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Current Economic Statistics and Review For the
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Theme
of the week:
Situation Assessment Survey – A Synopsis*
Indebtedness of Farmers
Introduction
Economic
and social well being of a country depends upon the performance of
agriculture. It is more so in a developing country like In
spite of all these, the policy planners in the Ministry of Agriculture
were not fully aware of the life and living of farming community as also
their preferences. Thus Union Ministry of Agriculture planned a
countrywide survey known as ‘Situation Assessment Survey (SAS)’ at the
beginning of this millennium for the first time. Main areas of interest
are educational level of farmer households, level of living as measured by
consumer expenditure, their income, productive assets, indebtedness, their
farming practices and preferences, resource availability, awareness and
access to technological development, etc. National
Sample Organisation (NSSO), Ministry of Statistics and Programme
Implementation, conducted the above survey during January and December
2003 as part of its 59th round. The survey was conducted only
in the rural areas of the country. In all 51,770 households spread
over 6,638 villages were surveyed in the central sample. In the state
sample, seven states/Uts, namely, Andhra Pradesh, The
survey collected information on various aspects of farmers and the farming
practices along with their indebtedness and published five reports viz.,
I) Indebtedness of farmers, 2) Access to Modern Technology for Farming, 3)
Some Aspects of Farming, 4) Consumption Expenditure of Farmer Households
and 5) Income, Expenditure and Productive Assets of Farmer Households. This
aim of the note is to give a brief review of the results published by NSSO
in their Report No 498 on the Indebtedness of Farmer households. The
report gives the data of each component in terms of 1000 and total.
However, for a better understanding and
to have a sharper focus the data is presented in percentages. More over in
some cases in order to understand the
magnitude the problem actual number of households are worked out by
using the ratio published to the total given in the report. IIConcepts and DefinitionsA few of the concepts and definitions followed in the survey by the NSSO have been reproduced below for better readability of the note. Household:
Broadly, a household is defined as a group of persons normally living
together and taking food from a common kitchen. By “normally” it is
meant that temporary visitors are excluded while temporary stay-away are
included. “ Living together” is usually given more importance than
“sharing food from a common kitchen” in drawing the boundaries of a
household in case the two criteria are in conflict. Size of household is
the total number of persons, normally living in the household. Farmer:
Farmer is a person who operates some land and is engaged in agricultural
activities during the last 365 days. Agricultural activities include
cultivation of field crops and horticultural crops, growing of trees or
plantations, (such as rubber, cashew, coconut, pepper, coffee, tea, etc.),
animal husbandry, poultry, fishery, piggery, bee keeping, vermiculture,
sericulture, etc. Thus
a person gets qualified as a farmer if
It may be noted that persons engaged in agricultural and/or allied activities but not operating a piece of land are not considered as farmers. Similarly, agricultural labourers, coastal fishermen, rural artisans and persons engaged in agricultural services are not considered as farmers It
is also quite possible that during the reference period of last 365 days,
a person could have left his entire land as ‘current fallow’ by
discretion or due to natural situation or otherwise. Such farmers are also
execluded from the coverage of the present situation assessment survey. Farmer
household:
A household having at least one farmer as its member is regarded as a
farmer household in the context of the present survey. Social
Group:
There are four social groups, namely, scheduled tribe, scheduled caste,
other backward class and others. Others mean those who do not come under
any of the first three social groups and cover all categories. Principal
source of income
of the household is the source, which yields maximum income among various
sources from which the household received any income during 365 days prior
to the date of survey. The different sources are I) cultivation, ii)
farming other than cultivation, iii) other agricultural activity, iv)
wage/salaried employment, v) non-agricultural enterprises, vi) pension,
vii) remittances, viii) interest and dividends and ix) others. Income from
begging and prostitution, etc., is not considered as principal source of
income. Cultivation
means activities related to production of crops by tillage and related
ancillary activities. Farming
other than cultivation
includes animal husbandry, poultry, fishery, piggery, bee-keeping etc.
Growing of trees, horticultural crops and plantations ( rubber, cashew,
pepper, coffee, tea, etc.) are
considered under other agricultural activity. Loans:
Any liability, which was taken in cash or kind, is termed as a loan, if
the amount at the time of transaction was Rs. 300 or more. Loan
taken from different sources are considered as separate loans. Even if two
or more different loans were taken from the same source at different
times, they were considered as separate loans. Sources
of Loan:
For each liability, the agency to which the loan was due, was considered
as the source of loan. The different sources were government, co-operative
society, bank, agricultural/money lender, trader, relatives and friends,
doctors/lawyers and other professionals and others. Purpose
of loan:
For each liability, the purpose for which the household has taken the loan
was considered as the purpose of loan. There are nine purposes for which
loans are taken. They are capital expenditure in farm business, current
expenditure in farm business, non-farm business, consumption expenditure,
marriages and ceremonies, education, medical treatment and other
expenditure. Amount
of outstanding loan:
For each loan, the amount outstanding on the date of survey was the sum of
principal outstanding and the interest payable as on the date of survey.
In case of kind loans, the amount of the liability was evaluated at the
current market price prevailing in the locality. Reference
period:
Different reference periods were followed in collecting information on
different aspects of farming and the condition of farmers ‘as on the
date of survey’, ‘last 30 days’, ‘last 365 days’, ‘kharif
season’, ‘rabi season’, etc. For information related to loans, the
reference period was as ‘on the date of survey’. IIIGeographical Distribution of Total and Indebted Farmer HouseholdsAt all-India level, the survey covered 6,638 sample villages and 51,770 sample farmer households. At
all- The
percentages of indebted farmer households in the north-eastern states,
viz., The number of estimated farmer households in different social groups was 11.9 million (or 13.3 per cent) in scheduled tribes, 15.6 million (or 17.5 per cent) in scheduled tribes, 37.0 million (or 41.5 per cent) in other backward class and 24.7 million (or 27.7 per cent) others. The prevalence rate of indebtedness of farmer households has been the lowest at 36.3 per cent in respect of ST farmer households while other groups had higher rates at 50.2 per cent for SC, 51.4 per cent for OBC and 49.4 per cent in the case of others.
IV Source of Income of Total and Indebted Farmer Households
Table 2 shows state-wise distribution of farmer and indebted farmer households by source of income. The principal source of income of farmer households was categorised as cultivation, farming other than cultivation, other agricultural activities and others. Out
of the 89.4 million farmer households, 51.1 million (57.2 per cent) farmer
households had their income from cultivation, among them 24.7 million
(48.3 per cent) were indebted. Another 32.1 million (35.9 per cent) farmer
households derive their main income from other sources. Farming other than
cultivation was the main source of income reported by 2.7 million farmer
households and out of them 1.4 million were indebted. Among
the states, cultivation is the main source of income among farmer
households except Kerala. In Kerala, 61.7 per cent of the farmer
households reported that they draw their income from other sources.
V
Distribution of Total
and Indebted Farmer Households
–
by
Size Class of Land Possessed
According
to agricultural census the farmer households have been categorised as per
various land holding size classes have been regrouped under five groups
viz., Marginal ( size of land <=
1 ha), Small (1.01 – 2.00 ha), Semi-medium ( 2.01 – 4.00
ha), Medium (4.01 – 10.00 ha), and Large ( more than 10.00
ha). Situation assessment survey collected some information about the
number of households possessing by size of land. Table 3 shows the number
of total farmer households and indebted farmer households classified
according to land possessed by farmers.
About 66 per cent of farm households were marginal farmer households (58.9 million) each possessing land holdings of size less than or equal to 1 hectare. Of these households, 26.5 million (or 65.2 per cent) were indebted. Small farmers having land of size between 1 to 2 hectares numbered 16.1 million ( or 18.0 per cent) with 8.2 million households ( 18.8 per cent) indebted. About 8 lakh farmer households fall in large category,having land above 10 hectares. Among them about 5 lakh households were indebted. Thus about 80 per cent of the indebted farmer households possessed land amounting to 2 hectares or less and the prevalence of indebtedness among them was the least at 46.3 per cent. The prevalence of indebtedness among other categories had been much higher than this and it ranged from 58 to 66 per cent and higher incidence could be because of their better land ownership.
Table
4 presents the statewise distribution of the number of indebted farmer
households as per different categories of their land holdings. Among
southern region states, about 56 per cent of indebted farmer households in
Andhra Pradesh (or 2.8 million) were marginal farmers and about 22 per
cent (1.1 million) were small farmers. Thus in Andhra Pradesh among
indebted farmer households 78 per cent of them had land holdings of 2
hectares or less. Among
central region states, in Uttar Pradesh out of 6.9 million indebted farmer
households, 4.9 million were marginal households possessing land of less
than one hectare. Small indebted farmers were 1.2 million and hence in
Uttar Prdaesh, 6.1 million were indebted farmer households (88 per cent)
possess land of only 2 hectares or less.
Among
eastern region states, in
VI Distribution of Outstanding Loans by Size of Land Holdings
Farmer households numbering 89.4 million have reported an outstanding debt of Rs 112,447 crore as per SAS survey. Among them, marginal farmers reported Rs. 44,395 crore as debt outstanding (59million) marginal farmers. Average amount of debt per marginal farmer household has been worked out to be Rs.7,536 crore. Thus among various categories of farmer households, the average amount of outstanding debt increased with the size of land holdings; and the amount of debt per large category farmer household stood at Rs.76,232 crore.
VII Distribution
of Outstanding Loan by Source of Loan
As
per SAS report, 24.7 million farmer households had reported indebtedness
to institutional agencies to the extent of 57.7 per cent of their cash
loans outstanding. About, 11.7 million farmer households had reported
indebtedness to Banks accounting for 35.6 per cent of
cash loans outstanding with Banksof all indebted farmer
households.The farmer households’ indebtedness to non-institutional
agencies constituted about 42.4 per cent of their total cash loans
outstanding. Moneylenders with about 26 per cent of total debt and
relatives and friends with 8.5 per cent were the major non-institutional
agencies. Table
7 presents state-wise distribution of cash loans outstanding by source of
loans. The
farmer households in the north-eastern states like Megalaya, Arunachal
Pradesh, Manipur, etc. have reported large part of their loans from their
relatives and friends (loan from any agency is classified under this
source only if it is interest free by definition). Indebtedness to
government have been reported to be high in states like
The most important source of loan as revealed by Table 8 has been moneylenders. At all-India level, on an average, 29 out of 100 indebted households had borrowed from moneylenders. Bank and co-operative societies are the next major source of loans for farmer households with their incidence of borrowing at about 26 per cent against each of these two sources.
VII Distribution
of Outstanding Loan by Purpose of Loan The state-wise distribution of outstanding loan taken by farmer households by purpose of loan is provided in Table 9. It has been reported the most important purposes of loans were capital and current expenditure in farm business and marriages and ceremonies. At all-India level, 58.4 per cent of the debt for farm business and 11.1 per cent for Marriages and ceremonies. Borrowing for education among farmers had been very small at 0.8 per cent. Cash debt drawn for consumption expenditure formed about 8.8 per cent of the total debt.
Education purpose is paramount importance among farmer households of Arunachal Pradesh. They had reported about 20 per cent of their cash loan outstanding for this purpose. Farmers in Manipur and Nagaland had reported about 8 per cent of their debt for the purpose of education. All other states reported miniscule amount for education. Farmer households in 11 states reported more than 10 per cent of their borrowings for marriages and ceremonies. Reported
debt for productive purposes (farm and non-farm business) by farmer
households among various states ranged from the lowest of 16 per cent in
case of Manipur and the highest of about 81 per cent among the farmers of
Mizoram. In the case of consumption, expenditure the highest utilisation
of 18 per cent had been reported by the farmer households of Table
10 shows the incidence of indebtedness of farmer households according to
purpose. It is observed that at all-
Highlights of Current Economic Scene AGRICULTURE As
per the record, there has been 9.02 million tonnes of wheat in the central
pool as on November 1,2007, which has been higher from 5.99 million tonnes
as compared to that with last year. Thus, wheat stock has increased this
year by 51 per cent and seems be enough to meet domestic demand till March
2008. While, as on November 1,2007, the central government has 10.65
million tonnes rice in the central pool lower from 12.51 million tonnes
during the same period a year ago. At present the government has purchased
nearly 8.08 million tonnes of rice from farmers as against that of 8.55
million tonnes in the previous year. The
central government had asked state run firms STC, MMTC Ltd, PEC Ltd and
NAFED to import nearly 1.25 lakh tonnes of edible oil in November 2007, to
meet an anticipated rise in its demand in the domestic market in the view
of festivals. However, at present, it has stopped import of edible oil, as
domestic prices have not jumped as anticipated earlier and even in the
international market prices of edible oil are soaring up drastically. Prices
of pulses have shot up by over 25 per cent in the month of October 2007
and are likely to increase further in November 2007 due to festival
season. Despite imports of 1.6 million tonnes, prices are soaring high
especially of pulses like pigeon peas (Arhar), which is being sold at Rs
46-48 per kg at present in the beginning of November as against that of Rs
39-40 in September, while gram (chana) in November 2007 is being sold at
Rs 39-40 per kg from Rs 32 per kg in September in the retail stores.
During current fiscal year government owned firms such as MMTC and STC
have contracted for imports of 1.21 million tonnes of pulses. According
to Solvent Extractors Association of India, country’s oilmeal exports in
2007-08 (April- March) is likely to rise by 11.7 per cent to a record high
of 5.7 million tonnes due to global shortage of oilseeds amid higher
domestic production. Earnings from oilmeal exports would also rise in
2007-08 by 50 per cent to Rs 60,000 crore. In
spite of volatility in edible oil prices, the decision to launch smaller
packs with lower pricing would be one of pioneering effort made by the
FMCG companies to attract the consumers across the country. It would put
forth the sachet revolution in the edible oils category, by offering Dalda
edible oils in the sachet packs pricing at Rs 5 (70 ml) and Rs 10 (145 ml)
to consumers in smaller towns.
International
prices of edible oils over the last one year have shot up from 61 per cent
for crude degummed soyabean oil and in case of sunflower oil it has gone
up to by 122 per cent. However, during the same period the rise in
domestic edible oils’ prices have been contained within 15-20 per cent
with the central government adopting the measure of reduction in import
tariffs. The central government resorted to this measure since domestic
prices were not moving fully in tandem with global prices and rupee
continued appreciating against dollar during the same period. This, on one
hand, has protected consumers from inflationary pressures led by increase
in global prices of many commodities, while on the other hand it has
adversely affected exports of the same. As
per the research report on Oils and Oilseeds 2007 prepared by the
Knowledge Management Team of National Commodity and Derivatives Exchange (NCDEX),
kharif oilseed production is expected to go up by around 20 per cent to
16.1 million tonnes in the ongoing financial year as against that of the
estimated 13.4 million tonnes last financial year. Kharif sesame is the
only oilseed that is showing negative growth in production, while area
under soybean cultivation is around 17.6 million hectares as of
mid-October, which is almost 7 per cent higher than the area sown during
last kharif season. Except for sunflower and sesame, all kharif oilseeds
have registered growth in sown acreages this year. Overall, the highest
percentage increase in oilseed acreages is seen in Andhra Pradesh and
Tamil Nadu. As
per Spice Board, during the first half of the current fiscal year (April-
September) 2007 exports of spices and spice base products have shown a
sharp rise by about 22 per cent with the shipments touching 2,19,640
tonnes valued at Rs 2,100.34 crore (US $ 514.10 million) as compared with
the export performance of 1,80,500 tonnes valued at Rs 1,627.52 crore (US
$353.90 million) in the same period last year. This exemplify that there
is growth in quantity by 22 per cent, 45 per cent in US $ terms and 29 per
cent in rupee terms. While exports target for this financial year has been
set at 3,80,000 tonnes valuing Rs 3,600 crore (US $ 875 million), so far
the country has achieved 58 per cent of it both in quantity and value
terms. Spices like red chill’s export has rose by whooping 72 per cent
in quantity and 92 per cent in value, i.e., total exports would be around
100,000 tonnes during this period, while exports of black pepper have
grown by 37 per cent to 17,000 tonnes while its export earnings have
soared by 126 per cent to Rs 245.43 this year. Exports of cardamom (large)
has touched 650 tonnes, up by 61 per cent and its export earnings have
risen to 53 per cent to Rs 7.19 crore. Coriander exports have increased by
22 per cent to 12,900 tonnes valued at 49.49 crore. Ginger and turmeric
exports have registered a marginal increase in quantity but in value
terms, these have dropped by 27 per cent and 9 per cent,
respectively. Whereas in case of
garlic, exports have fallen down sharply in quantity by 97 per cent to 305
tonnes valued at Rs 1.87 crore as against that of 10,325 tonnes last year,
and even the exports of cumin seed have dropped by 2 per cent to 16,940
tonnes valued at Rs 120.97 crore. This resulted due to increase in value
realisation of the spices to Rs 107.53 per kg from Rs 72.90. According
to International Pepper Community (IPC), world pepper production is
projected to be lower in 2008 at 2,62,400 tonnes as against that of
2,72,040 tonnes in 2007 and 2,89230 in 2006 due to weak crop in India,
Brazil, Indonesia and Vietnam. While, carry forward stock of the same is
likely to fall at 61,719 tonnes in 2008 as against that of 73,404 tonnes
in 2007 and 88,384 tonnes in 2006. Total exports during the current year
are estimated at 2,01,700 tonnes as against that of 2,45,741 tonnes last
year, while projection for 2008 has been put at 1,90,800 tonnes. With the
estimated international demand for pepper touching to 2,45,000 tonnes,
there would be gap of around 55,000 tonnes between demand and supply next
year. As per projection by IPC, In
the state of Uttar Pradesh, farmers have started selling sugarcane to the
mills at lesser prices of Rs 1,000- Rs 1,100 per tonne below than the
current state advised price of Rs 1,250-Rs 1,300 per tonne. Most of the
farmers are selling canes to the gur manufacturers since they would get
cash immediately. As sugar prices are declining at a faster phase, farmers
are preparing to shift their cultivation to the more remunerative crop -
wheat.
According
to projections undertaken by International Cotton Advisory Committee (ICAC),
world cotton production would reach a new high of 27.1 million tonnes in
2008-09, while consumption would be 27.8 million tonnes, resulting into
further decline in stocks to 10.6 million tonnes. The world cotton
production in the current season (2007-08) is projected to decline by 2
per cent to 26.1 million tonnes, while world mill consumption is predicted
to be up by 3 per cent to 27.5 million tonnes; this would result in
decline in stocks by 11 per cent to 11.4 million tonnes. While, world
exports would be down to 8.7 million tonnes. It is estimated that crop
size in According
to Coffee Board, coffee exports in the first 10 months of calendar year
2007 (January – October) have decline to 1.92 lakh tonnes as compared
with 2.18 lakh tonnes in the corresponding period last year. It indicates
that there was down by 11.92 per cent. While, export realisation in rupees
has also marginally fallen to Rs 1,666.44 crore as against that of Rs
1,679.91 crore last years. Whereas, rupee exports (value added in the
country after importing) for the period were down by 55.63 per cent to
12,517 tonnes, as compared to that of 28,214 tonnes in the same period
last year. The fall is attributed in coffee exports because of weak
overseas demand and domestic growers’ reluctance to release stock
anticipating price appreciation. The
Cashew Export Promotion Council (CEPC) has urged the central government to
include cashew in the Vishesh Krishi Aur Gram Udyog Yojana (VKGUY) to
improve its competitiveness in the world market as the country is facing
stringent competition from other cashew exporting countries.
As
per the study undertaken by MCX in August 2006, projects that farmers
get just half the price that consumer pay for their produce, while other
margins are taken away from traders, intermediaries, and processors. A
farm product when sold changes hands at least five times before it reaches
the consumer from the farmer. In the process, mostly, value-addition to
the product takes place only twice, with the other intermediaries looking
just to add to their margins. The margin earned by brokers, millers,
canvassing agents, wholesalers and retailers after putting it together is
between 38 per cent for a product like chana (gram) and 67 per cent for
urad (black matpe). Usher
Agro Ltd, one of the agricultural processing companies in Uttar Pradesh
would set up new company named as Usher Eco Power Ltd to produce power
form rice husk and edible oil. This venture would involve an investment of
about Rs 80 crore. The fuel utilised would qualify the company for carbon
credit under the Kyoto Protocol. It is determined that nearly 10 million
tonnes of husk is said to generate 1000 mega watt (MW), besides 10 million
tonnes of carbon credit worth US $ 30-50 million would be produced. In
addition to it company intends to raise its rice milling capacity to 2
lakh tonnes per annum with an investment of Rs 40 crore. Attur
based Rasi Seeds Private Ltd and the TamilNadu Agricultural University (TNAU)
have jointly signed an agreement to develop transgenic cassava resistant
to mosaic virus as this is an important crop in the southern region and
limited availability of germplasm has been a major impediment in crop
development. InflationThe
annual point-to-point inflation rate based on wholesale price index (WPI)
remained unchanged at its previous week’s level of 2.97 percent for the
week ended October 27,2007. During the comparable week of the earlier
year, it was 5.35 per cent. During
the week under review, the WPI remained stationary at 215.1 at the
previous weeks’ level (Base: 1993-94=100). The index of ‘primary
articles’ group, (weight 22.02 per cent), declined marginally to 224.5
from its previous week’s level of 225.0. The
index of ‘fuel, power, light
and lubricants’ group (weight 14.23 per cent) was also remained
unchanged. The
index of ‘manufactured products’ group (weight 63.75 per cent) rose by
0.1 per cent to 187.6 from 187.4 for the previous week due to rise in the
prices of atta,maida,bran, bran oil etc. The
latest final index of WPI for the week ended September 01,2007 has
undergone upward revision; as a result, both the absolute index and the
implied inflation rate stood at 214.8 and 3.72 per cent as against the
provisional data of 214.4 and 3.52 per cent. Banking The
RBI has proposed to form a working group to lay-down the roadmap for
cross-border supervision and supervisory co-operation with overseas
regulators, consistent with the framework envisaged in the ICICI
Bank has sold roughly 45 per cent of its sticky home loans to the Asset
Reconstruction Company India Ltd (ACRIL) in a first step towards creating
a market for retail loans that have turned bad. The bank sold Rs 360 crore
of non-performing home loans at a price around the book cost. The home
loans sold are a mix of loans ranging from Rs 15 – 20 lakh.
Close
on the heels of State Bank of India, ICICI Bank has cut interest rates on
its special deposit scheme by 25 to 50 basis points. Reliance
Power has bagged the Krishnapatnam ultra mega power project by bidding to
supply power at an average of Rs 2.33 per unit. This was much lower than
the other two bids received, from L&T (which bid Rs 2.68 per unit) and
Sterlite (Rs 4.18 per unit). This is the second ultra mega power project
of 4000 MW for Reliance Power which is also constructing the Sasan ultra
mega power plant in MP. Financial SectorCapital
Market Primary
Market Sebi is considering amendments to primary market rules to give companies greater leeway in pricing initial public offerings (IPOs) and disclosures. The rules on pricing of IPOs stipulate that if the issue price is less than Rs 500 per share, the face value should be Rs 10 per share. If the issue price is Rs 500 or more, the issuer (unlisted) company can fix the face value below Rs 10 per share, subject to the condition that it should not be less than Re 1 no matter what. According to sources, a proposal is set to be considered at the regulator’s forthcoming board meeting to allow firms to issue shares at a price of less than Rs 500 even when the face value of the shares being issued is less than Rs 10 per share. This needs amendments to Sebi’s disclosure and investor protection guidelines. Bharat Oman Refineries Ltd, a joint venture between BPCL and Oman Oil Ltd will come up with an initial public offer by March 2008 to raise Rs 2,000 crore. The money would be used to fund the upcoming 6-million-tonne refinery in Bina, Madhya Pradesh which Bharat Oman Refineries Ltd is planning to set up. Kolte-Patil Developers Ltd, a real estate developer, is to enter the capital market with an initial public offering (IPO) of 1.9 crore-equity shares of Rs 10 each for cash at a price to be fixed through a 100 per cent book-building process. The issue will be open from November 19 to November 22. The price band has been fixed between Rs 125 and Rs 145 per equity share. The
IPO of the Adani group-promoted Secondary
Market Weak global markets and profit taking after the two-month long rally held the surging indices down last week. Slower foreign inflows and higher outflows caused volatility. Oil prices nearing $100 a barrel too, spoiled the party. The Sensex shed 917.3 points - 4.6 per cent until Thursday. Muhurat trading saw the index lose another 150 points to end the week at 18,904 points. Nifty too, followed suit losing 4 per cent to close at 5,663 points.
Stocks closed in the red during Muharat trading for the first time in seven years on Friday. The day’s trading marked the beginning of the traditional year — Samvat 2064. Although Muharat trading is more a ritual and is characterized by thin volumes and low institutional participation, it did seem an anti-climax to a year that saw the Sensex climb 8,000 points from last year’s Muhurat close of 12736.82. (During the year, the Sensex crossed the 20,000-mark). Early trade saw the Sensex rise to 19329.57 on Friday, but given that trading time lasted only an hour, it was extremely volatile. It lost almost 600 points intra-day, to hit a low of 18737.22. The index closed at 18907.60, lower by 0.79 per cent from Thursday. The broader 50-stock Nifty lost 0.62 per cent, closing at 5663.25. Fridays’ trading is in keeping with the direction of the markets ever since the Sebi restricted the participatory note route for foreign institutional investors. For the last ten days, the benchmark indices have been mostly moving southward. All the sectoral indices of BSE have declined during the week under review; the highest decline has been in case of Bankex by 9.15 per cent followed by IT 8.23 per cent and BSE teck 6.9 per cent. Foreign institutional investors (FIIs), who pumped in a little over Rs 30,500 crore in net investments in the three weeks prior to the Securities and Exchange Board of India (SEBI) outlining its draft restrictions on the former’s ‘participatory note’ based investments, have been net sellers to the tune of roughly Rs 3,500 crore in the three weeks since then. This becomes clear from an analysis of Sebi’s trading data on FII investments during the relevant period. Between October 18 (the first relevant date of FII data since SEBI’s draft proposals were made public) and November 8 (the latest date for which such data is available), they were net sellers to the tune of Rs 3,505 crore. Derivatives
Futures and options turnover by Thursday was down below Rs 60,000 crore, off almost 40 per cent from its heights. Open interest showed similar declines with intra-day traders unwilling to leave overnight positions. The Nifty closed at 5,663 in spot on Friday. However, the derivatives trading on that day was spotty with volume only in the November futures, which was last traded at 5590 when the spot was 5614. On Thursday, the November Nifty was held at 5709 with spot at 5698, December at 5700 and January at 5684. Open interest expanded across all three series. On Thursday, the Junior closed at 10460 in spot, while the November contract was settled at 10483. The CNX IT closed at 4461 with November settled at 4457. The Bank Nifty closed at 8876 with November settled at 8967. Government Securities Market Primary
Market RBI re-issued 8.20 per cent 2022 and 8.33 per cent 2036 for Rs.5,000 crore and 3,000 crore on November 08, 2007 at the cut-off yields of 8.26 per cent and 8.39 per cent, respectively. Seven State Governments have announced the sale of 10 year paper maturing in 2017 for an aggregate amount of Rs. 5,896.45 crore through an yield based auction using multiple price auction method on November 13, 2007. On November 07, 2007, RBI auctioned 91-day and 364-day T-bills for the notified amounts of Rs.3,500 crore (out of which Rs.3,000 crore under MSS) and Rs.3,000 crore (out of which Rs.2,000 crore under MSS), respectively. The cut-off yields for 91-day and 364-day T-bills were 7.31 per cent and 7.76 per cent respectively. Secondary Market Overnight call rates ended at 6.05-6.25 per cent jumping to a near 3-month peak on the last day of a holiday-shortened week. Call rates reached at 7.40-7.60 per cent since concerns of fresh supplies once again rose after RBI announced an increase in the ceiling on MSS bond issuance to Rs 2.5 lakh crore from Rs 2 lakh crore. At the weekend liquidity adjustment facility auctions, recourse to the reverse repurchase window reduced to just Rs 2,030 crore from just 4 bidders, as oil refiners drew on their credit lines. Traders were concerned about the near term liquidity scenario, where fears of fresh supplies added to the woes. The outflows towards the bond and bills auction and outflows worth Rs 16,000 crore towards the CRR hike made traders uncertain about the cash levels in the market. The yield on gilt-edged securities firmed up in the range of 7.72-8.70 per cent as against 7.17-8.66 per cent. Bond
Market Public sector entities are expected to swamp the domestic financial markets with bonds worth Rs 9,000 crore over the next four months. Public sector banks (PSBs) alone are expected to raise Rs 5,500 crore during the period. Banks in the fray to raise resources through bonds include Bank of India, State Bank of India, Union Bank of India, Vijaya Bank, UCO Bank and Dena Bank. Banks are raising the resources to increase their respective Tier II capital, for propelling their asset growth and partly for offsetting the impact on capital standards after migrating to Basel II next financial year. In addition, transmission utility, Power Grid Corporation of India Ltd, is expected to raise Rs 3,300 crore during the current financial year. Foreign
Exchange Market The rupee on Monday fell by 3.5 paise to 39.36/37 against the US dollar on account of bearish equity markets as well as the Reserve Bank intervention to contain Indian currency's rise. The rupee ended steady at 39.32/33 despite testing higher levels persistently. A market wide dollar liquidation mid-week by exporters and traders, triggered by broad dollar weakening helped the rupee to rally and hit a decade long high at 39.19/$. But bids suspected to be coming from state-run banks amidst higher crude prices pushed the unit back to 39.30/$. A slip in Asian and local stock markets later in the week also weighed on the rupee. Forward premia edged up, leaving absolute dollar levels higher. Annualised levels were up by almost 30 bps. Commodities Futures derivatives The domestic futures market turned volatile on the week ended on Thursday. The spot and futures Markets remained closed on Friday on account of Diwali. Futures prices of crude oil, silver, and gold on the MCX platform, touched recent highs on Wednesday, mainly on strong overseas Markets, fueled by local buying support. In the overseas Markets, crude oil climbed above $98 a barrel for the first time and gold headed past $840 an ounce and bound for a new high. A combination of demand, short covering, and supply factors pushed crude oil higher, while a new low for the dollar against the euro again added upward pressure to the prices of both gold and oil. Silver futures prices on the MCX platform climbed over the Rs 20,000-mark, following strong overseas Markets. The active November crude oil contract was higher 1.8 per cent to trade at Rs 3,814 per barrel. The total volume was 19.06 lakh barrels, down sharply over the previous week due to heavy volatility in prices, while the open interest was also down to 15.72 lakh barrels. Crude oil prices in the world market stalled in their climb toward $100 a barrel on Wednesday, after a government report said oil inventories fell less than expected last week, while refinery utilisation remained flat. Light, sweet crude for December delivery fell 33 cents to settle at $96.37 a barrel on the Nymex. Before the report's release, prices rose as high as $98.62, a new record. The active December gold contract was up 2.61 per cent to trade at Rs 10,534 per 10 gram. Total open interest was 11,838 kgs, down by 1,000 kgs over the previous week. The active December silver contract was up 3.3 per cent to trade at Rs 19,965 per kg. However, prices touched a psychological level of Rs 20,000 a kg on Thursday. According
to Rajesh Agrawal, Indore-based Soyabean Processors Association of India (SOPA)
Coordinator, The
proposed fourth national commodity futures exchange would feature gold,
silver, copper and base metal contracts, besides farm products.
According to S.K. Batra, managing director of MMTC, they are
hopeful of getting approval from the Forward Markets Commission.
Indiabulls will hold 74 per cent in a special purpose vehicle to set up
the exchange and MMTC the rest, if approval is given. The two firms would
invest one billion rupees in the equity capital of the SPV. The turnover of commodity exchanges in the country dropped by 4.59 per cent to Rs 20,87,288 crore till October 31 in the current financial year against Rs 21,87,901 crore in the corresponding period last year. According to data released by the commodity market regulator Forward Markets Commission (FMC), the futures trading in three national level commodity exchanges and 20 regional bourses stood at Rs 1,84,723.85 crore during the second fortnight of last month, down by over 22 per cent, compared to the year-ago period. During October 16-31 period, the turnover of leading exchange MCX stood at Rs 94,914.17 crore while the leading agri-commodity bourse NCDEX recorded a business of Rs 27,331.97 crore. Other national-level exchange Ahmedabad-based NMCE registered a turnover of Rs 939.90 crore InsuranceCorporate SectorJK
Paper has started the commercial production at its new multilayer
packaging board plant at Consumer
durables major Videcon Industries has acquired Planet M, the music and
entertainment retail arm of media house Bennett, Coleman & Co. for Rs
200 crore. The acquisition has been done by NEXT, Videocon’s retail
chain for consumer electronics and home appliances. Close
on the heels of signing an agreement with Renault for cars, Bajaj Auto has
picked up a 14.5 per cent stake in Vienna-based sports bike manufacturer,
KTM Power Sports, for more than Rs 300 crore. Punj
Lloyd has bagged a contract worth Rs 1,770 crore for engineering,
procurement and construction work at the new mega aromatics plant in Mitsubishi
Heavy Industries Ltd, Asia’s biggest power-equipment maker and L&T
will form a venture to build steam turbines in India by investing 880
crore to build turbines for 500 to 1000 MW to projects. Information
Technology IBM
India Research Laboratory (IBM IRL), one of the eight IBM Research labs
across the globe has announced the expansion of its Telecom Passive
telecom infrastructure firm GTL Infrastructure will be investing around
$1.7 billion (around Rs 6,800 crore) for setting up 25,000 shared telecom
towers in the country. Recently the company has also raised $300 million
through a foreign currency convertible bond (FCCB) issue, which was
subscribed over 4.41 times. Reliance
Communications and Microsoft has announced a strategic partnership to
provide internet protocol television (IPTV) services in the country. RCom
will pay $500 million to Microsoft Corporation as licence fee and spend
another $500 million for setting up the necessary IPTV infrastructure.
*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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