The bearish undertone also influenced trading volumes in key counters.    

New Delhi, May 8 
The Prime Minister�s Council on Trade and Industry has recommended that State Bank, Bank of Baroda, Bank of India, Canara Bank, Corporation Bank, Syndicate Bank and Punjab National Bank should either be merged or restructured to give them greater financial muscle.

The report, which suggests ways to carry out the disinvestment of government�s stake in PSUs, says the Centre�s equity in the financially strong banks should be sold in the domestic market and through GDR or ADR issues � not by offloading the shares to a strategic or a joint venture partner.

The report submitted to Prime Minister Atal Behari Vajpayee says all other banks should either be wound up, sold off part by part to other banks, or restructured completely, depending on their viability.

The Prime Minister�s Office (PMO) and the finance ministry are considering the report. There are growing indications that these proposals will be combined with those made by internal committees earlier when the strategy to sell the government�s stake in the public sector banks � a cornerstone of the second wave of reforms � is finalised.

�The advice of not going in for a strategic sale of shares of strong PSU banks is a sound one. These banks should remain in partial government control, but with greater autonomy. The majority stake can be dispersed among small and institutional investors in such a manner that no single shareholder is in a position to challenge the government�s status and role as the original promoter and the largest stakeholder,� a senior finance ministry official said.

Officials are, however, unwilling to comment on closing or selling off the weak PSU banks, not least because of the furore generated by a CII report which had recommended that three banks � Indian Bank, Uco and United Bank � be shut down.

�The sale or transfer of branches from weak banks has been thought of earlier, but these are not easy options. Closure is always an alternative but not the one we can recommend at this point of time,� they said.

The report, drafted by industrialists Nusli Wadia, G.P. Goenka and Rajeev Chandrasekhar, wants turning the stronger and more profitable among the state-owned banks into financial powerhouses by restructuring some of them and, if need be, merging others to impart greater financial strength.

However, while the council wants government shareholding in banks to go down to 26 per cent, the finance ministry feels the degree of dilution has to be linked to the financial strength of banks. In State Bank, for instance, it feels the government stake should not be reduced to less than 51 per cent.    

Mumbai, May 8 
The Reserve Bank of India (RBI) has ruled that total resources to be mobilised by a financial institution through bonds should not exceed 10 times its net owned funds (NOF). It has also relaxed a key eligibility condition for seeking a waiver from prior RBI permission for the issue by reducing the minimum maturity period of the bond from five to three years.

In its draft guidelines, the central bank clarified that certain developments in the past two years have necessitated a review of the existing guidelines governing resource mobilisation by FIs.

Under the existing guidelines, financial institutions do not have to seek the RBI�s issue-wise prior approval/ registration for raising resources through plain vanilla bond issues (both public issue and private placement) if the minimum maturity of the bond is five years.

In its draft guidelines being circulated among the institutions, the apex bank has said the minimum maturity of the bond would be three years in respect of issues which offer call/put or both options.

Further, the options should not be exercisable before the expiry of one year from the date of issue of the bonds.

Similarly, the yield to maturity (YTM) offered at the time of issue of bonds should not exceed 200 basis points above the YTM on the Government of India securities of equal residual maturities. �The effective YTM on instruments having call/put options should also satisfy this requirement,� the circular issued to FIs said.

Another stipulation put forward by the RBI is that no exit option on the bonds will be offered before the end of one year from the date of issue and such option will be available only to individual bond holders.

The central bank also clarified that the total resources mobilised by an individual FI including funds mobilised under the umbrella limit will be related to its NOF when it said that this should not exceed 10 times its NOF.

Earlier, the RBI had not specifically linked the amount to be raised by FIs with its NOF but followed it internally while giving its approval to individual institutions.

An RBI spokesperson told The Telegraph that the draft modifications have been prescribed at a time when significant changes such as progressive deregulation, introduction of asset-liability management system and an apparent shift in investors� preference towards short-term instruments has been witnessed. �In doing so, we are ensuring that borrowing requirements of FIs are aligned with their assets,�� she added.

The RBI�s move comes after it spelt out its stance in the monetary and credit policy for the year 2000-01 where it had pointed out that the guidelines relating to raising of resources through issue of bonds would be issued after consultations with FIs.    

Calcutta, May 8 
The Securities and Exchange Board of India (Sebi) has decided to make it mandatory for companies to declare the end use of funds on a quarterly basis. The move is aimed at containing the diversion of funds raised through the equity route.

Sebi chairman D.R. Mehta said the market regulator would issue a circular in this regard soon.

�The companies will be required to declare the use of funds quarterly as the investors are entitled to information. This will help protect the investors� interest,� he explained.

Mehta, while addressing a seminar on the role of capital markets as a catalyst for growth organised jointly by Bharat Chamber of Commerce and the Calcutta Stock Exchange, said derivatives trading would start on the Bombay and National stock exchanges by the end of this month or next month.

Mehta said the infrastructure for the derivatives trading was ready and the required policies were in place.

�Once the derivatives trading starts, the complexion of Indian capital market would radically change,� he said.

Mehta said the disclosures norms, prescribed by Sebi, were made stringent so that investors can put in their funds with adequate knowledge.

�We are not going to interfere with the pricing of any issue, nor do we have any objection to the size of the issue. Only thing we need is adequate disclosure in the prospectus so that investors are not cheated,� he said.

The Sebi chairman further said the decline in the number of public issues was not because of Sebi�s stringent norms.

�The top 1000 companies listed on the BSE did not come out with any public offer during the last couple of years as they did not have any new or expansion project. Most of these companies are saddled with over capacities, which they set up before economic reforms. If the companies do not need funds, why should we be blamed,� he asked.

Mehta said Sebi had cleared 93 issues during the last financial year with a net mobilisation of Rs 7860 crore.

Earlier in the day while attending a seminar on e-commerce organised by the Indian Chamber of Commerce, Mehta said the policies were being prepared in consultation with the Reserve Bank of India and the Union finance ministry for foreign venture capital funds.

Mehta also said the process of dematerialisation of shares was in full swing with over 1300 scrips being in demat form.

He said the current margin norms and the scrip specific circuit filter had contributed substantially to contain volatility in the market.

�The rolling settlement too, has evoked positive response,� the Sebi chief said.    

New Delhi, May 8 
Responding to market leader Maruti Udyog�s attempts to secure its turf, Hyundai Motor India Ltd (HMIL) today upgraded the two variants of its small car Santro to Santro zipDrive, equipping the upgraded versions with power steering, a new radiator grille and rear spoiler, besides the cosmetic change of upholstery.

HMIL�s Santro zipDrive LS with power steering and a new radiator grille, would be available for Rs 3.56 lakh (ex-showroom Delhi). The Santro zipDrive GS which will be available for Rs 3.79 lakh (ex-showroom Delhi), comes fitted with a rear spoiler as well, besides the power steering and a new radiator grille.

The existing Santro GLS I model will be replaced by the upgraded Santro zipDrive LS and Santro GLS II would be replaced by the Santro zipDrive GS.

The base model from the HMIL stable, Santro-L2 , will be available for the same price at Rs 3.2 lakh (ex-showroom Delhi) with an additional radiator grille.

HMIL�s director marketing and sales, B.V.R. Subbu said, �The variants are targeted at customers who would like to have more choice in this range.�

The upgrades are aimed to ward off the heat generated by the Wagon-R, the latest offering from the Maruti stable.    

Penang (Malaysia), May 8 
Philips Consumer Electronics has designated India and China as its two focus areas in the Asia Pacific region where it plans to launch later this year a cornucopia of new top-of-the-line products. These range from widescreen televisions to audio-visual equipment, from hand-held convergence devices to a clutch of computer-related accessories that will incorporate the latest artificial intelligence and speech recognition technologies.

�India will emerge as one of the top three regional markets for most of our range of consumer electronics products by 2005,� said Frans van Houten, executive vice president of Philips Consumer Electronics in Asia, Pacific, Middle East and Africa.

Van Houten, who is masterminding a makeover at Philips India to regain brand equity which has diminished alarmingly over the years, said: �We�ve allowed Philips India to slip to the middle of the market for consumer electronics products. We have to move up the value chain.�

To do that, Van Houten and his lieutenant in India � Rajeev Karwal � are fashioning a two-pronged strategy that is designed to enable the company to straddle both the high-end and the mass markets. Van Houten, who joined the Philips India board last August, reckons that the business strategy should start bearing fruit in about two years.

Philips intends to make fresh investments at its plant in Pimpri for which it has already commissioned a viability study. It also plans to increase its expenditure on marketing to 6 per cent of sales from current levels of 3-4 per cent. There are also plans to expand the software development centre at Bangalore which currently develops software for Philips� DVD Recordables.

At the high end of the market, Philips India is likely to launch its Personal TV sometime next year � about six months after its launch in the Asia Pacific markets. Discussions with service providers are due to begin shortly before a business plan is finalised. The Personal TV, which has already been launched in the US where it retails at a street price of $ 700, incorporates a 32 GB hard disk and artificial intelligence that helps it track a viewer�s programme preferences over a period of, say, a month. Once a viewer profile emerges, it will record all the favourite programmes that the customer was unable to watch because of his busy working schedule. It will also give complete listings of TV programmes from which the viewer can choose by categories and schedules. Its best feature is that a viewer can control the show by hitting the pause, rewind, and slow motion buttons even during a live TV broadcast.

Philips is also planning to roll out its digital televisions in India sometime in 2001. The digital TV, which allows signals to be manipulated using computer technology, enables compression of signals transmitted over satellite, cable, terrestrial and phone thereby providing more channels. An added advantage is the convergence with the internet.

Another key product to be launched in India will be the Super Audio CD player (SACD) that enhances sound quality because of direct stream digital recording. The product will initially be marketed in the fourth quarter of 2000 in Hong Kong, Singapore and Australia at a target price of $ 1999. Efforts are on to bring down the prices to �mass market� levels by 2001 when it will be on offer in India.

Philips will be jockeying for space in an extremely competitive environment as rivals like Sony, Marantz, Pioneer, Panasonic and Aiwa are also slated to launch their SACD versions by the end of 2000.

Philips is also hoping to secure its place in the highly competitive market for mobile phones with three new offerings � the Xenium 989, Ozeo and Savvy Vogue � that incorporate the latest voice navigation technology. The Xenium, which will retail at Singapore $ 500 (US$1 = Sing$ 1.76), enables the customer to access all major features of the phone using voice commands. For instance if you are in an important meeting and the cellphone rings, bark �shut up� and the phone nixes the call.

Other products that are being lined up for launch in India along with the rest of Asia Pacific include the Rush MP3 � a solid state portable digital audio player � that measures just 7x7 cms and weighs only 50 gms.

Bundled with RealJukeBox software, the $ 249 Rush MP3 provides everything needed to acquire, play, manage and transport a personal library of digital music. The device, to be launched in the second quarter of 2000, plays back compressed digital MP3 files downloaded from the Net via a PC and stored on flash memory cards. It can download a three-minute audio track in just 25 seconds and is compliant with Secure Digital Music Initiative (SDMI) proposals � the codified arrangement that is designed to protect music companies from the threat of internet piracy.

Philips, which is attempting to shake of its fuddy-duddy image in Asia, is planning to reach out to the youth through a series of programmes with MTV and Channel V.

Pune TV factory likely

Philips India is planning to set up a television assembly plant in Pune. A feasibility study is now being carried out and the plans will be finalised shortly.

The move comes barely six months after the Supreme Court allowed the consumer electronics giant to sell off its largest colour television factory in the country at Salt Lake in Calcutta to Kitchen Appliances India, a Videocon group company.

Asked if that sale which realised proceeds of Rs 9 crore was justified in the light of the latest development, Frans van Houten said, �Our supply chain was too scattered. Moreover, there were problems with tax harmonisation. Pune will be our base for all future developments.�

Van Houten, who is executive vice president for Asia Pacific and a director on Philips India board, said the consumer electronics business in India had taken a beating over the past few years because the management had been out of touch with the market and too slow to introduce new products.

With a new team in place and a slew of new products in the pipeline, Philips India is hoping to grab market share in India where it has emerged as the No 3 audio-visual brand.

Van Houten said if conditions proved favourable, then the company could consider the possibility of setting up television factories in other parts of the country.

But it is evident that Philips, which had encountered a lot of litigation hassles over the sale of the Salt Lake factory, will not be looking at Calcutta as one of the destinations.    

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