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April 13, 1997 |
Three fatal hours
Investors lose about Rs 40,000 crore on that black MondayMARKETMEN bit their nails in panic and investors may havve lost close to Rs 40,000 crore in just three hours the day after the Congress chief upset H.D. Deve Gowda's apple cart. The Bombay Stock Exchange Sensitive Index crashed by a record 302 points and the situation was no better at the other exchanges across the countyr on that black Monday.
Even the Global Depository Receipts took a battering on the international market and fell by nearly 10 per cent in Singapore. The all-round panic was reflected on the National Stock Exchange as well which lost 89.50 points.
The NSE has been slowly but surely emerging as the number one bourse in the country at the expense ofgood old BSE. However all is not hunky-dory at the NSE which finds itself saddled with a big chunk of forged and bogus shares of blue-chips like Hindustan Lever, MTNL and Reliance Industries. Vipul Securities, an NSE member, allegedly intorduced these chips worth Rs 40 crore (only Rs 15 crore if NSE is to be believed) in the exchange between December 1996 and February 1997.
Even the NSE figure of Rs 15 crore is abnormally high by Indian standards. Apparently, these tainted shares have found their way into the hands of foreign broking house and Foreign Financial Institutions like Morgan Stanley and WI Carr. But they chose to downplay the damage and have claimed that these shares amount to a fraction of their total trading volume. However, the affected FIIs have asked the exchange to endure that the tained shares are 'rectified' within a week as against the time-frame of three weeks permitted by the Securites and Exchanges Board of India for rectifying bad deliveries.
That is bad news for the National Securities Clearing Corporation (NSCC) as it will have to make good the losses suffered by the trading mambers. Though the NSCC officials claim that they have the funds, this unsavory episode could hit its ambitious plans.
Meanwhile, the SEBI has set up a panel to review the revised carry forward system. This is being viewed in market cirlcles as a major victory for the governing board of the BSE and particularly for its president M.G. Damani who hadbeen lobbying hard for a review. Marketmen are unanimous that the setting up of the panel marks the first step towards the introduction of a revised carry forward system.
It will be headed by J.R. Verma, the public nominee on the board. Damani himself is on the panel besides R.H. Patel, NSE president, M.M Kapoor of the Unit Trust of India and a representative of an investor association.
It may be recalled that in the not too recent past SEBI had constituted a committee headed by G.S. Patel to review the reintroduction of the carry-forward trading system, more popularly known as badla at the BSE. Based on its report, a revised system was put in place.
The SEBI has also launched fresh initiatives aimed at reviving the market. For instance, issues which are not underwritten too will be now allowed to procure subscription within 60 days of its closure.
To improve the quality of the issues, the board has decide to plug the loophole in the term 'track recor' for raising capital from the primary market.
The SEBI has also made it mandatory for a company tha wants to raise money from the public to declare dividends.
Well, SEBI at least is making all the right noises now. That itself is a welcome change.
ASHOK KUMAR
(The author is a financial consulatant in Mumbai)
IT INDUSTRY
On the fast track
IT is one of the fastest growing sectors in the Indian economy and recorded a rise of 61 per cent in its export during the first half of 1996-97. A major requirement of this technology-intensive industry is a trained and English conversant workforce which is available in plenty in India. Having proved its reliability in the global market, India's IT industry also stands to benefit substantially from the latest Union budget. The outlook appears promising for this industry.Major Players
INFOSYS TECHNOLOGIES
A company with fairly sound fundamental, Infosys Technologies ranks among the leaders in the IT Techonologies ranks among the leaders in the IT segment. Its well-known package include DMAP, INLEGOE and Bancs 2000 date compliance projects world wide. Its financial track record is impressive.NIIT
Its net profits have been growing at the rate of 49 per cent in the last five years. NIIT is engaged in computer education and training and development of software marketed under the brand names Hyper, LEARN, Vista and Vista Multimedia. The company also has produced cutomised instructional software development projects and application solution.SATYAM COMPUTERS
A leading developer of offshore solution. Satyam Computers is enganged in software development for exports, professional services and communications products. Its clientele includes Volkswagen, Selective Insurance, Caterpillar and AT&T. Satyam Computers had recently tied up with Dun and Bradstreet corporation of the USA for software services. On the financial front, it has an excellent tract record.TATA INFOTECH
Its clientele includes insurance companies, banks, airlines and governemtn bodies spread over 50 countries. Tata Infotec, earlier known as Tata Unisys, is currently engated in the development of Year 2000 solutions. Its financeial track record, fundamentals and prospects are satisfactory.
SCRIPS TO BUY
WOCKHARDT
A manufacturer of IV fluids, infant formulae, bulk drugs and pharmacaceuticals. Wockhardt is concentrating on its bio-pharma division. It had recently tied up with Rhein Biotech (GErmany) for installing a bio-technology-based bulk drugs and formulations manufacturing facilty in Maharashtra. It is presently developing tow bioptechnology-based products : hepatitis B vaccine and insulin through recombinant technology.Wockhardt has an encouraging financial track record but expects greater competition from world palyers in the Post -GATT era. It has earmarked over Rs 100 crore for its R&D division.
ELGI EQUIPMENT
Primarily a manufacturere of compressors, Elgi Equipmenthas set up facilities for producing lubricating equipment, hydraulic and mechanical lifts, mobile lube services and workshops and vacuum pumps. During the first half of 1996-97, Elgi posted sales and net profit of Rs 83.93 crore and Rs 6 crore respectively. It is projecting an EPS of Rs 41.7 for the full year. A company with strong reserves position and sound fundamentals.BURROUGS WELLCOME
Famous for its brands like Septran and Calpol, Burroughts Wellcom is a 51 per cent subsidiary of Glaxo-WEllcome (UK) and has a satisfactory track record. It had introduced as many as five new products in the last two years. The company which made a loss in the first hall of 1996, recorded sales and net profit of Rs 184.23 crore and Rs 11.79 crore respectively during December 1996. Overall, its prospects appear promising.ASEA BROWN BOVER
It is into power generation, transmission and distribution and supplies equipment for various projects in the country. Asea Brown Boveri also takes up the construction of switch yards. It is setting up agreenfield transformer facility and is expected to become a global supplier of products for the ABB group. Investments could yield handsome gains in the medium to long term.
MARKET TALK
Asea Brown Boveri is being recommended as a good investment choice by a well-known portfolio manager from Mumbai.
The shares of TVS Suzuki are being accumulated by a BSE bull operator. He is optimistic about earning handsome gains.
Dump the shares of Rajdoot Paints, advises a veteran analyst whosees it as a lost cause. Another expert has advised disinvestment of Emkay scrips. Holding on is unlikely to yield returns.
The tie-up between Pearl Global and Lerros of Germany has attracted the attention of a group of NSE brokers.
Keep an eye on Maral Overseas which is expected to record a sharp rise in its price according to a source close to the management.
SCRIPS ON THE SLIDE
TITAN INDUSTRIES
It is a leading player in the Indian watch namufacturing segment. TIL's aggressive marketing and publicity campaign involved a heavy outlay which in turn had a direct impact on its profitability. Yet, considering that it has an established brand name and its products are popular, TIL's fortunes could soon be on the upswing. Investors with a long-term perspective could thus hold on.TUBE INVESTMENTS OF INDIA
One of the largest bicycle manufactureres in the country, Tube Investments of India is a larger exporter of bicycles. Though the company's margins have been under pressure during the first half of the current year, its expansion plans could have a positive effect on its bottomline. Hold on to this scrip for the time being.
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