Buyback of shares cleared

NEW DELHI, Oct 26 (PTI) — The Cabinet today cleared amendments to the Companies Act to allow buyback of shares by companies as part of efforts to reinvigorate capital markets.

The decision follows announcement of an economic package by Prime Minister Atal Behari Vajpayee on Saturday which included proposals to permit companies to buyback their shares and inter-corporate investments.

An official spokesman told reporters after a two hour Cabinet meeting that "The Law Ministry is working out the modalities and the details would be announced soon."

The Cabinet decision came amidst speculation that the government might promulgate an ordinance to allow buyback of shares.

Stock markets shot up today following Mr Vajpayee’s announcement of an eight-point package, including permission to companies to buyback their shares and speedier passage of new companies Bill.

Stock markets shot up today following Mr Vajpayee's announcement of an eight-point package, including permission to buy back their shares and speedier passage of the new companies Bill.

The BSE sensex, which stood at 3095.25 on September 22 and at 2784.46 on October 23, today rose sharply netting a gain of 105.5 points. The DSE index shot up by 20.48 points to close the day at 651.28 points.

The market has responded favourably to the PM’s economic revival package, including the announcement of an early decision on the buyback of shares.

Operators were engaged in short-covering and even fresh buying to enlarge their commitments but the daily limits on buyers restricted further activity.

In the Delhi Stock Exchange cement and steel shares led the upward march. Analysts said that this trend was sparked by the announcement of a mega road project involving an expenditure of Rs 28,000 crore.

In a determined attempt to put in place world-class infrastructure, the PM had announced on Saturday that a mega road project covering 7,000 km would be started within a month’s time.

Significantly, unlike other road projects, the proposed plan envisages building of cement roads in place of black bitumen top roads.

Cement , being a core sector, will have multiplier effects on the economy. Employment generation is expected to get a major boost. The Prime Minister announced that the project has the potential of the three crore "man years" of employment.

The package comes at a time when almost all major companies in the core sectors like cement and steel had reported poor first quarter and half yearly results, market observers said. ACC was the most prominent gainer in the specified category shooting up by Rs 66 to close the day at Rs 895.

The same sentiment prevailed in the BSE with domestic institutions like the Life Insurance Corporation (LIC) and mutual funds picking up small lots of shares of Guj Ambuja Cement and Corporation Bank.