Mumbai Stocks Fall 2.4%; Governance Issues

123jump.com Staff
12 Jan, 2009
New York City

Stocks in Mumbai trading fell on the worries that more companies are behind in keeping high corporate governance standards. The BSE reported that nearly 1,200 companies may be in violation in filing such reports. In another blow, Wipro was barred by the World Bank in doing business with it.

[R]10:00AM New York, 7:30 PM Mumbai - India’s industrial production rises 2.4% in November. India’s business confidence drops to 37.8 in the quarter to September.[/R]

Stocks in Mumbai dropped 3.2% on rising concern over the corporate governance standards of Indian firm. The Bombay Stock Exchange in a report suggested that nearly 1,200 companies have not filed corporate governance standard report in the last one year.

Wipro also revealed today that it was barred by the World Bank from bidding for contracts until 2011 after it offered its employees shares during its initial public offering.

Investors also feared that Sebi will tighten regulations after it set up a panel to review all records maintained by auditors on the quarterly results of companies which are a part of the 30-Sensex and the 50-share S&P CNX Nifty.

Losses were pared after the industrial production unexpectedly increased 2.4% in November.

In Mumbai, the BSE 30-share Sensex index declined 3.2% or 296.42 to 9,110.05, and CNX Nifty fell 3.5% or 99.90 to 2,773.10.

Trading Statistics

Daily turnover on the BSE dropped to 3,203 crore rupees from 4,207.30 crore rupees from Friday last week.

Industrial Production Rises 2.4% in November

Goldman Sachs Global ECS Research of India’s industrial production data showed India’s industrial production gained 2.4% year-on-year in November from a drop of 0.3% in October.

Economists expected production to decline 0.8% in the period, while Goldman Sachs had forecasted a 2% decline. Goldman said seasonally adjusted monthly momentum gained 1.7% month on month in November from a drop of 3% in October.

The report also notes that in the April- November period, the index rose 3.9% year on year from 9.3% in the comparable period a year earlier.

Growth in consumer goods grew 4.4% year on year in November from 2.2% in October as consumer non-durables soared 7.3% year on year.

Exports and motor vehicle sales each declined 10% year on year in November.

Goldman Sachs forecasts that economic activity will gain 7.8% in the first half of 2008 but slow in the second half of the year.

The GDP growth is projected to remain unchanged at 6.7% year on year for 2009 and 5.8% for 2010.

Goldman Sachs Global ECS Research expects the Reserve Bank of India to ease both the repo and reverse repo rates by 50 basis points each in the January 27 meeting, and also expects the RBI to ease the cash reserve ratio by 150 basis points by mid-2009.

Business Confidence Falls 37.8 in the September

Federation of Indian Chambers of Commerce and Industry’s business confidence index fell 37.8 in the three months to September from 52.8 in the last survey.

The FICCI said information collated from 412 Indian companies showed that 88% of the respondents said the current economic conditions have “moderately to substantially” worsened in the last six months.

Half of the companies surveyed said industry performance will weaken in the coming six months, while near term prospects for sales, profits and investments were regarded as “very bleak”.

In addition, 84% of respondents said they will limit new recruitments and urged government to lower interest rates and slash taxes.

Satyam Computer Services CFO Blames Auditors and Raju

Economic Times of India reported today that Satyam Computer Services chief finance officer Srinivas Vadlamani has blamed founder Ramalinga Raju and auditors Pricewaterhouse Coopers for perpetrating the 7,000 crore rupees financial fraud.

Srinivas said auditors were not able to notice the holes in the company’s balance sheet notwithstanding the fact that fixed deposits were unreal and fictitious.

Gainers & Losers

Satyam Computer Services gained 44.7% to 34.55 rupees on the expectations that the newly appointed three-member board by the government will help salvage the company''s clients and staff.

The government yesterday appointed Deepak Parekh, chairman of Housing Development Finance Corporation, Kiran Karnik, former president of the National Association of Software and Service Companies, a technology lobbying group, and C Achutan, a former official at the Securities and Exchange Board of India in order to restore confidence in the market.

However, the National Stock Exchange announced today that Satyam Computer Services will be removed from the futures & options segment once all existing contracts expire on January 29, 2009.

Wipro tumbled 10.6% to 224 rupees after the company said it was barred from bidding for contracts from the World Bank until 2011 after it offered employees of the institution shares in its initial public offering.

An estimated 1,750 shares worth $72,000 at the IPO price were purchased in this way.

Infosys Technologies fell 3.4% to 1,155 rupees ahead of its third quarter results for 2008 that are due to be announced tomorrow.

Tata Consultancy Services declined 5.7% to 505.10 rupees despite the rupee dropping to 48.74 against the dollar from 48.28 on Friday last week on fears global economic conditions are worsening.

Reliance Industries fell 4.5% to 1,099 rupees and Oil & Natural Gas Corporation tumbled 3.1% to 650 rupees after crude oil prices for February delivery declined 32 cents to $40.51 per barrel.

Oil marketing companies also dropped. HPCL slipped 3.5%, BPCL dropped 5.5% and IOC plunged 3.8%.

Financial stocks fell. ICICI Bank lost 2.7% to 442.60 rupees and HDFC Bank tumbled 0.7% to 1005.30 rupees.

Commodity stocks dropped. Tata Steel edged down 7% to 199.60 rupees and Hindalco Industries lost 4.9% to 50 rupees.