WASHINGTON, July 28: An Indian stockbroker and his wife have been ordered by a New York...more

Investors to soon have gold
benchmarked mutual fund

MUMBAI, July 28: India’s first exchange traded, debt-oriented mutual fund, which will provide in......more

Indo-Pak standoff
has affected sales of
Kashmiri handicrafts

NEW DELHI, July 28: The current Indo-Pak standoff after the December 13 attack on Indian.....more

NEW DELHI, July 28: With no contingency plan to tackle the spectre of drought looming over the ...more

Call rate range-bound, gilts
surge on bank rate cut buzz

MUMBAI, July 28: The interbank call rate stayed stagnant just below the repo rate amid active Open....more

Mkt faces drought
of positive inputs,
shares may rally partly

MUMBAI, July 28: Friday’s recovery in the US market and hopes of disinvestment of some.......more

Indian couple fined 1.5 mln dlrs for insider trading

WASHINGTON, July 28: An Indian stockbroker and his wife have been ordered by a New York-based court to pay 1.5 million dollars for alleged involvement in insider trading in the securities of several companies.

The US Securities and Exchange Commission (SEC) said that former Merrill Lynch broker Sharad Kapoor and his wife Rohina Sharma, during their stay in the United States between September 1997 and January 1998, engaged in insider trading in the securities of the companies prior to five merger and acquisition announcements concerning them.

The firms involved were MCI Communications Corp, Brooks Fiber Properties Inc, Carson Pirie Scott Co Inc and Southern New England Telecommunications Corp.

Both Kapoor and his wife now live in India.

Based on its findings, the court ordered Kapoor to pay disgorgement of 294,418.94 dollars, prejudgement interest of 115,838.21 dollars and civil penalties amounting to 883,256.82 dollars.

Sharma has been told to disgorge 58,322.61 dollars in trading profits, prejudgement interest amounting to 22,946.83 dollars and civil penalties to the tune of 174,967.83 dollars.

The couple have been permanently enjoined from future violation of Sections 10(B) and 14(E) of the Securities and Exchange Act, 1934 and Rules 10b-5 and 14E-3.

During their stay in the US, the duo — in connivance with one Arjun Sekhri and others — engaged in a highly-profitable insider trading scheme by collectively purchasing call options and/or common stock shortly before major corporate announcements and reaped profits of about 2.5 million dollars from their illegal transactions. Other defendants in the case were Pratima Rajan, Amolak Sehgal, fuad dow, Gordon W Cochrane and Martin L Thifault. Sekhri, the source for the inside information, was an investment banking associate at Salomon Smith Barney, Inc in New York City.

Sekhri had tipped Kapoor — known to him since college — and Sharma with inside information about the pending corporate transactions regarding the companies involved.

On April 1, 1998, the SEC commenced an insider trading case against Sekhri and others.

The SEC later amended its complaint to add defendants Kapoor and Sharma.

Sekhri, a fugitive for more than a year, was arrested on May 30, 1999, by the Australian Federal Police at Sydney airport. He was extradited to the US and pleaded guilty to criminal charges of insider trading.

He was incarcerated and later deported to India after completing his criminal sentence. Dow, Cochrane and Thifault have previously settled the SEC’s insider trading charges by consenting to the entry of final judgements requiring, among other things, payment of almost 2 million dollars.

They also pleaded guilty to criminal charges of insider trading in related criminal actions.

The SEC’s litigation in this case continues against the remaining defendants. (UNI)

Investors to soon have gold benchmarked mutual fund

MUMBAI, July 28: India’s first exchange traded, debt-oriented mutual fund, which will provide investors a return closely corresponding to return from investments in gold, will be launched soon.

The Benchmark Asset Management Company (BAMC) is awaiting approval from the Securities and Exchange Board of India (SEBI) to launch the gold Benchmark Exchange Traded Scheme (Gold BEES).

The gold BEES will be listed and traded on the National Stock Exchange (NSE) and track the domestic price of gold through investments in debt paper linked to gold prices.

It will invest at least 90 per cent of its total assets in the debt paper linked to gold prices and maximum 10 per cent in other securities/instruments, including obligations of the Government of India.

The scheme will have a face value of Rs 100 with each unit approximately equal to the price of one gram of gold and will be available in dematerialised form to facilitate consolidation with other portfolio holding, according to the offer document filed with the SEBI.

These funds have been very popular in developed countries due to characteristics of the benchmark such as a secure asset, cushioning effect on investment portfolio, high liquidity and an ideal diversifier. Investment analysts are, however, apprehensive about its success in the Indian market. Despite India being the largest consumer of gold, the precious metal has not yet emerged as a sought-after investment avenue and consumption pattern is driven by other considerations, they argue.

Moreover, 65-70 per cent of gold purchases in India are done in rural areas and people there may not trust the new investment instrument like this due to their conservative investment behaviour, they point out.

According to the World Gold Council, the demand for gold in 2001 was 843.2 tonnes.

For thousands of years, gold has been prized for its purity, splendor, beauty and above all, its unique accumulation value.

In today’s uncertain climate, many investors turn to gold because it is a secure asset and has a stabilising influence for investment portfolio by being an effective diversifier.

Gold is an ideal diversifier as the economic forces that determine the price of gold are in many cases opposed to the forces that influence most financial assets.

Recent independent studies have revealed that traditional diversifiers such as bonds and alternative assets often move together in the same direction as that of various asset class during times of market distress or stability.

A small allocation of gold can, however, significantly improve the consistency of the portfolio performance during both stable and unstable financial period. (UNI)

Indo-Pak standoff has affected sales of
Kashmiri handicrafts

NEW DELHI, July 28: The current Indo-Pak standoff after the December 13 attack on Indian Parliament, which heightened after the Kaluchak massacre in may has adversely affected the sales of the Kashmir Goverment arts emporium here.

"After the ghastly terrorist strikes in the past few months there has been a considerable decline in the flow of foreign tourists, and that has affected our sales badly," Mr Habibullah Daga, Manager of the emporium told UNI here.

"Our sales have especially gone down in the past three months, after several countries, including US and Britain, issued travel advisories urging their nationals not to visit the sub-continent in view of the prevailing tension," he added.

Moreover, these countries had also recalled a number of staff members from their embassies here, Mr Daga said.

In fact the slide started after the September 11 terrorist attacks, Mr Daga said, adding "the post-September 11 period has seen a significant decline in the number of foreign tourists visiting the capital.

"Prior to 11/9, we received as many as 1000 tourists per day," he claimed.

"Despite this, the emporium here has registered profits and the State Government has no plans to introduce Voluntary Retirement Scheme (VRS)," he pointed out.

The rest 21 emporia across the country have been doing well in the past ten months, he said, adding Delhi being the capital has a greater flow of foreign tourists, though it has reduced in the past few months.

"With the easing of tensions in the sub-continent and the travel advisories being softened, we hope sales will pick up in the near future," Mr Daga said.

Unlike many other state emporia, Kashmir arts emporium had been consistently earning profits in the post-economic liberalisation period, Mr Daga said.

Kashmiri handicraft products like carpets, pashmina shawls, paper mache and wooden products have a worldwide appeal, he stressed.

The Indo-Pak tensions and militancy in Kashmir for the past one decade had been an impediment in the growth of the handicraft industry, which was the backbone of the state’s economy, he regretted.

Although the decade-long terrorism in the state has affected the industry, neither the production units had been closed nor any products been scrapped, Mr Daga said.

"Infact during the period we have introduced new designs in our carpets, and have improved their quality," he said, adding the school of design in Srinagar was helping the artisans in their endeavour.

The central as well as State Governments were contemplating several steps to encourage the artisans, he informed.

"Had there been no militancy in the state, the handicraft industry of Kashmir would have witnessed tremendous growth," Mr Daga said, adding, "we hope normalcy would return to the valley soon." (UNI)

Drought-panic nudges inflation up to 2.48 pc

NEW DELHI, July 28: With no contingency plan to tackle the spectre of drought looming over the horizon, primary goods became dearer and power supply more erratic during the week ended July 13 pushing the inflation rate up by 0.49 per cent to 2.48 per cent as compared to the previous week’s low of 1.99.

A monsoon failure took a heavy toll on the power situation resulting in four per cent hike in electricity tariffs considering that the country is largely dependent on hydel power.

Consequently, the index for the major group of fuel, power, light and lubricants climbed up 1.5 per cent to close at 238.4 from the previous week’s 234.9 points.

Wholesale price index for all commodities (base 1993-94) upped by 0.4 per cent to 165.1 from 164.4 points as food items like fruits and vegetables, maize, gur, rice bran oil and butter became costlier, non-food products like niger seed shot up 36 per cent and minerals such as barytes rose nine per cent. Prices of rubber and plastics like cycle tyres and tubes, however, inflated by 15 and five per cent respectively.

Its upward spiral was somewhat contained by the major manufactured goods group which remained static. The subsidiary groups of textiles, chemicals, non-metallic minerals and machinery and machine tools all registered a decline.

For the week ended May 18, the final WPI stood at 162.7 as against 162.8 points and the annual rate of inflation based on the final index calculated on a point-to-point basis was 1.25 per cent and not the 1.43 per cent provisionally announced earlier.

The index for the primary articles group jumped up by 0.5 per cent to close at 171.7 as against the previous week’s 170.9 as against 162.8 pointsin thismajor group, food articles showed a 0.3 per cent rise from 177.8 to 178.4 due to uptrends in the wholesale prices of maize, fuits and vegetables (two per cent each), jowar, bajra, gram, masur and eggs (one per cent each). Barley (three per cent) and tea (two per cent) slumped.

Indices for non-food articles escalated 0.8 per cent from 158.0 to 159.2 points with niger seed prices going up a whopping 36 per cent. Raw tobacco went up five per cent, copra by four per cent, raw cotton, rapeseed and mustard seed, cotton seed and linseed all increased by two per cent and soyabean and rubber upped one per cent each. On the other hand, the prices of raw silk (nine per cent), mesta (four per cent) and raw jute (two per cent) declined. The index for the minerals group moved up a notch from 117.0 to 117.1 points due to higher prices of barytes (nine per cent), gypsum (three per cent) and silica sand (one per cent) even though fire clay(12 per cent) and asbestos (five per cent) plummeted.

Indices in the major manufactured products group, however, remained unchanged at the earlier 146.4 points with various sub-groups showing variations during the week.

Food products rose by 0.3 per cent from 152.4 to 152.9 points with gur, rice bran oil (five per cent each), salt (four per cent), coconut oil (three per cent), khandsari, rapeseed and mustard oil and oil cakes (two per cent each), butter, maida, sooji-rawa, solvent, extracted groundnut oil and unrefined oil (one per cent each) all becoming more expensive. However, all kinds of bran (two percent) and sugar (one per cent) declined.

Conversely, the textiles group showed a decline of 0.2 per cent from 118.1 to 117.9 points over the previous week due to lower prices of hessian cloth, hessian and sacking bags (two per cent each).

The index for the chemical and chemical products group also fell marginally by 0.1 per cent to 172.1 from 172.2 points with prices of pvc resins (11 per cent)and nitrogen being slashed. Phenol (one per cent), however, became slightly costlier.

Rubber and plastic products group recorded a sharp rise of 1.1 per cent to 132.6 from 131.2 points with prices of cycle tubes (15 per cent) and cycle tyres (five per cent) being hiked.

Off-setting this, the non-metallic mineral products group slumped by 0.4 per cent from 138.6 to 138.1 due to lower wholesale prices of cement (one per cent). But the cost of railway sleepers, went up.

Machinery and machine tools declined by 0.2 per cent from 130.1 to 129.8 points with downpricing of roller bearings (eight per cent) and ball bearings (seven per cent). PVC insulated cables moved up slightly by one per cent.

Indices for all other groups were static at the previous week’s respective levels. (UNI)

Call rate range-bound, gilts surge on bank rate cut buzz

MUMBAI, July 28: The interbank call rate stayed stagnant just below the repo rate amid active Open Market Operation (OMO) by the Reserve Bank of India (RBI) and heavy subscriptions to the RBI repos during the week ended July 26.

According to dealers, the banking system witnessed abundant liquidity, boosted by forex route inflows, while the demand for funds in the second week of the reporting fortnight remained subdued.

The central bank’s omos and repo auctions, however, absorbed the excess liquidity, confining the call rates in a tight range.

Call rate opened at 5.65-75 per cent, witnessed little movement and grooved between 5.55-5.75 per cent throughout the week despite the two OMO auctions for Rs 3,500 crore on Tuesday and another round of OMO sales of two other securities on Wednesday.

Call rates closed at 5.55-5.70 per cent on the reporting Friday.

Reflecting the surplus liquidity, RBI received bids for an aggregate amount of Rs 1,06,850 crore during week, of which the central bank accepted Rs 87,764 crore. RBI conducted omo auctions of 11.98 per cent, 2004 bond for Rs 2,000 crore and 11.90 per cent, 2007 for up to Rs 1,500 crore on Tuesday which was oversubscribed.

Encouraged by the good response to its Tuesday’s OMO , RBI conducted another round of OMO sales of two securities - 8.07 per cent, 2017 and 10.18 per cent 2026 - on Wednesday at the static rates of Rs 103.02 and Rs 121.85 respectively for an undisclosed amount.

The sale of 24-year paper had closed on the same day, while the 15-year bond was withdrawn by the RBI on Thursday after meeting the targeted resources.

Market analysts feel there was a need for RBI to conduct frequent omos in order to stabilise the continuous inflow of foreign currencies which led to the high rupee liquidity in domestic market.

Forex reserve crossed the 59 billion-mark and stood at a historic high of 59.606 billion as on July 19 due to a significant rise in foreign currency assets.

The secondary market for Government securities stayed range-bound initially during the week on slight liquidity concerns due to the repeated omos by the RBI.

Gilt prices, however, rallied towards the weekend after RBI closed the OMO sales and on presence of ample liquidity, boosted by continuous forex inflows.

Strong expectations of a bank rate cut in view of the erratic monsoon and its adverse impact on the economy, also aided the upbeat sentiment in the bond market, dealers said.

The 11.50 per cent, 2011 and 11.03 per cent, 2012 bonds ended the week higher by 44 paise and 50 paise at Rs 127.67 and Rs 125.15 respectively as compared to Rs 127.23 and Rs 124.65 of the previous week-end.

The 7.40 per cent, 2012 bond also gained 19 paise at Rs 100.68 during the week from Rs 100.49 of the previous week’s closing level. (UNI)

Mkt faces drought of positive inputs, shares
may rally partly

MUMBAI, July 28: Friday’s recovery in the US market and hopes of disinvestment of some giant psus were likely to halt the ongoing slide on the domestic bourses as lower levels may attract investors, market players say.

A spate of negative factors, including the meltdown in global equity markets and erratic monsoon, adversely affected sentiments on domestic bourses with major indices registering a massive decline of at least 6 per cent in the week ended July 26.

Reports of scanty rainfall and drought-like situation in various parts of the country badly affected FMCG and cyclical stocks as they came under sustained selling pressure.

Friday’s rebound on the US bourses was expected to play a major role in providing some positive direction to the domestic bourses, dealers said.

"The market was expected to move side-ways. PSU disinvestment news may fuel the uptrend," said Mr Jignesh Shah, a strategist at the ask Raymond James Associates, a leading foreign brokerage and investment bank.

He was, however, quick to add that unless there was buying interest in the market, the firm trend may not be sustainable.

The 30-stock Bombay Stock Exchange (BSE) sensex lost 205.92 points (6.37 per cent) at 3024.34 in the last week.

The S P CNX nifty index at the National Stock Exchange (NSE) breached the psychological barrier of 1000 points and closed at 973.50, down 62.40 points (5.96 per cent) during the week.

Total market capitalisation at the BSE declined by Rs 36,761 crore at Rs 5,98,454 crore as compared to Rs 6,35,215 crore.

In the overseas markets, barring the Dow Jones industrial average, all major indices in the US and Asia posted sharp falls.

Technology stocks all over the world suffered a major blow, followed by telecom and media.

In the US, stocks finished higher at weekend after a topsy-turvy week. Dow Jones returned into a positive territory and was up 3.6 per cent at 8264. The tech-dominated Nasdaq composite index dipped 4.32 per cent at 1262. The hang seng index at hong kong plummeted by 5.35 per cent at 9773.

Japan’s Nikkei too fell sharply by 5.99 per cent at 9591 points. Disinvestment Minister Arun Shourie told the Lok Sabha on Friday that the Government was pursuing 31 cases of disinvestment, which included undertakings like Air-India, Indian Airlines, BPCL, HPCL, STC and remaining hotels of ITDC and HCI.

Market players are heavily banking on some positive development on the disinvestment front as there was a dearth of positive factors to revive the market.

Dealers also pointed out that foreign investors usually keep a low profile in July and August. They mostly remain buyers in the first four months of the financial year. The redemption pressure and country-wise revision in portfolio allocation, however, forces them to maintain a low profile during the next two months.

FIIs’ limited interest in the market was a cause of concern as domestic players, too, have displayed lack of buying interest.

Major domestic investors such as Unit Trust of India (UTI) continuously pressed sales in the market, while other such as GIC and LIC, too, refrained from buying, dealers said.

The Friday’s closing list of top 100 companies, however, did find a few gainers.

Technology giant Infosys Technology ended lower by Rs 149 to Rs 3016, HCL Tech Rs 47 to Rs 179, HCL Infosys Rs 4 to Rs 99.95, Satyam computer Rs 22 to Rs 215 and Rolta fell by Rs 11 to Rs 95.65.

Second-rung IT stock NIIT fell sharply by Rs 54 to Rs 195.10.

Wipro, India’s third largest software exporter, suffered a major setback as the scrip lost Rs 116 to Rs 1155.

Media and entertainment giant Zee Telefilm dipped by Rs 16 to Rs 103.30.

Monsoon worries affected FMCG stocks. Index heavy-weight and FMCG giant Hind Lever declined sharply by Rs 13 to Rs 174.95, while tobacco giant ITC fell Rs 37 to Rs 636 despite an encouraging first quarter results. Nestle down by Rs 5 to Rs 510.

Among cyclicals, Cement Major ACC lost Rs 12 to Rs 137, Grasim Rs 14 to Rs 316, Gujarat Ambuja Cement Rs 19 to Rs 175, Madras Cement Rs 87 to Rs 4163 and TELCO ended lower by Rs 20 to Rs 132.

Among Pharma shares, Glaxo plummeted by Rs 14 to Rs 316, Ranbaxy Rs 13 to Rs 913 and Pfizer lost Rs 10 to Rs 456.

Index heavy-weight and petrochem giant Reliance Industries was down Rs 14 to Rs 245.65. (UNI)

Despite Govt’s commitment to reform, power
subsidies on rise

NEW DELHI, July 28: Government subsidies to the power sector are on the rise, even while the Government is in favour of restructuring and reform of the sector.

Gross subsidy on energy sales has been increasing over the years due to the policy of some of the states to provide electricity at subsidised rates to agriculture and domestic consumers.

The gross subsidy is likely to increase from a level of Rs 7,449 crore in 1991-92 to Rs 43,060.10 crore in 2001-02, according to a Planning Commission report on State Electricity Boards (SEBs) and Electricity Departments.

The gross subsidy per unit (kwh) of energy sold during 2001-02 works out to 122.62 paise.

While some State Governments partly compensate the State Electricity Boards (SEBs) for the subsidised sales of electricity to agricultural and domestic sectors, others do not provide any compensation at all. The 2001-01 annual plan proposals indicate the likely subvention from the State Governments amounts to Rs 8,339.62 crore.

The SEBs make an effort to recover losses due to the subsidised power supply to domestic and agricultural consumers by way of cross subsidisation, mainly to the industrial and commercial consumers. The report estimates that the surpluses generated by way of cross subsidisation for 2001-02 at Rs 5,759.01 crore. The subsidy payable by State Governments on account of energy sales to domestic consumers is likely to increase from a level of Rs 4,386 crore in 1996-97 to Rs 12,238.5 crore in 2000-01, the report says.

Subsidy on account of sales to agricultural consumers is estimated to double from Rs 15,586 crore in 1996-97 to Rs 30,462 crore in 2001-02.

Gross subsidy for domestic, agricultural and interstate sales has also gone up two-fold from Rs 20,210 crore in 1996-97 to Rs 43,060 crore in 2001-02.

The subvention given by the State Governments to partly compensate the subsidised sales to domestic and agricultural consumers is estimated at Rs 8,339.60 crore in 2001-02 compared to Rs 6,630.60 crore in 1996-97.

Uncovered subsidy, after taking into consideration the subvention received from State Governments and surplus generated from sales to other consumers, is estimated at Rs 2,896.92 crore during 2001-02 against Rs 5,805.03 crore in 1996-97.

The report also estimates the commercial losses of SEBs (without subsidy) during 2001-02 at Rs 13,177 crore against Rs 11,305 crore during 1996-97 and commercial losses with subsidy payable by the State Government for these years at Rs 2,4837 crore and Rs 4,674.31 crore respectively. (UNI)

Consumer durable sector records excellent
growth, says survey

NEW DELHI, July 28: A Confederation of Indian Industry (CII) survey of the consumer durables sector has indicated excellent production growth during April-June 2002 over the same period in the previous year, following steady increase in demand in domestic and export markets.

The latest ASCON survey shows steady growth in production of refrigerators, air-conditioners, colour televisions, glass, vehicle and rubber goods industry.

According to the survey, among consumer durables, production of refrigerators witnessed a high growth of ten per cent this year as compared to 0.2 per cent last year. However, the sale of refrigerators went up from 0.5 per cent in April-June 2001 to ten per cent in the corresponding period in 2002. Its exports actually fell from a positive growth of ten per cent last year to six per cent this year.

The main factors affecting the export growth were appreciation of the US dollar, limited opportunity to export due to marginal growth in demand worldwide for appliances and the lack of brand equity for the made in India label, the survey added.

The ASCON survey also revealed that the air-conditioner segment recorded an excellent growth of 22 per cent in production this year from 15 per cent last year. Washing machines, which had witnessed a negative growth so far, recorded a marginal increase in both production and sales to two per cent this year. Water coolers also recorded a high growth of 12 per cent this year compared to a moderate growth of five per cent the previous year.

A sluggish demand, low penetration levels, poor infrastructure facilities, high excise duty of 32 per cent, change in cst rates, anti-dumping duties and steep increase in the costs of steel, aluminium, copper and plastics, capacity constraints for certain models and a high duty structure, were the main factors responsible for hampering the growth of the white goods industry.

The outlook for the next six months in terms of production of air conditioners is ten to 15 per cent and that of refrigerators is ten per cent, while that for sales and exports was in the range of five to ten per cent and 0-5 per cent respectively.

The outlook for next year would be revised in view of the likely impact of the delayed monsoon or drought, the survey said. In the consumer electronics sector, the most impressive growth was recorded by the colour television segment which registered an excellent growth of 40 per cent this year from last year’s negative growth of minus ten per cent.

According to the survey, while VCRs, VCPs, VCDs and DVDs recorded a growth of 25 per cent in production, audio products witnessed a high growth of ten per cent in 2002 as compared to zero growth in 2001. Barring black and white televisions which registered a negative growth even this year, other segments of the consumer electronics sector such as the clock and watches recorded a moderate growth in 2002.

However, there was a marginal drop in exports from 15 per cent to ten per cent this year.

In order to achieve a growth of ten to 20 per cent in the next six months, some of the issues that need to be resolved for the sector include high sales tax of 12 per cent on consumer electronics items from an average of four to six per cent, particularly on low value items like transistors, clocks and watches up to a MRP of Rs 500, customs duty of 35 per cent on CPT leading to a rise in prices and lesser abatement on MRP for excise duty for colour television at 35 per cent against 40 per cent for similar products.

According to the survey, the overall production growth in the glass industry was recorded at 7.2 per cent in April-June 2002 compared to 6.5 per cent in the corresponding period last year.

Barring glass table wares, other segments of the glass industry registered a moderate growth with glass containers and wares at nine per cent, sheet and float glass at five per cent and float glass at eight per cent.

The growth in both sales and exports recorded a marginal decrease to six per cent and 15 per cent respectively this year from last year’s sales growth of nine per cent and export growth of 17 per cent.

Some of the key constraints hampering the growth of this industry were poor demand compared to production capacity, excessive imports from South Asian countries, reduction of import duties on finished goods, and poor infrastructure facilities. However, the outlook in terms of production, sales and exports for the next months is positive and will vary between five and 15 per cent, according to the survey. (UNI)

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