Supreme Court blow to brokers
Sensex slips 41 points
Cabinet clears 27% selloff in Videsh Sanchar
Nasdaq keen on alliances with Indian bourses
Maruti sales up 21% in January
Telco braces for Moody�s rating rap
Eveready to demerge in three months
Sinha warms up for fiscal rope trick
Foreign Exchange, Bullion, Stock Indices

New Delhi, Feb. 1: 
Just as the stock markets of the country were trying to come to terms with the Gujarat quake, the Supreme Court delivered a rude shock which took the brokers by surprise and spoiled their upbeat mood.

The apex court today upheld the controversial registration fee (turnover tax) charged from brokers by the Securities and Exchange Board of India (Sebi), which would substantially enhance the income of the regulatory body.

The court order, in effect, rings down the curtain on the five-year-old plea by brokers against the levy imposed by Sebi which, according to a rough estimate, could rake in as much as Rs 1000 crore for the market regulator.

Dismissing a petition by the Bombay Stock Exchange Brokers Forum challenging the Sebi decision, a three-judge bench comprising Justices B.N. Kirpal, N. Santosh Hegde and Brijesh Kumar said Sebi had the necessary legislative competence to impose the said fee.

The court accepted the contention of Additional Solicitor General Kirit Raval, who appeared for Sebi, that a large number of activities were being carried out by Sebi and hence the fee was not only for the registration of a broker but also to perform its regulatory functions.

Forum�s counsel P. Chidambaram had contended that the market regulator had exceeded its powers by linking the fee to the turnover of a broker for five year post-grant of registration.

Sebi has charged a fixed amount plus one hundredth of one per cent of the turnover of brokers for a five-year period. It has already collected Rs 49 crore as registration fee from brokers alone and another Rs 79 crore from other intermediaries.

Justice Hegde, writing the judgment for the bench, rejected the contention of Chidambaram that the fee charged from brokers was in the nature of a tax and beyond the legislative competence of Sebi.

The Supreme Court held that the market regulator has the necessary powers under Section 12 and Section 11(2)(k) of the Sebi Act to levy such a fee and since �it is a fee, the question of any quid pro quo on services to be rendered by Sebi to the stock brokers does not arise�.

Justice Hegde said the services to be rendered were to the vast body of persons coming in contact with the securities market of which the brokers formed a part and, therefore, Sebi�s activities should not be examined only from the limited perspective of the brokers alone.

The apex court also rejected the contention of senior advocate Ashok Desai, appearing on behalf of the National Stock Exchange, that they should be treated differently.

Justice Hegde said once it was held that Sebi had the necessary legislative power and competence to levy the fee, it was for the Sebi to consider and determine the reasonable fee.

He also rejected the contention that linking of the fee to the annual turnover of the brokers was irrational saying it was only a measure of levy of fees and added �what measures is to be adopted has to be left to the regulatory body�.

The court said since Sebi itself had stated that it had accepted the recommendations of the R.S. Bhatt committee, which was set up to determine what should be the method of calculating annual turnover, it was reasonable that the fees to be collected should be in accordance with that report.

While issuing this direction, the court clarified that it was doing so only in view of the fact that Sebi itself has accepted the recommendations of the Bhatt Committee.


Mumbai, Feb. 1: 
Frustrated brokers, gave vent to their disappointment through heavy selling, bringing the benchmark sensitive index down 41 points.

The frustration over the Supreme Court ruling was on concerns that various brokerages would have to sell stocks to raise the money.

However, differences continue to persist over the monetary impact of the court�s decision. While initial figures suggested a liability ranging between Rs 500-750 crore on the entire broking community, it was subsequently feared that it could be even more at Rs 1,000 crore.

�Though it remains to be seen whether the impact of the ruling will be seen tomorrow as well, we will have to pay the fees,� a disappointed broker said.

It is now learnt that brokers� associations are planning to approach the government to ask the market regulator to withdraw the proposed fee. While there are over 9,000 brokers registered with Sebi as of date, some figures say the market regulator has so far collected over Rs 50 crore as turnover fees.

The decision was enough to cause a 105-point intra-day movement. Reflecting the choppy session, the BSE sensitive index opened weak at 4303.13 and dipped below the 4,300 mark, touching an intra-day low of 4230 following the ruling. With buying from FIIs and domestic operators coming in at the lower levels, the index managed to stage a recovery.

Brokers said the buying by operators was induced by market rumours that film financier Bharat Shah is likely to be released by the Mumbai high court.

The sensex closed at 4286.11 as against yesterday�s close of 4326.72, netting a fall of 40.61 points.


New Delhi, Feb. 1: 
The government today decided to disinvest 25 per cent of its stake in Videsh Sanchar Nigam (VSNL) to a strategic partner, and 1.97 per cent to employees. The dilution will bring down its equity to 26 per cent from 53 per cent.

It will also offload 57 per cent stake in CMC after which its holding will come down to 26 per cent to a strategic partner through an international competitive bidding process.

The department of divestment had recommended that the selloff in VSNL be carried out in phases. The move is important given the fact that its monopoly on long distance calls ends in 2002. Parliamentary Affairs minister Pramod Mahajan said the divestment in both PSUs will be carried out swiftly.

�The divestment of government�s equity in VSNL will enable the board to take independent decisions and launch a range of new services. We propose to complete the disinvestment process in both companies by the year end,� he said after a meeting of the Cabinet Committee on Disinvestment (CCD).

Disinvestment minister Arun Shourie said the VSNL board will be given powers to enter into new business. The country�s international telecom carrier has already announced plans to enter DTH and other value-added services.

The company recorded a 34 per cent growth in net profit at Rs 400 crore in the third quarter ended December compared with Rs 298 crore in the same month of 1999. Total revenues increased 23 per cent at Rs 2,062 crore as against Rs 1,682 crore during the corresponding quarter of the previous financial year. The company�s internet subscriber base expanded 73 per cent at 5.57 lakh during the third quarter of 2000-01 as against 3.22 lakh in the same period last year.

�The cut in telecom accounting rates (TAR) has not affected us. We have been fully compensated by the volume of traffic, which has gone 21 per cent. The selloff will help us to take decisions which enhance shareholder value,� VSNL officials said.

CMC Limited, on the other hand, posted a turnover of more than Rs 400 crore in 1999-200 and a compounded annual growth rate of about 25 per cent. It has 3,000 employees, and 18 offices in the country and more than 150 overseas.

In another significant move, the Cabinet Committee on Disinvestment approved the shareholders� agreement in the Balco selloff, and sent it to the law ministry for final clearance.


New Delhi, Feb. 1: 
The Nasdaq stock market plans to enter into tieups with Indian bourses once the Indian currency is made fully convertible. Nasdaq vice-chairman Alfred R Berkeley III, who is here to open an Indian office of the bourse at Bangalore, told a gathering of industrialists invited by consulting firm Ernst & Young that this would work as a groundwork for future alliances with stock exchanges in India.

�It is our long-term commitment to India which is why we have opened an office here,� Berkeley said. Identifying new technology, consumer goods and retailing firms as potential clients, he said the office would help Indian companies planning to list on the US bourse.

He said Nasdaq would like to take up fungibility of shares with the Reserve Bank of India to increase the liquidity of shares listed by Indian companies with it.


New Delhi, Feb. 1: 
Maruti Udyog Limited recorded a 21.5 per cent jump in sales in January compared to the same month last year. The company sold 33,898 passenger cars sold in the domestic market as against 26,590 units sold in January 2000. Maruti continued to make major gains in the competitive �B� segment. Its sales in this segment in January 2001 were 64 per cent higher at 10,349 units as against 6,318 units sold in the same month last year.

Maruti�s performance in January is powered by a surge in the people�s car, Maruti 800. The company sold 16,731 units of Maruti 800 during the month which is 33 per cent higher than the number of units sold in January 2000.

The jelly bean shaped Zen, the Alto and the WagonR registered an improved performance in January. Including Omni, Maruti sales in the �A� segment touched 22,347 units during this period.


Mumbai, Feb. 1: 
Moody�s Investors Service is reviewing the Ba2 rating of Tata Engineering and Locomotive Company (Telco) for a possible downgrade after the auto major�s worse-than-expected third-quarter and nine-month losses at Rs 120 crore and Rs 350 crore.

Reacting to the development, a Telco spokesperson said he was sure the independent agency would talk to the company before taking a decision.

Moody�s is considering the progress likely to be achieved by the company at a time when the commercial vehicle industry is in the throes of a severe downturn, and the Indica small car business has turned in a weak operating performance.

�The company continues to devote considerable effort on reducing its costs and improving working capital management,� Moody�s said in a statement issued from New York.

For the largest maker of commercial vehicles in the country, the plan to raise its capital base through a rights issue of equity-related instruments will be an important consideration when the global rating agency takes a fresh look at its rating.

Only 4,274 heavy commercial vehicles rolled out in December 2000 compared with 8,163 in the same month last year and 5,704 in December.

In the light commercial vehicles, another segment the company dominates, 2,943 vehicles came out of the factories, down from 3,060 in December 1999 and 4,308 in December 1998.

In the multi-utility vehicles segment, the company could not keep pace with rivals such as Toyota Kirloskar and Mahindra & Mahindra.

Telco blamed the dismal showing � especially the worst December tally in three years � to a shrinking market for heavy, medium and light commercial vehicles. The contraction in demand in the north, west and eastern regions was particularly severe.

These areas, seen as Telco strongholds, bore the brunt due to the diesel price hike and the sales tax rationalisation that pushed up rates in some states of the country by 6 to 8 per cent.

Diesel prices were increased by over 40 per cent in October 1999 and by another 20 per cent in March. The two hikes made the fuel dearer by a aggregate 68 per cent in the space of just six months.

This, compounded by the sales tax rationalisation, drove transport operators to the brink.

�It had a snowballing impact and the markets shrunk as the cost of operations rose alarmingly,� an analyst said. The cost of a medium-truck chassis rose by 6 to 8 per cent, or almost Rs 45,000.


Calcutta, Feb. 1: 
The demerger of the battery and tea divisions of Eveready Industries India Limited (EIIL) will take place within another two to three months, group supremo B. M. Khaitan said today.

The group has decided to first merge the tea business of Bishnauth Tea Company Limited (BTCL) with EIIL, following which the latter�s battery division will be demerged.

Khaitan said the demerger plan outlined by ICICI and Morgan Stanley will soon be placed before the board.

Both Bishnauth Tea and Eveready Industries had called extraordinary gener-al meetings to get their shareholders� approvals for the merger and the swap ratio.

The boards of both companies have already agreed on the swap ratio of four paid-up shares of EIIL for three shares of BTCL for the proposed merger of the two companies. The scheme will be effective from April 1, 2000. The companies also conducted a poll on the merger and swap ratio, results of which will be declared tomorrow..

Khaitan said after the merger is through, the board will decide on the division of assets and loans of the companies. �While we have to restructure the loan, assets of both companies will remain intact. We are informing financial institutions like UTI, GIC and LIC of the developments.�

EIIL has already decided to sell its unprofitable gardens in the state, in Dooars and Darjeeling, to retire its high interest burden of Rs 83 crore. The company has already sold six of its gardens at a consideration of Rs 44 crore. Out of the 25 gardens of EIIL, 12 are in the state. �We are not in a hurry to sell the gardens. We are watching the market and will sell only when we get the right price,� Khaitan said.

Further, R. S. Jhawar, EIIL director said, �We will not sell our gardens, bought in the last three years, below the market price.�


New Delhi, Feb. 1: 
Prime Minister Atal Behari Vajpayee appears to believe that his finance minister Yashwant Sinha can conjure up miracles in the general budget for 2001-02.

By asking him to present a growth-oriented budget which aims at an 8 per cent increase in gross domestic product (GDP), Vajpayee has made his colleague�s task extremely difficult. Only a rabbit-out-of-the-hat technique can achieve the feat.

The budgetary support for the next fiscal�s central plan, already finalised, is barely enough to achieve a 6.5 per cent rate of GDP growth.

The Ninth Plan budgetary support is falling short by nearly Rs 45,000 crore. Senior bureaucrats in the economic ministries are speculating on the provocation for the Prime Minister to issue of a directive of this nature.

Sinha cannot afford to ignore the Prime Minister�s request. But, at the same time, his hands are tied by the Fiscal Responsibility Act, which makes it mandatory for the government to reduce the fiscal deficit-GDP ratio by half a percentage point every year.

It was quite unimaginative on the part of the finance minister to rush through the legislation without proper consultation.

Official sources say the level of fiscal deficit is not alarming. There is nothing wrong on the part of the government to run up a higher fiscal deficit for growth-stimulating projects. In times of recession, the government will have to resort to the Keynesian strategy of stepping up expenditure.

Luckily for the finance minister, the Fiscal Responsibility Act makes an exception in the event of natural calamities. Sinha can now use the devastation caused by the recent earthquake in Gujarat to tot up a higher fiscal deficit next year.

The size of the fiscal deficit is a sensitive issue. For credit rating agencies, this is the most important yardstick to measure the strength of an economy.

The first reform budget of Manmohan Singh in 1993 brought down fiscal deficit from 8 per cent of the GDP to 5.5 per cent. But the next year, he ended up worse with a fiscal deficit of 7.3 per cent.

It was this, which triggered the economic boom during 1994-97. Singh and his successor, Palaniappan Chidambaram, did not have a Fiscal Responsibility Act to comply with.

To achieve an 8 per cent GDP growth, finance minister will have to step up public investment.

This alone can kick-start the economy, now in the throes of a prolonged demand slump. Sources say a smaller fiscal deficit and higher public investment cannot go hand in hand in the budget.

If the fiscal deficit has to be raised significantly, it calls for a bold decision from the political leadership, the fallout of which will have to be owned up not only by the finance minister but also by the Prime Minister.

The alternative to public investment is an upsurge in private investment.

That is not happening, and is unlikely to occur in the next few months.

Except for Reliance Industries, no major industrial house is investing in mega projects. The FDI flow has also slowed. It is against this gloomy backdrop that the finance minister assembles the millennium�s first budget.



Foreign Exchange

US $1	Rs.46.40	HK $1	Rs. 5.85*
UK �1	Rs. 68.32	SW Fr 1	Rs. 28.10*
Euro	Rs. 43.70	Sing $1	Rs.  26.30*
Yen 100	Rs. 39.40	Aus $1	Rs. 25.25*
*SBI TC buying rates; others are forex market closing rates


Calcutta			Bombay

Gold Std (10gm)	Rs. 4490	Gold Std(10 gm)	Rs. 4450
Gold 22 carat	Rs. 4240	Gold 22 carat	Rs. 4115
Silver bar (Kg)	Rs. 7900	Silver (Kg)	Rs. 7925
Silver portion	Rs. 8000	Silver portion	Rs. 7930

Stock Indices

Sensex		4286.11		-40.61
BSE-100		2175.81		-33.50
S&P CNX Nifty	1359.15		-12.55
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