ALL LISTED COMPANIES REQUIRED TO MAINTAIN 25% PUBLIC HOLDING

The Government has made amendments to The Securities Contract (Regulation) Rule to increase the public holding Minimum 25% level. The Salient features of amendment are as follows:
• The minimum threshold level of public holding will be 25% for all listed companies.
• Existing listed companies having less than 25% public holding have to reach the minimum 25% level by an annual addition of not less than 5% to public holding.
• For new listing, if the post issue capital of the company calculated at offer price is more than Rs.4000Cr., the company may be allowed to go public with 10% public shareholding and comply with the 25% public shareholding requirement by increasing its public shareholding by at least 5% per annum.
• For companies whose draft offer document is pending with Securities and Exchange Board of India on or before these amendments are required to comply with 25% public shareholding requirement by increasing its public shareholding by at least 5% per annum, irrespective of the amount of post issue capital of the company calculated at offer price.
• A company may increase its public shareholding by less than 5% in a year if such increase brings its public shareholding to the level of 25% in that year.
• The requirement for continuous listing will be the same as the conditions for initial listing.
• Every listed company shall maintain public shareholding of at least 25%. If the public shareholding in a listed company falls below 25% at any time, such company shall bring the public shareholding to 25% within a maximum period of 12 months from the date of such fall.
             The Securities Contracts (Regulation) Rules 1957 provide for the requirements which have to be satisfied by companies for the purpose of getting their securities listed on any stock exchange in India. A dispersed shareholding structure is essential for the sustenance of a continuous market for listed securities to provide liquidity to the investors and to discover fair prices. Further, the larger the number of shareholders, the less is the scope for price manipulation. Accordingly, the Finance Minister in his Budget speech for 2009-10, inter- alia, proposed to raise the threshold for non- promoter, public shareholding for all listed companies. To implement the Budget announcement the Securities Contracts (Regulation) (Amendment) Rules, 2010 have been notified.
        The companies  / promoters can increase public holding by any of the mode which is viable to them that is IPO / FPO / Rights Issue / Private Placement etc. The real benefit is to investor who can get shares of various PSU etc. this move was made so that disinvestment process can be started quikly. further at present around 180 companies have be identified which has less public holding. Further if companies follow this rule then market should be ready to invest in these shares which will require around 2,00,000 croes or say around $45billion so this kind of money market does not have even till date FII investment in india is $65billion so this will be only possible when companies disinvest around 5-10% to retail investor and balance can be possible with QIP / Private Placement with FII's, DII, Hedge funds, Mutual Funds etc. so that long term capital will help companies to bring down debt level and for GOI it will be helpful to bring down deficit which is balloning.

FINANCIAL SHOCKS

The USA market got the first shock in 2008 due to bad loans that lead to disaster, the government had to pump in USD1Trillion dollars but still it’s not out of wounds and the second shock started in European countries such as Greece and it is expected to hit Spain, Italy etc. Which also required USD1 Trillion package now after all these packages, relief funds etc. its not sure that the entire problem is solved.
The Developed market is witnessing stagnation in demand/ growth (except food articles) along with boiling Crude Oil prices which remains above $75 and the Fiscal deficit is ballooning at faster rate which at one point of time will eat economy as a whole. Another important problem is Inflation which is also not cooling of especially due to crude and food items. The Emerging economy is 100% risk and reward play but the developed economy is NOT SAFE in long run that is for sure and we do not know when Currency Dumping will start in the emerging market.

Looking at the current scenario I expect that Developed countries will require around USD5-7 Trillion and working capital of around USD 2 Trillion (Including existing Package) and it will take around 7-10 year to recover from full problem especially the USA as the financial system has completely struck hard whether Credit Card, Mortgage etc.

But Fund Managers, Hedge funds are bullish on China & India for Longer term prospective because large gap of demand and supply in these market and population is key driver for the same.

It’s expected that China will dominate world market as USD will loss its shine as and when such financial shock occur, that means may be its possible that Yuan will be the acceptable currency and most power full as whole.

In case of India it may not dominate same as china but Rupee will appreciate considerably in Long run as we can expect around USD70-100 billion (Fresh Funds) is waiting to come in our market provided proper government policy is initiated. Further at present our main problem is inflation, Demand supply gap in commodity and boiling oil prices etc. Long term market prospectus is bright but short term shock is not avoidable in any case.

However India’s share of export in manufacturing is less compare to china so if domestic consumption level is improved it will have better impact on our market, but all this is matter of time. We all know that once if a person is wounded badly it will take time to recover from such accidents in the same way is the financial market which had just seen 2 big accidents and many more may happen in developed market.

Indian Investor should be prepared to take Big & Small Crash that is why i always say that Retail Investor with small capital must avoid Speculation it will only give pain as they cannot compete with those FII’s, Hedge Funds etc.

UNION BUDGET 2010-11 PROPOSALS FOR EACH SECTOR

POWER
•Plan allocation to renewable energy ministry hiked
•Coal regulatory authority to be set up
•National clean energy fund to be set up
TEXTILES
•One-time 200 cr for allotment to Tripura Textile sector in Tamil Nadu
Infrastructure
•Plan allocation doubled for power sector
•To construct 20 km highway everyday
•13% rise in allocation for transport sector
•5 mega food parks to be set up
•Infrastructure thrust to be maintained in rural and urban areas
•Govt. committed to SEZ growth
AGRICULTURE
•Budget gives strong focus to boost agri production
•Rashtriya Krishi Vikas Yojna to get Rs 300 cr
•Four pronged strategy to boost agri production
•Repayment of loans to be extended to 6 months in drought and flood hit areas
•Fertilizer subsidy to be reduced
•Failure in agriculture sector compensated by good show in manufacturing sector
EXPORTS
•2% interest subvention for exports extended
BANKING & FINANCE
•Rs 16,500 cr allocated to public sector banks
•Divestment proceedings to be spent on social sector
•Double digit food inflation a worry
•RBI considering giving banking licenses to more private players
•Medium term growth plan to cross double-digit figure
•Private investment can sustain 9% growth
•Need to review fiscal stimulus
•GDP to reach 10% soon
•Efforts on to reduce inflation in two months

UNION BUDGET 2010-11 PROPOSALS

1. Individual / HUF Tax Slabs.
Up to 1,60,000 :- Nil
1,60,000 - 5,00,000 :- 10%
5,00,000 – 8,00,000 :- 20%
Above 8,00,000 :- 30%
2. Income tax return form to be made simple, Saral 2 form for individuals to come
into force, it will have only 2 pages
3. New Direct Tax Code by April, 2011
4. Additional Deduction of 20,000/- available for investment in Long Term
Infrastructure Bonds. This benefit is available above present 1,00,000/- on
savings instrument available U/s 80C
5. MAT Increased from 15% to 18% of the Book Profits.
6. Surcharge for Domestic Companies reduced from 10% to 7.5%
7. Relaxation of Audit with Business Income up to Rs.60 Lacs & Professional Income
Up to Rs.15 Lacs.
8. Threshold limit for TDS applicability to be rationalized.
9. No capital gains tax on conversion of a business entity into LPP
10.It is proposed to increase the interest chargeable u/s 201(1A) for late payment
of TDS from one percent to one and one -half percent for every month or part of
a month
11.Custom duty on gold to be reduced
12.Rationalisation of custom duty on gaming software
13.Excise duty on petrol, diesel increased
14.Mobile phones to be cheaper
15.Peak custom duty unchanged at 10%
16.5% custom duty on crude petrol back
17.Petro products to cost more
18.Cement to cost more
19.Large cars, SUVs to cost more
20.Cigarettes, non-smoking, chewing tobacco to cost more
21.Cross Tax Receipts Rs 7. 46 Lakh crore
22.R&D deduction hiked to 200%
23.Fiscal stimulus to be partially rolled back
24.GST to be implemented by 2011
25.Fuel price hike in due course
26.Defence allocation up by 6000 cr
27.Technology Advisory Group to function under Nandan Nilekani
28.15% rise in plan expenditure
29.Increase in allocation for school education
30.Interest subvention to benefit handicraft, jewellery and gem exports
31.Social sector spending up to 1.37 lakh crore
32.Bharat Nirman outlay Rs 48,000 cr
33.NREGA allocation Rs 40,100 cr
34.Banks in all villages with over 2000 population
35.Subsidy for affordable housing increased
36.Special allocation for unorganized labour sector
37.Slum free India at the earliest

BUDGET EXPECTIONS

The budget is important event in the country effecting planning’s of man people but what can we expect from the budget. The following points one can expect from the budget.
1.Full / Phase manner rollback of stimulus package.
2.Hike in personal income tax basic limits.
3.hike in excise duty
4.Benefits to export oriented sectors.
5.More benefits for software industry
6.Review of the STT system due to implementation of New Direct Tax Code from 2011-12
7.Road map for implementation of GST
8.Disinvestment of other PSU
9.Certain announcements with regard to housing sectors
10.Strategy for bringing down the Fiscal deficit.
11.Infrastructure spending for development of Roads etc.
12.The GOI may also consider to bring down subsidy for fertilizers due to gas based production.
13.Reconsider tax benefits U/s80C
14.May bring in more stiff provisions for tax evasion

I feel the budget may surprise many of us because the main effort will be to bring down deficit without hurting the growth of the country. However with inflation at 8.5% and likely to cross 10% in near term, the only option available to FM is to Full / phase manner rollback of stimulus package. However these packages will continue to EOU because the export is just picked up for last 2 months or so with increase of 10%. The main beneficiary will be the ITES, Textiles & EOU etc.
Therefore taking into consideration above points i feel that budget will be a disciple affairs and one should not expect more from FM. The market may react negatively with regard to rollback of stimulus packages & Hike in petrol etc.
WITH ROLLBACK OF STIMULAS the IIP will stabilise at around 12%, GDP at 7% and inflation will be at 3-4% after rollback for first FY and growth will be at better rate provided there is no policy overlapse from GOI.

BENEFIT OF INVESTING IN EQUITY SHARES

Many investors will invest in the stock market without knowing its benefit and risk involved in it, but market is always right to reward its investors whether long term or short term prospective. However investors may find painful times and joyful profits based on the market conditions and there investment strategy but we should know the benefits of investing in equity shares to understand its implications. The benefits of investing in equity shares (Listed) are:-

• Dividend is exempted from tax Under Section 10(34) of Income Tax Act.
• Long Term Gains is exempted from tax Under Section 10(38) of Income Tax Act (If shares are sold in recognized stock exchange).
• The holding period for calculating Long term Capital Gain is 12 months (other assets its 36 months).
• Short term capital gains is taxed at lower rates that is 15%
• Dividend is not constant but can vary as per profitability of company.
• High risk and return always follows.
• Easily cashable
• Capital appreciation is high compare to other assets class.
• Easy to gift and transfer by demat mode.
• Low transaction & carrying cost.
• Bonus issue by companies if good profitability. This will maximize wealth.
• Hedge against inflations.

The equity shares of listed companies are one of the best investment avenues that are present. It can give good returns when calculated for many years. There may be years when returns may be very bad like the year 2008. But new investor should invest in shares of listed companies in systematic approach without giving importance to volume / quantity but quality of shares purchased. For example if you desired to invest every month 3000/- it not big issue you can buy say 10 Dabur Ltd, 16 Lakshmi Vilas bank(LVB) etc. over period of 12 months you can accumulate over 120 Dabur & 200 LVB with benefit of bringing down cost of investment when market is falling otherwise book profit. But never feel bad of low volume / quantity but quality and invest on long term basis on SIP approach only.

CITY UNION BANK LTD

CUB is 105 years old South Based Bank with 222 branches in India with strong presence in Tamil Nadu. CUB has consistent track record of dividend and profitability since IPO, currently it has issued rights shares in ratio of 1:4 at 6/- per share, post rights issue Equity share capital will increase to Rs.40 Cr. In order to Improve its business & comply with prudential norms the bank has proposed to go for QIP issue which can be for Rs.300 Cr.
At Current Market Price of Rs.25/- per share Long term Investor can approach this stock with Long term target of 40/- & Short term target of 30/-. Further its pertinent to mention that post rights issue the EPS will be 3/- and book value of 21/- and investor can expect another Rights Issue / Bonus from bank along with QIP which will increase the Paid up capital upto Rs.100 Cr.
For the FY 2009 the bank performance was ok with total Income has grown 35% and Profitability by 20% but the provisions were around Rs.105 Cr. During Q2 for Current FY Total Income Increased by 31% and profitability by 22%.
The only risk to this recommendation is that any new provisioning Norms by RBI or such other crises will only effect the profitability of the company.
It is to be noted that targets mentioned above may change with the dilution of equity share capital by bank.