The Tribune, Chandigarh, India

Sensex dives for 5th straight day to 28-month closing low

Mumbai, December 20
The Bombay Stock Exhange benchmark Sensex fell for a fifth session in a row on Tuesday, dropping 1.3 per cent to their lowest close in 28 months, as risk aversion deepened in the absence of policy initiatives to revive slowing domestic growth.

Investor confidence was further dented when European shares initially extended a two-week slide after a euro zone plan to boost crisis funds parked with the IMF failed to reach a hoped-for target.

Engineering and construction conglomerate Larsen & Toubro , which has been facing a slowdown in new orders as companies put off investment in large projects, was among the big losers.

"The whole India story was built around just one word — growth," said Jagannadham Thunuguntla, research head at SMC Global Securities. "Now that growth is not there and nobody is interested in this market."

The main 30-share BSE index shed 1.33%, or 204.26 points, to 15,175.08, its lowest close since August, 2009. All but five of its components ended in the red.

Industrial output in India fell for the first time in two years in October, shrinking 5.1%, and the central bank held interest rates unchanged last week after 13 rounds of increases since early 2010.

Pushed to a corner by a series of corruption scandals, the ruling coalition has been unable to reach a consensus on policy decisions that are needed to lift investment and growth. Foreign funds have pulled out a net $300 million from Indian shares this year till last Friday, after ploughing in a record of more than $29 billion in 2010.

"It’s tough to find many optimists willing to bet their money on Indian equities at the moment," brokerage IIFL said in a research note on Tuesday.— Reuters

Indian cash rates climb to 5-month high

Indian overnight cash rates rose to a five-month high on Tuesday as liquidity conditions remained tight after last week's tax outflows. Banks borrowed Rs 1.64 trillion from the RBI's repo counter, just below Rs 1.66 trillion a day earlier that was the highest in nearly a year. At 2 pm, the one-day cash rate was at 9.45/50 per cent after hitting 9.65 per cent, a level last seen on July 15. It had closed at 9.40/9.50 per cent on Monday. — Reuters

Investors may turn cautiously bullish in Q4

New Delhi, December 20
Mutual fund house Daiwa Asset Management India, part of Japan's Daiwa Group, said Tuesday investors might turn bullish in the next quarter, although with a cautious approach, if the central bank manages to tackle the liquidity issues. "The January-March, 2012 quarter might see a mood of cautious bullishness among investors, if the Reserve Bank of India takes care of the liquidity situation," Daiwa AMC head (fixed income) Killol Pandya told PTI from Mumbai.

He said the mutual fund industry is witnessing a downfall, as the customer is "not excited" to enter the market. The total assets under management of the fund houses fell 2% in November 2011.

"Underlying asset class itself is suffering, equity market is on a downhill. Thus, investor is not excited to enter the market," Pandya said. — PTI

RBI measures to hurt rupee in the long term: Analysts

Mumbai, December 20
India's piecemeal steps to defend the rupee can do little more than slow its decline for now, and some of the measures risk hurting the currency in the long term. In particular, new Reserve Bank of India rules that reduce trading limits of banks and companies could have the unintended effect of hampering their ability to hedge, choking off market liquidity and driving a chunk of trading to offshore markets.

The rupee's weakness — a drop of nearly 20 per cent from July highs to a record low last week — reflects the increasing doubts of foreign investors over the ability of India to tame high inflation, prop up falling growth and rein in its large fiscal and current account deficits.

Citigroup expects rupee trading volumes to drop by 25% to 30% after measures implemented late last week.

Thinning liquidity could amplify volatility, dragging the rupee beyond last week's record low if bearishness morphs into a full-fledged selloff.

"Structurally, it’ll reduce liquidity and this will mean more volatility in the long run, but this is acceptable as the move reduces pressure for now," said Dariusz Kowalczyk, senior economist at Credit Agricole in Hong Kong.

Restrictions in the onshore market could also drive more flows to the flourishing offshore nondeliverable forwards market, where rupee volumes are exceeded in Asia only by the Korean won and the Chinese yuan .

A senior FX trader at a European Bank in Mumbai said onshore banks would be wary of trading large volumes with their clients on worries they would not be able to offset their exposure. The best hope for the rupee, traders and economists argue, is for India to get its fiscal and economic house in order.

The central bank has taken a slew of measures to stem the rupee's slide. — Reuters

Re drops in thin volume, hits 53 to $

The rupee fell Tuesday in light volume, weighed down by slowing domestic growth and worries the eurozone's debt crisis could spill over into the global economy and put more pressure on riskier currencies. Many markets players were on the sidelines after the RBI slashed trading limits in the forwards market last week to curb speculation after the currency had ploughed record lows, traders said.At 10:28 am, the rupee was at 53.04/05 to the dollar near the day's low of 53.065. It had closed 0.3% weaker on Monday at 52.88/90. — Reuters

New Companies Bill to empower investors
Sanjeev Sharma/TNS

New Delhi, December 20
The Companies Bill tabled in Parliament seeks to tighten corporate governance norms to ensure frauds of the Satyam type do not get repeated and shareholders are empowered by introducing class action suits. The bill also stipulates a portion of corporate profits is spent on corporate social responsibility initiatives.

Some observers have called the bill "old wine in a new bottle" while others say some of its provisions are too complicated and would take time to comb it fully.

It is also not clear as to when the bill will get passed. Says Ramesh Adige, president of Ranbaxy Labs: "I feel the bill's consideration in Parliament won't happen in this session and we'll have to wait till the budget session".

According to Vaibhav Agrawal(VP research, banking), Angel Broking, the bill, proposed in the backdrop of the Rs 14,000 crore Satyam fraud and advocates stricter corporate governance norms. It proposes to introduce the concept of class action suits for the first time in India. This would give powers to investors to sue a company for 'oppression and mismanagement' and claim damages. Class action suits are quite prevalent in the United States where shareholders can get together to file lawsuits against firms for various malpractices.

In addition, it also proposes to tighten the laws for raising capital from the public. Further, the bill proposes companies should allocate 2% of the average profit of last three years for corporate social responsibility activities. Among other things, the bill also seeks to prohibit insider trading by company directors or key managerial personnel by treating such activities as a criminal offence.

Some experts contend the bill has gone too far in protecting minority interests. Says Ramesh Vaidyanathan, partner, Advaya Legal: "While the bill seems to be expanding the scope of protection of minority interests, it goes too far in doing that. The provisions may pose a lot of practical difficulties and have cost and time implications".

There are also provisions for corporate mergers. According to Agrawal, the bill also proposes significant changes to existing corporate law provisions dealing with mergers and acquisitions and corporate restructuring with some modifications to the Companies Bill, 2009.

The bill simplifies the process pertaining to process relating to merger of small companies and that of a wholly-owned subsidiary with a holding company with some modifications. The bill mandates the RBI’s approval for crossborder mergers. “The restrictions on structuring of capital through issuance of shares with differential voting and dividend rights under the 2009 bill have been done away with”, said Agrawal.

Other features of the bill include a more extensive range of activities that will now be possible online, the changing role of company secretaries, mandatory rotation of auditors every five years, changes in provisions relating to independent directors, corporate social responsibility being made mandatory and substantial judicial being given to the National Company Law.

Apex industry body Assocham said the bill would promote greater shareholder democracy and stricter corporate governance norms.

Fitch warns it may downgrade EFSF eurozone bailout fund

Paris, December 20
Credit rating agency Fitch warned on Tuesday that the eurozone's new bailout fund could lose its triple-A debt status if its main sponsors France and Germany do.

"Fitch Ratings says the 'AAA' rating on debt issues of the European Financial Stability Facility largely depends on France and Germany retaining their 'AAA' status," the agency said in a statement. "The revision of the rating Outlook on France to 'negative' last Friday implies that the risk of a downgrade of EFSF debt has increased," it said.

Fitch Ratings said that the change in the French outlook was not something that could be reflected in its assessment of the EFSF. — AFP

Govt taking action against Kingfisher

New Delhi, December 20
The government said Tuesday it was taking action against debt-ridden Kingfisher Airlines for not depositing Rs 153 crore, which the company deducted as TDS from its employees, with the exchequer. "Proceedings have been initiated for FY 2010-11 to crystalize the default amount, levy interest on delayed payment and take further statutory action," minister of state for finance SS Palanimanickam said in a written reply in the Rajya Sabha.

The liabilities with regard to TDS default, as quantified from preliminary examination, was Rs 53.82 crore for 2010-11 and Rs 100 crore for the current fiscal, he said.

The minister further said, "Out of the (total liability), Rs 21.04 crore has been collected by the IT department. The airline has filed a commitment letter and has undertaken to pay the balance TDS liabilities by the end of the current financial year".

He added the Vijay Mallya-promoted airlines has not defaulted on payment of dues towards provident fund of the employees.

"No dues of Employees' Provident Fund Organization (EPFO) and Employees State Insurance Corp are pending against Kingfisher Airlines as on October 30, 2011", he said.

The airlines has been facing financial problems on account of huge debts and is struggling to stay afloat. Recently, it has cancelled several flights and suspended operations of its budget carrier Kingfisher Red. — PTI

US call centre bill targets overseas jobs

Houston, December 20
A bipartisan bill has been tabled in the US House of Representatives to make companies that move call centres overseas ineligible for grants or guaranteed loans from the federal government, a move aimed at stemming the tide of jobs heading to nations like India.

Introduced by Rep Tim Bishop and Rep David McKinley, the US Call Center Worker and Consumer Protection Act would also put some aggressive mandates on call centre operations.

"Outsourcing is one of the scourges of our economy and why we are struggling so to knock down the unemployment rate," said Bishop. The bill has strong backing from the Communications Workers of America, a union which represents 150,000 call centre workers in the US. — PTI

Micro finance institutions can raise up to $10 m through ECBs

Mumbai, December 20
The Reserve Bank of India has allowed micro finance institutions (MFIs) to raise up to US $10 million through external commercial borrowings, as against the earlier limit of $5 million, a move that will widen their fund raising sources.

"Considering the specific needs of the micro finance sector, the existing ECBs policy has been reviewed in consultation with the central government and it has been decided micro finance institutions may be permitted to raise ECBs up to $10 million or equivalent during a financial year for permitted end-uses, under the automatic route," the RBI said in a notification issued on Monday.

It has also been decided that NGOs engaged in micro finance activities can avail of ECBs up to $10 million or equivalent per financial year under the automatic route, up from $5 million or equivalent, RBI said.

Of late, MFI sector has been facing liquidity crunch resulting in the RBI announcing a working group on restructuring of loans.

Last week, RBI deputy governor HR Khan had said: "All MFIs of all hues will now be permitted to take ECBs of (up to) $10 million." "Of course, they have to be hedged. If you don't hedge you get into difficulties," he had added.

As part of eligibility criteria, the MFIs registered as societies, trusts and co-operatives and engaged in micro finance should have a satisfactory borrowing relationship for at least 3 years with a scheduled commercial bank authorized to deal in foreign exchange.

MFIs would require a certificate of due diligence on 'fit and proper' status of the board of the borrowing entity from the designated authorized dealer bank.

The notification further said, ECB funds should be routed through normal banking channels. NBFC-MFIs will be permitted to avail of ECBs from multilateral institutions, such as the International Finance Corp (IFC), Asian Development Bank (ADB), etc.

Companies registered under Section 25 of the Companies Act and engaged in micro finance will be permitted to avail of ECBs from international banks, multilateral financial institutions, export credit agencies, foreign equity holders, overseas organizations and individuals, it said. — PTI

BT sues Google in US over patent infringement

London, December 20
British telecoms firm BT has launched legal action against Google in the United States over patent infringement in a number of key areas for the technology group such as mobile map services. BT, Britain's dominant fixed-line telecoms group, said in a statement on Monday that it had filed a claim with the US District Court of Delaware for patent infringement.

The BT claim relates to six patents which BT says are infringed by such services as Google's highly successful mobile platform Android, Google Maps, Google Music, advertising services, gmail and other products.

"This is about protecting BT's investment in its intellectual property rights and innovation," the group said. "We believe there’s a strong case of infringement." — Reuters