Indian stocks may extend their three- day, 14 percent slump as some overseas investors judge local shares expensive given the outlook for earnings.

Stocks tumbled 10 percent at one point yesterday, sparking a one-hour halt on both the Mumbai Stock Exchange and the National Stock Exchange. Shares recovered from their lows of the day after the government said banks would help investors meet calls for cash. The Sensitive Index, or Sensex, ended down 4.2 percent to 10,481.77.

“When there are worries about markets around the globe, clearly the markets that have gone up the most are going to get hit the most,” said Arjun Divecha, who manages the $10 billion GMO Emerging Markets Fund in Berkeley, California. “For a year or so we’ve felt the market is overvalued.”

The Sensex rose 95 percent in the 12 months to May 10, when it closed at a record 12,612.38. The benchmark has dropped 17 percent since then. The measure is valued at 17 times estimated earnings, more than the 12.9 times for the Morgan Stanly Capital International Emerging Markets index, according to Bloomberg data.

“It’s still very expensive,” said Peter Hill, who manages the $218 million Highmark International Opportunity Fund in Foster City, California. “The fundamentals are pretty good for India, and it’s at an early stage of getting on this growth wagon. It’s not so much the fundamentals as over speculation in the stock market.”

Reliance Industries Ltd., which owns the world’s third biggest refinery, yesterday dropped 44.95 rupees, or 4.6 percent, to 931.6. Infosys Technologies Ltd., the country’s second-biggest software maker, fell 148.05 rupees, or 5 percent, to 2826.55. The two stocks account for about a fifth of the key index’s weight.

`Next Risk’

Overseas investors sold $302.9 million more of Indian equities than they bought on May 19, according to figures released late yesterday from the Securities & Exchange Board of India, the stock market regulator. That’s the most they have sold in almost a year.

If people who have put their money in mutual funds “start getting nervous, then you could see a second wave of selling pressure,” said David Chatterjee, who helps manage $700 million of investment in India for Pictet Asset Management in London. “That’d be the next risk.”

Finance Minister Palaniappan Chidambaram said yesterday there’s no cash problem in the stock market and banks will give “ample funds” to pay for shares. The Indian government, which controls nine of the country’s 10 biggest lenders, said yesterday that money will be available from banks to cover demand that may arise from so-called margin calls.

Source: http://www.bloomberg.com/apps/news?pid=10000080&sid=aCwd0JykgDgg&refer=asia

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The Sensex is now down 127 points at 10,446.

The index had opened with a negative gap of 52 points at 10,521, and then tumbled to a low of 10,275 - down 298 points from the previous close.

Reliance Energy have tumbled 5% to Rs 505.

HDFC and Tata Power have shed nearly 4% each at Rs 1,140 and Rs 510, respectively.

Tata Motors and BHEL are down over 3% each at Rs 752 and Rs 1,912, respectively.

Wipro has gained 1% at Rs 457. Hero Honda is the only other gainer among the Sensex stocks.

The market breadth is extremely negative - out of 1,999 stocks traded so far, 1,564 have declined, 406 have advanced and 29 are unchanged.

Source: http://www.business-standard.com/common/storypage_c.php?leftnm=11&bKeyFlag=IN&autono=1076

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Central bank asks banks to levy reasonable, cost-based charges. 
 
If the minimum average quarterly balance in your bank account falls below the stipulated level, ICICI Bank and HSBC debit Rs 750 from your account as a penalty. 
 
However, if you bank with the State Bank of India, the charge for not maintaining adequate balance in a savings bank account is just Rs 300. 
 
This is not the only instance where service charges by commercial banks vary. 
 
For instance, for every return of local cheque deposited for clearing, a customer of Canara Bank ends up paying a meagre Rs 15. Customers of SBI, however, have to pay a charge that’s five times that of Canara Bank � Rs 75. 
 
Surprisingly, ICICI Bank charges 33 per cent lower than SBI. An ICICI Bank customer has to pay only Rs 50 for each local cheque returned. 
 
This scenario would soon change with the Reserve Bank of India’s (RBI�s) activism against inexplicable charges recovered from customers by banks. The RBI has decided to take the responsibility to ensure charges levied by banks are reasonable and cost-based. 
 
Hitherto, it was left to the banks to fix charges consistent with the cost of providing these services and also to ensure that customers with low value/volume of transactions were not penalised. Standard Chartered Bank has an unusual charge for its credit card customers. A credit card holder has to pay a penalty of Rs 99 for every payment made in cash for clearance of dues. 
 
�The RBI is basically putting the various charges of banks to reasonability test as it feels many of the charges collected are unaccountable,� said a public sector bank chairman. 
 
Another public sector bank chairman pointed out how the RBI�s financial inclusion policy is being disregarded. �Saral�, HSBC’s no-frills account, is full of restrictions. 
 
Under �Saral�, a customer is allowed only one free-of-cost cash transaction at a branch per month and additional transactions attract a penalty of Rs 50 per transaction. HSBC has similarly permitted only two free transactions at its ATMs per month and every additional transaction attracts Rs 10. All balance enquiries are, however, free. 
 
�All these will change with the RBI becoming active to ensure customers’ rights,� said a senior banker. 

Source: http://www.businessstandard.com/common/storypage_c.php?leftnm=10&bKeyFlag=BO&autono=92316&chkFlg=

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NEW DELHI (Reuters) -Finance Minister P Chidambaram has said people should stay in the market and there was no need to panic after markets crashed by over 1100 points on Monday.

Dubbed as Black Monday - trading was suspended for an hour but there was a recovery when trading resumed.

On Monday the Sensex closed at 10.481.77 down 456.84 points and the Nifty at 3081.35 down 165.55 points.

Among the worst affected were the small investors. However, in an exclusive interview to Finance Minister P Chidabaram said there was no need to panic and people should stay in the market.

Source: http://www.ndtvprofit.com/homepage/news.asp?id=250659

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The government�s keenness to remove the 10% voting limit in banks, push a higher FDI ceiling in airport revamp ventures and revisit foreign shareholding norms in telecom is welcome. Unwarranted restrictions on or hindrances to foreign investments are largely the reason why the country does not attract foreign direct investment (FDI) commensurate with its potential.

The total inward FDI in April-January 2005-06 was only $5.8 billion against $5.7 billion in 2004-05. From the end 1990s, the FDI inflow has just about doubled, if compared on like-to-like basis. (FDI data from 2000-01 includes retained earnings of FDI companies, $1.5 billion in 2004-05, as per international best practice.)

That much of the blame for this dismal performance rests locally is evident: in a 2005 UNCTAD survey, transnational corporations ranked India the second most attractive global business location after China.

The bulk of the global FDI now moves through cross-border mergers and acquisitions. Although India has substantially reduced regulatory hurdles to foreign ownership, restrictions such as limit on voting rights in the case of banks have limited such FDI inflows. Underdeveloped organised retail and restrictive labour laws, too, pay a role in holding back FDI including for business acquisitions.

As to greenfield investments, the regulatory requirement of procuring no-objection certificates from any joint venture partner has often stalled projects. Except in a few sectors, there is an urgent need to remove all such irritants, in the larger interest of investments and growth.

India�s outward FDI has grown at a faster rate and may even cross the inward FDI in a few years, if Indian companies continue with their acquisition spree overseas. From $757 million in 2000-01, the total outward FDI increased to $2.4 billion by 2004-05.

Since these outbound investments are important for India Inc obtaining or sustaining the already acquired competitive edge, the policy framework must not discriminate against overseas acquisitions. In particular, the notion that the economy stands to benefit if the rupee depreciates ought to be questioned. A cheaper rupee makes overseas acquisitions expensive for Indian, even while facilitating acquisition of Indian assets by foreigners.

Source: http://economictimes.indiatimes.com/articleshow/1540961.cms

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The State Bank of India (SBI) will be able to unlock huge value once
its seven associate banks entered the capital market with public issue offers, A K Purwar, chairman of SBI, said yesterday.

"We expect to get good money from the public issue offers of the associate banks," Purwar said.

This is evident from the fact that the combined business volume of the seven associates was next only to SBI. "This makes the associates together the second largest banking entity in the country after SBI," Purwar said.

Once the SBI Banking Subsidiary Act is passed by the Parliament, the associates would start entering the capital market within 2 to 3 months, After the Act is passed, SBI would bring down its holding in the banks to 51%, Purwar said.

SBI holds 100% shareholding in three associates, while in four others it varies from 75% to 98%.

Source: http://www.businessstandard.com/common/storypage_c.php?leftnm=11&bKeyFlag=IN&autono=845

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