BSE GETS SEBI APPROVAL FOR SME EXCHANGE.

Written by HARIKRISHNAN.T
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Finally the Bombay Stock Exchange received approval from the Securities and Exchange Board of India for its proposed SME (Small and Medium Enterprise) Exchange.

The BSE applied for permission for an SME Exchange in July 2010, and the final approval from SEBI came after 1year after studying all the aspects of SME Exchange.

The SME Exchange will now start receiving the offer documents from the merchant bankers for companies wishing to list on the exchange platform.

The CEO, BSE SME Exchange Mr. Laxman Gugulothu said that many companies already approached them and among these about 30-40 percent were very serious about getting listed on the SME Exchange.

He added that " Of the 70-80 who have approached us on the web site, 15-20 are very serious. Apart from these, 50 other companies have shown an interest in our exchange. Of these 50, around 25 have filed a mandate with merchant bankers"

The National Stock Exchange also waiting for the final approval from the SEBI for its SME Exchange.

For any company to get listed on an exchange, the company has first to file a draft RHP prospectus with SEBI. It then needs in-principle approval from both SEBI and the exchanges. This is followed by a one-month notification to the public.

This has been done away with for companies proposing to list on SME Exchange. An SME needs to only submit the offer documents and on receiving the exchange's approval alone can enter the capital market.

The only criteria for the SMEs to qualify the listing is that the promoter share holding to be diluted has to amount to a minimum of Rs. 25 crore. That is at a face value of Rs. 10 per share, the total number of shares on offer should be 2.5 crore. (2.5 crore * 10 = 25 crore)

Regards Hari " लोका समस्ता सुखिनो भवन्तु "



OPERATION TWIST.

Written by HARIKRISHNAN.T
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Federal Reserve announced the recovery policy called 'Operation Twist' in order to solve the US Debt crisis.

The main objective of this policy is to decrease the interest rates. What will happen if interest rates became low..??? 

When interest rates became weak, more people will borrow money and thus more capital flow will be pumped into the economy. As a result of this the overall growth of the economy will take place, the corporate profits will be increased, more and more opportunities will flow into the system and thus the unemployment issue in the US will overcome.

When we consider the following figures of US, we will get a clear picture.

GDP:                   1.60 percent
Interest rates:    0.25 percent
Inflation rate:    3.60 percent
Jobless rate:       9.10 percent

Here the GDP rate of US is too low compared to EMEs like India and China. For India GDP on YoY basis is 7.80 percent and for China it is 9.70 percent. Also the jobless rate for US is also high.

But the positive note for US is their inflation rate. Their inflation rate is much lower compared to India and China.

In US, the interest rate for 10 year treasuries is 1.95 percent.  This figure seems pretty interesting. This is lower than the inflation rate.

So what they are trying to do with the Operation Twist..?? This can be explained like this.

The Fed already owns $1 trillion bonds. They purchased this in the fast few years in order to bring down the medium and long term interest rates.

Among these, a lot of bonds especially medium term bonds will become expire in the coming years.

When we observe the interest rates of these bonds, they are almost Zero.

So the Fed will sell some of these medium term bonds and they will buy longer term bonds, such as 10 year to 30 year treasuries.

This is the main idea behind the Operation Twist.

The main objective of this strategy is to lower the interest rates further and thus boosting the economy by pumping more capital in to the system.

Regards Hari " लोका समस्ता सुखिनो भवन्तु "






RUPEE CRASHES.

Written by HARIKRISHNAN.T
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The rupee went into a free fall on Thursday, declining 2.5 percent (or Rs. 1.23) against the USD. This is one of the sharpest single day drops in recent times.

When we observe the stock market movement and the Rupee movement, we can see that both the things are inter connected with each other. This is mainly because the Foreign Institutional Investors (FIIs) are the major key players in the markets and their buying as well as selling has a great influence in domestic stock prices.

First of all lets look what are the main reasons for rupee depreciation. The main reason for the weakening of rupee is the flight of foreign funds from the Indian Market, also the demand for Indian rupee is getting low.

Lets see how rupee depreciation affect the economy.

First lets look the positive sides. The weakening of rupees is good when we are talking in terms of exports. Since we get more amount of money equivalent to USD, the exporters will get more profit. For example IT giants such as Infosys, TCS etc. About 60 percent of their revenue comes from US itself. So their profit will substantially increase.

But there are some negative sides also.

The cost for importing goods and services will definitely increase because of this.

For example India Inc. importing 70 percent of the required crude oil from the foreign countries. So they have to pay a higher amount for the crude oil. This will result in the price hike in petrol and diesel and that will negatively affect the Inflation rate. I think if rupee is weakening like this, inflation will touch 2 digits soon.

Also raw materials cost will increase. So the production cost will increase. When the production cost increases the companies have to raise their cost and this will decrease the demand and eventually the net profit will go down.

I think the rupee can correct to 50.30 per dollar in the short term. It will be in the range 48.50 - 50.30 in the coming weeks.

Regards Hari " लोका समस्ता सुखिनो भवन्तु "