Market Matrix: Current events affecting Indian Stock Market

By krsna Khandelwal - A veteran market analyst

Vary a many developments are taking place in our country and it is necessary to keep abreast of news and analyse it.

Air Sahara is renamed by Mr.Goyal of Jet Air as JET LITE. He would be acquiring 20 wide-bodied Boeings for fleet requirement of both the airlines. There is scope for the merged entity, as economies of scale would work for its advantage. A bigger airline is always preferred by the customer and operating costs get lower on higher scale of operation, more so for an airline.

The point of sale (POS) spending through credit cards has topped Rs 55000 Crs mark in 05-06. A total number of 18 million credit cards and 60 million debit cards were issued in 05-06. Indian Banks areplanning to have their own payment settlement service and not depend on MasterCard/visa for this. This will save cost to them. The total payment for the services to MasterCard and VISA aggregated $50 million in 05-06. With software service support available in India this is a logical step forward.

Sensex closed at 13696 on 16th Apr 06 (Nifty 4013) after gaining over 10% over the last nine sessions.

China has reported foreign currency reserves of $1202 billion. This is very substantial indeed. The western economies may not absorb it in any way without problems arising. China may have to look towards India and other Asian nation for the deployment of funds in its hands. I think this will happen mostly on bi-lateral basis without the international financial institutions and firms playing a major role. May be there is line of credit given to Indian banks. For this to materialise, China ahs to bring its currency at par with intrinsic value. it seems to be inclined to do the same. Mumbai should gear up for becoming a financial hub of international order.RBI may put a check on the interest rates offered to NRI for deposits.NRIs have deposits of the order of $39.3 billion as on 31 Mar 07 as against $35.13 billion last year. RBI should shed its responsibility of managing flows and currency. It should now happen in a free manner for the benefit of India.

SBI's 400 employees have decided to take early retirement.Earler some 6000 employees had done so. SBI has 160000 employee strength and such reduction in work force is in its interest as technology is taking care of the operations even with reduced work force. Eventually cost of intermediation should come down for the Indian banking industry as this is unnecessary to remain competitive and give better interest rates to depositors, otherwise the alternate channels would take away much of savings of Indian households.

Put/Call ratio stands at 1.1 and this should be affecting the prices adversely now.

Tata Steel board is to consider raising of capital. I think Tatas would put in place a game plan to raise their own stake in Tata Steel while taking care of the funds needed for CORUS acquisition. May bethis is why Tatas did not mind the slide in Tata Steel share price after CORUS related intentions were out. This will ensure a moderate average for the last six months and the allotment of fresh capital toTata Group itself would be possible at low rates. They may also come out with rights issue of big size which may not be entirely absorbed by the rest of the shareholders and they may subscribe to unsubscribed portion. This is like killing three birds with one stone. One, that Tatas have got their big ticket acquisition and thereby becoming a multinational group, two, they were not comfortable with the holding level in Tata Steel and direct arising of holding by market purchase would have been too costly for comfort, thirdly, the cash flow on account of dilution in TCS would be suitably deployed. I have to say the same thing now again as was earlier told that the management should have the interests of sleeping, unknowledgeable shareholders in mind while taking decisions. I may tell you if CORUS would not have been there in Tata Steel's hand, its share price would have been not less than 770/- today. SEBI should make it a condition that any deliberation about merger and acquisition should be reported instantly outlining the nature of discussion even if the names are not immediately given. The small shareholders should have some inkling as to what is coming.

I want to suggest to SEBI and the Govt. that a listed public company should not have less than 35% public holding and there should be 5% lower rate of corporate tax on profits for publicly listedcompanies. It was the case some thirty years back. There should be a further provision that the publicly held shares would be dealt by only the individual public shareholders i.e. this body of shareholders would exchange the shares between themselves. Rest should be open for sale and purchase between the promoter groups, institutions, FIIs and banks etc. If this condition is likeable to the promoters there should be no fund raising from the public and no public listing as the price discovery is material for the small individual share holder only, others may do so by themselves without listing. We have seen many a scams happening where the operators with hands in glove have taken the public for a ride with the promoters. We have also seen the promoters coming forward to dilute their holding at one time and at other time to raise it. Some times in open market, some other times by allotting greater share to them selves. I am sure this small cry would not go far unless you the members of public convert it in to a big uproar. The matter should be given a cool thought by every body and a public opinion should be formed.

Hari Om

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