Sebi seeks clarifications on Bharti Infratel IPO

Market regulator Sebi has sought clarifications from the merchant bankers of Bharti Infratel, regarding the company’s proposed Initial Public Offer (IPO). Without disclosing the details of the clarifications, the Securities and Exchange Board of India (Sebi) has said that “clarifications (are) awaited from Lead Managers” for the proposed public offer.

In its latest weekly update to the processing status of draft offer documents filed with Sebi, uploaded on its website today, the regulator has said that clarifications were awaited on Bharti Infratel IPO as on October 25, 2012.

The status is updated on a weekly basis by the regulator and the the next update of the status as on November 2, 2012 would be uploaded on the Sebi website on the next working day. Sebi said it might issue observations on Bharti Infratel draft offer document within 30 days from the date of receipt of satisfactory reply from the lead merchant bankers to the clarification or additional information sought from them.
Sebi had received the draft offer documents of Bharti Infratel, the tower arm of telecom giant Bharti Airtel , on September 14 through its lead manager DSP Merrill Lynch. The proposed IPO, estimated to raise about Rs 5,000 crore, comprises of fresh issue of shares as well as offer for sale (OFS) of shares by certain existing shareholders.

Sebi had sought certain clarifications on the IPO last month itself, after which the company is believed to have replied to the regulator through its lead manager. However, Sebi is still awaiting replies to some of the clarifications. Incidentally, a Member of Parliament has written to the top Sebi officials, about “irregularities and uncertainties” in a scheme of arrangement involving Bharti Infratel and the objections raised by Department of Income Tax to the scheme.

The MP has asked Sebi to reject the draft offer documents of the IPO, saying the issue is “not advisable for public at this stage due to uncertain outcome of legal matters”. As per a new Sebi directive, which came into effect on October 9, the regulator can reject the draft offer document for an IPO if it is not satisfied about the investors’ interest being safeguarded, among other reasons.

Sebi Chairman U K Sinha recently said that “there are certain IPOs about which we are not very sure that the intention is clear, the data and information is clear, and we have decided to reject them.”

The guidelines for rejection apply to all draft documents filed with Sebi, while one-time withdrawal is allowed to the issuers whose papers are pending with the regulator. Such withdrawal is allowed till one month from the date of issuance of the general order, which was issued on October 9. Entities whose draft offer documents get rejected will not be allowed to access capital markets for at least one year from the date of such rejection.

US markets shut on Tuesday, focus shifts to Wednesday

Hurricane Sandy will close US stock markets for a second straight day on Tuesday, as Wall Street turned its attention to whether markets would be able to resume functioning on the month’s final trading day.
US stock markets closed on Monday due to weather for the first time in 27 years. Bond markets closed early, at noon, as winds and waves from Hurricane Sandy lashed the Eastern seaboard.

Also read: Asian shares subdued, lack direction after US closure

NYSE Euronext and Nasdaq OMX Group, the largest two US exchange operators, said they intend to reopen Wednesday, conditions permitting. The bond markets will also close on Tuesday, with traders aiming to reopen on Wednesday.

Wednesday is a key trading day because it marks the end of the month, when traders price portfolios. With New York still to feel the full impact of the storm, fears remained that wind damage and possible power outages could test the ability of markets to reopen. New York’s mass transit system, which most employees use to get to work, also remained shut and it was unclear when service would be restored.

The broad effects of the market shutdown – the first for the NYSE in 27 years due to weather – were beginning to become more apparent by Monday, as analysts estimated banks and trading firms could lose tens of millions of dollars in revenue.

Some companies postponed their quarterly earnings, and banks closed branches in the Northeast, while promising to waive certain fees in hurricane-threatened areas.

Disaster modeling company Eqecat said the storm is likely to cause insured losses of USD 5 billion to USD 10 billion, and economic losses of USD 10 billion to USD 20 billion.

The trading closure also threatened to delay IPOs of at least six companies, while Facebook Incemployees were prevented from selling shares in the social media company after a “lock-up” on trading expired.

“If you go two days, you really start to create some serious financial stress for some players that need to get something done,” said Jim Paulsen, of Wells Capital.

As Hurricane Sandy began battering the US East Coast on Monday, many Wall Street employees stayed home. Major Wall Street banks had planned to open with skeleton staffing, but with the stock and options markets closed and the bond market closing at noon, many people said they had little to do.

“There’s nothing to do, so I’m just relaxing,” said one New York-based equities trader at a large global investment bank, who spent most of the day in his pajamas, staying in touch with his boss and clients via phone and email.

Steve Gerbel, who runs hedge fund Chicago Capital Management, said that when he called a Goldman Sachs Group Inc trading desk on Monday, he got to talk to employees from its Salt Lake City office for the first time.

Since markets were closed, Gerbel said he would spend most of the day dealing with paperwork that he typically put on the back burner, and his employees would do the same, or clock out early.

“I predict my office will never be cleaner than it will be today,” he said.

For operations and back-office staffers, it was a big day, as workers struggled to keep data centers and company systems up and running.

LIKE HERDING CATS

Earlier on Monday, equities trading executives pressed the stock exchanges to clearly communicate their plans to avoid a repeat of Sunday night’s uncertainty.

Market participants and regulators decided late at night on Sunday to shut the stock and options markets, reversing a plan to keep electronic trading going on Monday, leaving some people complaining about confusion.

The biggest problem with the New York Stock Exchange’s initial plan to trade exclusively over its ARCA electronic system was that the contingency plan that it had created in March had not been vetted by many brokerage firms, sources familiar with the situation said.

The decision to close the stock and options market came on Sunday night after SIFMA, the Wall Street trade group, held a conference call around 11 p.m. to debate whether to close, said a brokerage executive, who requested anonymity because he is not allowed to speak to the media.

“It was like trying to corral cats,” the executive said.

NYSE spokesman Richard Adamonis declined comment on friction with the brokerage community over the on-again, off-again decision to open trading during the storm.

“Through the storm, SIFMA has and will continue to work with a variety of market participants to ensure smooth market function,” spokeswoman Liz Pierce said in an email.

On Monday, the industry tried to avoid a repeat of the confusion. A decision to close the markets on Tuesday had been announced by early afternoon, after an industry-wide call that included regulators, broker-dealers and executives.

BONDS AND IPO PRICINGS

On a call Sunday evening hosted by SIFMA, with big banks, exchanges and other industry representatives, banks pushed for bond markets to open in New York on Monday, at least temporarily, to help secure short-term funding needs for themselves and their clients. The bond markets were open until noon, on an abbreviated schedule.

Many cautious clients took care of funding needs through Wednesday, according to a source at a large global investment bank. If firms or their clients need to get trades done during the rest of the week while markets are closed in New York, they can trade out of bank offices in Asia or Europe, he said.

The stock market’s closure means companies that were looking to go public may have to wait. Six initial public offerings scheduled to price later this week will likely have to be pushed back, equity capital markets sources said. They said decisions were being made now between underwriters and the issuers.

“We can’t market some of these deals while no one is on the other side of the phone,” said one equity capital markets banker at a large Wall Street bank. Some deals may be pushed back to next week after the election, the source said.

Restoration Hardware, the highest profile of the public offerings set to launch this week, is still on track to price Thursday night, a source familiar with the matter said.

Radius Health, which was set to price its USD 61.8 million IPO later this week, is in a “wait-and-see mode,” said Chief Financial Officer Nick Harvey. “We haven’t made any decisions yet,” he added.

Equity futures continued to trade through Monday morning, closing at 9:15 a.m. EDT. CME Group Inc said it was closing its interest-rate futures trading as of noon EDT.

Realistic to expect Nissan to miss earnings targets: CEO

Japan’s second largest automaker says it is “realistic” to expect the company to cut its forecasts for the full year when it reports earnings next week, its chief executive Carlos Ghosn told CNBC.

“It’s true, we have seen already some announcements made by competitors, revising their forecast down, which would be very realistic,” Ghosn said, a day after rival Honda cut its full-year net profit by a fifth as an islands dispute between Japan and China hit sales in China. Nissan is scheduled to announce its results for the fiscal first half on November 6.

Anti-Japan protests after Japan nationalized the Senkaku Islands pushed Nissan’s sales down 35 percent in September, while it had to trim production by 20 percent as showroom traffic came to a halt. While Ghosn said that customers were gradually starting to return to Nissan’s stores, he said demand will not normalize before the end of the year.

“This recovery is going to take many months before we come back to some normal level,” Ghosn said. “I think it’s going to take way into next year before we come back to normal production.”

Nissan makes up a quarter of global profits in China, which means the downturn undermines its performance more heavily than its Japanese rivals. Nissan currently forecasts sales to increase 9.5 percent in fiscal 2012 to 10.3 trillion yen. Meanwhile, analysts also expect industry leader Toyota to lower forecasts when it reports next Monday.

As CEO of Renault, Ghosn is also faced with a three-year debt crisis in the euro zone that threatens to push France into recession for the first time in three years. With unemployment in France hitting 10 percent, the government of President Francois Hollande has been pressuring companies to maintain jobs; Ford Motor broke from the ranks last week when it announced it would close three factories in Europe and cut 5,700 jobs.

“We think we can avoid the situation, on the condition that we have established competitiveness in the main market and in the main base, which is France,” Ghosn said.

Oil markets brace for ‘demand destruction’ after Sandy

Hurricane Sandy may inflict a negative hit to demand for crude oil and fuel products as production at US East Coast refineries comes to a standstill, reducing demand for the primary input.

Meanwhile, diesel and gasoline consumption by businesses and households could also be cut sharply after New York and other large cities are shut down by the storm, reducing economic activity. Power outages lasting as long as ten days may reduce demand further.

The supply of gasoline, diesel and jet fuel into the US East Coast ground almost to a halt on Monday as Hurricane Sandy forced the closure of two-thirds of the region’s refineries, its biggest pipeline, and most major ports, Reuters reported.

“If you think of it from the end-users’ standpoint, if they can’t process it then they’re going say, I’m going to store it and use it later,” CME floor trader Tres Knippa of Kenai Capital Management told CNBC’s ‘Closing Bell’ on Monday. “So if you don’t have the end-users using it, that means there’s more supply and, ergo, crude going down. However, as we move into the election I am not interested being short crude at these levels.”

Brent December crude dipped 11 cents to settle at $109.44 a barrel, having reached $110.26. Brent was on pace to post a more than 2 percent loss for the month, a second straight monthly loss.

US December crude fell 74 cents to settle at $85.54 a barrel. Monday’s $84.66 intraday low was the lowest price since July. US crude futures were on track to end October down more than 7 percent, after sliding more than 4 percent in September.

Still, at this juncture traders appear divided over the direction crude and product markets will take in the wake of the worst weather event to hit New York City since at least 1938.

Fuel product futures initially jumped reflecting fears that power outages and flooding could leave refiners struggling to restore operations while reports of pipeline, port and terminal operations either shuttered or reduced raised concerns of supply bottlenecks.

Colonial Pipeline said on Monday it is proceeding with its plans to shut Line 3, which runs from North Carolina to New Jersey, at 7 p.m. Monday night ahead of the arrival of Hurricane Sandy.

November gasoline futures which expire on Wednesday, rose 5.77 cents to settle at $2.7568 a gallon on the New York Mercantile Exchange on Monday. The $2.8115 session high was the highest price since Oct. 17. US November heating oil gained 1.74 cents to settle at $3.1152 a gallon, reaching its highest level relative to US crude oil on record.

“With all these big closures of all these refiners on the East Coast, it’s not a surprise that you’re going to see crude a little bit lower and unleaded gasoline higher,” Kenai Capital’s Knippa said.

But longer-dated gasoline prices dipped on Monday as traders start pricing in reduced demand for fuel after the almost total shut-down of eastern seaboard roads and airports, Reuters reported.

“While the storm will shut down 6.5% of US refining capacity and motorists will top off their tank the shutdown of major cities and the expected power outages may take a toll on demand unlike anything we have seen before,” said Phil Flynn, Senior Market Analyst at The PRICE Futures Group.

“The impact on demand may not last for hours but more than likely for days. This could be the biggest demand destruction event in history. The East Coast is by far the largest consumer of gasoline as they consumed 3,202 barrels per-day,” Flynn added.

US economy may skirt direct hit from Hurricane Sandy

Hurricane Sandy is shaping up to be one of the biggest storms ever to hit the United States but even with the severe damage that is expected, the blow to the economy is seen as short-term.
Economists say some of the impact caused by businesses closing will be offset by reconstruction efforts, and point to catastrophic storms like Katrina, which devastated New Orleans but did not deal lasting damage to the national economy.

Still, Sandy’s sheer breadth – 10 states have declared a state of emergency – means it could hurt this quarter’s economic output, even if the long-term impact ultimately proves neutral.

Gross domestic product in the region between New York and Washington amounts to some USD 2.5 trillion, so that every day the region’s economy grinds to a halt amounts to about USD 10 billion in foregone output, said Mark Zandi, chief economist at Moody’s Analytics.

At the local level of course, the destruction can be severe, and vary in direction depending on the industry affected.

Peter Morici at the University of Maryland estimates that Sandy will cause about USD 35 billion to USD 45 billion in losses and damages but then be followed by as much as USD 36 billion in recovery spending.

Damage caused by last year’s Hurricane Irene totaled as much as USD 20 billion, he said.

Predicting the impact of Sandy is made all the harder by complexity of the rare, hybrid “super storm” involving other weather systems that could get trapped over the Northeastern United States and amplify inland flooding.

“The range of possible scenarios for Hurricane Sandy remains enormous. There are examples of natural disasters ultimately exacting only minimal toll – Irene – and others having an outsized impact, such as Hurricane Katrina when the (New Orleans) levees broke,” said Eric Lascelles, chief economist RBC Global Asset Management Inc. “Really, it is a game of probabilities.”

Disaster modeling company Eqecat forecast economic losses caused by Sandy at USD 10 billion to USD 20 billion.

The toll from Katrina in 2005 exceeded USD 100 billion by most accounts. US economic growth slowed in the quarter immediately after the devastation inflicted on New Orleans but bounced back quickly.

The US economy grew 2 percent in the third quarter of 2012, picking up from earlier in the year but still a weak number, as consumer spending helped to offset a worrisome pullback in business investment. Many analysts were already concerned that retail sales could suffer later this year.

Retailers bear a significant brunt of any storm’s economic impact as shoppers stay at home. But the last-minute scramble for supplies and emergency goods has a moderating effect on the overall sales declines.

Still, Evan Gold, a senior vice-president at Planalytics, a Philadelphia consulting firm that advises businesses on weather-related matters, was less optimistic about seeing any upside, particularly with Sandy hitting so close to the holiday season.

“If consumers in this part of the country are spending hundreds, if not thousands, of dollars to buy things like generators, or after the storm, to do clean-up, that is likely going to cut into budgets that people might have for their holiday shopping,” said Gold.

FORECASTERS CHANNEL METEOROLOGISTS

One thing economists do agree on is that data releases in coming weeks will be even harder than usual to forecast. For instance, the impact of Sandy is likely to skew figures on weekly jobless benefit applications and chain store sales.

“The monthly economic data will become more volatile – October retail sales, vehicle sales, and industrial production will be hurt, but they will bounce back in November and December,” Zandi said.

“Restaurants will be hurt, but grocery stores will benefit; general merchandise stores will lose business, but online retailing should get a boost, he added. “Of course, if the storm knocks out major infrastructure like refineries, cell towers, trains, sea and airports, then the economic damage will be more severe and difficult to recover from.”

The hurricane has the potential to cause some of the largest losses the global insurance industry has faced this year, but nothing that would strain insurers financially aside from hurting earnings this quarter, according to analysts.

RBI faces rising pressure to cut rates

The Reserve Bank of India (RBI) faces growing pressure to cut interest rates later on Tuesday for the first time since April after the finance minister pledged to rein in the country’s fiscal deficit.

Remarks by Finance Minister P. Chidambaram at a hastily called news conference on Monday that he would nearly halve the deficit in just over four years had increased the chances for a Tuesday rate cut, some analysts said.

“Net-net, the odds for a rate cut have increased because of today’s press conference,” said A. Prasanna, an economist at ICICI Securities Primary Dealership in Mumbai.

A Reuters poll on October 19 found most economists expected the Reserve Bank of India to keep its policy repo rate unchanged at 8 percent. Nearly half said the RBI would take a more targeted measure and cut the cash reserve ratio, the share of deposits banks must hold with the central bank, from 4.5 percent in an effort to get banks to pass along earlier rate cuts to borrowers.

The RBI has kept the policy repo rate at 8.00 percent since April despite calls from members of the government and industry for action to revive the country’s flagging economic growth.

It says inflation – at a 10-month peak in September – is too high and that government action is needed instead to address its fiscal deficit and supply-side bottlenecks in the economy that fuel price pressures.

New Delhi has unveiled a spate of reforms to bolster investment and rein in its fiscal deficit, including raising the price of subsidised diesel and lifting caps on foreign investment in several industries.

While those measures have improved the mood of markets, the central bank has sought more in order to improve the investment climate and lower the fiscal deficit.

On Monday, Chidambaram pledged to nearly halve the fiscal deficit by March 2017 in a bid to avoid a credit rating downgrade and persuade the central bank to cut interest rates. But he offered few concrete steps on how to achieve the goal.

Higher spending on fuel, food and fertiliser subsidies along with sluggish tax revenues have led many economists to predict a fiscal deficit of 6 percent of GDP for the fiscal year that ends in March.

Chidambaram said India’s fiscal deficit would hit 5.3 percent of GDP this fiscal year, up from New Delhi’s earlier target of 5.1 percent.

In a pre-policy review on Monday, the central bank said that New Delhi’s reforms were a step in the right direction but more was needed, and fast implementation was key.

It also said headline inflation, which hit 7.8 percent for September and is expected by many economists to rise to more than 8 percent in coming months, was likely to ease starting in the January-March quarter.

“As macro-risks from inflation and twin deficits recede further, that could yield space down the line for monetary policy to respond more effectively to growth concerns,” the RBI wrote, a sign that it may be moving towards a rate cut. The twin deficits refer to the fiscal and current account deficits.

Gold likely to trade Rs 30900-31300 range: Nirmal Bang

 

Nirmal Bang has come out with its technical report on precious metal, base metal and Crude Oil. The research firm says Gold prices are expected to bounce till Rs 31200 -31300 whereby it is expected to witness some profit taking. Prices are expected to trade within a range from Rs 30900 to 31300.

Silver prices are expected to bounce till 60200 – 60300 one can buy around 59450 with a stop loss below 59000. Prices are expected to trade within a broad range from 60300 to 59000. Fresh buying is expected above 60300 on closing basis.

Gold prices are expected to bounce till 31200 -31300 whereby it is expected to witness some profit taking. Prices are expected to trade within a range from 30900 to 31300.

Copper prices are holding the support at 424 423 on closing basis, we expect the metal to bounce till 430 -432. One can buy with a stop loss below 420.

Nickel prices are expected to trade within the range from 850 to 890. One can trade within the range with a positive bias maintain a stop loss below 840.

Lead prices as expected to bounce above 110 till 112 -112.50, for intraday one can buy above 110 with a stop loss below 108.80

Crude price are expected to bounce if sustained above 4650 4640 one can maintain a small stop loss below 4625 for the target of 4700.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

 

US stock markets to close on Monday, possibly Tuesday

US stock trading will be closed on Monday and possibly Tuesday in response to Hurricane Sandy, NYSE Euronext said late on Sunday.

NYSE Euronext, which runs the New York Stock Exchange, had previously said that electronic trading would remain open and that only the exchange’s trading floor would close.

In a statement, the company said that “the dangerous conditions developing as a result of Hurricane Sandy will make it extremely difficult to ensure the safety of our people and communities, and safety must be our first priority.”

 

Rupee at 1-week low on euro weakness

The rupee falls to 53.815-53.825 after earlier hitting as a session low of 53.88, the lowest since October 22. The pair closed at 53.56-53.57 on Thursday.

Weaker euro spurring gains in the US dollar as traders await Spain’s request for a bailout and keep a wary eye on Greece after the country’s opposition leader said his party would vote against an austerity package expected to go before parliament this week.

Foreign bank dealer says USD/INR may remain well bid on the back of month-end dollar demand.

Pair will take further cues from RBI’s rate decision on Tuesday, with any rate cut likely to feed rupee gains by improving confidence in the economic outlook and potentially sparking foreign flows into stocks.

However, The Economic Times reports being told by two unnamed finance ministry officials the central bank was unlikely to cut key policy rates.

Rupee loses at open; oil demand watched

The rupee loses to 52.99-53.00 versus its previous close of 52.87-52.88 in early trade tracking overnight losses in the euro compared to levels seen during end of domestic trade on Wednesday.

Slight dip in the euro levels from late in the domestic session on Wednesday hurts sentiment for the local unit.

However, most other Asian units were stronger compared to the dollar, and that is seen limiting sharp gains in the USD/INR.

Traders expect good dollar demand from oil firms to continue to pressure the pair higher. 52.80 to 53.30 is expected to be the band for the day.