India: Investors on edge over Scandals, Governance

Discussion in 'Economy & Infrastructure' started by Rage, Feb 12, 2011.

  1. Rage

    Rage DFI TEAM Stars and Ambassadors

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    India investors on edge over scandals, governance

    By Tony Munroe
    MUMBAI | Thu Feb 10, 2011 8:48am EST



    Feb 10
    (Reuters) - These are nervous times for India's power elite, as well as investors.

    A spate of corruption scandals has crippled the government, led to arrests of politicians and company executives, and rattled a market worried about where the next shoe may drop.

    A ferocious selldown on Wednesday knocked $2.5 billion from the value of companies controlled by billionaire Anil Ambani, one of India's highest-profile businessmen, whose group blamed rivals for spreading what it said were "baseless" rumours.

    While the shares in his firms, including No.2 cellular carrier Reliance Communications (RLCM.BO) and road-builder Reliance Infrastructure (RLIN.BO), made back some of their losses on Thursday, a general sense of fear has pushed Indian stocks to their lowest levels since July.

    The government is estimated to have lost as much as $39 billion in revenue over a flawed 2G mobile phone licence process, a scandal that has tarnished the reputation of Prime Minister Manmohan Singh, led to a near-shutdown of parliament, and saw the sacking and later arrest of a powerful telecoms minister.

    Preparations for last year's Commonwealth Games were riddled with irregularities, while a bribes-for-loans investigation late last year saw eight senior financial executives arrested.

    The cosiness between the political and corporate elite in a country with a huge gap between the rich and poor was exposed in the release of taped conversations involving lobbyist Nira Radia and top industrialists, politicians and journalists, with talk of swinging deals, granting favours and ministers taking bribes.

    Ratan Tata, an icon of India Inc, went to the Supreme Court to stop further publication in media of the tapes.

    "The whole bull case on India should be built on this assumption that the government kind of does the right thing and puts in place policies that allows all the necessary investments that need to be made," said Michiel van Voorst, a Hong Kong-based portfolio manager with Dutch fund manager Robeco.

    "But given what is currently going on that has all come to a standstill," he said.

    MARKET SLIDE

    The market continued to skid on Thursday, with the Sensex .BSESN down 0.74 percent and 17 percent below a November peak. After pouring a record $29 billion into Indian stocks last year, foreign instutions have pulled out $1.4 billion in 2011.

    On Thursday, No. 2 listed property developer Unitech (UNTE.BO) dropped nearly 12 percent before paring losses. The company, whose telecoms joint venture partner is Norway's Telenor (TEL.OL), was one of two accused last week by police of securing mobile licences at unfairly cheap prices in 2008.

    Brokerage Daiwa on Thursday downgraded Unitech to sell from hold, citing "increasing concerns about the impact of the telecom-licence issue on the company."

    Late on Tuesday, authorities arrested Shahid Balwa, vice chairman of Etisalat DB, the venture between DB Group and Abu Dhabi's Etisalat (ETEL.AD), over the 2G licence scandal.

    Shares in one of India's biggest real estate companies, DB Realty (DBRL.BO), where Balwa is managing director, fell as much as 20 percent on Wednesday.

    The companies linked to the probe have denied any wrongdoing.

    "There is a lot of fear in the market," said R. K. Gupta, managing director of Taurus Mutual Fund.

    "The issue here is not about technicals or fundamentals but, it is about the loss of credibility of the government," he said.

    AMBANI STOCKS

    The group controlled by Anil Ambani, the world's 36th richest man, on Wednesday asked regulators to investigate what it called "vicious and illegal bear hammering" of group stocks.

    Ambani did not provide further details.

    Last month, Anil Ambani and two of his firms, Reliance Infrastructure and Reliance Natural Resources, which has since been merged into Reliance Power (RPOL.BO), reached a settlement with the markets regulator. Anil Ambani agreed not to invest in listed securities until the end of this year, and the two companies agreed not to buy stocks until the end of 2012.

    Anil Ambani, 50, an avid runner who is married to a former Bollywood actress, is the younger brother of Mukesh Ambani, who controls energy-based conglomerate Reliance Industries (RELI.BO), ranks fourth on the Forbes global rich list.

    A dispute between the brothers over gas distribution that went all the way to the Supreme Court saw Anil launch an attack in 2009 on his brother and the oil minister, including a series of newspaper ads accusing the petroleum ministry of siding with Mukesh in the dispute.

    Last year the two brothers called a truce to their long-runnning feud.


    http://www.reuters.com/article/2011/02/10/india-corruption-companies-idUSSGE71906U20110210
     
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  3. Iamanidiot

    Iamanidiot Elite Member Elite Member

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    the truth is Anil Ambani is in the red
     
  4. amitkriit

    amitkriit Senior Member Senior Member

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    Indians must get ready for this new trick. Industrialists will try to convince us that anti-corruption drive is bad for India's economy. In fact they have already started. Every corrupt person no matter whether he/she is a neta or a billionaire must be locked up for the rest of his life.
     
  5. Rage

    Rage DFI TEAM Stars and Ambassadors

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    How do you have access to that information?
     
  6. Rage

    Rage DFI TEAM Stars and Ambassadors

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    Not possible. If we did, we'd be left with morons or impotent guys like Antony or Manmohan Singh. Rather, I think the focus should be on severely deterring corruption. Of making fines so heavy, that corporate head-honchos think twice before engagin' in it. Of actively monitoring and making selective, vicious examples of them. Of starting first with governance, so that the incentive, or requirement, to be corrupt is eliminated at the source. So that even those among corporates that engage in it once, will refuse to engage in it a second time.
     
  7. Iamanidiot

    Iamanidiot Elite Member Elite Member

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    Radia tapes explain Anil Ambanis financial woes well
     
  8. jhon woo

    jhon woo New Member

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    The most important thing is reliable news. If you are getting your news from CNN or CNBC you are getting bad information. CNN has an agenda and CNBC is hurting for money so badly that they have taken to having experts on the show who are not divulging their interest in the stocks that they are hawking. Bloomburg, FOXBN, and The Wall Street Journal along with DOW Jones Newswire are the only real financial news of worth.
     

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