(Photo: PTI)

9.36 am: Aurobindo Pharma shares rose over 3 per cent to Rs 779.70 in the early trade on BSE after the company on August 29 said it has received the final approval from the US Food & Drug Administration to manufacture and market Raloxifene Hydrochloride Tablets USP 60mg. Sensex was down 132.95 points at 26,259. NSE Nifty was down 35.30 points at 7,967.

9.26 am: Sensex was down 158.78 points at 26,233.60.

Domestic equity markets opened in green on Monday. The BSE Sensex and NSE Nifty opened 77.04 points and 7.3 points higher at 26,469.42 and 8009.25, respectively.

Shares of healthcare and information technology were trading in positive zone in the early trade.

Asian stocks fell on Monday after a US Federal Reserve official suggested a September interest rate hike still was possible and Japanese factory activity weakened.

The Shanghai Composite Index fell 2 per cent to 3,167.76 and Tokyo’s Nikkei 225 shed 1.1 per cent 18,920.90. Hong Kong’s Hang Seng retreated 0.3 per cent to 21,539.59.

(With inputs from agencies)

Incumbent banks have cautiously reacted to new payments bank licences. Payments banks will compete on savings and payments; we believe access to better customer data could also help them milk some income from lenders’ assets business. The key opportunity for new banks is to identify and offer highly relevant products/services to unmet needs in underserved customer segments.

A recent analysis by BCG highlights that a combination of existing financial suppression, expansion of mobile connectivity, financial autonomy and supportive regulatory framework has led to a rapid expansion of digital finance in China. This has forced Chinese banks to react by specialising vertically and/or entering into the turf of e-commerce companies.

In India, the RBI will continue to raise competitive intensity in the banking industry, thereby raising risks for the incumbent banks’ profitability. It is too early to call winners, but a differentiated niche will provide some safety.

Since the RBI, for the first time, laid out its vision in May 2014 on the coming competitive landscape in the banking sector, it has consistently attacked two grand bargains in the banking system by pushing for: (i) PSU bank reforms and (ii) making deposit financing more competitive. Issuance of payments bank licences has hastened the process, with small finance bank licences to be announced soon.

Whilst the extent, timelines and sources (cost of deposits, yields, cost of operations) of pressure on profitability are yet uncertain, we believe these new players would raise competitive intensity in the segment.

In the last two years, the number of transactions through mobile wallets has expanded at a CAGR of 179% to 255m in FY15. The growth in mobile wallet transactions indicates the potential of growth that digital channels can facilitate if the unmet needs of customers are met through targeted products/ services. Payments banks, in our view, would also focus on specific customer needs that are currently underserved by banks.

In the context of issuance of 11 new payments bank licences, we met a few FinTech companies and visited the recently-held Ficci/ IBA conference. Whilst trends in technological innovations are quickly evolving, some widely expected trends are forcing incumbent banks to take note.

Cautious response to new payments bank licences: At the Ficci/IBA event. SBI was the most vocal on the challenges that new payments banks will pose to existing banks; these challenges are: (i) Uncertainty around the unknown disruptive practices of new banks; (ii) Strategy to acquire customers at any cost, facilitated by the large investors willing to ‘burn’ significant amount of capital initially; (iii) Lack of legacy issues at new banks, unlike, for example, existing banks’ asset quality challenges; and (iv) New banks’ agility to use a range of systems and delivery modes.

Origin of m-wallet industry: The origin of the mobile wallet industry in India lies in the prepaid mobile re-charging industry, where B2B and B2C mobile apps replaced the old paper-based prepaid mobile scratch cards. This drastically lowered the cost of distribution. Mobile wallets further evolved into DTH recharging, utilities payment and e-commerce payments. Yet, mobile recharging (estimated to be a $25 bn industry) likely accounts for 50% of mobile wallet transaction in India.

China—According to BCG, in the last 18 months, 18 digital-only banks have been launched in China. Existing banks also face fierce competition from a host of internet companies in all aspects of banking . The drivers of the digital channel for financial services are: (i) pervasive presence of digital channels in all aspects of life (e.g. shopping, eating, communication, entertainment and education); (ii) extent of current financial suppression; (iii) expansion of mobile connectivity to “anywhere and anytime”; (iv) spread of cloud computing and ‘big data’ as facilitators; (v) financial autonomy; and (vi) supportive regulatory framework. The banks have begun to respond by identifying and strengthening their niche in the banking value chain. The Big-4 banks have also entered into online marketplaces.
M-wallets not popular in the West: The Western world’s experience with mobile wallets has not been as successful as has been the case in India. In the West, plastic money was pervasive as a mode of payment due to the penetration of credit cards and point-of-sales (POS) terminals. In India, lack of velocity of transactions has not allowed a wide POS roll-out. Thus, in India, a section of cash economy (used for mobile recharging) moved to mobile wallets, but there was no such opportunity in the West. In that sense, mobile wallets seem to be leap-frogging plastic money and POS network, as mobile telephony earlier did for fixed-line in India.

Sebi expects the newly set-up special courts for securities markets to further speed up the prosecutions.(Express Archive)

To further tighten its noose on manipulators and black money launderers in the stock markets, regulator Sebi will undertake a comprehensive review of its surveillance systems including with help from independent experts and also fast-track its enforcement actions.

Sebi has been asked by a Supreme Court appointed Special Investigation Team (SIT) on Black Money to take additional measures to catch those evading taxes and laundering black money through trading in illiquid stocks and P-Notes.

The regulator is also pitching for a greater coordination among various watchdogs and enforcement agencies to bring to book the rogue elements that misuse the stock market platform, a senior official said.

Sebi would soon discuss with the government the details regarding the existing safeguards against this menace, as also the proposed new measures, after which same would be communicated to the SIT, he added.

Amid a sharp surge in volatility in Indian stock markets, Sebi has stepped up its surveillance to ensure that no unscrupulous players take genuine investors for a ride.

The enhanced vigil has resulted into identification of broadly four distinct ways adopted by the manipulators.

In one typical modus operandi, certain entities seeking Long Term Capital Gain (LTCG) were misusing the stock exchange mechanism, while the second one involves Offshore Derivative Instrument (ODI) holders trading on the basis of Unpublished Price Sensitive Information.

Also, certain Indian and overseas entities were engaged in fraudulent activities of manipulating GDR route, while the fourth modus operandi involves unregistered entities being involved in fraudulent act of luring investors to securities market through false or unrealistic SMS claims.

While Sebi’s existing surveillance systems are already generating over 100 alerts a day to facilitate detection of market manipulation, it has been felt there is a constant need to enhance capabilities of surveillance both in terms of systems and skill sets so as to address challenges emerging out of extremely dynamic Indian securities market.

Towards this continuous endeavour, Sebi has decided to upgrade its existing surveillance infrastructure by enhancing the system capacity this year.

“Further, a comprehensive review of surveillance systems is also proposed by engaging outside experts. In addition, a world class data centre for hosting Sebi IT Infrastructure (specifically Data Warehouse set up of SEBI) is also proposed to be built during the year,” the official said.

Simultaneously, continuous skill enhancement program and training would also be undertaken during the year.

For faster action against the manipulators, Sebi is also adopting a time-bound approach to complete its probes as also other enforcement actions including prosecution proceedings.

Sebi expects the newly set-up special courts for securities markets to further speed up the prosecutions.

At a board meeting last week, the Securities and Exchange Board of India (Sebi) took stock of all the checks and balances it has put in place to check such manipulations.

The board members, which include nominees from the government and the RBI as also independent members, were apprised of the action initiated by Sebi against those suspected to be evading taxes and laundering black money through stock markets.

Sebi has barred over 1,000 entities so far in such cases through interim orders, while further proceedings are underway and all these matters have been referred to other agencies including Income Tax Department, Financial Intelligence Unit and the Enforcement Directorate.

While the government and Sebi are of the view that sufficient measures are in place to deal with such cases, further consultations would be held to ascertain whether additional safeguards are need to be put in place.

The SIT had suggested last month that further steps might be required to check misuse of P-Notes route to launder unaccounted money from abroad. It also suggested that Sebi needs to further strengthen its monitoring mechanism to detect instances of the stock market platform being misused for tax evasion.

Sebi is also of the view that it has put in place a robust system to check any misuse of the P-Note route.

P-Notes are issued by foreign portfolio investors registered with Sebi to other overseas investors who want to take a position in the Indian markets without any direct registration for trading in Indian markets.

These instruments are popular as they provide a low-cost and easier route for investing in the country’s markets.

Sebi says it has put in place strong checks and balances to avoid misuse of this route, and P-Notes can be issued only after strong KYC requirements are followed and they can not be issued to high-risk investors. The norms have been tightened considerably for P-Notes over the years.

In May, investments through P-Notes hit a seven-year high of Rs 2.85 lakh crore. It stood at Rs 2.75 lakh crore at the end of June. The offshore derivative instrument accounts for nearly 15-20 per cent of the total FII investment in India since 2009.

Its share has fallen over the years after Sebi tightened disclosure norms and other related regulations. It was as high as over 50 per cent at the peak of stock market bull run in 2007.

In the recent months, Sebi has also stepped up its crackdown on tax evasion and laundering of black money by HNIs and other domestic entities through the stock markets.

Suspecting tax evasion of over Rs 5,000-6,000 crore, Sebi has clamped down on a large number of organised syndicates who had set up ‘shops’ to convert black money into legitimate-looking funds through the stock market platform.

A mock bidding session was conducted on Friday to check the system performance, BSE (formerly known as Bombay Stock Exchange) said.(PTI)

Leading bourse BSE will auction, tomorrow, investment limits for foreign investors to buy government debt securities worth Rs 561 crore.

The auction will be conducted on BSE’s ebidxchange platform from 1530 hours to 1730 hours after close of normal market hours on August 31, the exchange said in a circular.

The debt auction quota gives overseas investors the right to invest in the debt up to the limit purchased.

Depository data showed that total investments, including limits acquired by foreign investors through the auction route, stood at Rs 1,23,876 crore till August 6, which is 99.5 per cent of the total permitted investment limit of Rs 1,24,432 crore in government debt securities.

Consequently, exchange would conduct an auction for the allocation of unutilised debt limits on August 31.

A mock bidding session was conducted on Friday to check the system performance, BSE (formerly known as Bombay Stock Exchange) said.

During earlier auctions, government bonds have always been subscribed multiple times, given the huge interest among foreign investors, while the demand for corporate bonds remains less.

Earlier this month, National Stock Exchange (NSE) conducted an auction for government bonds worth Rs 556 crore, which attracted bids worth Rs 974 crore.

Foreign investors are allowed to invest up to USD 25 billion (Rs 1,24,432 crore) in government debt securities through auction while an investment of up to USD 5 billion (Rs 29,137 crore) is permitted ‘on tap’.

Further, the Reserve Bank of India (RBI) is in talks with the government to reset FII limit in government bonds in rupee terms.