Jalan�s crystal ball cracks
Apex body for co-op banks
Decks cleared for GIC demerger
New formula for car insurance
Maran allays fears on patents, Bill passed
IPCL shoots up on hopes of high bid
Bhagwati panel votes for postal ballots
Mid-cap stocks steal the show
Two-wheeler battery to power Exide growth
Foreign Exchange, Bullion, Stock Indices

Calcutta, May 9: 
The Reserve Bank of India�s (RBI) credit policy rushed ahead with a growth rate forecast of 6 to 6.5 per cent in 2002-03, but the man who heads the institution says he has not sighted any sign of recovery.

There are takers for credit, but there is no sustained uptrend. �The credit offtake changes from week to week. Unless there is a steady flow of credit, the economic recovery will not take place at a fast clip.�

Jalan was in the city to attend the central board meeting of RBI, which has estimated in its credit policy that agriculture is likely to grow at a higher rate than last year. There are indications also of a quicker industrial recovery and prospects for export look good too.

Asked whether the bank rate would be cut, the RBI governor said one percentage point reduction might be made, if required. �We have no concrete time-frame,� he said. �At present, there is enough liquidity in the market and there is no immediate need to cut the bank rate.�

In the credit policy, RBI has said there is excess liquidity in the system, which is reflected in the repo amounts. On an average, amounts tendered by banks in one or three-day repos have ranged from Rs 1,565 crore-Rs 16,024 crore, the credit policy said.

On the possibility of a 50 basis point cut in the cash reserve ratio (CRR) earlier than the June 15 date set in the credit policy, the governor said it could be done if it is warranted. �But, at the moment, it is not required since there is enough supply of money in the market,� he said.

To step up credit, Jalan said banks should slash the spread between the prime lending rate (PLR) and the rates at which the banks actually advance loans. �We have asked the banks to look into the matter so that all creditors can get money at a reasonable rates,� he said.

Internationally, the spread varies between 1 and 1.5 per cent. In India, however, it is between 3 and 4 per cent. Bankers say narrowing the spread is not easy in here because efficiency levels are much lower.

�The overhead cost is high in India. It will take time to happen,� they said.

Jalan, however, said the RBI is in favour of softer rates. �We have also stabilised expectations and have already indicated that a half a percentage point cut in interest rate might come, depending on liquidity,� he said.

Talking about the recent hardening of interest rates in Australia and New Zealand, Jalan said the Indian situation was not linked to events in other countries. �We have our own compulsions about interest rates and that is linked to our situation,� he said.

Jalan promised adequate credit for the industry, pointing to the changes made by RBI to encourage flow of funds to housing, small-scale and agriculture sectors.

Asked whether RBI was shifting to a �neutral rate bias� instead of a �softer rate bias�, the governor said: �There is no change in the policy. We like the interest rates to be soft, but at the same time, we want this to be translated in lower spreads, which is still quite high.�


Calcutta, May 9: 
Stung by the gilts scam rocking the co-operative banking sector, the Reserve Bank of India has submitted a proposal to the finance ministry to set up an apex co-operative bank that will supervise and monitor operations of all such entities in the country.

The proposed apex bank will comprise representatives from the RBI, National Bank for Agricultural and Rural Development (Nabard) and co-operative societies.

�The dual supervision of co-operative banks is creating problems for the Reserve Bank,� sources said. Though registered under the Co-operative Societies Act of respective states, co-operative banks are regulated by the Reserve Bank in all key aspects of banking. They are governed by the Banking Regulation Act, 1949 and Banking Laws (Co-operative Societies) Act, 1965.

The RBI wants the apex body to dedicate itself to the supervision and monitoring of co-operative banks.

The issue of regulating co-operative banks was discussed at the central board meeting of the Reserve Bank here today. It was attended by central bank governor Bimal Jalan and three RBI deputy governors � Vepa Kamesam, Y. V. Reddy and G.P. Muniappan. Other directors on the RBI board who attended the meeting were Y. H. Malegam, A. P. J. Abdul Kalam, K. Madhav Rao, Ratan Tata, Amrita Patel, Vijay Shankar Vyas, H.P. Ranina, Suresh Krishna, Kushal Pal Singh and D.S. Brar.

The board also reviewed the operations of the forex department, in addition to the central bank�s debt management department.

The RBI governor told directors that the chairman of the Nagpur District Central Co-operative Bank was empowered to invest in securities through subsidiary general ledger (SGL), not in instruments other than gilts. He personally finalised the deals and allowed these transactions. The bank did not prepare half-yearly reviews for submission to the board, Nabard or the RBI.

The RBI is unhappy over the way urban co-operative banks have been regulated. It feels Nabard has not delegated the powers in a proper manner. Jalan told the Reserve Bank board the Nagpur co-operative bank violated a key guideline that requires transactions done through an individual broker to be capped at 5 per cent. The bank also fell foul of the law by making investments in shares under a buy-back arrangement.

In addition, it violated a Nabard norm that limits lending to others outside the co-operative � such as the companies, corporate registered bodies, agencies and institutions � at 25 per cent of the bank�s total capital. For Nagpur District Co-operative Bank, that limit works out to Rs 11.25 crore. The RBI has found out that bonds supposed to have been purchased by the bank were never received, and later shown as if they were exchanged for government securities � which are missing too.

The securities that were never handed over to the bank were purportedly a part of its investments under the statutory liquidity ratio (SLR).


New Delhi, May 9: 
The Lok Sabha today cleared a Bill that paves the way for spinning off General Insurance Corporation�s four subsidiaries into independent entities and turning GIC into a national re-insurer.

The General Insurance Business (nationalisation) Amendment Bill, 2001, was passed by a voice vote after a debate that turned acrimonious and sparked a walkout by the Left parties, Samajwadi Dal and RPI.

The government defended the move arguing this was being done to make the state-run insurance firms more competitive � a contention that the Opposition refused to buy. Opposition MPs voiced apprehension that it would weaken the state-run firms and place them at a disadvantage vis-�-vis the new private players who were coming in.

CPM MP Rupchand Pal pointed out that the global trend was towards mergers and acquisitions to create strong behemoths, while the Indian government seemed to believe the reverse made better business sense.

Replying to the discussion, minister of state for finance Balasaheb Vikhe Patil argued that ever since the four companies were demerged, they have been doing well with their capital having increased to Rs 8,050 crore.

The minister said the entry of multinational firms would not in anyway affect the domestic companies because they would have to invest 15 per cent in the social sector and they have a cap of 26 per cent foreign equity.

A Bill abolishing the Banking Service Recruitment Boards (BSRBs) was also cleared by the Lok Sabha today. The government assured the House that job reservation for scheduled castes, tribes and other backward classes would continue in the banking sector.


New Delhi, May 9: 
Motor insurers are likely to introduce a new concept�insured declared value�under which the value of a particular car will be adjusted for depreciation and underwritten.

Under the prevalent policy, insurers cover the estimated value of the car.

This means that the market value of the car or the sum insured, whichever is less, is taken into account to determine the claim amount admissible in case of theft.

Under the new formula, the reinstatement cost of the same brand and model based on the latest dealer price of the model, minus the cost of depreciation at the rate of 35 per cent, will be taken into account to determine the claim amount.

The new formula will introduce three determinants to decide the insurance claim. These are�the age of the car, the cubic capacity of the engine, and the geographical location of the claimant.

At present, there is no insurance �loading� based on the age of the car.

However, under the new formula, there will be three slabs: five years, 5-10 years, and over 10 years.

The country will also be divided into four zones�A, B, C and D. Zone A comprises two metropolitan cities�New Delhi and Chennai.

Zone B comprises Ahmedabad, Bangalore, Hyderabad, Calcutta and Mumbai.

Zone C will cover all other state capitals and Zone D will encompass the rest of India. Zone A will have the highest rate and Zone D will be the lowest.

Under the existing mechanism, the country was divided into only two zones�A and B. While zone A covers Ahmedabad, Chennai and the Mumbai region (excluding Mumbai city) and Madhya Pradesh. Zone B covers the rest of India and Mumbai.

The third factor �cubic capacity of the engine� will now be broken into three slabs.

The first will be cars with engine capacity up to 1000cc; the second covers models from 1001cc to 1500cc; the third category will cover cars with an engine capacity of over 1500cc.

The higher engine capacity cars will attract higher rates.

The earlier formula saw cars being divided into two categories: up to 1500 cc and over 1500 cc.

Under the new tariff regime, the new owner of a second-hand car will not be allowed to avail the no-claim bonus (NCB) of the old owner.

Under the existing motor tariff insurance, the NCB was not deposited for the year during the sale.

It is to be noted that after the motor tariff revision, the NCB will now likely fall straight to 0 per cent on the occurrence of a claim.

Currently, a bonus malus system (step-wise system) exists, under which one could move up and down a single step whenever a claim occurred.


New Delhi, May 9: 
Commerce minister Murasoli Maran today promised to introduce all the safeguards recommended by the Joint Parliamentary Committee to ensure that there was no skew in the Patent Bill provisions that someone could exploit.

The Patents (second amendment) Bill, which was moved by Maran in the Rajya Sabha today, was later passed by a voice vote with the support of main opposition Congress.

The CPI-M sponsored amendments proposed by Biplab Dasgupta were defeated by 83 to 21 votes.

Maran allayed fears that the Bill would introduce product patents and that it diluted the earlier provisions compromising national security and public health concerns.

�The committee has reinforced the flexibilities already provided in the legislation with a view to address national and public interest requirements and concerns specially those relating to public health and nutrition,� Maran said.

�More importantly, the committee has fully restructured the existing provisions relating to public interest, compulsory licensing, government use, national security, protection of traditional knowledge, protection of public health and nutrition as contained in Chapter XVI (Working of Patents, Compulsory Licenses and Revocation) of the Patents Act,� he said.

�We all can be proud that we have not diluted any of the earlier provisions nor compromised our positions and interests � rather we have designed a strong and modern Intellectual Property (IP) Act,� he said.


Mumbai, May 9: 
The Indian Petrochemicals Corporation (IPCL) share sizzled on bourses today, hoisted by the excitement building up ahead of its selloff.

Rumours swirled that the winning bid for the government�s 26 per cent stake in the company could offer a share price that is much higher than expectations. Heady estimates put it at Rs 210 per share, a steep increase from the earlier reports of Rs 125-160.

Three companies � Indian Oil Corporation, Reliance Industries and detergent maker Nirma � are vying for the government�s stake in the petrochem PSU, which has a strong presence in the country�s ethylene market.

The Cabinet Committee on Disinvestment will meet next week to take a decision on selling the Centre�s stake in IPCL, apart from Maruti Udyog Limited.

Reflecting the anticipation in the market over the selloff, the IPCL scrip opened at Rs 119.70 and peaked at an intra-day high of Rs 128.70 before ending at Rs 127.35.

Today�s close marks a 5 per cent premium on its 52-week high of Rs 121 and 10 per cent on its previous finish of Rs 117.45. In all, there were 21,000 deals in the stock as 49 lakh shares changed hands, generating Rs 61.43 crore.

�Rs 210 could be an unrealistic price, but if reports about the aggressive bid are true, we could make a killing,� said a fund manager who bought the scrip cheap.

Industry watchers say the fight for government�s stake in IPCL, which will come with management control, has been narrowed down to a two-horse race between Indian Oil and Reliance. The Ambanis, already a leader in most petrochemicals, are now depending on acquisitions and capacity expansion to realise their ambition of becoming world leaders in the industry.

In recent times, Indian Oil has showed its eagerness to enter petrochemicals, after having built up a large refining capacity over the past few years. In addition to IPCL, it is also looking at acquiring a significant stake in Haldia Petrochemicals. The company stunned observers and rivals when it won over IBP Ltd, the petroleum marketing PSU, hands down.

IPCL owns three petrochemical complexes, a naphtha-based unit at Vadodara, and gas-based facilities at Nagothane near Mumbai and at Dahej in the Narmada estuary in Gujarat. The company also has a catalyst manufacturing facility at Rabale, Navi Mumbai.

Apart from IPCL, the government has lined up plans to divest its stakes in two other oil companies, Hindustan Petroleum and Bharat Petroleum this year.


Mumbai, May 9: 
The P. N. Bhagwati committee on takeovers has recommended that a change in management control can be brought about only with a special resolution passed by a shareholders� general meeting. To ensure greater shareholder participation, it has suggested that there should be a provision for postal ballots.

The committee has proposed that offer documents should include an undertaking from the acquirer not to strip substantial assets, except in cases where it is done with prior approval of shareholders of the target firm.

In its report presented to Sebi on Wednesday, the committee said exemptions from the takeover code for preferential allotment of securities should be made only if a company passes a resolution allowing postal ballot.

The committee, which is reviewing Sebi�s takeover regulations of 1997, wants share acquisitions made in breach of the takeover code to be declared null and void.

In cases where provisions of the code have been flouted, the market regulator should ask for the appointment of a merchant banker to divest shares acquired in violation of the code, either through a public auction or any other market mechanism it deems fit. Profits from such proceeds should be put into an investor protection fund, the committee has said. The suggestion may have been made in the light of the tussle for Herbertsons between Vijay Mallya and Kishore Chhabria.

The panel also plugged a loophole in the existing code by specifying that the term �shares� does not include preference shares.

Referring to the disclosures, the committee said the acquirer should divulge his holding when he picks up 5, 10 and 14 per cent in a company. Once his holding rises to 15 per cent, every 2 per cent of the equity purchased should be reported to the target company as well as to the exchanges concerned, the committee said.

In a bid to streamline takeover procedures, the panel said acquirers should be allowed to enter management after the period of competitive bidding is over.

Such changes may be allowed only when 100 per cent of the amount to be paid, assuming full acceptances, is deposited in an escrow account, tendered in cash or in the form of securities. Investors may be allowed to withdraw their acceptance forms within three working days.

Only share transfers among different promoters or groups of promoters at a price less than 25 per cent of the market value (determined in terms of Regulation 20) should get automatic exemption. Other cases may be referred to the panel.

Payments under non-compete agreement in excess of 25 percent of consideration to persons other than the target company should be factored into the offer price.

The committee has also said that in cases where it is not possible to restore its old status for any reason, Sebi can direct appointment of a merchant banker for the purpose of causing disinvestment of shares.

The shares bought in breach of regulations could be liquidated either through public auction or market mechanism, in its entirety or in small lots, or through offer for sale.

If it is satisfied that that the share acquisition violates the code, Sebi may direct the target company or the depository not to give effect to transfer of any such shares.

In cases where norms have been breached, Sebi should have the power to order divestiture of the shares that are in excess of the trigger point, besides vesting it with the authority to impose a monetary penalty.

The panel comprises representatives from industry chambers, investor associations, legal eagles, merchant bankers, chartered accountants and Sebi officials.


Mumbai, May 9: 
The stock markets are witnessing a subtle shift in investor preference as medium and smaller cap counters attract investors in droves to the detriment of index heavyweights that are given the thumbs down.

The trend prevailing on the bourses can be seen by simply tracing the movement of the market cap of sensex stocks and those of broader indices like the BSE-200 and BSE-500 over the last couple of months.

The 30-share BSE sensex, the stock markets� main barometer, has seen an accretion of a mere Rs 10,599 crore in its market capitalisation from January 31, to May 8. Against this, the much broader BSE-200 and BSE-500 have seen a surge in their market cap to the tune of Rs 73,425 crore and Rs 91,772 crore respectively.

While the broader indices have more stocks, it can also be argued that the stocks comprise an equity capital that is puny in comparison to the index heavyweights. It is also a fact that the PSUs have been re-rated after the bulge-bracket bid made by Indian Oil Corporation for IBP, opening up new heights for the PSU scrips to scale.

Another factor behind the performance of the broader indexes is the fact that ONGC, the PSU major, does not find a place in the flagship index. The scrip has even overtaken the FMCG major HLL in market cap terms.

In fact, many of the big mutual funds like Alliance, HDFC, Templeton and others are investing in the smaller and medium cap stocks by edging out the index heavyweights from investment portfolios as they provide a better scope for returns, unlike the index heavyweights.

Explaining the trend, Vivek Gupta from Gupta Equities Pvt Ltd, a broking outfit affiliated to both the BSE and the National Stock Exchange (NSE) said: �Value buying is the name of the game. It means less risk. Investing wherever there is value and discounting growth are trends in the market today.�

While the heavyweights are expected to grow faster than the smaller cap stocks, there is no longer a premium on growth, he opined, as recession has gripped the global economy. Many of the small cap stocks have seen their values decimated after the crash.

Marketmen expect the trend to pick up where investors will move from index stocks to value stocks and mid-caps because that is where the values are waiting to be realised and the real stories are to happen, a fund manager affiliated to a bank said.

The belief in the market is that value stocks and mid-caps will actually give greater returns than what the index or other heavyweights will give an investor.

Does that mean that index stocks are no longer attractive? Index funds are the most popular in developed markets, but this concept is yet to pickup in the domestic markets.

�Its a cyclical phenomenon,� says Sanjay Sinha, assistant general manager of UTI, the largest mutual fund in the country.

Market soothsayers aver that the small cap stocks crashed after 2000 and therefore the potential for appreciation is far more when the market sentiments improve.

�However, many of the stocks have reached their fair value,� he warned. It comes at a time when the index stocks are gyrating sideways leaving many in the markets to plunge headlong for the small caps instead of the more resilient large cap stocks.


Calcutta, May 9: 
Exide Industries Ltd (EIL) plans to expand its manufacturing capacities for two-wheeler batteries by one million units in two years� time.

Disclosing this to reporters here today, EIL chairman S. B. Ganguly said the two-wheeler battery segment has a very strong growth even in the face of a depressed market situation.

�While our average growth last year was merely 2-3 per cent, the two-wheeler battery segment has grown by 20 per cent. Demand is picking up and we need to expand capacity to increase our market share,� Ganguly said.

The company currently produces 2.6 million units of two-wheeler batteries and has a market share of over 52 per cent. EIL has also decided to strengthen its two-wheeler battery lines at its plant in Bawal, Haryana.

The company plans to shift similar battery lines from other plants in due course of time to Bawal and only small operations will be maintained in another plant at Pune.

Ganguly said the battery line is being concentrated in the Haryana plant, to remain closer to the market.

The company will invest Rs 30 crore during the current year. Half of this investment will go into the industrial battery segment and a majority of the other half will be spent on setting up new lines for two-wheeler batteries.

The company, which registered a poor performance last year due to depressed economic conditions, has also embarked on a new marketing strategy in order to tap the vast potential in the rural market.

The initiatives include launching new brands, besides setting up a strong dealer network in villages for customer service.

Outlining the company�s strategy, the EIL chairman said the rural areas have a very large potential, which is mostly cornered by the low-cost manufacturers in the unorganised sector.

�About 68 per cent market share is currently held by the unorganised sector whereas our share is almost nil, although our brand is a household name in the urban areas. We feel a change in mindset is badly required to jack up our overall market share,� he said.

The company recently launched a low-cost but high quality �rural� brand called �Jai Kissan�. It intends to sell 20,000 units under this brand during the current financial year.

EIL also has plans to launch another brand for heavy commercial vehicles in July with a target of selling 10,000 units per month.



Foreign Exchange

US $1	Rs. 48.96	HK $1	Rs.  6.20*
UK �1	Rs. 71.35	SW Fr 1	Rs. 30.05*
Euro	Rs. 44.36	Sing $1	Rs. 26.75*
Yen 100	Rs. 38.05	Aus $1	Rs. 26.10*
*SBI TC buying rates; others are forex market closing rates


Calcutta			Bombay

Gold Std (10gm)	Rs. 5280	Gold Std (10 gm)Rs. 5140
Gold 22 carat	Rs. 4985	Gold 22 carat	   NA
Silver bar (Kg)	Rs. 7925	Silver (Kg)	Rs. 8010
Silver portion	Rs. 8025	Silver portion	   NA

Stock Indices

Sensex		3462.01		+26.95
BSE-100		1729.13		+16.64
S&P CNX Nifty	1127.60		+10.00
Calcutta	 118.46		+ 1.10
Skindia GDR	 551.53		+ 7.15

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