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Indian stock market and companies daily report (October 05, 2012, Friday)

Contributed by Angel Broking

The Indian markets are expected to open in the green today on account of another round of reforms undertaken by the government yesterday. The Union cabinet has cleared the amendments to the pension and insurance bills which are expected to further boost the positive sentiments that have been created post the first round of reforms.

US stocks moved mostly higher during trading on Thursday, adding to the gains that were posted in the previous session. The markets benefited from a positive reaction to the latest U.S. economic data, although buying interest was somewhat subdued ahead of todays jobs report. Investors also reacted positively to comments from European Central Bank President Mario Draghi, who spoke following the central bank's widely expected decision to leave interest rates unchanged. Draghi said the ECB is prepared to start buying government bonds and said the decision to institute the bond buying program has helped to alleviate tensions in euro area financial markets.

Indian shares had rallied yesterday on expectations the Union Cabinet will clear a slew of big-ticket reform bills in the Cabinet meeting. The government has responded positively to these expectations by increasing the FDI limit in insurance and pension sectors (has to be passed by the parliament) which should bolster investor confidence and provide support to the slowing economy.

Markets Today

The trend deciding level for the day is 19,035 / 5,782 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 19,130 - 19,202 / 5,813 - 5,838 levels. However, if NIFTY trades below 19,035 / 5,782 levels for the first half-an-hour of trade then it may correct up to 18,963 - 18,868 / 5,757 - 5,726 levels.

Reform momentum continues

In a positive move on the reform agenda, the Union cabinet on October 4, 2012 continued to maintain its thrust on policy reform measures in the financial sector. The Cabinet approved official amendments to the Pension Fund Regulatory and Development Authority Bill and opened up the pension sector to FDI with a cap of up to 26%. Further, it also approved key proposals such as:

Amendment to the Companies Bill, 20011, so that spending on corporate social responsibility is mandatory for companies above a threshold size.

Amendment to the Competition Act, 2002 whereby it attempts to bring all voluntary mergers and acquisitions under the purview of the Competition Commission of India.

Amendment to the Forward Contracts (Regulation) Amendment Bill, 2010 giving the regulator, Forward Market Commission (FMC), more autonomy and power to regulate the market effectively and allowing options in the commodity market with the objective of price discovery and price risk management.

Following the approval of these proposed changes, the bills will have to be cleared by both houses of parliament in order to take effect. However, the implementation of these measures is likely to face challenges since some of the opposition parties have expressed dissent regarding FDI in insurance and pension sector. Nevertheless, we expect markets to react positively to the reform measures since the government has signaled its intent to drive the momentum on reforms ahead. Sensex regained the 1 9,000 mark in anticipation of positive reforms.

Cabinet approves 49% FDI in insurance

Cabinet has given its nod to the Insurance Laws (Amendment) Bill which inter-alia include amendments like increasing the foreign investment ceiling in the insurance sector to 49% from the present 26%, reducing the minimum capital requirement for health insurance company to '50cr instead of '100cr. However the bill is still not law and is likely to be taken up by Parliament for passage as Law in the forthcoming winter session.

Overall, increasing FDI in insurance is expected to ensure greater flow of capital into the industry and attract foreign investors to increase their stake. Most of the private life insurers in the country are in joint ventures with foreign insurers and it is likely that once the bil is passed the foreign counterparts might increase their stake upto 49%. It would be beneficial for companies like ICICI Bank (ICICI Prudential Life), HDFC Ltd (HDFC Standard Life), SBI Bank (SBI Life), Bharti Group (Bharti Axa Life), Max India (Max Life), Future group (Future Generali Life), AB Nuvo (Birla Sun Life) and several others.

TDSAT issues notice to Bharti Airtel on Asergis plea

Telecom tribunal, TDSAT, yesterday issued notice to Bharti Airtel over a petition filed by Asergis Telecom Services, alleging that Bharti Airtel had blocked its toll free Intelligent Network (INservices) number leased from Tata Teleservices. The TDSAT asked Bharti Airtel to file a short reply by Tuesday over Asergis's allegations.

Asergis, a fully owned subsidiary of UK-based Asergis Global Services, has been given two days after that to file its rejoinder to the reply.

Asergis has alleged that Bharti Airtel is blocking its subscribers from accessing its toll-free numbers on the plea that calls were terminating outside India. Asergis has leased toll-free numbers of 1800 series from Tata Teleservices for audio conferencing with its customers. Bharti Airtel and Tata Teleservices have an interconnection agreement between them. Callers don't have to bear the cost of toll-free calls and charges are paid by the company holding the 1800 series number.

Asergis, after getting license for Voice Mail/Audiotex services from the government, had set up the network with 71 toll free numbers leased from Tata Teleservices for providing audio conferencing to its IN customers. The firm contended that from September 11, 2012 Bharti Airtel had blocked access to calls originating from its subscribers in India on IN services, alleging that it was using it to provide to its customer outside India. We maintain our Neutral view on Bharti Airtel.

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- TDSAT issues notice to Airtel on Asergis plea