Government to keep a close watch on its expenditure
Mumbai: The Indian government will henceforth keep a close watch on its expenditure. The government's expenditure has sharply grown over the last two years. The bulk of the increase in 2001-02 was on account of plan expenditure, which to some extent is still justifiable. But the 2002-03 jump has very much been on account of a sharp increase in non-plan expenditure. The fiscal deficit, which was hovering around the Rs 1,10,000 crore level for three years has suddenly jumped to Rs 1,44,000 crore in 2002-03 and even this is not the full picture. If you look at the non-debt capital receipts for 2002-03, it shows an almost 100 per cent jump over last year. This to my mind is on account of the Rs 13,000 crore of debt swaps done by the States, whereby they raised resources from the market for that amount to prepay the expensive debt of the Central Government. This caused a windfall gain for the Centre, thereby reducing its fiscal deficit.
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PSUs remain most volatile stocks on bourses
Mumbai: Shares of public sector companies are among the most volatile stocks in the market. PSU stocks account for a third of the over Rs 725,000-crore market capitalisation on the Bombay Stock Exchange. Oil and petrochemical giants, public sector banks are dominating the research produced by brokerages as more and more investors are keen to cash in on the disinvestment, return of capital by banks stories. The government is the single largest shareholder in the capital market. Secretaries in various ministries either head key companies or sit on their boards. Hindustan Petroleum is one of the most volatile public sector companies. It is likely to witness a strategic sale sooner or later. The scrip has become one of the most volatile shares in the stock market. NSE data reveals, that the volatility in the HPCL shares ranges between 3 to 4.4 over the past six months, while the Nifty’s volatility during the same period has remained 1.7-1.9. Players say that HPCL is among the most volatile scrips in the NSE Nifty companies. On June 25, a government official said the due diligence for HPCL is expected to begin by the end of June and get over in August. He also added that the government would wrap up the stake sale by November. HPCL shares jumped 7 per cent that day with volumes touching a record 9 m shares on NSE. A similar incident on the return of capital issue of banks on May 26, 2003 resulted in a sharp slump in public sector banking scrips. On May 22, a government official participated in a conference and said that the return of capital by banks would not happen at par. PSU bank stocks crashed heavily on May 26 when the statement was reported by the media. The next day, a finance ministry spokesperson denied any plans of charging premium on banks’ return of capital. The stocks recovered smartly.
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Infosysperforms well
Mumbai: For the week, the S&P 500 was down by about 2 per cent to 976.22, the Dow Jones Industrial Average lost 2.3 per cent to 8989.05 and the tech-focussed Nasdaq Composite Index slipped 1.2 per cent to 1625.26. In contrast, the domestic markets finished the week on a strong note. The BSE Sensex closed at 67-week high (registering a gain of 2.39 per cent) and the NSE S&P CNX Nifty shot up by 2.30 per cent. Among the ADRs, Infosys Technologies stole the limelight with sharp gains. Telecom majors VSNL and MTNL also witnessed a smart activity. Reports on jobless claims that suggesting a recovery in the US economy seemed to have rekindled hopes for Infosys. The counter ended sharply higher at $54.9 as against the previous week close of $49.91. Though the other IT majors — Satyam Compute and Wipro — witnessed upward movement in earlier part of the week, they could not sustain the momentum and ended the week around the previous week's close levels. VSNL, which shot up to high of $5.44 during intra-week, finished the week at $5.15 ($5.07). The renewed activity has to be viewed in the back of drop the company getting a licence to offer international telecom services for its Sri Lankan unit. On the other hand, disinvestment talk seemed to have to invigorated fresh activity for MTNL, which ended the week at $4.75 ($4.28). There were speculations that the Government will sell soon its stake in MTNL. There were no deviations in the premium/discount of the ADRs to their respective underlying equities.
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Govt securities buyback scheme: Bond markets wait for pricing announcement
Mumbai: Bond markets remained lacklustre throughout last week as traders remained cautious in anticipation of the Government's securities buyback scheme slated to begin next month. One trader said, "Any major yield movements will take place only after the government's announcement of the pricing for the buyback." As a result of this anticipation, the quarter percentage point cut in the US Fed rate had very little impact on the domestic market. Ten-year yield to maturity in fact went up slightly to 5.73 per cent last week, from the previous weekend's level of 5.71 per cent. Traders also said that this rise was also contributed by the RBI announcement of large securities offers during the week and large liquidity mop up during the week. The RBI during the weekend mopped up more than Rs 21,000 crore through three-day repos during the weekend. Besides, traders there was also some rise in demand for foreign currencies. Traders said that this was partly due to the entry of oil companies into the market. In face, some of them have begun taking forward cover after having entered into futures contracts with major oil suppliers. Traders said that this was done to hedge against any hardening of oil prices in view of the deteriorating situation in Iraq and the increasing possibility of further escalation in the conflict. Also traders said that some of the foreign banks have also been selling heavily in the markets in anticipation of hardening yields in the short-term. This was done partly because of signals that the RBI was not willing to let rates fall further from the current levels. In fact, some of the foreign banks, primary dealerships had bought securities anticipating a further softening. The intention of the RIB was also evident from the T-bill auction yields, where the cut-off was fixed at 5.05 for the 91-day T-bills and for the 364 T-bills at 4.96. In the last auction, the 364-day T-bill yield was 4.97 per cent and for the 91-day T-bill, the yield was 5.07 per cent. With the intention now becoming clear, that rates would not be allowed to soften further, some of these PDs had incurred trading losses. But foreign bankers have not been doing too well, traders said. This was because of their entry into the markets, and the stop loss actions, were not very well timed. The biggest beneficiaries have been the domestic public sector banks who have been more aggressive in the markets, in view of the large size of their investment portfolios. The yield on 91-day continued to remain above the repo rates belying traders' hopes of any reduction in the repo rates.
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