India Stocks Drop, Paring Yesterday’s Record Gain on Election

INDIA SENSEX

Indian stocks fell as investors judged yesterday’s record one-day advance, triggered by the Congress Party’s election victory, overdone.

The benchmark Sensitive Index fell 212.70 points, or 1.5 percent, to 14,071.51 as of 10 a.m. local time. The Sensex yesterday jumped by a record 17 percent on the Bombay Stock Exchange. Trading was halted for most of the day for the first time ever because the Sensex breached the upper limit set by the market regulator.

Prime Minister Manmohan Singh’s ruling Congress party won its most seats since 1991 in the election. The victory will enable the party to start forming a new government without support from communist lawmakers, who frustrated plans to entice foreign investment and sell state-owned companies in Singh’s first five-year term.

“It’s okay to be bullish on India, but not recklessly bullish,” Ajay Bodke, who helps manage $3.4 billion in assets at IDFC Asset Management Co. in Mumbai, said late yesterday. “We are not in 2007; we are no longer living in an era of easy liquidity.”

Indian stocks were yesterday trading at 14.6 times earnings for the year ending March 31, 2011, Bodke said.

S&P CNX Nifty Index declined 2.2 percent to 4,230.05 today. Infosys Technologies Ltd., the country’s second-largest software developer, fell 8.8 percent to 1,642 rupees. Reliance Industries Ltd., the nation’s most valuable company, slid 3.2 percent to 2,292 rupees.

‘Overstretched’

Stocks may extend their record rally this week before falling as shares are too costly, given the outlook for economic growth and earnings, said UTI Asset Management Co., the nation’s oldest money manager.

“Markets can go up some more but valuations are looking overstretched,” Anoop Bhaskar, equities head at Mumbai-based UTI, which oversees $11 billion of assets, said in an interview.

The gains yesterday pushed shares to 15.56 times earnings, twice the 7.7 multiple six months ago, according to data compiled by Bloomberg.

India’s growth may weaken to 6 percent in the year that started April 1, the slowest pace since 2003, the central bank said last month. Asia’s third-biggest economy expanded 5.3 percent in the quarter through Dec. 31. Factory output in March shrank the most in 16 years as exports plunged by a record.

The government is seeking to maintain annual growth rates above 8 percent for two decades to reduce poverty. Profits at Indian companies may expand at a pace of 11 percent or less next year, Bhaskar said.

Indian Goods

The government will need to bolster an economy that’s slowing as the global recession saps demand for Indian goods.

India’s post-election rally may last for a few weeks at the most, as the government battles an economic slump, said Gautam Prakash, founder of Monsoon Capital LLC with about $500 million of Indian assets.

The rupee climbed 0.7 percent today, extending yesterday’s 3.1 percent gain against the dollar, which was the most in more than two decades. The benchmark bond yield fell 16 basis points, the biggest decline in a month. A basis point is equal to 0.01 percentage point.

Bhaskar said valuations may not be sustainable as earnings growth at Indian companies may not exceed 11 percent next year. Kotak Securities said in a note yesterday the stock rally has prevented “a more aggressive view” because there aren’t signs of improving earnings.

Stocks Upgraded

India’s stocks were yesterday upgraded to “overweight” from “underweight” at Morgan Stanley, which said it was the first time the brokerage’s so-called country quant model recommended an overweight rating on the nation’s shares. Morgan Stanley said the Sensex may rise to 15,300 this year.

The ruling government has unveiled three stimulus packages since December, including lower retail fuel prices, taxes on consumer products and injecting capital into state-run banks, to shield the economy from the global crisis. With almost twice as many seats as the main opposition, Singh may further reduce barriers to foreign investment in insurers and retailers, plans that had been blocked by communist lawmakers.

Indian rupee trims gains as stocks seesaw

* Loses upward momentum; stocks wobble on profit-taking

* Importers, refiners buy dollars after sharp rise in rupee (Updates to mid-morning)

MUMBAI, May 19 (Reuters) - The Indian rupee trimmed early gains of more than 1 percent on Tuesday, after the stock market seesawed as investors locked in profits following a 17.3 percent surge in the previous session.

At 10:32 a.m. (0502 GMT), the partially convertible rupee was at 47.48/50 per dollar, 0.8 percent stronger than its Monday's close of 47.88/90.

It rose as high as 47.27 in early trade, its strongest since Dec. 19, at which point it was up 10.4 percent from its record low of 52.2 in early March.

The rupee had surged 3.2 percent on Monday, its biggest single-day rise since Jan. 19, 1998, after the ruling coalition won a comfortable victory in national elections, boosting hopes for speedier economic reforms and higher foreign investment.

"There was heavy profit-taking in the sharemarket, so people started covering their short dollar positions. Stocks are very volatile, so even the bid-ask spreads in the forex market are very wide," a senior dealer with a private bank said.

"The rupee should most likely trade in a 47.30 to 47.80 band today, with a break possible on either sides," he said.

The main stock index .BSESN was up 0.7 percent after falling more than 3 percent early, but trade was volatile after the euphoria caused by the election win.
oreigners have bought more than $2 billion worth of stocks so far in 2009, after dumping over $13 billion last year.

Prime Minister Manmohan Singh's Congress-led coalition eyed possible new allies and needed just 10 seats for a parliamentary majority, rare in a country used to unwieldy coalitions. [ID:nDEL176255] For other election stories see [IN-VOTE]

One-month offshore non-deliverable forward contracts PNDF were quoting at 47.62/72, slightly weaker than the onshore spot rate. (Reporting by Swati Bhat; Editing by Ranjit Gangadharan)

Sensex creates history, vaults 2111 points

INDIAN STOCK MARKET

THUMBS UP: The Bombay Stock Exchange (left) gave a thumbs up to election results with the 30-share benchmark Sensex zooming by 2111 points on Monday for the first time in history within minutes of opening. The authorities halted trading for the day after the index hit the permitted upper circuit. Picture at right shows onlookers watching the movement of the index with all smiles.

MUMBAI: It was a day of surprises for the stock markets on Monday as it gave a thumbs-up to the victory of the United Progressive Alliance (UPA) in the general elections with a gain of 2110.79 points.

The Dalal Street lost fear for the first time since the global recession hit markets with the fall of U.S.-based investment banker Lehman Brothers in August 2008. United Progressive Alliance’s near majority in parliamentary elections helped the market create history and hit the upper circuit twice in a day.

The Sensex, at the opening bell, surged 1306 points to 13479 and Nifty was 532 points up at 4203 and hit the first circuit for the day and also for the first time in the history of the Indian stock exchanges and the markets were closed for two hours. At 11.55 a.m. when the market opened again, the Sensex gained another 700 points and Nifty 150 points and hit the second circuit of the day and the market was closed for the day.

The BSE 30-share sensitive index (Sensex) gained 2110.79 points or 17.34 per cent and closed at 14284.21 while a broader 50-sahre Nifty of the NSE gained 651.50 points or 17.74 per cent to close the session at 4323.15.

Monday’s gain was an affirmation of investors that an effective and smooth continuation of the current policies of the government in the coming days. “With proactive monetary and fiscal policies combined with stable government, one can only expect that the economy will be back on track much faster than what one could have thought of,” said A. Balasubramaniam, CIO of Birla Sun Life Mutual Fund (BSLMF).

“The market breadth, the number of advancing shares to declining shares, was highly tilted in favour of advancing shares,” said Gaurav Dua, Head of Research, Sharekhan, a stock trading firm. Of the 846 stocks traded on the BSE, 833 advanced, whereas 11 stocks declined. Two stocks ended unchanged.

All sectoral indices on the BSE closed positive gaining in the range of around 7-23 per cent. The rally was led by the realty sector which moved up by 23.45 per cent, followed by capital goods sector which was up by 21.90 per cent.

BSE Bankex was up by 19.18 per cent, Oil & Gas by 19.11 per cent, Power by 18.33 per cent, PSU by 16.42 per cent, Metal by 16.10 per cent and Teck index by 14.02 per cent. Voicing a concern in the midst of jubilation, Mr. Balasubramaniam said that “Though the Indian equity market is going to cherish the positivity, the bond market may not cherish as much as the equity market due to fiscal concerns”.

Among the broader indices, BSE midcap was up by 447.41 points or 11.75 per cent and small cap by 387.14 points or 9.05 per cent.

The BSE said that all settlements were completed smoothly according to schedule. “There are no issues on margin collection and it has been computed as per the regular policy,” it added.

Ramalinga Raju's Satyam Crimes, Self-Interest, & Moral Paralysis

INDIA :

About a couple of weeks back, I had a very interesting conversation with a friend (and former classmate). The conversation started off with him telling another friend that “a day will come when you will look for a meaning, a larger purpose in your job/life”. I inquired what he meant by a larger purpose and the conversation moved to self-interest and sacrifice. By the end of the discussion his position was that sacrifice should not be the guiding principle in normal life but that it might be necessary in certain (rare) situations. I claimed that pro-sacrifice and anti-selfishness principles are the dominant ethical principles today, to the exclusion of everything else and this has severe consequences in our lives, as these principles provide no guidance (at best) in normal life and actually create an undeserved sense of guilt if accepted. He responded that he did not believe that the pro-sacrifice ethical principles had many far reaching consequences. Since we were running out of time at this point, I said that I would provide evidence for my claim. Here is the first piece of evidence. This post seeks to show how prevalent the “selfishness is evil” theme is in the culture at large.

In its leading front page article on Friday, The Times of India asks

Did Raju Pick Lesser Of 2 Crimes?
He Said He Inflated Figures, But Did He Divert Money?

… Raju said that in the second quarter (July-Sept) of 2008, Satyam showed an operating margin of Rs 649 crore (which was 24% of revenue) when it was actually only Rs 61 crore (that’s 3% of revenue). This, he indicated, was part of a fudging exercise over years to inflate profits—presumably to keep the stock price up and the magic of Satyam alive.

Essentially, what Raju confessed to was creative accounting—showing cash where none was generated and therefore did not exist. But, as he kept emphasizing, he did not profit personally from it. Still a crime, but not top of the pops in order of heinousness.
…
It’s a crime to show money in the books where none existed, which is what Raju said he did. But it’s a worse crime to divert money that actually did exist.

Note the assertion that Raju’s crime would be less heinous if he did not profit personally from it. I do not know if this is true as per the Indian penal code. It is the moral angle that is more interesting. Consider the two possibilities.

1) What Raju wrote is true - that Satyam really was making very small profits (compared to the IT industry norms) and Raju inflated the books to keep the company going.

2) Satyam was making normal profits and Raju siphoned them off.

In both cases, Raju betrayed the responsibility he had as the company founder and board chairman. In both cases, he defrauded the shareholders. The difference in the two cases is that the motive in the first case is somewhat less personal than the second. So what does the Times’ assertion mean? It could mean one of two things:

a) Self-interest (personal profit in this case) is bad in itself.

b) Self-interest is amoral (neither good nor bad) but concern with other people’s interests (a larger purpose) is good.

I am sure that the pragmatist Times would hold that there is nothing wrong with personal profit if it is obtained by honest means. Its position on the issue (if it ever took the trouble of taking a definite position at all) would essentially be something like:

Selfishness is (regrettably) part of human nature and it is impractical to oppose it consistently. However it needs to be restrained in favor of a larger purpose (the common good).

So the Times assertion essentially means b. Now consider what that implies. It implies that the supposed “larger purpose” (keeping Satyam going in this case) can be a mitigating factor in the moral judgment of Raju’s actions. If things had gone a little differently and Raju had said that he fudged accounts after considering the delicate position of the global economy, the troubles his employees would face if Satyam were to shut down etc, etc…, the Times would find it difficult to take a unequivocal moral stand. After all it routinely justifies and calls for fudging the national accounts - by imposing fuel prices, interest rates, lending rates, printing money and a host of other such actions - on precisely such grounds.

Holding self-interest as amoral results in moral paralysis. One can no longer say that fraud is wrong irrespective of the motives behind it. All that is needed to justify it is some sufficiently “larger” purpose. And since everyone has a different “larger” purpose, a different “shared” vision for how other people should live - purposes such as Maharashtra for Marathis or India for Hindus or universal health care or universal education or the rule of Islam or saving the planet - anything goes.

I am a software developer based in Mumbai. I am interested in ethics, politics, culture, books and philosophy in general. Most of all, I am interested in making the most of my life. You can find my blog here

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