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That segment, meant for trading in fixed-income securities, has been a big draw with investors over the past few years, but it lost some of the sheen in the days after the lid was blown off murky deals in government bonds. Its turnover, an eye-popping Rs 6,000 crore in the days before the blight became public, has plunged to Rs 2,400 crore as investors wait for more skeletons to be dug out.
NSE managing director Ravi Narain conceded business taken a beating. �There was brisk trading in the segment before the monetary policy was announced. After that, traders have kept away since the speculation on the policy has died down,� he told The Telegraph.
Home Trade�s role in the scam, he said, may have left players who trade in NSE�s debt market too skittish for business. �The scam, involving many co-operative banks, has certainly affected the market. It is tough, though, to measure the precise impact in numbers,� a dealer affiliated to a prominent broking outfit said.
Narain sees the decline as a blip on the screen, part of seasonal fluctuation that will even out, but dealers talk of big operators in the segment, such as StanChart, ABN Securities, selling their way out in a jiffy.
The shadow is darker, also because of broking entities such as Home Trade issued contract notes to clients on deals that were never executed. While it acquired the membership of the wholesale debt segment, the membership was not �enabled�. As a result, the brokerage had no right to issue any contract notes.
Market watchers reckon that the market will look up only when the Reserve Bank promises participants that physical trading in government securities is safe enough.
Since it started in June 1994, WDM has provided the first formal, screen-based trading facility in the country. Now, it offers facilities for trading in a variety of debt instruments, including government securities, treasury bills, bonds issued by PSUs, companies and banks.
Other items traded on the segment are floating rate bonds, zero-coupon bonds, commercial papers, certificate of deposits, corporate debentures, state government loans, SLR and non-SLR Bonds issued by financial institutions, units of mutual funds in addition to securitised debt floated by banks, financial institutions, corporate bodies, trusts and other institutions.
Large investors and a high average traded value are hallmarks of the WDM segment. Primary dealers contributed almost 22.33 per cent to its turnover in the month of April; Indian and foreign banks accounted for 34.45 per cent and 12.66 per cent of its traded volume respectively; companies and trading members accounted for 1.78 per cent and 25.45 per cent respectively.
The bulk of the turnover on the segment comes from government securities, which made up an overwhelming 94.22 per cent of last month�s trading; treasury bills and bonds accounted for only 2.10 per cent and 0.72 per cent.
Until recently, the debt market was purely an informal one with much of the deals directly negotiated and sealed between various participants. A separate whole-sale segment on the NSE has brought in much-needed transparency and efficiency to the debt market, apart from effective monitoring and surveillance.
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Last month, when the Confederation of Indian Industry (CII) came out with its Ascon industry survey for the period for April-March 2001-02, it had drawn a sketchy first cut that barely gave the contours of the rally. It had revealed then that 65 sectors (56 per cent of the industrial sectors) had exhibited a moderate growth of 0-10 per cent while 30 sectors (28 per cent of the sectors surveyed) had exhibited negative growth during the year. On the positive side, it said, 15 sectors have shown high growth rates of 10 to 20 per cent, and six have exhibited excellent growth of more than 20 per cent.
It has now come out with a more detailed picture: it says that the cement sector has shown a significant turnaround in terms of production with a healthy 9.4 per cent for the year 2001-02. It says that this may be indicative of housing and construction activity picking up in the economy. Since this sector has significant linkages, it is likely that the demand will pick up in other sectors also.
The cement sector expects the trend to continue over the next six months. However, the outlook for exports is not very bright. The sector has reported that high incidence of input costs and domestic taxes coupled with the hefty hike in royalty charges have made Indian cement non-competitive. The sector wants an amendment to the Coastal Regulatory Zone Act to permit setting up of bulk terminals to improve export prospects.
The paints sector has also maintained relatively high growth of 10 per cent. A pick-up in housing and construction activities will again give a boost to this sector.
Polymer products on an overall basis recorded a 10.4 per cent growth compared with 11 per cent in the last year. This sector expects to maintain a healthy growth of 12 per cent in the next six months also.
The aluminium sector grew 4.7 per cent in 2001-02 but it is lower compared with 9 per cent growth in the previous year. This sector has been affected in the last two quarters of the current year due to some structural problems in the industry. Its exports have been hit by a slump in Europe, Japan and the US.
Although the steel sector is maintaining a positive growth of 4.4 per cent, it is down from 10 per cent last year. Imports of seconds/defectives steel under advance licence, issues relating to DEPB rates, poor investment in infrastructure continue to bog this vital sector .Trade actions by the US and EU have impacted growth prospects. Cold-rolled steel continues to reel under a slowdown recording a dismal negative 3 per cent growth compared with negative 1.4 per cent growth in the last year. The problem of cheap imports of seconds/defectives, defective grades CR and galvanized sheets and floor price on HR continue to be major concerns.
Cast-iron spun pipe makers have recorded a negative growth of 15 per cent in the year 2001-02 compared with 5 per cent growth in the previous year. Basic constraints are poor demand, erratic orders from government departments and competition from cheaper substitutes.
Crude oil has achieved negative growth of 1.2 per cent compared with 1.6 per cent last year. Other sectors, such as natural gas (1.5 per cent against 12 per cent), refinery (3.8 per cent against 22 per cent), petrol (4 per cent against 6 per cent), diesel (8 per cent against 12 per cent), and LPG (8 per cent against 14 per cent) have maintained a positive growth trend in the current financial year.
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This development comes amidst intense speculation that Reliance Industries Ltd (RIL), fresh from a recent mega-merger, plans to buy-out the Birlas� 37.5 per cent stake in the 9-million tonne refinery.
Unconfirmed reports say the Birla group is not keen on continuing the joint venture with Hindustan Petroleum Corp Ltd (HPCL) and that it has given a mandate to Lazard India for sale of its equity stake in MRPL.
Incidentally, the financial institutions are reportedly engaged in drafting a restructuring package for the joint venture. This package is likely to contain conversion of a part of MRPL�s huge debt into equity. Sources said a definite trend towards the induction of a new partner or even a new management should be available by the end of this month.
IOC, industry circles said, was at one point of time interested in participating in the project as a strategic investor. However, the corporation is now believed to have developed second thoughts in view of its existing capacity in the southern part of the country.
�We don�t require an additional refining capacity out there. Our needs are taken care of by Chennai Petroleum Corporation Ltd (CPCL),� said a senior official.
CPCL, an IOC subsidiary, which has a refinery with a capacity of 7-million tonne at Manali, plans to expand capacity by 3 million tonnes, and modernise the plant, at a cost of close to Rs 2,400 crore. The project is scheduled to be completed by July 2003.
IOC officials pointed out that in addition to this subsidiary, the corporation is involved in expansion of its existing capacities by another 10 million tonnes over the next couple of years. Among this, the capacity of its Barauni refinery, slated for later this year, is now set to go up to over 6 million tonnes from the existing 3.3 million tonnes.