This follows cabinet decision on Monday to amend the Companies Act to allow buyback and ease inter-corporate investment limits for companies to improve stock market sentiment. Sources said the company affairs ministry was finalising the details.Prime minister AB Vajpayee had announced on Saturday to come out with a package for the capital market including buyback proposal and liberalise inter-corporate investments.

Soon after prime minister's announcement stock markets shot up with BSE Sensex gaining 105 points on Monday and marginally up on Tuesday.According to the buyback guidelines in the proposed new companies bill, companies can buy back their shares out of its free reserves and share premium accounts.

Other recommendations in the new companies bill which are expected to be incorporated in theordinance include companies to buy back their shares from the open market, existing shareholders on proportion basis, from odd lots -- lot of the securities is smaller than the market traded lot.

The bill has stipulated companies to buy back their shares from shareholders within 15 months from the date of passing the resolution. Following the buy back companies cannot issue further securities within a period of 12 months except by way of bonus issue or through conversion of warrants and other similiar instruments, companies bill had proposed. It has also proposed the debt-equity ratio does not exceed 2:1 after the buy back.

Before the resolution for buy back, companies would have to explain the necessity for it, class of security intended to be purchsed under the buy back and the amount to be invested by the company under the buy back. For inter-corporte investments, the bill had proposed a company can acquire/purchase securities of other companiesexceeding 60 per cent of its paid-up capital and freereserves or 100 per cent of its free reserves, whichever is more without goverment permission.