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Business This Week – Markets Recover, SEBI in Action Mode, SpiceJet Takes Off

December 21, 2014

Financial troubles of SpicejetThe equity markets of India went through an exceptionally tumultuous week and ended in the green after registering early losses and fanning concerns that the bull run might have ended. After a fortnight of fall, the Indian stock markets had managed to register a turnaround and strong selling sentiments hit the brake this week.

The 30 share S&P BSE Sensex first three trading sessions opened at 27,136 points and hit a low of 26,469 before recovering to close at 27,371 – a gain of 0.08 percent (21.16 points). The 50 share CNX Nifty started at about 8,160, plunged to around 7,969 on Wednesday and went on to close on Friday at 8,225.20 – a gain of about 65.90 points (0.81 percent).

The small and mid cap indices registered a drop of about 1.32 percent and 1.07 percent, respectively. The top gainers from the Sensex 30 were BHEL (gain of 4.7 percent), HDFC (gain of 4.2 percent), ONGC (gain of 3.7 percent), and Infosys (gain of 3.1 percent). The top Sensex losses were registered by DLF (loss of 13.2 percent), Reliance Infra (loss of 6.9 percent), ITC (loss of 6.8 percent), Reliance Capital (loss of 6.2 percent) and Hindustan Unilever (loss of 5.3 percent). Among the sectoral indices, power was the top gainer with a gain of 2.65 percent; IT came next with a gain of 2.56 percent. The PSU sector gained 1.32 percent this week.

Gold prices may fall further

Gold ended the week at 26,998, up 0.68 percent. It is expected that with dollar strengthening and oil staying low, gold prices may fall further. With an anticipation of rise in interest rates in the US in 2015, gold may further decline.

Silver ended the week at 36,940, a gain of 1.04 percent. Silver is also anticipated to decline on global cues. Crude closed at 3616, a gain of 1.36 percent. Constant supply, however, is likely to keep oil on a decline mode.

While the WPI inflation reached zero levels, worries that manufacturing would see a decline kept retail investors apprehensive and selling sentiments high.

Flipkart receives USD 700 million funds

Online retail giant Flipkart has announced a receipt of an investment of USD 700 million for long term development in India. The new investors into India’s biggest e-commerce site include Greenoaks Capital, Baillie Gifford, T. Rowe Price Associates, Steadview Capital, ​and Qatar Investment Authority. The seven-year old online retail company has also confirmed that it shall soon be filing an application with ARA Asset Management Ltd, the regulator for Singapore-based companies, to go public.

Current stakeholders who also contributed additional investments to the latest fundraising exercise include ICONIQ Capital, DST Global, Tiger Global, and GIC. The company’s announcement said, “Flipkart Limited (incorporated at Singapore) has filed with ACRA Singapore for conversion to a Public Company. This is a mandatory procedure for all companies where the number of shareholders exceeds 50”.

Flipkart has confirmed that it does not intend to come up with an IPO or has plans for any other corporate activity. The filing with ARA is merely an attempt to comply with the laws of Singapore. Flipkart intends to use the newly raised investment “to build a world class technology company, delivering superior customer experiences.” Following this fundraising exercise Flipkart’s pre-money valuation currently stands at USD 11 billion.

SpiceJet will need INR 200 crore by year-end

SpiceJet’s financial woes are far from over. India’s second largest budget airline has been in deep financial trouble for a while now. The Government has issued a mandate that the low-cost carrier will be required to garner an investment of about INR 200 crore by the end of December. Currently, the Airports Authority of India (AAI) has decided to extend credit to the airline till the end of this calendar year. The AAI’s previous deadline had been till December 15 and this deadline has been extended till the month end. The airline’s total liabilities including its debts to the AAI are estimated at INR 1,600 crore as of December 5, 2014.

SpiceJet is currently holding talks with various investors, including one of its initial promoters, Ajay Singh, in hopes of raising more funds. SpiceJet resumed normal services following this temporary reprieve. Towards the end of the week, all 230 flights of the low-cost airline had resumed flight to the immense relief of the passengers.

It remains to be seen, however, if SpiceJet can maintain its buoyancy in the year to come. Airline ticket prices had skyrocketed with SpiceJet passengers switching to other carriers; this trend has now normalized.

Sebi bans 260 entities from securities market

Market regulator Sebi barred 260 entities including a number of repeat offenders in the securities markets. Both individuals and corporations were among those banned due to suspected tax evasion and for allegedly having used equity trading platforms for money laundering activities. Sebi estimates that about 152 of these entities have made a gain of INR 177 crore by illegal manipulation of the First Financial Services stock. A further 108 entities are believed to have made about INR 313 crore by manipulation of the Radford Global stock price. These entities have been barred from dealing in securities including buying and selling and using other depository services.

The Sebi is currently investigating a number of these companies and individuals for laundering money through manipulation of the long term capital gains tax. The market watchdog also asked the BSE, NSE and the depositories to ascertain that all its directives and regulations were strictly adhered to.


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