Author: Santosh Nair

Explained: Why SEBI penalised ex-NSE CEO Chitra Ramakrishna; who is the mysterious ‘yogi’

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Securities and Exchange Board of India on February 11 passed an order imposing a penalty of Rs 3 crore on NSE’s former Managing Director and Chief Executive Officer Chitra Ramakrishna, for sharing internal confidential information of the exchange with an unknown person, besides irregularities in the appointment of a senior official Anand Subramanian, for which NSE and the senior management, too, were responsible. Bizarrely, Ramakrishna said that she was being guided by a ‘yogi’ living in the Himalayas on decisions relating to Subramanian’s compensation.

Let’s take a look at what the case is about.

Who is Anand Subramanian?

He was Chief Strategic Advisor of NSE from April 1, 2013, and was re-designated as Group Operating Officer and advisor to MD and CEO from April 01, 2015, till October 21, 2016.

How did he get hired by NSE?

According to the SEBI order, Ramkrishna brought Subramanian into the NSE as Chief Strategic Advisor, but in a consultant’s role working four days a week. Subramanian was formerly working as a mid-level manager in Balmer and Lawrie and had no previous exposure to capital markets. His salary at Balmer and Lawrie was Rs 15 lakh per annum. His compensation package was raised to Rs 1.68 crore when he joined NSE.

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What were the irregularities in Subramanian’s appointment?

The Human Resources department was not consulted. The position of Chief Strategic Advisor was not advertised, neither was any other person considered for the position. The only person who interviewed Subramanian for his appointment was Ramkrishna. There were no notings in the personnel file of Anand Subramanian in relation to his interview. Over the years, Subramanian was given arbitrary and disproportionate increases in compensation. By FY17, Subramanian was drawing an annual package of Rs 4.21 crore while remaining a consultant. This compensation was higher than what most senior executives in the exchange were drawing. Also, despite his seniority, Subramanian was not designated as Key Management Personnel (KMP).

When did this catch the attention of SEBI?

During the course of the investigation into the issue of co-location facilities at NSE, it emerged that Ramakrishna had shared certain internal confidential information of NSE viz: organizational structure, dividend scenario, financial results, human resources policy, and related issues, response to the regulator, etc., with an unknown person via emails to rigyajursama@outlook.com from 2014-2016.

What was Ramakrishna’s response when SEBI asked her for an explanation?

Ramakrishna said the identity of the email id holder rigyajursama@outlook.com was a Siddha Purusha/Yogi, i.e. a Paramahansa largely dwelling in the Himalayan ranges. She said he is a spiritual force who has been guiding her for the past 20 years and that as a spiritual force, he would manifest at will. The SEBI order noted that Ramakrishna was deeply influenced by this ‘yogi’, who would write emails to Ramakrishna, directing her on Subramanian’s designation and compensation. Interestingly, Subramanian, too, was marked on the same mail. In addition, the yogi also advised Ramakrishna on redesignations and promotions of other senior officials as well.

Was the NSE aware of Ramakrishna’s correspondence with the Paramahansa?

Yes.

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Did the NSE inform SEBI about it?

No. The NSE and the board took “a conscious decision to not report the matter to SEBI and keep the matter under wraps”, the SEBI order said. The regulator also slammed the NSE and its board for not taking action against Ramakrishna and allowing her to exit through resignation despite having knowledge of the grave irregularities and misconduct.

So who exactly is the person behind the email id rigjajursama@outlook.com?

According to a forensic audit by consultancy firm E&Y, it was Anand Subramanian himself directing Ramakrishna.

What is NSE’s view on this?

In its letter dated November 27, 2018, to SEBI, NSE submitted that its legal advisors had consulted practitioners dealing with human psychology. “As per the opinion of human psychology expert Ramakrishna has been exploited by Subramanian by creating another identity in the form of Rigyajursama to guide her to perform her duties according to his wish. The Noticee no. 1 (Ramakrishna) was manipulated by the same man in the form of different identities; one as Noticee no. 6 (Subramanian), who enjoyed her trust, and the other as Rigyajursama, who had her devotion and dependence,” the SEBI order said, quoting NSE’s response.

What is SEBI’s view on this?

The SEBI order says that there is no conclusive evidence that the person behind the email id was Subramanian himself. However, what is evident from the E&Y report is that confidential information/data, including those pertaining to NSE 5 year financial projections, dividend pay-out ratio, NSE’s business plans, agenda of NSE’s board meeting and consultations over the ratings/performance appraisals of NSE employees, has been shared with an unknown person/ an outsider.

Also Read | Sebi amends PFUTP norms; to send notices, summons via instant messaging services

What is SEBI’s case against Ravi Narain, Ramakrishna’s predecessor?

The SEBI order says Narain was aware of the irregularities in the appointment of Subramanian as Group Operating Officer without being designated as KMP and correspondences of confidential information by Ramakrishna with an unknown person. Yet, at the NSE’s meetings on October 21, 2016, and November 29, 2016, Narain neither opposed the serious governance lapses in NSE nor recorded the matter in the minutes of the meeting, citing confidentiality and sensitive information.

What are the penalties imposed by SEBI on Ramakrishna, NSE, Ravi Narain, Anand Subramanian?

SEBI has imposed a penalty of Rs 3 crore on Chitra Ramakrishna and barred her from associating with any market infrastructure institution or any SEBI-registered intermediary for three years. In addition, NSE has been asked to recover Rs 1.54 crore paid to Ramakrishna as leave encashment and withhold Rs 2.83 crore of deferred bonus payment. NSE, Narain and Subramanian have been fined Rs 2 crore each. NSE has been forbidden from launching any new product for the next six months. Narain and Subramaniam have been barred from associating with any market infrastructure institution or any SEBI-registered intermediary for two and three years, respectively.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

LIC IPO: Policyholders with lapsed policies can still apply for shares

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Policyholders of LIC having a policy in lapsed condition can still be eligible for applying for shares of LIC’s initial public offering under the policyholder reservation portion.

The policyholder reservation portion is yet to be finalised, but will not exceed 10 percent of the total issue size.

“All policies which have not exited our records by way of maturity, surrender or by way of death of the policyholder are eligible for reservation under the Policyholder Reservation Portion,” says the draft red herring prospectus of LIC.

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As for policyholders who have applied for a LIC policy but are yet to receive the policy document, the following rule applies:

“To be eligible for reservation under the Policyholder Reservation Portion category, the policy should have been issued on or before the date of this Draft Red Herring Prospectus and should not have exited by way of surrender, maturity or death claim on the Bid/Offer Opening Date,” says the DRHP.

If you are a policyholder of LIC and have questions about the eligibility conditions for applying for the initial public offering, you can find the answers here.

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LIC IPO FAQs: Which policyholders can apply for shares and other questions answered

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Following are the frequently asked questions (FAQs) by the Life Insurance Corporation of India (LIC) policyholders about the initial public offering (IPO).

Excerpts from the draft red herring prospectus:

1. Is it necessary for policyholders to have a demat account to apply for shares in the offer?

Yes. As per SEBI ICDR Regulations, no equity share can be issued by any company in physical form, and the equity shares can only be issued in dematerialised form.

2. Is there any lock-in period for the shares purchased through the Policyholder Reservation Portion?

There is no lock-in period, and the policyholders can sell the equity shares immediately on listing of the equity shares, if they choose to do so.

3. I have a policy in SBI Life Insurance. Can I apply for the equity shares of the corporation in the offer under the Policyholder Reservation Portion category?

No, bidding under the Policyholder Reservation Portion is only for policyholders of our corporation. However, you can apply under RIB or Non-Institutional Bidders category.

4. Is there any minimum number of equity shares for which the policyholders need to apply?

A minimum number of equity shares (x) will have to be applied under the offer in all categories. Hence, the eligible policyholder(s) must apply for the said minimum x number of equity shares, as specified in the offer documents.

5. What is the maximum amount eligible policyholder(s) can apply under the Policyholder Reservation Portion?

The policyholder reservation portion is yet to be decided but will not exceed 10 percent of the book size. Eligible policyholder(s) can apply for such number of equity shares in multiples such that the bid amount does not exceed Rs 200,000 (net of policyholder discount).

6. Is there any minimum balance of equity shares to be kept in the demat account?

No minimum balance is required like in demat account.

7. Can a policyholder apply from the demat account of his/her spouse or son or a relative?

No. The policyholder has to have the demat account in his/her name.

8. Is it possible to apply for shares for more than Rs 200,000 (net of policyholder discount)?

No. The maximum bid amount is limited to Rs 200,000 (net of policyholder discount, if any). However, eligible policyholder(s) can also apply for equity shares under the RIB category or Non-Institutional Bidders category for an additional amount of up to Rs 200,000 (net of policyholder discount) and more than Rs 200,000 (net of policyholder discount), respectively.

9. How much is the discount for eligible policyholder(s) under the offer?

Yet to be decided.

10. Will our corporation’s investment in equity shares qualify for tax exemption?

No, investment in equity shares of our corporation does not qualify for tax exemption, as per income tax rules.

11. At what price the eligible policyholder(s) should bid for within the price band?

Eligible policyholder(s) can bid at the cut-off price. However, in that case, it is necessary to keep the bid amount blocked for investment at the cap price (maximum price) net of discount since the cap price may turn out to be the cut-off price.

12. I have a joint life policy. Whether I and my spouse both will be eligible for reservation or not?

Only one of the two can apply for the equity shares under the Policyholder Reservation Portion category. The PAN number of the applicant bidding in the offer (you or your spouse) needs to be updated in the policy records. The applicant has to have a demat account in his/her name, and in case the demat account is joint, the applicant needs to be the first /primary holder of the demat account.

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13. My daughter is studying in Canada. Whether she would be eligible to bid?

People need to be residing in India during the bid/offer period to be eligible for applying in the offer.

14. I am a proposer of a policy for my minor son. Whether I am eligible for reservation under the Policyholder Reservation Portion?

Since you are the policy owner and, hence, being a policyholder, you are eligible for reservation under the Policyholder Reservation Portion.

15. I have a policy of the corporation that is in lapsed condition. Am I eligible for reservation under the Policyholder Reservation Portion?

All policies that have not exited our records by way of maturity, surrender, or death of the policyholder are eligible for reservation under the Policyholder Reservation Portion.

16. I am a policyholder (karta) under the HUF policy. Whether I can apply for the equity shares?

Yes, if you are applying for equity shares as a karta you are eligible to bid under the Policyholder Reservation Portion.

17. How can I link my PAN to my policy?

The easiest way is through the option made available on the website of our corporation for updating PAN. You need to have your PAN number, policy number, mobile number and email ID, and through a simple process, your PAN number will be updated. You may also approach our offices where PAN number can be updated.

18. I had submitted proposal papers before the date of DRHP but received policy bond later. Am I eligible to apply?

To be eligible for reservation under the Policyholder Reservation Portion category, the policy should have been issued on or before the date of this Draft Red Herring Prospectus. It should not have exited by way of surrender, maturity or death claim on the bid/offer opening date.

19. I have a joint demat account in the name of “my spouse and me”, and we have two separate policies, and PAN is linked therein. Can both of us apply in the offer based on that one joint demat account?

As per SEBI ICDR Regulations, individual applications cannot be made by both beneficiaries of the demat account. An application can be made only in the name of the first/primary beneficiary.

20. I have a Pradhan Mantri Vaya Vandana Yojana policy. Whether I am eligible to apply for the equity shares of the corporation in the offer?

Yes, all policies other than group policies qualify for bidding in the Policyholder Reservation Portion.

21. Under my annuity policy, annuities have already started. Whether I am eligible to apply for the equity shares of the corporation in the offer?

Yes.

22. I am the spouse of a deceased policyholder under an annuity policy and currently receiving annuities. Am I eligible to apply for the equity shares of the corporation in the offer?

No, since you are not a policyholder and only a beneficiary, you are not eligible to apply in the offer.

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23. Is the allotment to eligible policyholder(s) guaranteed under Policyholder Reservation Portion?

No, the allotment is not granteed. Approximately 10 percent of the offer size is reserved for eligible policyholder(s). The allotment will be subject to competitive bidding and will depend on the demand in the bidding process.

24. I am a nominee under a policy issued by the corporation. Am I eligible to bid for the equity shares under my name?

No, only the eligible policyholder(s) is eligible to bid under the Policyholder Reservation Portion. Nominee is not eligible to bid.

25. Whether NRI policyholders or other policyholders residing out of India can apply in the offer?

No, only resident Indians can apply.

26. What is the last date for updating the PAN in the policy records?

Yet to be decided.

27. Can senior citizens apply in the offer or any age restrictions?

No, there is no age restriction. All eligible policyholder(s) on the date of this Draft Red Herring Prospectus and the policy continuing without exit on the bid/offer opening date are eligible to apply in the offer.

28. Will the allotment be based on the premium amount or sum assured or number of policies?

All eligible policyholder(s), irrespective of the premium amount or sum assured or the number of policies, will be treated under the same footing, and the equity shares will be allotted on a competitive bidding basis.

29. Is there any condition of minimum premium or sum assured to be eligible for bidding under the Policyholder Reservation Portion?

No such condition. All eligible policyholder(s), subject to rules, are eligible to bid under the Policyholder Reservation Portion.

Also, catch all latest updates and trends from LIC IPO DRHP with CNBC-TV18’s blog

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

The craze for NFTs may be ebbing

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Non-fungible tokens or NFTs are all the rage these days. Your friends and family are talking about it. Your favourite brands are trying to sell you their NFTs. Even Bollywood celebrities like Amitabh Bachchan have piled on to the digital asset bandwagon.

But with fame also comes infamy. A large section of society is now coming out against the minting and buying/selling of NFTs. While there was strong backing from artists for NFTs initially, popular artists like Kanye West, famously known for peddling any product he could attach his name to, are now reluctant to sell NFTs.

There are several factors behind this shift in momentum, ranging from climate change to multimillion-dollar scams and everything in-between. But before we get into those details, let us first get to know NFTs a little better.

Understanding NFTs:

NFTs are not cryptocurrencies. You can exchange one bitcoin for another without losing or gaining any value. A concept called fungibility. On the other hand, NFTs are not interchangeable with one another. Every NFT is meant to have a unique value and cannot be exchanged for another. Hence the name ‘non-fungible’ tokens.

NFTs are tied to a blockchain (public ledger) using a unique ID that links the original assets to the location it is hosted, like a website.

But are NFTs really unique?

The word ‘unique’ pops up time after time when talking about NFTs. But technically, any NFTs can be copied by simply right-clicking and downloading them. Unlike an oil painting, a copy of an NFT art piece is bite-to-bite the same, with no physical distinction at all. Many people believe downloading a copy of an NFT is as good as the NFT itself, and it is kind of true.

When you own an NFT, you only own a link to the asset that is saved on a blockchain. Another problem with NFTs is that your link is tied to an external source like a website, which the owners can take down, leaving you with a unique ID that links you to a now-dead site.

Truth about the number of NFTs being bought

There is a perception that anyone and everyone is getting into NFTs. And if you don’t join them, you might miss your chance to participate in this lucrative venture. However, this could not be further from reality.

According to the Financial Times, around 80 percent of the total value associated with NFTs is held by only 9 percent of the community. This means that roughly 360,000 individuals own all the available NFTs in the market.
When compared with other virtual items, the number of NFT holders is surprisingly low. For instance, a blog post by the New World Notes states that, in the popular virtual world game ‘Second Life’, over 500,000 people own virtual items. Second Life is a very niche game that never gained mainstream popularity, yet the number of virtual assets owned still outweighs NFT ownership numbers to date.

The environmental cost

The first and biggest problem NFTs currently face is their impact on the environment. The climate crisis is slowly spiralling to a disastrous state. And NFT trading is adding to fossil fuel activities.
This is because the minting, buying, and selling of NFTs involve cryptocurrencies. And the process of mining cryptocurrencies, which verifies crypto transactions and adds blocks to the blockchain, uses hardware that consumes large amounts of energy.
Therefore, as more people get into NFT trading, there will be more cryptocurrency transactions, which in turn consume more energy. The NFT rush has led to people looking for short-term profits, and any concerns about environmental impact are an afterthought. This has also led to scrutiny from governments and lawmakers who want to curb the environmental cost caused by NFTs.

Empowering artists, and scammers too

When NFTs first came around in 2014, they were meant to empower artists. In an op-ed on the Atlantic, the creator of NFT technology, Anil Dash, wrote, “Technology [NFT] should be enabling artists to exercise control over their work, to more easily sell it, to more strongly protect against others appropriating it without permission.”

But this has not come to fruition. Instead, artists are being taken advantage of and their works are being stolen. Anyone can take an artist’s picture from the internet and tokenise it without permission or credit. Artists are now speaking out and setting their Twitter accounts to private to curb these blatant thefts of intellectual property.

It’s not just artists. Scams, in general, are plentiful in the NFT space. Thanks to its surge in popularity, there is a constant influx of novel investors trying to ride the NFT wave. Bad actors quickly take advantage of these newcomers, using rug-pulls, phishing, fake airdrops, and numerous other methods to dupe people into handing out their money.

Gamers, the last line of defence

One community that has been at the forefront of adopting new technology but has had nothing but vitriol for NFTs, is gamers. The gaming space has been plagued with micro-transactions that try to squeeze out more money from games even after they have spent the initial price for the game. Micro-transactions now have been controversial for a decade, with some European countries even banning them.

The arrival of NFTs triggered the same feeling for many gamers as they were offered the ability to buy/sell weapons and skins in-game in the form of NFTs, which they already had rebuked. Many developers started introducing NFT incorporation in their games, which were only met by harsh criticism and backlash.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Will Rakesh Jhunjhunwala be third time lucky in DB Realty?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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DB Realty shares are on fire, and partly stoking that is the news of ace investor Rakesh Jhunjhunwala and his better half buying 2 crore warrants in the company (which the market is betting will be converted into shares at some point).

The stock has been hitting the upper end of the circuit filter since January 27, even before news of the company trying to rope in investors—strategic and financial—became public.

For those looking to ride Jhunjhunwala’s coat tails, bear in mind that the Big Bull has been invested in the stock for more than nine years, without having made any meaningful returns (unless he has been trading in and out of the stock between quarterly disclosures).

Jhunjhunwala first picked up a 1 percent stake in the company in October 2012 at Rs 90 per share. That was also the first time he publicly endorsed a real estate company because, till then, he had a dim view of the sector as a whole because of its opaque accounting norms.

At the time of Jhunjhunwala’s purchase, the stock had already fallen 80 percent from its peak price two years ago after the promoters and firm got embroiled in the 2G telecom scam.

In an interview with a TV channel a few days before Jhunjhunwala disclosed the purchase to stock exchanges, he said he had made up his mind in half an hour after going through the presentation on the company’s financials. He was convinced that the shares were a good bargain because of the company’s underlying assets.

DB shares soared to a high of Rs 158 by early January 2013 but soon crashed to Rs 60 by late March and never saw the three-digit mark for almost nine years.

Jhunjhunwala doubled his stake in the company to 2.06 percent during the quarter ended March 2015. The exact price of that acquisition is unknown, but the average stock price for that quarter was Rs 76.

Jhunjhunwala has since maintained his stake at that level, though the stock has been an underperformer in all these years. Not that it would have given the Big Bull sleepless nights because his exposure to the stock was minuscule in the context of his overall portfolio. Jhunjhunwala and his wife are set to be allotted 1 crore warrants each, which can be converted into shares over the next 18 months.

So, will Jhunjhunwala be lucky the third time around?

DB Realty is still incurring losses, and there are plenty of other issues the company is grappling with, as pointed out by CNBC-TV18’s Sonal Sachdev in this article here.

Godrej Properties’ shareholders opposed their company’s proposal to buy a stake in DB Realty and partner it in some of the slum rehabilitation projects in Mumbai.

But other companies are willing to deal with DB Realty. Bangalore-based Prestige Estates has picked up a stake in DB Realty and is partnering it in three commercial and one residential project in Mumbai. And the joint venture is through a promoter firm rather than the listed company.

“…I believe that that also shows the confidence of the family office to see that we are investing in that entity,” Prestige Estate’s MD Irfan Razack told CNBC-TV18 in an interview. “I do believe there is a lot of potential, and that was the whole rationale behind it. That’s why we didn’t go the listed entity route, and we said let the family office invest in that.”

Between promoters and non-promoters, the company is planning to raise Rs 1,575 crore that will help the company become debt-free, according to the company’s communication to the stock exchange.

One of the promoters, Vinod Goenka, has mopped up a little over a couple of lakh shares through open market purchases over two months.

Also read: Ace investor Rakesh Jhunjhunwala, others to pick up stake in DB Realty

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Union Budget 2022: State government staff to get higher tax deduction benefit for NPS contribution

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Currently, the Central Government contributes 14 percent of the salary of its employee to the National Pension System (NPS) Tier-I. This is allowed as a deduction in computing the income of the employee.

However, such deduction is allowed only to the extent of 10 percent of the salary in case of employees of the State government. To provide equal treatment to both Central and State government employees, the Budget has proposed to increase the tax deduction limit from 10 percent to 14 percent on employer’s contribution to the NPS account of state government employees as well.

Also Read | Budget 2022: Tax evaders not to get loss set off on undisclosed income

This would help in enhancing the social security benefits of the state government employees and bring them at par with central government employees.

For all the latest updates on Union Budget 2022, follow our LIVE blog here

For full coverage of Union Budget 2022, click here

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

FAQs: Nifty, Sensex rebound; should you buy now and other questions answered

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Equity benchmarks snapped a six-day losing streak Tuesday, helped by a late rally in the US equities Monday. Investor sentiment, however, remains edgy ahead of the US Federal Reserve meeting Wednesday, where the central bank is likely to hint at the road map for hiking interest rates through the year.

CNBCTV18.com tries to answer some of the questions uppermost in the mind of investors.

Why did the market rebound today? Can this sustain?

Today’s rebound in benchmark indices could have more to do with what is known in the market as a ‘relief rally.’ When share prices fall many days in a row, they are likely to rebound for two reasons. One is buying from investors and traders who may have sold at higher levels, and the second is buying from investors who feel prices have become attractive after a steep fall.

It is too early to say if the rebound can sustain, given that there are some negative triggers ahead in the short term.

Is the market close to making a bottom?

Again, hard to say. Sentiment has taken a knock over the last week, which could trigger fresh selling at the slightest sign of weakness in the market. A couple of months back, it was a ‘buy-on-dips’ market. Suddenly, it has become a ‘sell-on-rise’ market, as investors try to make some money off the table while they can.

Why are investors jittery?

The primary cause of concern is the US Fed getting ready to signal higher interest rates as it battles raging inflation in the home economy.

Why does that matter?

An immediate effect is in the rise in US Treasury bond yields. It causes global investors to shift a part of their cash into those bonds. Those purchases are usually funded by pulling out money from so-called ‘risk’ assets such as equities, commodities and, to a lesser extent, corporate bonds.

So investors are selling equities and buying US bonds?

Not exactly. Multiple factors are at play here. When the US Fed raises rates, other central banks are also forced to raise rates to retain the attractiveness of their country’s debt.

Most importantly, rising interest rates hurt corporate margins in the short term and dampen consumer sentiment, resulting in lower spending.

Because of the near one-way rally since March 2020, share prices had gotten expensive. The rally was triggered at first by a sudden rush of money and then supported by a rise in earnings as economic activity started picking up. But with profits set to shrink, investors are wondering if the shares should be priced so high.

What about Indian equities?

Most foreign fund houses see Indian equities as expensive compared to their Asian counterparts. That could limit inflows into India till the time foreign investors get comfortable with the valuations.

Does that mean the stock market is set to crash further?

Not necessarily. But much will depend on the trends in global markets. What is certain is that stocks quoting at absurd valuations—such as the vaunted ‘new age’ tech startups—could continue to get pummeled for some more time as investors shift money into defensive stocks as well those which look more attractive in terms of earnings potential.

How much have FIIs sold far?

A little over Rs 11,000 crore so far in January alone and close to Rs 9000 crore in December.

But isn’t domestic liquidity strong enough to offset it?

For now, yes. Monthly inflows into mutual funds through SIPs are over Rs 10,000 crore. But remember, if foreign funds continue to sell at this pace, it is a matter of time before domestic liquidity dries up.

Not so much the money coming in through SIPs, but definitely, the money being directly invested by high net worth individuals and retail investors. Domestic inflows are a function of stock prices. If stock prices fall, investors will not be as enthusiastic about investing.

What about leveraged positions in the market?

The recently introduced SEBI rule requiring brokers to collect the entire margin amount upfront from their retail clients has to an extent reduced the selling triggered by an inability to meet margin obligations.

In the past, brokers would fund their clients’ margin obligations and allow them to over trade. That is no longer the case. Retail clients can now only trade to the extent of the margin they are able to deposit with their brokers.

What about the positions in the F&O market?

Retail exposure to stock and index futures has reduced over the last couple of years because of SEBI’s decision to increase the minimum lot size. That has made it expensive for retail investors to trade in futures.

However, retail investor participation in stock and index options has considerably risen in the last couple of years. Compared to futures trading, the risk to the system from a build-up in options contracts is much lower. But the investors can suffer heavy losses in the event of a sharp adverse move in prices, and this can affect domestic liquidity.

What about IPOs?

Reasonably priced IPOs will find takers in any market. But the days of any random company being able to ask for obscene valuations and get it are behind. Many companies will be deferring their IPOs, hoping to get a better price later when the market stabilises.

What should a retail investor do?

If you have mutual fund SIPs running, do not discontinue them. If you are a direct investor in stocks, use every rally to sell stocks that were more a flavour of the season and not backed by fundamentals. As for fundamentally sound stocks, wait for a while before you start looking to add to existing positions.

Check out the highlights of Tuesday’s stock market session here

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

New age tech cos could fall 80-90% in 2022, says Big Bear Shankar Sharma

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

New age tech companies—the darlings of fund managers and retail investors alike just a few months back—are bearing the brunt of the selling fury on Dalal Street Monday.

Shares of Zomato, Paytm, PB Fintech, CarTrade, Nykaa, Fino Payments Bank have all fallen to their lowest levels since listing. Shares of Paytm and CarTrade are now down by more than 50 percent from their issue price, while Zomato, one of the star performers in the pack, is not far from its issue price after a spectacular performance in the first three months after listing.

Independent market expert Shankar Sharma, known more for his aggressive bearish calls than bullish ones, has cautioned that these shares may still have room to slide further.

In an interview to CNBC-TV18, Sharma said one should not be surprised if new age tech companies fall 80-90 percent by the end of 2022.

Sharma is of the view that the market is seeing normalisation of “something that was “extremely frothy”. The froth started from the unlisted space, which was really the venture capital-funded companies that permeated to the listed space through listings in the last six months,” he said.

“Almost all of them are completely and totally devoid of any valuation merit. Their business models are commoditised, there is nothing unique about any of the companies that have got these crazy valuations… They have already fallen 20-50 percent, and can fall another 50 percent and still not be cheap,” Sharma added. 

He said the run up in prices had pushed many segments of the market into the overvalued zone.

At the same time, India as a market is relatively better placed compared to other emerging markets and could remain an outperformer in 2022 as well, Sharma said, adding that India had a solid buffer in the form of domestic liquidity.

Foreign funds have net sold over Rs 8,000 crore so far in January, but brokers say interest from individual investors, particularly wealthy investors, has been quite strong.

Monthly inflows into mutual fund schemes by way of systematic investment plans(SIP) is now over Rs 10,000 crore, creating a problem of plenty for fund managers.

Sharma said there were a number of stocks in the chemical and pharma sectors that were going cheap.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

GMO’s Grantham: US bull market in ‘vampire’ phase; massive crash ahead

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Jeremy Grantham, co-founder of asset management firm GMO, and one of the most outspoken sceptics of the rally in global equities over the last year has warned the super-bubble in the United States is all set to burst, and will result in severe economic pain.

“This time last year it looked like we might have a standard bubble with resulting standard pain for the economy. But during the year, the bubble advanced to the category of super-bubble, one of only three in modern times in US equities, and the potential pain has increased accordingly,” Grantham wrote in his note to clients.

According to Grantham, all five previous super-bubbles—in equity and housing in the US and in Japan since 1929—‘corrected all the way back to trend’ with much greater and longer pain than average. In other words, when bubbles burst, prices retreat all the way back to where they had started.

Using this as the reference point, Grantham sees the US equity market crashing by at least 45 percent from current levels to around 2500.

Grantham highlighted that for the first time, the US has been witnessing a bubble simultaneously in four asset classes—equity, bonds, housing, and commodities. And there were signs the super-bubble in equity was close to bursting, or may have already burst.

“The final feature of the great super-bubbles has been a sustained narrowing of the market and unique underperformance of speculative stocks, many of which fall as the bluechip market rises. This occurred in 1929, in 2000, and it is occurring now,” Grantham wrote.

Also Read // Ahead of Budget, experts advise retail investors to be more ‘cautious’

By narrowing of the market, Grantham refers to the increase in the number of stocks that decline in price, compared to stocks that are appreciating. He buttressed this point by flagging the more than 50 percent drop in meme stocks like Gamestop, AMC, and in more than one-third of all Nasdaq stocks, besides a 40 percent drop in Bitcoin.

“The most important and hardest to define the quality of a late-stage bubble is in the touchy-feely characteristic of crazy investor behaviour. But in the last two and a half years there can surely be no doubt that we have seen crazy investor behaviour in spades—more even than in 2000—especially in meme stocks and in EV-related stocks, cryptocurrencies, and NFTs,” he wrote, adding “the checklist for a super-bubble running through its phases is now complete and the wild rumpus can begin at any time.”

He said the bull market was now what he thought was a ‘vampire’ phase.

“We are in what I think of as the vampire phase of the bull market, where you throw everything you have at it: you stab it with Covid, you shoot it with the end of QE and the promise of higher rates, and you poison it with unexpected inflation—which has always killed P/E ratios before, but quite uniquely, not this time yet—and still the creature flies,” Grantham wrote.

He cited the example of the global financial crisis when equities continued to rise through the second half of 2007 even as the rot in subprime loan portfolios was spreading at an alarming rate and bleeding the banks dealing in these securities.

“Until, just as you are beginning to think the thing is completely immortal, it finally, and perhaps a little anticlimactically, keels over and dies. The sooner the better for everyone,” Grantham wrote.

Stay tuned with the latest stock market updates

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

TV18 clocks record quarterly operating revenues, operating profit in Q3

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

TV18 Broadcast reported its highest ever operating profit of Rs 355 crore for the quarter ended December 31, 2021, as strong advertising demand drove operating revenues higher by 15 percent to Rs 1567.1 crore, also a record for a single quarter.

Revenue growth in regional markets helped the regional news portfolio deliver its first profitable quarter

Buoyed by the advertising demand and a robust viewership share, both entertainment and the news businesses delivered a strong growth in advertising revenues with year-to-date revenues surpassing the figure for the whole of FY21, the company said in a release.

Highlights of the quarter were a sharp improvement in the profitability of the news business, and strong margins in the entertainment business as well. The strong performance has to be seen in the context of the pandemic-induced headwinds faced by the movie business.

#3QWithCNBCTV18 | TV18 Q3 (YoY)
▶️Operating revenue up 15.1% at 1,567.1 cr Vs 1,361 cr
▶️EBITDA up 10.7% at 355 cr Vs 320.7 cr
▶️Margin at 22.7% Vs 23.6%
TV18 says news biz saw a sharp improvement in margin to 27.2%; rev up 13% YoY. Entertainment margin at 21.4%; rev up 16% pic.twitter.com/r0BhEkjKol

— CNBC-TV18 (@CNBCTV18Live) January 18, 2022

Operating margin for the news business was 22.7 percent and that for the entertainment business was 21.4 percent.

The TV industry saw an all-time high advertising volumes in the third quarter driven by strong consumer demand, increased spending by existing brands for a higher share of voice and new advertisers using the medium to widen their reach, the release said.

However, news genre viewership at overall industry level declined during the quarter even as it continued to see event driven spikes. TV18 Broadcast’s portfolio of news channels is well diversified with presence in business and general news across languages which helps it to strengthen revenue salience, the release said.

Domestic subscription revenue was stable, the release said, adding that the implementation timeline of NTO 2.0 regulation was postponed during the quarter by the regulator to 1st April’22 even as the litigation regarding its validity continued in the Supreme Court of India.

Commenting on the financial performance, Adil Zainulbhai, Chairman of TV18, said: “We are building a strong and sustainable media franchise which not only delivers quality content to Indian audience but also value to the shareholders.”

He said the Group had over the last few years, we have taken several significant steps which have helped achieve the turn around on profitability front and a visible shift in the margin profile of our businesses.

“As content consumption continues to grow across mediums, our aim is to build platforms of choice for consumers looking for news and entertainment content in their local languages, movies and leading sports events,” he said.

Meanwhile, Viacom18 entered into a multi-year partnership with NBA to provide live coverage of the regular season of basketball games and marquee events through its television channels and digital platforms. Basketball is one of the world’s most watched sports in the world and a localised marketing outreach and consumer-connect program will help build fandom for the sport in India.

Voot, Viacom18’s on demand video platform, continued to grow with improvement across all user metrics. The platform delivered a strong growth in its paid subscriber base powered by the exclusive content experience centred around India’s biggest reality show – The Bigg Boss. Some of the exclusive features for subscribers included a 24-hour live feed from the Bigg Boss House, ‘Before TV’ access to daily episodes, ‘Unseen Undekha’ curated stories that did not make it to the main episodes, ‘Weekend Extra Dose’ of power packed episodes with highlights of the week. More than 90 percent of paid subscribers sampled this content spending a total of around 5 billion minutes on Voot.

Disclosure: TV18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow