Weekly Stocks Outlook

FMCG Stocks Outlook:

Gains seen capped due to high valuations Shares of fast-moving consumer goods companies are likely to stay at current levels in the coming sessions due to their already high valuations. Though domestic shares are seen rallying next week, analysts said gains in fast-moving consumer goods' shares will be capped due to their bloated value.

Oil Stocks Outlook:

ONGC seen up next week on Kazakhstan field buy Shares of state-owned Oil and Natural Gas Corp, and Bharat Petroleum Corp are likely to surge next week while those of index heavyweight Reliance Industries may hold on to gains due to bullishness in the market.

Pharma Stocks Outlook:

May fall marginally on lack of trigger Shares of pharmaceutical stocks are seen falling marginally next week due to lack of any positive trigger, market players said.

IT Stocks Outlook:

Bouts of profit booking expected next week Shares of information technology companies, particularly frontline ones, could face bouts of profit booking next week after sharp gains this week, market participants said. 

Cement Stocks Outlook:

Down next week; cement sales data seen weak Stocks of cements companies will stay in a narrow range with a weak bias next week as data on companies' despatches in November is expected to be bearish, analysts said.

Steel Stocks Outlook:

To consolidate tracking mkt; fundamentals weak Shares of major steel companies are seen consolidating in the coming sessions tracking the trend in the domestic market, where the previous three sessions' rally is unlikely to sustain, analysts said.

Auto Stocks Outlook:

To track Nov sales numbers next week Shares of automobile companies are seen taking cues next week from monthly auto sales numbers for November. The auto index is expected to trade in a range with positive bias, according to market participants.

Telecom Stocks Outlook:

Firm next wk post lukewarm spectrum auction With the lukewarm response to the recently held auction of spectrum in the 1,800 MHz bandwidth, leading to less than expected outgo on spectrum acquired and the one-time spectrum charge to be levied on operators, telecom stocks are expected to trade positively next week.

Q2 GDP at 5.3%

India July-Sept GDP -- Table of Data

Following is a breakup of data on India's gross domestic product by sector for the fiscal second quarter through September:

GDP By Sector

                                      FY12-13       FY12-13    FY11-12

                                       2Q                 1Q             2Q

Agriculture                              +1.2%          +2.9%        +3.1%

Mining                                     +1.9%          +0.1%         -5.4%

Manufacturing                       +0.8%          +0.2%         +2.9%

Utilities                                   +3.4%          +6.3%         +9.8%

Construction                         +6.7%          +10.9%       +6.3%

Trade, Hotels, Transport    +5.5%          +4.0%         +9.5%

Finance, Property                +9.4%          +10.8%       +9.9%

Social Spending                  +7.5%         +7.9%          +6.1%

Book Profit in Existing Tax-free Bonds and Invest in New Issues

Listed bonds are yielding 7.2-7.5%,which is lower than what new issues will offer.Prashant Mahesh explains why it makes sense for investors to switch to new offerings 

You may see a slew of tax-free bonds hitting the market soon.As per a Central Board of Direct Taxes (CBDT) notification,10 companies NHAI, IRFC, IIFCL, HUDCO, NHB, PFC ,REC, JNPT, Dredging Corporation and Ennore Port can issue tax-free bonds worth.53,500 crore during the current financial year.Rural Electrification Corporation (REC) is likely to hit the market first with its public issue of tax-free bonds in December.The issue is likely to open for subscription on December 3.Though the interest rates for RECs tax-free bonds are yet to be announced,as per the CBDT circular,there will be a ceiling on the coupon rates based on the reference government security (G Sec) rates.The rate offered will be the reference G-Sec rate less 50 basis points for retail investors;while in the case of institutional investors,the rate will be reference rate less 100 basis points.That means since the 10-year benchmark currently offers a yield of 8.21%,the 10-year REC paper for retail investors is likely to offer 7.71%,while the 15-year could offer 7.86%.Does that entice you Even if it does,you have to check the rates available on issues already listed on the secondary market.Yes,you can either buy tax-free bonds on the public issue from the primary market or buy bonds of NHAI,REC,IRFC,HUDCO,among others,which are already listed on the stock exchange.Investors need to compare the yield they can get in the secondary market with the primary market offering.Since the already listed bonds give you a yield between 7.2 and 7.5%,which as of now looks lower than the primary market offering where REC could offer 7.71-7.86%.Hence new investors should apply through the primary market.Existing investors may book profits by selling their existing tax-free bonds in the secondary market and invest again through the primary markets, says Ajay Manglunia,senior vice president (fixed income) at Edelweiss Capital.

CALCULATE BEFORE YOU ACT

Now,if you are invested in,say,the taxfree 8.2% 10-year NHAI bond (face value.1,000) in January 2012 through the primary market,the math would work out like this: This bond trades at.1,077 in the secondary market.Since it trades at a premium to its offer price,the yield for a prospective investor falls.So for anyone who buys these bonds now,the yield will be only 7.18%.Also,since the bond is 10 months old,the balance tenure will be 9 years and 2 months.As against this,you are expected to get 7.71-7.86%,from REC.Thereby subscribing to the REC bonds will be more lucrative,as there is a gain of 50 to 70 basis points.Similarly,the 15-year HUDCO bond trades at.1,119.If you were to buy this,you will get a yield of 7.49%.So if you sell these bonds and subscribe to fresh offering from REC in the primary market you stand to benefit.You get to invest in a higher tenure paper,and also have a chance of higher capital appreciation, says Deepak Punjwani,head (debt markets) at GEPL Capital.So if you hold 8.2% NHAI 10-year paper,by selling it you benefit in two ways.First,you make capital gains;and second,you also have an option to buy into a longer tenure paper (say 15-year REC bond at face value).A longer term paper would work better because interest rates are expected to fall in the near future.One basis point change in yield on a 15-year bond can change the price of the bond by 8 to 10 paisa,where as one basis point change in yield on a 10-year bond can change the price by 7 paisa, says Deepak Panjwani.

DO NOT WAIT

Given the fact that growth is slowing down and inflation is moderating,the Reserve Bank of India may be forced to cut interest rates.The central bank may cut interest rates by 50-100 basis points in the next one year,feel experts.Typically,whenever a series of issuances are lined up,investors try to wait and watch for the best coupon rates.However,experts advise against following such a strategy now.Most of the expected tax-free bonds are from PSUs.Even if there is a marginal difference in rating,it does not make much sense to wait.Rather there is a risk that further issuances could be at lower yields, says Ajay Manglunia.Hence investors should apply at the earliest.The forthcoming issues will have a higher limit for retail investors at.10 lakh as against.5 lakh in the earlier issuances which increases your chance of allotment, says Vikram Dalal,managing director,Synergee Capital.

Is it Time to Say Goodbye to Delisting Theme?

Many have lost money as stock prices of several potential delisting candidates have fallen after they decided to continue on the bourses.Nikhil Walavalkar weighs the options 

Many investors were charmed by the MNC theme last year.They were chasing shares of multinational companies with promoter holding of more than 75%.The rationale was simple these companies would delist before June 2013 to adhere to the norm of at least 25% public holding for private companies listed on stock exchanges.And while delisting,minority investors were expected to get a golden handshake.But this simple investing theme hasnt actually played according to the script.Companies such as Disa India,Honeywell Automation,Blue Dart Express have opted to reduce the promoter holding instead of delisting the shares.The delisting offer of Ricoh India has failed.No wonder,the stock prices of most of these MNCs have corrected from their one-year highs as investors queued up for a quick exit.Investors in stocks such as AstraZeneca Pharma India,3M India,Timken India are guessing if the delisting will ever happen.Investors were banking on delisting and companies opted to reduce promoter shareholding which was a shock for many, says Vijay Kedia,managing director of Kedia Securities.You have to look at each of the delisting bets separately and decide accordingly, he adds.

MORE PUBLIC SHAREHOLDING

For the uninitiated,it all started with the ministry of finance directing private sector listed companies to ensure 25% public holding and public sector companies to ensure 10% public shareholding.The deadline for the implementation of the norm was June 2013.Companies had two options.First,to come out with a delisting offer and corner the adequate number of shares through reverse book building process and delist their shares from the exchanges.The second option was that the promoter should sell his holding or issue additional shares to non-promoter entities and bring down the promoter holding to 75% of total shares of the company.Most market participants were expecting the financially strong companies,especially the multinationals to take the first option.In that hope,investors bought into these stocks to push up the prices in an otherwise range-bound market.(The adjoining table shows the price rise in last one year.) 

REDUCING PROMOTER HOLDINGS

But now the prices are on the way down for many such shares.Blue Dart Express,Honeywell Automation,Disa India and Fresenius Kabi Oncology have opted to reduce the promoter shareholding by offer for sale a mechanism where in the promoter offloads some of his stake using the stock exchange route.More important is,the floor price fixed for offer for sale by these companies were below the prevailing market price.The floor price for Disa India offer for sale was at.1,500 while the stock was quoting above.2,700.In case of Blue Dart Express,the offer price was at.1,720 against the market price of.2,000.Multi national parents are not willing to pay through their nose to delist their subsidiaries.Naturally the greed is replaced by fear and hence we have seen the stock prices correcting, says a fund manager.A case in point is that the share price of Honeywell Automation correcting 20% on the day it announced its intention to reduce promoter shareholding.Failure of Ricoh India delisting is another one.The stock corrected from a high of.91 to.50 in two weeks.Investors have started doubting the delisting theme and many of those who are already invested and have been watching the prices coming down are now clueless about the future.

GOING AHEAD

There is no point in summarily discarding this investment theme,feel some experts.There are several companies with high promoter holding and a financially strong parent entity.Some such companies may opt for delisting as the same would result in more operational flexibility, says Dipen Shah,head of PCG research at Kotak Securities.Many market participants subscribe to his views.AstraZeneca Pharma India,Kennametal India,3M India,Gillette India,Oracle Financial Services Software are some such stocks that savvy investors are still looking at for a possible delisting.Of course,there is no guarantee that these companies would delist.Prices of most of these delisting candidates are already quoting at very high levels and there is not enough margin of safety.If you have bought into a stock at the lower level and it is a small component of your portfolio,you may choose to hold on to it where delisting expectations are still alive, says Chetan Parikh,director,Jeetay Investments.Any new entry at this level however must be carefully examined in the light of business prospects and prevailing valuations,he adds.The decision becomes difficult if you are looking at companies where the offer for sale is already announced.Some companies have wonderful underlying businesses and you can buy into them as stock prices tank in the short term, says Vijay Kedia.He prefers Blue Dart Express and Honeywell Automation among such companies.As companies opt to reduce promoter shareholding,investors are given a message that the company should remain listed for at least two to three years.Institutional investors prefer listed shares if they have great underlying businesses.In the medium-term,institutional demand should push up the stock prices, says the fund manager.However,the recent failure of Ricoh India has left investors guessing.Many are still hopeful that there should be another delisting attempt at higher price in the short term.But such hopes may not fructify.If you have entered a special situation such as delisting and it does not materialise,it is better to exit and take the losses, says Chetan Parikh.However,there is another angle,too.There are investors who keep aside the delisting trigger and are keen to look at the business with a long-term view.Ricoh India looks good for the long term as business is expected to grow thrice in next five years, says Abhishek Jain,head of research at JHP Securities.

Fate of Reforms,Global Woes to Keep Investors on the Edge

A holiday-shortened week,expiry of November series along with key meetings of International Monetary Fund and European Union are expected to keep indices volatile 

The turn of events in Indian Parliament nd a growing nervousness among global investors over the impending US fiscal cliff will keep markets edgy this week.With the Prime Ministers dinner diplomacy failing against an opposition adamantly against the governments reform announcements,developments (or the lack of them) in Parliament will be closely tracked by market participants in a truncated week.

Markets will be shut on Wednesday on account of Guru Nanak Jayanti.Expiry of November series equity derivatives on Thursday is likely to keep indices volatile.Traders will also watch developments in Europe,where leaders of the International Monetary Fund and the European Union are meeting on Monday to discuss the aid to Greece.

The market is keeping its fingers crossed on big-ticket reform proposals like greater foreign participation in insurance and pension.Proceedings in the Parliament are the most important market-movers this week.If the reforms process does not continue in the Parliament,then the market might see it as a reversal of reforms, said AK Prabhakar,SVP - research at Anand Rathi Financial.

There is talk that the cap on LPG cylinders might be raised or abolished as a measure to appease electorates.Moreover,shares of public sector companies may come under pressure this week after Hindustan Coppers deeply discounted offer for sale, he said.In the US,the fiscal cliff threat still looms large as congressmen have not finalised an alternative to the automatic spending cuts and tax increases.It is still very unclear whether there will be an agreement before year-end.Some legislators reportedly believe that it might be in their interest to enter the new year without striking a deal.

The debate would transform into one about cutting taxes thereafter rather than raising taxes beforehand, said Barclays analysts in a note.The uncertainty is likely to continue to grow as we approach the year-end,which could impact financial market confidence and near term growth prospects, they said.In Europe,the EU postponed a budget meeting to 2013 as member nations sparred over budget cuts for the union.Technical analysts said the market could continue to stick to a narrow range instead of showing signs of a directional breakout.

Even for the previous week,5540 was an important support level which the Nifty index did not breach, said Shubham Agarwal,AVP & senior technical analyst,Motilal Oswal Securities.So 5540 continues to be an important support level for the index.If it breaches this,it could slide another 150-200 points, he said.Stocks such as Maruti Suzuki appear positive in the week ahead.We see a secular uptrend in the stock and we are also positive on the auto sector, he added.

Weekly Stocks Outlook

Bank Stocks Outlook: 

Mixed trend; preference for pvt bks continues Bank stocks are likely to see a mixed trend with lack of secular direction for scrips in the sector ahead of November derivatives expiry on Thursday, analysts said. Banking stocks are also likely to take cues from the choppy trend in broader equity markets.

FMCG Stocks Outlook: 

Seen staying firm with positive bias next wk Shares of fast-moving consumer goods companies are likely to remain firm in the week ahead with a positive bias.

Oil Stocks Outlook: 

RIL seen dn on GRM concern; oil retailers weak Reliance Industries shares are seen weak in the near term because of the headwinds in its core refining business coupled with a downturn in petrochemicals margins.

Capital Goods Stocks Outlook: 

Choppy; action to be stock-specific Trade in shares of most capital goods and engineering companies is likely to remain choppy, as investors will roll over positions to the December derivatives series ahead of the expiry of the November futures contract, dealers said. Action is likely to remain stock-specific, they said.

IT Stocks Outlook: 

Range bound next week in absence of triggers Shares of major information technology companies are seen in a narrow range next week, in the absence of any sector-specific domestic or global triggers.

Pharma Stocks Outlook:

SC price policy verdict to lend cues next wk Shares of major Indian pharmaceutical companies are seen facing an air of uncertainty in the coming week ahead of the Supreme Court's verdict on the National Pharmaceutical Policy that has been approved by the Union Cabinet, analysts from domestic brokerages said.

Telecom Stocks Outlook: 

Up next wk as sector seen stable near term Shares of major telecom companies are expected to trade in positive territory next week taking cues from the clarity that was brought about by the auction of spectrum in last few days, dealers said.

Steel Stocks Outlook: 

Range bound amid lack of fresh triggers Shares of major steel companies are seen range bound in coming sessions because of continued weak fundamentals and lack of fresh triggers to initiate movement on either side of price scale, analysts said.

Cement Stocks Outlook: 

Seen range bound, gains likely to be capped Cement stocks will remain range bound next week, and any uptick in prices will be capped, as these stocks are currently in consolidation mode, analysts said.

Auto Stocks Outlook: 

Shares of automobile companies are seen tracking the broad market next week, according to market participants. Some movement is likely in automobile stocks on Thursday and Friday as expectations of monthly sales numbers will start pouring in, an analyst with a domestic brokerage said.

Cabinet okays pharma policy

The Cabinet on Thursday approved a long-pending National Pharma Policy, which may result in prices of essential drugs including anti-diabetics, painkillers, anti-infectives and anti-cancer drugs, reducing by around of 20%. 

The government did not disclose details of the drug policy, but sources say that it cleared the fresh pricing mechanism which was drawn up by the Group of Ministers led by agriculture minister Sharad Pawar on Wednesday. The GoM drew up a new mechanism which capped prices of 348 essential drugs, following the finance ministry's strong opposition earlier this month to the draft policy cleared in September. Experts say that an average reduction of around 20% in essential prices is substantial, given the fact that most consumers have to bear out-of-pocket medical expenses. The new pricing mechanism uses "the simple average method" for determining the ceiling price of all the molecules (drugs) under a particular therapeutic area with over 1% market share, while the draft policy had capped the price by taking the "weighted average". 

The government will present the policy before the Supreme Court on November 27, the day it meets to hear the PIL filed in 2003 to bring down prices of essential medicines. The SC had earlier asked the government to continue with the cost-based pricing mechanism to cap prices of essential drugs. It now remains to be seen whether the court will accept the government's proposal which is a market-based pricing formula. 

The Cabinet is believed to have included key riders, including the annual increase, which will be allowed to drug companies to increase prices. Also, when a company changes the original formulation by adding a new ingredient, it would come under price control. 

The reactions from pharma companies were, however, mixed. Though the industry was relieved that the existing cost-based formula was not employed to cap prices, it felt that there would be an additional impact as a result of the new formula of arithmetic average, as against the earlier weighted average mechanism. D G Shah, Indian Pharmaceutical Alliance director general, said: "The policy will hurt the industry. The price erosion on NLEM drugs will wipe out substantial profits." On the other hand, Ranjit Shahani, president of industry body, OPPI, said that it's a pragmatic policy, and takes the interest of patients at heart. 

Research firm AIOCD's director Ameesh Masurekar said: "Pharma industry allows for an increase in prices of 2-3% every year. If an average 20% reduction in prices of essential drugs happens, it means buying at 2004 prices. This will benefit consumers." Health activists were, however, not too happy with the Cabinet decision. The 20-30% reduction in prices is not substantial, according to Anant Phadke of Jan Swasthya Abhiyan, a patients' group, demanding that the government heed the SC's opinion and impose cost-based price control. 

The new pricing mechanism will lead to a price erosion of over Rs 1,400 crore, according to research consultancy IMS, while AIOCD estimated the impact to be around Rs 1,800 crore. Though the tweaked pricing formula would lead to an additional impact on companies, but when calculated on an industry size of over Rs 67,000 crore, it is marginal, around 2-3%, or over Rs 1,500 crore. The scope of the policy is around 17% of the total pharmaceutical market, while coupling it with the existing medicines under price control, the coverage increases to around 30%.

Most Global Luxury CEOs now Look to Invest in India

20% y-o-y growth,easier FDI norms make luxury brands line up for India 

A majority of global luxury brands consider wholly owned subsidiaries or joint ventures as their preferred medium to enter India after the government relaxed foreign investment norms early this year to allow up to 100% FDI,says a study.

One-fourth of 300 luxury brand CEOs who participated in a survey by Yes Bank and Assocham said they would prefer full control of their operations in India to protect proprietary knowledge and skills,while one-third of the respondents they prefer joint ventures with Indian partners given their expertise and knowledge about the local market.Before the government increased foreign investment limit in single-brand retail from 51% to 100%,a majority of luxury brands considered the franchisee route and distribution deals as their best options to enter the country.Global luxury giants are clearly keen to invest in a country where the market is booming.

According to the survey,Indias luxury market is expected to reach $14.73 billion by 2015 from an estimated $8.21 billion this year.Despite the inclination for having full control of their businesses in India,several international brands do not anticipate immediate benefits of 100% opening of FDI in single brand retail due to sourcing clauses and other regulatory hurdles. One in four CEOs believe that the biggest hurdle facing the 30% mandatory sourcing criteria is that they cannot achieve the same product quality by outsourcing a part of their production to India,said the survey titled India Luxury Top Management Survey 2012.

The heritage of a luxury brand built on decades of craftsmanship makes the 30% local sourcing clause a no go area, Anand Rai,financial controller (India and Turkey) at Christian Dior,said.As many as 46% respondents said while reforms are underway,current regulations were not supportive enough for businesses to scale viably.While 16 % CEOs are concerned by shortage of skilled labour since it is become difficult to make the local workforce understand the heritage and legacy of the brand as well as the specific finishes involved in the manufacturing process,12% respondents said counterfeit goods result in a sizeable loss of revenue and serve as a major hurdle to conduct operations in India.Given the hurdles involved,a significant number of brands do not anticipate an immediate change in their existing business model in India.That may be why more companies prefer joint ventures to wholly owned shops.

Most brands prefer to stick to Indian partners because of the knowledge that Indian partner brings in terms of understanding the consumer demographic and preferences of the Indian luxury consumer, says Sanjay Kapoor,managing director at Genesis Luxury.According to Kapoor,the FDI regulation change will just give an added impetus to brands such as Prada and Ralph Lauren to enter who have so far been holding back because they only come in through wholly owned businesses.Ankur Bisen,vice president (consumer products and retail) at Technopak Advisors,said,Sometimes the foreign company is apprehensive of sharing proprietary knowledge,processes and skills with a local partner. The surveyed CEOs also cited lack of premium infrastructure and high import duties among challenges in the way of the growth of luxury market in India.

Finding the right quality infrastructure space has been the biggest impediment for Louis Vuitton opening more stores in India.While we have 40 stores in China,India has only five stores, Tikka Shatrujit Singh,advisor to chairman at Louis Vuitton,said.The survey said that 95 % of the top management surveyed is extremely concerned about the inadequacy of infrastructure.Also,two-third of the CEOs are concerned about political and regulatory landscape,while 70 % are worried by the exchange rate volatility which is adding pressures on margins of most of the luxury players.

GoM tweaks stand on drug pricing

The Group of Ministers (GoM) on the proposed National Pharmaceutical Pricing Policy has decided to make some key changes in its earlier recommendations to soften the prices of essential medicines.

The changed position might prevent companies from dodging the price regulation by changing the composition of drugs.

Even as GoM head, Agriculture MinisterSharad Pawar , told the media that consensus had been reached on the revision, sources said it was still uncertain whether it would get enough political consensus to become a policy.

The GoM met today for almost two hours, with Finance Minister P Chidambarama “ special invitee ”. It is expected to propose three key changes to its earlier proposal. However, sources, present in the meeting said the GoM’s new proposal might still not have appease Chidambaram.

The changes to the GoM’s earlier proposal, sent to the Cabinet for consideration, were triggered due to opposition from the finance ministry. After this, the matter was referred back to the GoM and Chidambaram made an invitee.

According to government sources, the Group of Ministers has now decided to cap prices of 348 medicines based on the simple arithmetic average of all drugs in a segment with more than one per cent market share, instead of the weighted average proposed earlier.

“This would mean the weight of market share will not be reflected in the ceiling price of the drug,” a top source told Business Standard.

The move is significant because expensive medicines have higher market share. The higher share flows from the fact that companies get a better premium on expensive medicines, which they spend on brand building and marketing.

A cap based on weighted average would have meant the price of an expensive drug would reflect more on the cap.

However, a cap based on simple average would help bring down the prices of expensive drugs to a reasonable level, is the thinking.

The second major change to the earlier proposal is that any company changing the composition of the 348 essential medicines by adding a new ingredient to the formulation would come under price control and would have to seek permission from the pricing authority, the source said.

The idea is to prevent companies from circumventing price control by adding new ingredients to essential medicines.

The earlier recommendations of the GoM included only 348 formulations under price control, while companies were free to price combinations of these drugs.

The GoM has also decided that prices of these drugs can be reviewed by the National Pharmaceutical Pricing Authoritywhenever required, a deviation from its earlier suggestion of evaluating price caps every five year. Besides, the panel has also discussed asking companies to seek price approval from the regulator whenever they desire a price increase for their product.

Earlier, the suggestion was to allow companies to annually raise the prices of 348 medicines based on the Wholesale Price Index.

Sources said Chidambaram, who left the meeting before it concluded, did not still appear happy with the proposal.

However, Pawar said the matter would be placed in the Cabinet before the Supreme Court's next hearing, scheduled the coming Tuesday.

"We have resolved all the issues. There were certain issues raised by my colleagues. We discussed them in depth and we have come to an agreed formula. I think we will be able to take the Cabinet's approval before November 27," he told reporters after the meeting.

India may be Years Top Recipient of Remittances

Country will get $70 b by the year end,China will get $66 billion,says World Bank report 

India is likely to emerge as the largest receiver of Diaspora remittances in 2012 with $70 billion expected to flow in by the end of the year,according to World Bank.China may be the second with remittances of $66 billion,followed by Mexico and the Philippines with $24 billion each and Nigeria ($21 billion).Other countries with a robust remittance inflow are Egypt,Pakistan,Bangladesh,Vietnam,and Lebanon.

Over the years,money transfers by Indians working abroad to friends and relatives back home have been a steady source of foreign exchange supply.Such money is in the nature of permanent inflows as against the more volatile foreign capital that enters the stock market.Together with NRI deposits,the Indian Diaspora has brought in nearly $135 billion so far this year. Outstanding NRI deposits are estimated at $35 billion.Technically,NRI deposits,unlike remittances,are reversible,even though a sizeable part of it gets rolled over.Even during the 2008 Wall Street meltdown and dotcom crash of 2001,which caused global slowdown,remittances were not hit.

Migrant workers are displaying tremendous resilience in the face of the continuing economic crisis in advanced countries, said Dilip Ratha,manager of the World Banks Migration and Remittances Unit.Their agility in finding alternative employment and cutting down on personal expenses have prevented large-scale return to their home countries. India receives a bulk of its remittances from Europe and North America,which has a significant presence of highly skilled Indian professionals.There are also substantial inflows from other regions like the Gulf.

Sebi Stops Mini Futures to Protect Small Investors

Asks NSE & BSE not to issue new mini contracts,but allows existing contracts to trade till expiry 

Small investors trying their luck to make quick money by trading mini futures and options based on indices will soon have to refrain from such bets.Capital markets regulator Sebi has asked NSE and BSE to discontinue such derivatives contracts with a minimum size of.1 lakh to protect small and retail investors from the risk associated with these instruments.But the move is unlikely to have much of an impact on either exchanges or brokers owing to the negligible turnover of these instruments.

Exchanges have been directed not to issue any fresh mini futures or options contracts.However,the existing unexpired contracts till January 2013 will be traded till expiry and new strikes can also be introduced in the existing contract months,according to the circular issued on Tuesday.With a view to ensure that small/retail investors are not attracted towards derivatives segment,it has now been decided to discontinue mini derivative contracts on index (Sensex and Nifty), the circular said.Sebi introduced mini derivatives when the market was near its peak around December 2007 to allow retail players to access the instrument for a lower cost than the normal index futures.For instance,the contract size at 20 lots of the mini Nifty is smaller than the normal Nifty futures which has a lot size of 50.The margin one has to pay to buy or sell the index futures is normally 10%.

The NSE runs three concurrent month mini contracts based on Nifty as well as mini Nifty options.The mini contracts on Sensex are not traded currently.We will abide by whatever decision Sebi has taken, said an NSE spokesperson.A BSE official spokesperson said,We will comply with

the Sebi directions. At Tuesdays closing of near-month Nifty mini futures,upfront margin at 10% works out to.11,170 per contract.Based on the same days closing price,the nearmonth Nifty futures margin works out to.27,915.However,brokers do not see this as much of a difference even for a retail client who can easily buy a Nifty contract.Four brokers - Edelweiss,Anand Rathi,Angel Broking and Dolat Capital -- ET spoke to said the move would not have much of an impact as mini Nifty futures turnover as a percentage of Nifty turnover was negligible.For instance,on Tuesday mini Nifty futures November contract turnover was.178.5 crore,just 3.7% of Nifty November futures turnover.

Three concurrent month futures run with the near month (November) contract generating maximum turnover.Mini Nifty options turnover was negligible.The step should not impact markets either by way of sentiment or volume since mini derivative contracts posted a low turnover,not contributing much to overall derivatives turnover, said Yogesh Radke,head of quantitative research,Edelweiss Securities.Radkes sentiment was echoed by Aadil Sethna of Dolat Capital Market and Chetan Jain of Anand Rathi Securities.

However,Siddarth Bhamre,head of derivatives at Angel Broking said he did not find merit in the move.Rather than keeping derivatives out of retail investors reach,Sebi should have tightened the screws at brokers end to ensure against the misselling of such products, said Bhamre.However,MS Sahoo,advocate and former Sebi whole-time member said the decision was in line with the finance department standing committees decision of 1999 that derivatives contracts should be kept beyond the reach of small and retail investors to save them from risk associated with such instruments.

The department related standing committee back then was examining the Derivatives Bill,1999 as part of an amendment to the Securities Contract Regulation Act.A futures contract based on a stock or an index facilitates its purchase or sale at a predetermined price for settlement on a future date.An options contract gives a buyer the right but not the obligation to either buy or sell the underlier at a particular strike price.The option seller or writer has an obligation to deliver or take delivery if the buyer chooses to exercise an option.A futures contract exposes a holder by payment of amargin at a fraction of the contract value,to unlimited risk and unlimited reward since he or she either pays or receives cash on a daily basis depending on the movement of an index or stock.

Corporate Bonds May Soon be Part of SLR

Finmin in talks with RBI & corp affairs min,chalking out booster dose for corporate bonds mkt 

The finance ministry is readying a big booster dose for corporate bonds market that includes allowing banks to count their top-rated private sector bond purchases towards the mandatory investments and a reduction in funds that companies have to keep aside every year to redeem debentures issued.

The ministry has initiated talks with the RBI and the corporate affairs ministry to facilitate these changes that could ignite bank interest in corporate bonds and encourage companies to raise funds through debentures,which accounted for lowly 3.9% of their funds needs in 2010-11.There is a need to energise the corporate bond market... A number of measures is on the cards, said a finance ministry official,confirming the measures under consideration to wean companies away from banks.

Banks have to invest 23% of their deposits in government securities,which is called the statutory liquidity ratio or SLR.If their investment in AAA-rated corporate bonds is counted towards SLR,as proposed by the finance ministry,banks will get that much more room to invest in private sector debt,encouraging blue chip companies to come out with more issues.Allowing corporate bonds as part of SLR would make a new pool of capital available, says Avinash Gupta,head,financial advisory,Deloitte Touche Tohmatsu India.

The finance ministry has also initiated talks with corporate affairs ministry for changes in the companies act to cut debenture redemption reserve,funds they have to keep aside funds every year from their profits to build up a corpus to redeem debentures.This is a prudential measure but it imposes an extra burden on the company from the very first year of issue apart from the interest it has to pay on the borrowed funds.Manufacturing and infrastructure companies have to create a reserve of up to 50% of the value debentures issued through public issue.

The finance ministry now wants this fund to be reduced to 25% of the debentures issued to encourage companies to raise corporate bonds and also free up funds required for their servicing for investments.Experts point that such a provision only exists in India.There is no such requirement in overseas markets, said Sanjay Hegde,former executive director with PwC.However,others also advise some caution on this front.Some eligibility conditions should be put for companies eligible for reduced debenture redemption reserve to ensure safety of investor funds, Gupta said.

A separate exercise is also going on in the finance ministry to create an enabling framework for covered bonds,or debt instruments the payments on which are secured through a charge on certain cash flows of the company issuing bonds.Finance minister P Chidambaram has identified deepening of corporate bonds market as a priority area and has also asked the market regulator Sebi to call a meeting of leading corporate houses to deliberate measures.Last week the Financial Stability and Development Council,a body that deals with inter-regulatory issues and macro-economic stability of the country,had also discussed roadblocks coming in the way of a vibrant corporate bonds market.Banks provided nearly 18% of funds needed by companies in 2010-11,but such lending creates an asset-liability mismatch for banks that fund these borrowings through deposits of 3-5 years maturity.India has an active government securities market corporate bond market remains moribund despite several measures.The size of the Indian corporate bond market at 11.8% of GDP is lower than the average for emerging east Asia and for Japan at 17.2% and 19.8 %,respectively.

India Is JPMorgans Top BRIC Market for 2013

Improving policy climate and easier monetary conditions make India a better bet,says broking co 

Indian stocks are the top selection among the so-called BRIC nations next year at JPMorgan Chase & Co because of improving policy and easier monetary conditions.

We remain constructive on Indian equities as we go into 2013, JPMorgan analysts led by Adrian Mowat and Sunil Garg wrote in a report on Monday.The brokerage is underweight on China,where the key concern is profits as capacity continues to grow faster than demand, they said.

The BSE India Sensitive Index (Sensex) has rallied 18% this year,more than any other benchmark gauges for Brazil,Russia and China,driven by foreign fund flows and government policy measures unveiled since mid-September.Some 950 of Chinas Shanghai Composite Indexs companies reported third-quarter net income with an average drop of 1.9% from a year earlier,data compiled by Bloomberg show.

The 30-stock Sensex trades at 15 times estimated earnings,compared with a multiple of 16 for Brazils Bovespa Index,5.6 for Russia and 9.6 for China.

The MSCI Emerging Markets Index (MXEF) trades at a multiple of 11.2,the data show.JPMorgan said its also overweight on the Philippines as the nations consumption is picking up,and on Thailand because of robust domestic demand and low interest rates.The brokerage lowered South Korea,Taiwan and Singapore to underweight.

Indias Prime Minister Manmohan Singh started the biggest policy overhaul in a decade in mid-September to revive Asias third-biggest economy.Foreigners have purchased a net $18.7 billion of local shares this year,the most among the 10 Asian markets tracked by Bloomberg,excluding China.Indias gross domestic product will increase 5.8% in the year through March 31,the Reserve Bank of India said on October 30,the slowest pace since 2003.Theres a reasonable chance of easing in the March quarter as inflation cools,the bank said after refraining from cutting borrowing costs.Bloomberg

Is it Time to Buy Rate-sensitive Stocks

With a slowdown in GDP growth and moderating inflation,interest rates are all set to come down. Prashant Mahesh says which stocks one should buy and what to avoid 

Interest rates have peaked and it is a matter of time before they start coming down,say experts. With GDP growth slowing down to 5.5% and WPI inflation moderating to 7.45% in October,from 7.81% in September,an interest rate cut looks inevitable, they argue. Obviously,that is good news for equities,especially for interest rate sensitive sectors such as banking,housing finance,automobile,real estate and infrastructure companies. A slowdown in growth,coupled with moderating inflation,will force the central bank to lower rates soon. Depending on how inflation pans out,the cut could be between 50 and 100 basis points in the next 12 months, says Alok Ranjan,portfolio manager at Way2Wealth. A cut in rates will benefit rate sensitive sectors such as banking,housing finance,infra and automobiles. Banks will be a big beneficiary of a rate cut as NPAs will fall and their margins will improve. says Kartik Mehta,VP (research),Sushil Finance.

RATE CUT WILL HELPS BANKS 

Typically,falling interest rates help trigger growth and revive a slowing economy.In such a scenario,banks are naturally one of the biggest beneficiaries. If interest rates go down,banks will pay lower rates on fixed deposits to investors,which in turn will lower their borrowing costs.As economic growth picks up,lenders will borrow more,giving banks higher business growth. Not only this,income from treasury operations could also increase. Since banks hold bonds in their treasury portfolio,any fall in interest rates leads to an appreciation in bond prices,which in turn means higher income from treasury portfolio. Higher NPAs the biggest worry for PSU banks today could also come down.Once interest costs go down,both NPAs and slippages would reduce further, says Kartik Mehta.So in such a scenario,PSU banks are expected to benefit the most.Investors should buy into PSU banks that trade at a discount to their book value, says Alok Ranjan of Way2Wealth.For example Canara Bank trades at a price of.428,as against its book value of.465.6,while Bank of India quotes at.274,against its book value of.343.Housing finance companies too are likely to be beneficiaries of a rate cut.For example,for a.20-lakh loan for a 15-year period at 10% interest,the EMI works out to.21,500. Now,if interest rates fall to 9%,the EMI works out to.20,300 a savings of.1,200 per month.So a reduction in EMI could lead to higher loan growth for housing finance companies.Companies like HDFC,LIC Housing Finance and Can Fin Homes are likely to benefit from any rate cut.

STOCK SPECIFIC APPROACH IN INFRASTRUCTURE 

While banks will be big beneficiaries of a rate cut,one would have to pick and choose stocks amongst other interest rate sensitive sectors like infrastructure and automobiles,These businesses have several other parameters affecting them.One would have to follow a stock specific approach, says Jignesh Shah,executive director,Sarasin Alpen.Take the case of infrastructure companies where 60-95 % of the project cost is funded by debt and the balance comes from equity.If interest rates were to drop by 100 basis points,the interest burden for such companies could fall by 5-8 %,which could sharply increase their profitability.For example,Ashoka Buildcon paid an interest of.144 crore in 2011-12 and made a profit of.115 crore.Now if interest rates fall by 100 basis points,it could potentially lead to an 8% savings in interest cost for the company.This means the company could save as much as.11.52 crore.But then infrastructure companies have their own share of problems.Infrastructure companies could face problems of land acquisition and environmental clearance, says Alok Ranjan.Hence,investors should pick and choose companies which are least affected by these problems.For example,companies which get orders from NHAI could be considered.As NHAI is a government organisation,it ensures that when it releases an order it has land and environmental clearances.A stock like IL&FS Transportatio could be a beneficiary.With NHAI having ambitious plans to add 24,406 km of road over the next five years,such companies could be the beneficiaries.Finally,a pick up in the economy could be beneficial for companies in the commercial vehicle space.Due to higher demand,freight rates could go up.Companies like Ashok Leyland could be beneficiaries of a rise in demand for commercial vehicles.Though the real estate space will benefit,investors should avoid real estate companies due to the lack of corporate governance, says Kartik Mehta.

What is of Interest 

buy into PSU banks that are trading at a discount to their book values in EMIs could lead to higher loan growth for housing finance companies like HDFC adopt a stock specific approach in infrastructure could face problems in land acquisition and environmental clearances in the economy will be beneficial for commercial vehicle makers

Govt still hopes to earn Rs 40k cr from 2G spectrum sale this year

Says will re-auction the refarmed 900-MHz and unsold spectrum before March 2013

The government on Friday said it would be able to meet the budgeted target of earning Rs 40,000 crore from the telecom sector this financial year, even as the response to the recently concluded auction of 1,800-MHz band spectrum was lukewarm.

Addressing a press conference, Finance Minister P Chidambaram, also the head of the empowered group of ministers on telecom, announced the modalities to re-auction 1,800-MHz (GSM) spectrum in the four circles that received no bids — Delhi, Mumbai, Karnataka and Rajasthan — and 800 MHz (CDMA) spectrum, which failed to find any taker, were being worked out.

The government will also put up for auction the spectrum in the 900-MHz band, coming up for refarming, before the May 2013 deadline stipulated by the regulator. This spectrum is held by incumbent operators other than BSNL and MTNL, and the government has decided to permit operators to retain only 2.5 MHz. The rest would be refarmed to the 1,800-MHz band.

“The auction process has not ended. There will be another auction for the unsold spectrum before March 31. We are hopeful we will be able to achieve the target,” said Chidambaram.

Explaining the reason for the government’s confidence, Communications Minister Kapil Sibal said, according to his ministry’s calculation, the combined value of the unsold spectrum in the 1,800-MHz and 800-MHz bands, and the base price for the 900-MHz band spectrum to be refarmed (1.3 times of 1,800-MHz spectrum) would be Rs 62,000 crore. “Even if we get 50 per cent of this value at base price, it would give us between Rs 25,000 crore and Rs 30,000 crore. That will be good enough for us to meet the target,” he said.

He added the government had got Rs 17,343 crore from the auction of 1,800-MHz spectrum in 18 circles (Rs 9407.64 crore) and one-time fee in those circles (Rs 7,936 crore). Assuming around Rs 4,000 crore of the fee paid by operators who lost their licences due to a Supreme Court order (Videocon, Idea and Telenor, etc) would have to be adjusted, the government would still earn Rs 13,343 crore.

However, experts say, since the operators have to pay only a third of the money upfront (unless the rules are changed for the new auction), the government would be able to garner only between Rs 11,500 and Rs 13,000 crore this financial year.

Sibal said the EGoM on telecom would meet soon to discuss if it needed to re-price the 1,800-MHz spectrum in circles that had found no takers and CDMA spectrum.

The two ministers also attacked the Comptroller and Auditor General (CAG), saying the auction results bore no semblance of CAG’s assessment of a presumptive loss to the exchequer. “The 2G scam of Rs 1.76 lakh crore is a pure myth,” said the finance minister, while Sibal added: “Where is the Rs 1.76-lakh-crore scam everyone was talking about sometime back. In the case of 3G, though the government got revenues of over Rs 1,00,000 crore, there was no rollout, so the biggest loser was the common man, who was deprived of the benefit of a service.”

Sept IIP down -0.4%, misses expectation

Industrial production fell by 0.4% in September from a year earlier, a much weaker-than-expected performance.

Analysts polled by Reuters had expected a rise of 2.8% in September output. Revised government figures released on Monday showed August output growth was revised down to 2.3% from 2.7%.

Manufacturing, which constitutes about 76% of industrial production, fell by 1.5% from a year earlier, the government said.

In the April-September period, industrial production expanded an annual 0.1%.

The highlights of the IIP data for September 2012 versus September 2011 are:

• Manufacturing sector growth at -1.5% vs 3.1%
• Mining sector growth at 5.5% vs -7.5%
• Electricity sector growth at 3.9% vs 9%
• Basic goods growth 3.5% vs 5.3%
• Capital goods growth at -12.2% vs -6.5%
• Intermediate goods growth at 1.8% vs-1.4%
• Consumer goods growth at -0.3% vs 5.7%
• Consumer durables growth -1.7% vs 8.9%
• Consumer non-durables growth 1.1% vs 2.7%

Subsidy Issues Mean Retail Investors have Little to Gain

IndianOil,BPCL,HPCL were compensated for.60k cr against under recovery of about.86k cr 

Three oil marketing companies IndianOil,BPCL and HPCL reported profits on Friday for the July-September 2012 quarter,which were way short of covering the preceding quarters losses.That the government is facing challenges in compensating these navratna companies is becoming clear from delayed and limited payments,which is raising the debt burden and eroding the net worth for these three companies.

The three oil marketing companies together had reported a total under-recovery of.85,586 crore for the April-September 2012 period.However,they were compensated only for.60,160 crore.This meant nearly 30% of the under-recovery had to be absorbed by the marketing companies.IndianOil had to absorb.13,635 crore of under-recoveries,while BPCL absorbed.6,133 crore.

In other words,the profits from the second quarter were insufficient in compensating for the losses of the April-June quarter.IndianOil,the biggest of them,reported a net profit for the September 2012 quarter thanks to the.16,094 crore of government grant towards the April-September period.It had posted a net loss of.22,450 crore in the first quarter.

The governments support for the first half year barely at 35% of the industrys total under-recovery was at par with the burden borne by upstream companies like ONGC,Oil India and Gail.This reflects a sorry state of affairs where the governments ability to compensate oil companies for their losses has gone down substantially.IndianOils net worth total shareholders funds has reduced 22% in thepast six months to.45,041 crore as a result of these losses.

Ongoing cash losses have also forced the company to borrow heavily which has pushed its borrowings up 26% within the last six months to.88,960 crore at the end of September 2012.The growth in total debt is somewhat lower at BPCL and HPCL as they cut their long-term borrowings during thepast six months.Although the OMCs will never face the risk of bankruptcy or a shutdown,being governmentowned and strategically important,retail investors cannot expect to make any positive returns from them till the subsidy regime improves.

Auto sales grow fastest in two years due to Oct demand

Car sales increased by 23.09% to 172,459 units in October, shows data released by industry body SIAM

Demand for new launches, made by auto majors during the festival season last month, has helped the passenger car segment record its fastest growth in two years in the domestic market.

Car sales increased by 23.09 per cent to 172,459 units in October, shows data released by industry body Society of Indian Automobile Manufacturers (SIAM). The growth has, however, come on a low base of 140,105 units recorded in sales during the same period last year.

Sugato Sen, senior director, SIAM, said, “The car sales growth rate we have achieved this October is the highest since January 2011, which was at 25.27 per cent. In terms of volumes, this is the highest since March this year when it stood at 2,29,866 units.” Overall, 246,725 passenger vehicles were sold in the domestic market, an increase of 33.65 per cent over the 184,611 units sold in the corresponding period last year.

“It is, however, too early to detect any signs of revival as high interest rates and fuel prices, uncertain economic environment and low consumer sentiments still prevail. We have to see if sales continue to pick up in November,” he added.

Industry growth was largely pushed by Maruti Suzuki which registered a growth of 86.56 per cent to sell 96,002 units in October.

After reporting a 14 per cent decline in sales in September this year, Korean auto major Hyundai Motor India Limited’s (HMIL) volumes too grew by eight per cent to sell 35,778 units.

Utility vehicles segment saw a surge in domestic sales at 53,285 units, up 87.74 per cent from last year.

The growth was led by Mahindra & Mahindra with its UV sales in October this year registering a 42.81 per cent growth at 30,082 units.

According to SIAM datam, while motorcycle sales went up by 6.71 per cent to 9,36,122 units from 8,77,270 units in the same month previous year, sales of scooters increased by 32.39 per cent to 279,427 units. “Sales of scooters have been driven mainly from urban demand and we are seeing good traction in the segment. We are also seeing a trend of lot of women buyers,” said Vishnu MathuR, director general, SIAM.

The three-wheeler segment saw sales increase 12.58 per cent to 55,241 units in October this year. In the commercial vehicles segment, volumes were also up by 7.59 per cent to 66,722 units in October from 62,013 units in the year-ago period.

Total sale of vehicles across categories registered an increase of 14.81 per cent to 16,53,703 units last month as against 14,40,409 units in October 2011, it added.

ECB holds interest rate at 0.75%

The European Central Bank held its main interest rate at 0.75 per cent on Thursday, deferring any cut in borrowing costs while it assesses the extent of the Euro zone's economic downturn and waits for a cue to use its new bond-purchase programme.

The bank has said it was ready to buy bonds of debt-strained governments such as Spain and Italy once they had signed up to a European bailout programme. So far no request has been made, but the announcement alone has calmed markets.

"This is as expected," JP Morgan economist Greg Fuzesi said of the rate decision. "They hadn't signaled any rate move for this meeting."

A Reuters poll had given an 80 per cent chance the European Central Bank would hold its main refinancing rate, but most of the 73 analysts polled expected it will be cut to a new record low of 0.5 per cent within the next few months. Gloomy data this week indicated the Euro zone economy may shrink in the fourth quarter, which the ECB could eventually respond to by cutting rates.

Draghi himself gave a notably downbeat assessment of the economy on Wednesday.

"Unemployment is deplorably high," he said in a speech to German bankers. "Overall economic activity is weak and it is expected to remain weak in the near term. And the growth of money and credit are subdued."

Before making any decision to cut rates further, the European Central Bank will focus on making sure that its record low rates reach companies and households across the Euro zone, a mechanism that has been broken by the debt crisis.

The new bond-purchase plan — dubbed Outright Monetary Transactions (OMT) — is the European Central Bank's designated tool but it can only be activated once a Euro zone government requests help from the bloc's rescue fund.

Investors and Euro zone policymakers have been urging Spain to seek aid but Spanish Prime Minister Mariano Rajoy has so far avoided seeking help, saying he wants assurances ECB intervention would bring down Spain's debt costs.

Spain sold Euro 4.8 billion of debt including its first longer-term issue in 18 months on Thursday, enough to complete its 2012 financing programme and begin raising funds for next year, so there is little immediate pressure on that front.

Yields on Spanish government bonds have dropped by around 2 percentage points since Draghi said in late July the ECB was ready to do "whatever it takes to preserve the euro" — a pledge that heralded the bond-buy plan.

Some economists have now raised the possibility that the OMT might never have to be activated considering its impact so far.

But Matteo Cominetta, European economist at UBS, said it would eventually be put to the test because of the large amount of Spanish sovereign debt coming up for renewal next year, roughly Euro 140 billion according to Reuters data.

"Next year, you will have a record supply of Spanish bonds up for renewal in a situation where macro economic data will remain very bad for a long time in Spain," Cominetta said.

The European Commission said in its autumn forecasts on Wednesday that Spain would suffer a recession almost three times deeper at 1.4 per cent in 2013 than the 0.5 per cent contraction predicted by Madrid, and said it would miss its deficit targets too.

The Commission also said the Euro zone economy would barely grow next year, but pick up in 2014.

PSUs Respond to Govt,Demand More Autonomy

Govt had asked blue-chip companies to invest surplus funds to stimulate economic growth 

State-run enterprises have once again demanded more financial and managerial autonomy in their operations after the government last month exhorted blue-chip companies to invest their surplus funds to stimulate economic growth.The companies raised this issue with the department of heavy industries after Prime Minister Manmohan Singh met the heads of 25 PSUs last month to hear out their concerns.An official of the ministry of heavy industries said the government is already looking into the issues raised by these PSUs,which hold an estimated.3 lakh crore in surplus funds.

A high-level secretaries committee has been set up to look into PSUs issues such as autonomy and regulatory clearances,besides investment of surplus funds, the official said,adding that Cabinet Secretary Ajit Kumar Seth heads the panel.The government has been trying to goad state-run companies into investing their surplus funds,which it says will boost economic growth.Singh had said last month that companies should use their surplus funds for their own benefit and for the benefit of the economy.

They should use it for driving investment,growth and jobs. Based on the investment plan of about 20 blue-chip companies,the country could see close to.1.76 lakh crore being pumped into development work this fiscal.But,according to the official,the bureaucratic setup is a bit of a bugbear.PSUs are answerable to multiple bodies and this clouds executive decisions,as there is fear of undue scrutiny,which has a demoralising effect, the official said.State-run firms have now reiterated their demand for greater autonomy and sought a single-point accountability system.

Companies have also demanded an empowered group of secretaries for every sector so that PSUs can approach this group on strategic decisions.Some demands like PSUs be taken out of the ambit of Article 12 require greater deliberations, the official added.In 2005,a panel on Empowerment of CPSEs had recommended that issues related to amendment of Article 12 of the Constitution could be revisited at an appropriate time.As per the Sengupta Committee report,some judicial pronouncements have declared public enterprises to be an extension or arm of the State under Article 12 of the Constitution,which undermines the entrepreneurial and commercial functioning of public enterprises and puts them at a disadvantageous position vis-vis their private sector counterparts and competitors. The PSUs have also demanded a fixed tenure of five years for chairman of a state-run firm and three years for board directors.If there is a fixed tenure,there will be greater accountability on the CMD who can also give direction to the company, the chairman of a state-run firm said.