NBFC major Shriram Finance to replace agro chemicals firm UPL in Nifty50 | Stock Market Today – Business Standard



NBFC major Shriram Finance will replace agro chemicals firm UPL in the benchmark Nifty 50 index. The change, part of the half-yearly index rebalancing exercise, will become effective from March 28. “Shriram Finance has been included in Nifty 50 index as it has highest six month average free-float market capitalisation within eligible universe as a replacement to UPL,” said 


NSE Indices in a release.

First Published: Feb 28 2024 | 11:09 PM IST



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Canara Robeco Manufacturing Fund NFO: Should you invest?


Canara Robeco Manufacturing Fund is a new fund offer (NFO) and it is open till March 01, 2024. The open-ended, actively managed scheme will invest in companies engaged in the manufacturing theme and will be benchmarked to S&P BSE India Manufacturing TRI.

Manufacturing as a theme is gaining interest in Indian investing space. This NFO will be the eighth fund with the manufacturing theme of which four of them were launched in 2022 alone. There are several tailwinds to the theme, which makes it an interesting avenue to invest, actively or passively.

But there are other factors which need to be monitored before the manufacturing theme delivers results.

We breakdown the pros and cons of the theme and list the other players in the space before recommending the NFO.

Tailwinds in manufacturing

The fund aims to invest in companies focussed on domestic demand, firms gaining from policy reforms, private capex and alternative supply chains for the World.

The foremost tailwind is the notion that economies with more than $2,000 per capita GDP will witness a rapid expansion in consumption and hence domestic demand should expand significantly. India, which has a GDP per capita of $2,600, is expected to follow an exponential growth path as was the case in China and other developed economies prior to it. While this is only an expectation and a large part of FDI/FII optimism and domestic flows are based on it and so is the manufacturing theme.

While the notion is still nascent, global supply chain management is showing an inclination to source basic to key intermediates from economies other than China. Terms like friend-shoring and near-shoring of supply chains are allied with the larger strategic intent of developed economies. India is showing encouraging signs in speciality chemicals, tiles, mobile phones, 2W and other industries buoyed by the shifts in international trade.

Indian policymaking is aware of the shifting trends in global supply chain order and has started on a path of policy reforms to strengthen India’s case as a manufacturing hub. Production Linked Incentives is a pivotal step in that direction.

Overall, the PLI scheme has committed 2.63-lakh crore towards the scheme. The scheme has seen strong success in electronics and witnessing interest in textiles and mobile manufacturing sectors. Pharma, auto and alternate energy solutions are also expected to gain in the scheme. Improvement in ease of doing business rankings, tweaks to Labour laws and a duty structure focussed on import substitution are the other key policy reforms supporting a growth in manufacture in India theme.

Markers of a turnaround

Manufacturing as a percentage of GDP has been range bound at 16 per cent for several decades and a transformation, if possible, should be a long-drawn-out affair. Even in the recent trends, India Inc has been struggling with volume drivers in its growth, which is visible in FMCG, retail and consumer facing sectors.

A drop in commodity prices recently and post-Covid recovery earlier supported earnings and valuations growth. But a strong demand pull has been starkly missing in India Inc.

Government capital expenditure growth at 27 per cent CAGR in the last five years may most likely slowdown to low double digits to reign in fiscal deficit, which will most likely drag the overall economic expansion. This is being countered by expectations of private capex plugging the gap, especially considering the strong balance sheet positions. While strong return metrics and deleveraged balance sheets are a strong support to the expectations, the low base of private capex and range bound growth in capex to 8-9 per cent may not be sufficient.

Peers and NFO recommendation

There are seven other funds operating in the same theme and have delivered returns in the range of 44-64 per cent in the last one year compared to the benchmark returns of 45 per cent. Of the lot, Aditya Birla Manufacturing Equity Fund and ICICI Prudential Manufacturing Fund have existed for more than five years delivering 17 and 26 per cent CAGR returns in the last five years. The ICICI fund can be considered for investments as a diversifier. Ideally, it would be better to take exposure in the Canara Robeco Manufacturing Fund after it develops a track record.

However, considering the strong macro and domestic factors underlying the manufacturing theme, if investors with a high-risk appetite wish to explore more of the them, they can invest a small sum in the NFO or take the SIP route.





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State govt bonds to yield better returns under new investment regime | Economy & Policy News – Business Standard



The higher yield on state government bonds compared to central government securities is expected to make the former a “major draw” for banks for their investment book under the new portfolio norms, which kick in from April 2024.


Treasury officials said while the central government paper would continue to have the largest share in the portfolio, the state government bonds would give comfort of better returns to manage any pressures from adjustments in the months ahead.


Under the new norms, banks must categorise bonds as “held-to-maturity” on a permanent basis, with the exception of 5 per cent of the portfolio that can be withdrawn throughout the year.


Any deviation from this rule requires approval from both the bank’s board and the Reserve Bank of India (RBI).


Earlier, banks were allowed to reclassify their investments between categories once a year on the first day of the financial year, through which they used to book capital gains.


“The character of demand for government bonds may go under change. Overall demand from banks, especially from public sector lenders, will not decline. The higher premium on state government paper will remain a draw for banks for their SLR book,” said the head of treasury with a large public sector bank (PSB).


Another treasury head of a mid-sized PSB said under the revised rules, there would not be any limit of holdings of paper in the ‘Held-to-Maturity’ category. “So, this could drive the effort to have high-yielding paper like state government bonds, subject to liquidity requirements of banks,” the person said.


On Tuesday, 12 states raised ~32,800 crore through state government securities (SGS), marking a 27 per cent decrease from the highest-ever weekly auction target of ~45,200 crore specified for this week in the auction calendar. The weighted average cut-off eased to 7.44 per cent, down from 7.46 per cent in the previous week.


Furthermore, the spread between the cut-off of the 10-year SGS and the benchmark 10-year government bond yield narrowed to 37 basis points (bps), compared to 41 bps in the previous week.


State borrowings, though less than the central government, are significant in terms of amounts.


While gross market borrowings of the central government stood at ~15.13 trillion till mid-February 2024, states raised ~7.53 trillion during the same period, according to RBI data.  


The revised norms permit banks to categorise their entire bond investment portfolio into three classifications — held-to-maturity, available-for-sale, and fair value through profit and loss (FVTPL). The new regulations integrate the existing sub-category of held-for-trading (HFT) into the last category.


After transitioning to this framework, banks are not allowed to reclassify investments between categories without the approval of the boards and RBI.


The norms mandate that securities that are classified under the HFT sub-category within FVTPL should be fair valued on a daily basis, whereas other securities in FVTPL will be fair valued at least on a quarterly, if not on a more frequent basis.


“The impact of market movement on treasury books will be through reserves and not the profit and loss accounts. This will reduce the volatility of the flow of income from treasury and enhance transparency,” said the chief financial officer (CFO) of a PSB.


Banks have also started preparing in terms of technology upgradation, and modification for a smooth transition to the new regime.

“Banks have been working on upgradation of the current technology to ensure smooth transition to the new investment portfolio norm. Everybody is working on modification,” the treasury head at a private bank said.

First Published: Feb 28 2024 | 10:02 PM IST



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Sebi asks MFs to shield smallcap investor interest amid spike in volatility | Mutual Fund – Top Stories – Business Standard



The Securities and Exchange Board of India (Sebi) wants mutual funds (MFs) to put in place an investor protection framework for those investing in smallcap and midcap funds amid a build-up of “froth” in this space. Following directions from the markets regulator in this regard on Tuesday, the industry body Association of Mutual Funds in India (Amfi) has sent a letter to MF trustees, asking them to ensure “appropriate and proactive measures”.


The Sebi directive comes after the initial round of stress tests on smallcap and midcap schemes with large assets under management (AUM) to see if they can manage huge redemptions in the event of a market downturn.


Sebi has recommended measures like putting restrictions on inflows, portfolio rebalancing, and creating a framework to protect investors from the first-mover advantage of redeeming investors.


According to industry experts, Sebi is looking to ensure that during phases of market downturns and the resultant surge in outflows, the first set of investors shouldn’t be at an advantage to those staying invested.


The advantage can result from the fact that MFs can exhaust the cash and liquid assets to meet their redemption requests, leaving the rest of the investors holding stocks with low liquidity.


The measures can range from putting in restrictions on withdrawals to raising cash levels to resorting to borrowings during such market phases, said a senior MF executive, adding that some of these measures would require changes in regulations.


“In the context of the froth building up in the small and midcap segments of the market and the continuing flows in the small and midcap schemes of mutual funds, trustees, in consultation with unitholder protection committees of the AMCs, shall ensure that a policy is put in place to protect the interest of all investors,” Amfi said in its letter sent to MF trustees on Tuesday.


In the past few weeks, the smallcap space has witnessed turbulent trades, with the Nifty Smallcap 100 index declining more than 1 per cent on four occasions — the biggest being a 4 per cent crash on February 12. On Wednesday, the index fell nearly 2 per cent.


Sebi has given MF trustees 21 days to disclose the investor protection policy on their websites.


Four MFs — Kotak, SBI, Tata and Nippon — have already placed restrictions on the amount investors can put into their smallcap funds.


Sebi has been in discussion with fund houses that have large-sized smallcap schemes to look out for possible risks amid a sharp surge in inflows, despite elevated valuations. The regulator had reviewed the first set of stress test reports in January and is said to have asked for more data. One of the areas the regulator is looking at is MFs’ ownership in the total free float of smallcap stocks.


Typically, shares held by public investors and those not under any lock-in are considered free float. Liquidity risks are higher if the free float is low.


MF ownership in smallcap stocks has gone up significantly as smallcap schemes have attracted large inflows on the back of robust performance. In the calendar year 2023, smallcap and midcap schemes accounted for 40 per cent of the total net inflows into active equity schemes — receiving Rs 64,000 crore of the total inflows of Rs 1.6 trillion.


In 2023-24, the Nifty Smallcap 100 is up nearly 80 per cent. As a result, the 12-month forward price-to-earnings ratio of the index has surged to 21.7. The 10-year average is 16.5, according to Bloomberg data.


However, most MF executives believe that their schemes are prepared for market downturns as a significant part of the corpus, around 20 per cent to 30 per cent, is in cash and largecap stocks, where market depth tends to be higher.

First Published: Feb 28 2024 | 9:24 PM IST



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Sebi grants relief to investor Shankar Sharma, 4 others in Brightcom case | India News – Business Standard



The Securities and Exchange Board of India (Sebi) has given relief to five individuals, including renowned investor Shankar Sharma, in a matter related to alleged round-tripping of funds by Brightcom Group promoters. In the confirmatory order issued on Wednesday, the Sebi revoked the bar on Sharma from selling stake in the company after he submitted details of the transactions. Further, Sebi has also granted relief to company’s CFO Narayan Raju by changing directions on him.


Sebi has barred Raju from holding any key position in the group or its subsidiaries. Earlier, he was restricted from holding key positions in any listed company or their subsidiaries.


In the confirmatory order, Sebi noted that certain personal loans by overseas residents to promoter Suresh Reddy and his private companies were being repaid in India by allotment of shares of BGL in preferential issues for free or at partial consideration, at the cost of public shareholders.


As these transactions may involve violation of laws on forex, Sebi has forwarded a copy of the order to the Enforcement Directorate (ED) for ‘appropriate action’.


On findings around how Reddy violated promoter lock-in for shares allotted in preferential issues, Sebi said, “It appears that Reddy was advanced money against unpaid shares and by pledging them, he made money without actually paying for them.”


In an interim order issued in August, Sebi had found that the company funded its own preferential allotments and had indulged in round tripping of funds.


Sebi had pointed out that Brightcom claimed to have advanced loans to the tune of Rs 824 crore to its subsidiaries but it only transferred Rs 350.75 crore and the remaining amount appeared to have siphoned off.

First Published: Feb 28 2024 | 9:21 PM IST



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He should get 6 years in jail, pay back nothing: Sam Bankman's lawyer | Cryptocurrency – Business Standard


Citing the advisory guidelines, Bankman-Fried’s lawyers said a “just sentence” would be a prison term in the range of 63 months to 78 months


By Chris Dolmetsch and Robert Burnson


FTX co-founder Sam Bankman-Fried should serve no more than 6 1/2 years in prison for orchestrating the fraud that brought down the cryptocurrency exchange, his lawyers told a federal judge who could issue a sentence of as long as 20 years for the most serious charges.

 


Attorneys for the 31-year-old former crypto mogul made their recommendation to US District Judge Lewis A. Kaplan in a 98-page memo late Tuesday ahead of his March 28 sentencing. The filing includes letters from Bankman-Fried’s supporters, including his parents and public health advocates from Africa attesting to his charity work.


Under federal sentencing guidelines that take into account “Sam’s charitable works and demonstrated commitment to others, a sentence that returns Sam promptly to a productive role in society would be sufficient, but not greater than necessary, to comply with the purposes of sentencing,” according to the memo.


Citing the advisory guidelines, Bankman-Fried’s lawyers said a “just sentence” would be a prison term in the range of 63 months to 78 months. 


FTX Bankruptcy

 


His lawyers also recommended that he not be ordered to pay restitution or forfeit any assets, saying none of the accounts identified for possible forfeiture were for Bankman-Fried’s personal benefit. They argued that customers and creditors will receive a return of their funds through FTX’s bankruptcy.


Bankman-Fried was convicted in November of charges including wire fraud and conspiracy following a two-month trial. Kaplan’s final decision on sentencing could be a guidepost for other crypto currency executives who mismanaged funds.


Prosecutors have until March 15 to file their response to the memo.


US probation officials recommended a sentence of 100 years, Bankman-Fried’s lawyers said in the memo, calling the proposal “grotesque” and “barbaric” and arguing that it’s based on a flawed assumption that his offenses involved a loss of $10 billion.


Bankman-Fried last month hired Marc Mukasey, a former federal prosecutor and experienced white-collar defense attorney, replacing the lawyers who represented him at trial. Mukasey, who has a history of representing white-collar defendants, late last year secured a four-year sentence for Nikola Corp. founder Trevor Milton, well below the 11 years sought by prosecutors, in the same court where Bankman-Fried is being sentenced.


Autism Expert

 


Letters from psychiatrists, including an autism expert, were included in Tuesday’s filing. While Bankman-Fried has not previously disclosed an autism diagnosis, his ADHD became an issue at trial. His lawyers repeatedly complained about Bankman-Fried’s struggle to access medication while in custody.


His father, Joseph Bankman, alluded to mental health issues in a letter to the judge.


“Sam has struggled throughout his life to learn and control things most of us take for granted, such as eye contact, small talk, and responding to social cues,” Bankman wrote.


The FTX co-founder’s father urged Kaplan not to impose a “draconian sentence” that would likely lead to placement in a high- or medium-security prison. 


“Such a setting would put Sam in an environment where his responses to social cues will sometimes be seen as odd, inappropriate and disrespectful; when that happens, he will be in significant physical danger,” Bankman wrote. “Nothing he has done can justify putting him at that risk.”


Bankman-Fried’s sentence is unlikely to match some of the largest punishments handed down to white-collar criminals, such as Sholam Weiss, who received 845 years in prison in 2000 for racketeering and fraud linked to the collapse of National Heritage Life Insurance Co. His sentence was later commuted by President Donald Trump. Bernie Madoff died in prison while serving a 150-year term for his $20 billion Ponzi scheme. 


His lawyers said the most comparable case is that of Michael Milken, the so-called “junk bond king” who was convicted of securities fraud in the 1980s and banned from the securities industry but remade himself into a philanthropist. Milken, who was pardoned by Trump in 2020, was released from custody at a young age and went on to become “a tremendous force for good,” Bankman-Fried’s lawyers said.


“Sam’s ascendance to an influential position in the financial world at such a young age, using cryptocurrency, a new financial product, mirrors the young Milken’s meteoric rise,” Bankman-Fried’s attorneys said in their memo. “The genius of both men is undeniable, their contributions were vast, their wealth and fame were unplanned, their means and methods were questioned by prosecutors, and their downfall was swift and tragic.”


Kevin O’Brien, a former federal prosecutor, said Milken’s case provides hope to Bankman-Fried.


“Someone that young and that obviously talented who has so much to contribute potentially, I don’t think Kaplan’s gonna kill him, I really don’t,” said O’Brien, who’s now a defense lawyer. “He might even give him something under 20 years.”


You can’t always get what you want | What notable white-collar defendants requested at sentencing compared with the initial prison term issued by trial judge.

 


Kaplan — who was appointed to the bench in 1994 by President Bill Clinton — will determine the ultimate punishment using federal sentencing guidelines, which take into account the seriousness of the offenses, the defendant’s criminal history, as well as the amount of the losses.


Kaplan in the past has argued for caution when it comes to the guidelines, saying during the May 2022 sentencing of a man who pleaded guilty to a Ponzi-like cryptocurrency scheme that the loss often plays a “disproportionate role” in determining the punishment.


Rocky Relationship

 


But Bankman-Fried’s rocky relationship with Kaplan won’t necessarily help the one-time crypto mogul. He has been testing the judge for more than a year, from insisting the identities of his bail guarantors remain a secret to leaking the diary notes of his ex-girlfriend — a key government witness — to the press. The latter issue led Kaplan to revoke Bankman-Fried’s bail weeks before the trial was scheduled to start. Bankman-Fried has been in a federal jail in Brooklyn since August.


The trial itself featured another setback for Bankman-Fried following an uncommon proceeding. The judge limited what Bankman-Fried’s team could tell jurors about advice he got from lawyers, but not before putting the former FTX chief executive officer on the stand for three hours, outside the presence of the jury, to preview his testimony.


The case is US v Bankman-Fried, 22-cr-673, US District Court, Southern District of New York.



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