What ails the primary market? (The Economic Times 20th Feb 2008)Capital market, as a composite of primary and secondary markets, acts as the platform for channelising scarce economic resources to optimum utilities, fuelling the economic growth. The past few years have witnessed innumerable improvements by market forces and regulators, leading to healthy and efficient markets. Undoubtedly, India now boasts of one of the most efficient and transparent primary markets which has, in turn, helped in improving the depth and breadth of secondary markets. The recent sell-off in the global secondary markets have been a consequence of the subprime crisis, where global financial institutions suffered significant losses resulting in liquidity and capital adequacy problems. On the domestic front, the sustained rally in the last few years resulted in complacency across the market. This period has seen secondary market investors developing a habit of buying in small corrections (irrespective of valuations), traders adding positions during every correction (ignoring stop-loss mechanisms) and merchant bankers pricing IPOs at valuations on par with that of leading secondary market firms (ignoring discounted cash-flow approach of valuation). Over and above that, huge leveraged positions had been built up in domestic equity primary and secondary markets, both in official and grey markets (reportedly), as a direct consequence of greed and increase in the risk appetite of investors in the recent past. In a nut shell, complacency resulted in excesses being built into the system in terms of positions and prices. All of us have forgotten the oft-repeated saying from investment guru Warren Buffet: “You only find out who is swimming naked when the tide goes out”. And market, as always, defied all these assumptions bringing the valuations down to realistic levels.The correction was fast and steep, following a correction in the global markets. The leveraged positions were unwounded with volumes in the secondary market coming down to below 50% of the average for last month. Also, other effects were a lukewarm response in primary markets, reduction in IPO price bands and extension of IPO dates. Apparently, the reasons are systemic and do not suggest any structural problems in the capital market system. More
Jyoti Structures on Tuesday said it has bagged two orders worth Rs 253 crore from Uganda Electricity Transmission Company Ltd and Eskom Enterprises (Pty) Ltd for construction of transmission lines. The company has bagged Rs 160-crore order from Uganda Electricity Transmission Company Ltd for construction of transmission lines and sub-stations. Besides, the company's joint venture company Jyoti Structures Africa (Pty) Ltd has bagged a contract for Eskom Enterprises (Pty) Ltd, the electricity utility of South Africa for construction of transmission line. The scope of the order from Uganda Electricity Transmission Company includes supply and erection of Bujagali Interconnection Project, the manufacturer of transmission line towers informed the Bombay Stock Exchange. The contract valued at around $39.64 million (Rs 160 crore) is to be executed in 24 months, the company said, adding the company would construct 220 kV and 132 kV transmission lines and substations.
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