Investment Alert: Public float violations cost promoters :: Business Line

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With the June 3 deadline for companies to reduce their promoter holdings to 75 per cent behind us, SEBI cracked down on promoters who missed the bus. A circular issued on Tuesday curtailed voting rights for promoters beyond 75 per cent and said they cannot receive benefits like dividends and bonus offers with respect to the excess shares. These companies have been asked to file their replies, if any, to the SEBI within the next 21 days. So, it is unlikely that these companies will hold annual general meetings or declare dividends over the next few weeks. 105 companies including Adani Ports, Bombay Rayon, BGR Energy, Plethico Pharma, Essar Ports and Tata Teleservices are yet to comply.

Rupee effect

The rupee breached 57 against the US dollar and was within sniffing distance of the record low of 57.33. The US Federal Reserve’s recent hints on cutting back its bond purchases have seen currencies of emerging markets, including India, face pressure. The weakening Rupee presents a fresh threat to the profits of Indian companies who are large net importers. A sliding Rupee may offset recent saving from falling global commodity prices. Stocks from the fertiliser, oil, power and airline companies, the most import-dependent, will bear watching next week.

Dearer imports, better gold returns

As a part of its measures to discourage gold imports, the Government last Wednesday increased import duty on the yellow metal by two percentage points to 8 per cent. It was only in January that import duty was increased from 4 per cent to 6 per cent. Earlier in the week, the RBI barred importers from buying gold on credit. All this is bad news for gold jewellery companies and importers, but good news for those who already hold gold exchange traded funds. Every increase in import duty pegs up domestic gold prices, and actually lifts their returns.

Services up, manufacturing down

The HSBC India Services PMI, an advance indicator of industrial fortunes, rose to 53.6 last month from 50.7 in April, helped by new orders and optimism on the improving global scenario. In contrast, the manufacturing sector should brace for weak trends with the manufacturing PMI reading at 50.1 versus 51 in April. The reading indicates that manufacturing output isn’t shrinking yet, but is very close to it. Output was hit by poor order flows and disruption in production activities in several States facing a power shortage. The slowdown in manufacturing may reflect in IIP numbers in the coming months.