One step forward, two steps backward. That has been the continuing story on Dalal Street for nearly a month now. Major indices hurtled downhill on Friday amid thin volumes, highlighting the lack of confidence among participants.

The weakness in Asian markets only sought to undermine the sentiment further. After opening around 200 points below its previous close, the 30-share Sensex kept sliding through the session to close at 17,349.07, down 385.61 points, or 2.2%, over Thursday’s level. The 50-share Nifty dropped 81.05 points, or 1.6%, to close at 5,110.75.

Brokers said traders were keeping their commitments to the minimum, waiting for the Union Budget next week before firming up their views.

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After a brief lull in the last few months, the consolidation buzz in the banking sector is back. This time, the main characters are two private sector banks.

According to CNBC TV18, HDFC Bank is in advanced talks to merge Centurion Bank of Punjab (CBoP) with itself.

“…the talks are at a critical stage,” the channel reported.

“The talks are at an advanced stage and the two banks are working hard to somehow see this deal go through,” the report said, but added that it won’t be surprising if the deal doesn’t go through.

However, both the banks denied that there was any deal being worked out. In a clarification to the stock exchange, HDFC Bank said that, “at present, there is no such proposal for the consideration of the Board of Directors of the bank.”

A CBoP spokesperson termed the report “speculative”.

“It is not the practice to comment on speculative reports,” the bank said in a statement to the Bombay Stock Exchange.

A quick calculation shows that if the deal goes through, it will make HDFC the seventh-largest bank in terms of assets, ahead of state-owned IDBI, Union Bank and Central Bank of India.

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“shares” refers to a the ownership certificates of a particular company. This is a unit of account for various financial instruments including stocks, mutual funds and limited partnerships. A share is a unit of ownership of a company that is issued by the company to raise finance to enable it to extend its scope or fund other growth related initiatives. If you buy a share, you are a co-owner of a company. A shareholder is a part owner of the company who can influence decisions related to new business venture and the like and also receives a share of the profits generated known as dividends. If the company gets more valuable, your share will usually get more valuable. If the company makes profits, like any owner, you should get share of that profit, called a dividend.

A mutual fund is made of of many investors who buy shares of the fund.
Mutual funds are a long term investment for retirement, 401k plan, etc. They give you diversification which means less risk but in the long term also means less reward.

A mutual fund is a form of collective investment that pools money from many investors and invests the money in stocks, bonds, short-term money market instruments, and/or other securities.These are investment opportunities offered by a finance institution which may be in the form of shares, bonds and other forms of securities.The investor buys hundreds of shares and other investments. You can participate and own a fraction of those investments. If the funds investments do well, you do well. The investor gets paid from fees, usually about 0.5 - 2% of the money invested.

Different funds specialise in differnt types of stocks. A fund manager picks those stocks and buys and sells them in order to increase the value of the fund.

The essential difference between the two is that a share has the advantage of the holder discerning market trends with respect to the specific company while in a mutual fund the investor often cannot determine the exact channels of return on investment which is the domain of the portfolio manager in charge of the mutual fund

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Investors may soon be able to buy shares offered through initial public offerings at a fraction of the cost they have paid till now.

The primary markets advisory committee of Sebi has suggested that the face value of all new stocks should be a uniform Re 1 per share.

If accepted, the panel’s recommendations will force all new issuers to offer their shares at an affordable price because of a Re 1 par value.

Reports indicate that the Sebi board will meet in about three weeks to take a decision on the proposal.

This could be the first big decision taken by new Sebi chairman C.B. Bhave who assumed office yesterday.

If Sebi decides to clear the proposal, it will end controversies such as the one that erupted last August when Anil Ambani decided to fix the face value of the Reliance Power stock at Rs 2 and offer it to the public at around Rs 90.

After a barrage of allegations from certain quarters and intervention by the market regulator, the par value of the Reliance Power stock was fixed at Rs 10 and offered to investors in a price range of Rs 405-450 a share.

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The Budget has become one of the key drivers of the market movement in the country, following the economic reforms in 1991-92. Not only the post-budget, but the pre-budget movement of the market is also often guided by overall business scenario, wish-list presented by corporates, expectations of market participants and rumours and speculations. But if the data of last several years were to be taken into consideration, it would be clear that there has been no particular trend as to pre and post-budget market movement. In the last decade, eleven budgets have been presented including an interim budget in February 2004.

On five occasions out of the 11, the market has given negative returns in the two weeks ending on budget day and out of these five occasions, the market has fallen in 3 years in two weeks post-budget. In the rest two years, the market had reversed the losses, albeit marginally, in the post-budget period. In four out of those five occasions, market had taken a hit on D-day also, thereby proving the fact that lack of positive surprises actually has an impact on overall market movement, though in short-term only.

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Reliance Power Ltd (RPL), promoted by the Reliance Anil Dhirubhai Ambani Group (RADAG), has sought an inquiry by the markets regulator into the factors that resulted in a steep decline in the company’s stock prices on its debut Feb 11.

In a communiqué Monday to the Bombay Stock Exchange (BSE), RPL said the slide was compounded by “a vicious and orchestrated campaign of market manipulation and market abuse, unleashed by unscrupulous rival corporate interests, to hammer down all RADAG stocks”.

The statement added that this was an attempt to undermine the group’s “fair name and reputation and cause losses to million of genuine investors”.

The company said it had written to markets regulator Securities and Exchange Board of India (SEBI) seeking an investigation.

RPL also informed BSE that its board would consider a proposal Feb 24 to issue bonus shares to all categories of shareholders except the promoters.

The bonus issue would be considered “in keeping with the Reliance ADA Group’s fundamental and overriding philosophy of creating value for genuine long-term investors.

“This will include inter alia consideration of a proposal for issuing free bonus shares to all categories of shareholders, excluding the promoter group, thereby protecting investors even from notional short-term losses.

“The proposal will result in dilution of the promoter group’s shareholding in Reliance Power.”

From the time of opening of the Reliance Power initial public offer (IPO) Jan 15, the sensitive index (Sensex) of the Bombay Stock Exchange was down 13 percent. The company’s stock was down by a comparatively lower level of 11 percent from the issue price for retail investors, the company said.

Despite drawing record subscriptions, the first day of listing saw the Reliance scrip close at Rs.372 on the opening day Feb 11, with a huge discount over the issue price of Rs.450.

This had created huge resentment and disappointment among investors, who had overwhelmingly subscribed to the issue, as many expected the scrip to debut higher at around Rs.750-850 a share.

The IPO had attracted more than five million bids from all categories of domestic and international investors with aggregate commitment of over Rs.7.5 trillion ($189 billion) against the issue size of Rs.115.60 billion ($2.91 billion).

The company is currently developing 12 power projects in the country with a total planned installed capacity of 28,000 MW. This is among the largest portfolios of power generation assets under development.

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