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Current Economic Statistics and Review For the
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Theme
of the week:
Estimates of Gross Domestic Product - July-September, 2007-08*
The
Central Statistical Organisation has released the estimates of quarterly
gross domestic product (GDP), expenditure on gross domestic product, (at
constant (1999-2000 prices)), for the quarter ended September 2007. The
press release also included the estimates of GDP and expenditures of GDP
for the first half of the current fiscal year. As per the standards set by
the IMF for data dissemination, the CSO has released the estimates for the
second quarter of the current fiscal year by end November 2007, i.e.,
within 2 months after the closure of the quarter. The present note
attempts to review the trends revealed by these estimates. Estimates
of Quarterly GDP at factor cost
The
GDP at factor cost, at constant (1999-2000) prices has been estimated Rs
710,578 crore for the second quarter of 2007-08 which has increased by 8.9
per cent over that in the corresponding quarter of he previous year, as
against the similar rise of 9.3 per cent in the previous quarter (Table
1). The growth is also lower than that achieved in the same quarter in the
previous year (10.2 per cent). It may be seen from Table 1 that the
agriculture sector witnessed a higher growth of 3.6 per cent during the
quarter than that registered in the corresponding quarter of previous year
(2.9 per cent). During the second quarters of each of the years beginning
2002-03, the agriculture sector recorded the maximum growth at 7.2 per
cent in 2003-04. Similarly, among all the first quarters during same
period, the growth in agriculture sector was maximum (3.8 per cent) in
2007-08. The
mining and quarrying sector has grown by 7.7 per cent during the second
quarter of 2007-08 as against 3.3 per cent in the previous quarter. The
sector witnessed the next highest growth after that in the same quarter of
2002-03 (9.9 per cent). The manufacturing sector experienced a
decelerating trend from previous 4 quarters and registered a growth of 8.8
per cent during the quarter under reference. The electricity, gas and
water supply sector registered a growth rate of 7.3 per cent, lower than
that in the previous quarter (8.3 per cent) and also of that in the same
quarter of previous year (8.1 per cent).
The construction sector, on the other hand, continued to grow at
more than 10 per cent similar to that in the previous quarter and the
corresponding quarter of previous year. Among the second quarters, since
2002-03, the sector recorded the maximum of 15.2 per cent growth in
2003-04. Among
the constituents of services sector, “trade, hotels, transport and
communication”, “financing, insurance, etc.”, recorded 10.6 to 11.4
per cent growth in the second quarter while the “community, social and
personal services, etc.”, sector grew only by 7.8 per cent in the
quarter. The finance, insurance, etc., sector has been increasing by more
than 10 per cent in the second quarter from 2005-06. The GDP at factor cost, at current prices, amounted to Rs 971,908 crore in the second quarter of the current fiscal year compared with Rs 856,761 crore in the corresponding quarter of the previous year, registering a growth rate of 13.4 per cent, lower than that in the same quarter a year ago (15.4 per cent), as also in the previous quarter (15.0 per cent) of the current fiscal year. While agriculture and allied activities grew by 11.0 per cent in the second quarter of 2007-08, industry and services sectors registered higher growth rates at 13.5 per cent and 14.0 per cent in that quarter. Expenditures
of GDP
The CSO has been publishing, at quarterly intervals, distributions
of gross domestic product at market prices by types of expenditure, such
as private final consumption expenditure (PFCE), government final
consumption expenditure (GFCE), gross fixed capital formation (GFCF),
change in stocks, valuables, exports and imports, from 2005-06 onwards.
These estimates, for the first and second quarters of 2007-08,
2006-07 and 2005-06, at constant and current market prices, have been
presented in Table 2.
The PFCE amounted to Rs 432,026 crores accounting for 55.2 per cent
of GDP at constant (1999-2000) market prices, in 2006-07.
The share has gradually decreased from 61.7 per cent in the first
quarter of 2005-06. The GFCE
has formed less than 10 per cent of GDP in the second quarter of 2007-08
as against 11.5 per cent in the corresponding quarter of 2005-06.
Thus total final consumption expenditure accounted for 64.9 per
cent GDP in the second quarter of 2007-08, compared with 70.8 per cent in
the same quarter of 2005-06. The
gross fixed capital formation which accounted for 30.3 per cent of the GDP
at constant market prices in the quarter under reference has increased
from 27.9 per cent in the same quarter of 2005-06.
The CSO has started compiling the estimates of valuables acquired
by household sector in the recent new series of national accounts.
The valuables formed at about 1.7 per cent of GDP constant market
prices whose share has marginally increased from that in 2005-06.
The shares of exports and imports fluctuated during the three year
period (in the first and second quarters) and stood at around 17 per cent
and 15.5 per cent, respectively, in the second quarter of 2007-08.
At current prices also, the components of expenditure of GDP
behaved more less on the same lines of those at 1999-2000 prices.
The shares in GDP at current market prices, of GFCF, change the
stocks, exports and imports had been higher than those at current prices.
Gross fixed capital formation as a percentage to GDP at current
market prices has increased to 32.3 per cent in the second quarter of
2007-08 from 27.5 percent in the first quarter of 2005-06. While the share
of exports in GDP at current market prices has increased from 19.8 per
cent in the first quarter of 2005-06 to 22.9 per cent in the second
quarter of 2007-08, that of imports has increased marginally from 23.6
percent to 24.9 per cent during the same period. Half-Yearly
estimates of GDP
The GDP at factor cost as 1999-2000 prices for the first half (H1)
year of 2007-08, stood at Rs 14,33,709 crore which has increased by 9.1
per cent compared with 9.0 per cent in the corresponding half-year of the
previous year (Table
3). The
GDP arising from has agriculture increased by 3.7 per cent in the first
half of the current fiscal year, compared with 2.8 per cent in the same
period of the previous year. The
manufacturing sector has registered double digit growth (10.2 per cent) in
H1 of 2007-08, but lower than the growth witnessed in the same period of
the previous year and also lower than that in the previous half year.
All the constituents of the services sector have recorded lower
growth rates in this half year period compared with those in the
corresponding period of 2006-07.
In nominal terms, GDP at factor cost has increased by 14.2 per cent
in the first half of 2007-08 compared with 15.0 per cent increase in the
same period of the previous year. The
manufacturing sector, which has decelerated growth in real terms, has also
witnessed declined growth over the previous two half-year periods. The
construction and services sectors also have witnessed declines in their
growth rates over the previous four half-year periods.
Finance, insurance, real estate, etc., sector has registered higher
growth (15.7 per cent) in the first half of 2007-08 than that of “trade,
hotels, etc.” and “community, etc.”, sectors in the same period.
Half-Yearly
expenditure of GDP
The data on expenditure of GDP on half yearly basis are available only from 2005-06; and those for 2007-08, 2006-07 and 2005-06 at 1999-2000 prices and at current prices are presented in Table 4. The share of PFCE in GDP of the first half of 2007-08
stood
at 57 per cent which has marginally declined from 60.5 per cent in H1 of
2005-06. The share of GFCF has
increased to 30 per cent from 27.0 per cent during the same period.
Exports and imports shared each at around 17 per cent wherein the former
having marginally higher share than the latter.
At current prices, similar trends have been observed in the above
set of shares. While the share
of PFCE has been marginally lower than those at 1999-2000 prices, those of
exports and imports are much higher at current prices.
The GFCF stood at 31.8 per cent in H1 of 2007-08 compared with 28.4
per cent in H1 of 2005-06.
The trends in the shares of the constituents for full year, from
2002-03 to 2006-07 are given in Table 5.
For the complete fiscal year 2006-07, the PFCE accounted for 57.2
per cent of GDP at constant market prices (1999-2000 prices) which has
decreased from near 63 per cent in 2002-03.
The gross capital formation (GFCF + change in stocks) formed 30.7
per cent of GDP at constant market prices in 2006-07 which has increased
from 24.2 per cent in 2002-03. The
rise in the rate, also known as investment rate has been contributed by
both fixed assets formation and change in stocks. At
current prices, the share of PFCE has been lower marginally at 56.4 per
cent than that at 1999-2000 prices; that of GFCE, on the other hand, at
11.3 per cent is is higher than that (10.7 per cent) at 1999-2000 prices.
The GFCF rate at current prices stood at 29.5 per cent, which has
increased from 23.8 per cent in 2002-03 and this rate has been
consistently higher than the real rate.
The exports and imports as percentages to GDP at current market
prices are higher at 23.0 per cent and 25.8 per cent, respectively, than
those at real terms; and they have increased over time form 14.5 per cent
and 15.5 per cent in 2002-03, respectively.
The half-yearly estimates of expenditure of GDP for H1 of 2007-08
as seen from above are quite comparable and follow a pattern.
Annual
Aggregates
The CSO has provisionally placed the growth rate of real GDP for
2006-07 at 9.4 per cent compared with 9.0 per cent in 2005-06 (Table 6).
It has been observed from the date presented so far, that the
economy has remained buoyant to capture a growth of
above
8 per cent during the last four year series (except 2004-05).
While the industry sector (comprising mining and quarrying,
manufacturing, electricity, gas and water supply, and construction) has
experienced progressively increasing growth rate from 7.1 per cent in
2002-03 to 10.9 per cent in 2006-07, the services sector witnessed similar
growth increasing from 7.4 per cent to 11.0 per cent during the same
period. Agriculture sector,
however, experienced fluctuating growth from – 7.2 per cent to 10.0 per
cent during the same period perhaps due to vagaries of nature.
During the current fiscal year so far (first half-year), the real GDP has increased by 9.1 per cent compared with 9.9 per cent in the same period of previous year. The slow down has been mainly on account of decelerated growth in manufacturing, electricity, gas and water supply, and services sectors, although agriculture, mining and quarrying and construction activities performed well over that in the previous year. The real GDP growth has been projected by various agencies to be at around 8.5 to 9.0 per cent in 2007-08. *
This note has prepared by Dr. K. S. Ramachandra Rao.
Highlights of Current Economic Scene AGRICULTURE The
tender floated by PEC Ltd, for import of 3.5 lakh tonnes of wheat has got
moderate response with only 6 companies offering an aggregate quantity of
6.30 lakh tonnes at prices ranging from US $ 395.88 to US $ 483 per tonne
on cost & freight basis. J
K International is the lowest bidder offering 2.5 lakh tonnes
including 65,000 tonnes at the lowest quote of US $ 395.88 per tonne for
delivery at Mundra port. Starcom has
offered the highest price of US $ 483 per tonne for 40,000
tonnes at Tuticorin. The final decision taken on December 8, 2007 by
the central government has revealed that J K International of Australia,
has bagged the latest PEC wheat tender for purchase of 1.5 lakh tonnes at
a weighted average price of US $ 369.9 per tonne, cost and freight. According
to latest Crop Weather Watch Report published by Ministry of Agriculture
as on December 7, 2007 rabi sowing of wheat, oilseeds, pulses and coarse
cereals have continued lagging behind that of previous season, due to dry
weather in large parts of northern and central Food
Corporation of According
to Solvent Extractors Association, oil meal exports have declined by 10
per cent between April-November 2007-08 to 22.88 lakh tonnes from 25.49
lakh tonnes during the same period last year. On the Contrary to the
overall decline in exports, castor meal exports have jumped by 82 per cent
to 2.06 lakh tonnes from 1.13 lakh tonnes year-on-year during the same
period. While, exports of soyabean, rapeseed, groundnut and rice bran
extractions have been lower during the first eight months of this
financial year. The decline in oilmeal exports during April-November
2007-08 was a result of lower imports by
According
to International Cotton Advisory Committee (ICAC), it is projected that
global cotton mill consumption is expected to increase by 3 per cent in
2007-08 to 27.4 million tonnes despite of decline in the rate of global
economic growth, an increase in international cotton prices and loss of
competitiveness vis
a vis polyester in major markets since August 2007.
It has been forecasted that season average Cotlook A-Index
would be 67 cent per pound in 2007-08, eight cents higher than the
previous year. Global cotton output would decline during 2007-08 to 26
million tonnes showing a downfall by 3 per cent from last year, due to
drop in harvest acreages specially from the countries like Africa, China,
Pakistan, Turkey and U.S. It is estimated that South
India Small Spinners Association (Sisspa) has requested the central
government not to allow exports of raw cotton based on assumption of crop
size, but it should be permitted only on the actual stock of cotton
available in the country. This judgment was taken due to unprecedented
rise in raw cotton prices; artificial shortage of the natural fiber; and
recent surge in prices of raw cotton that has increased prices of cotton
yarn. On the other hand, higher bank rate and undeclared power cut largely
in Tamil Nadu and marginally in other parts of southern
According
to market estimates, barley acreage is likely to grow in the states of
Rajasthan by 25 per cent, in Uttar Pradesh by 25 per cent, in According
to Nasik-based National Horticultural Research and Development Foundation,
even though onion exports in November 2007 has slumped down by 72 per cent
in terms of quantity and by 53 per cent in terms of value, it has received
better realisation in the overseas markets compared to last year. The
export of onion has fallen to 30,714 tonnes in November 2007 valued at Rs
52.04 crore as against that of Rs 110.72 crore when the country exported
1,08,170 tonnes a year-ago. The total exports declined to 4.38 lakh tonnes
during April-November 2007- 08 from 8.02 lakh tonnes during the same
period a year ago. This reduction in exports can be attributed to measures
undertaken by central government to discourage overseas sales of onion due
to festive season, to keep a check on domestic prices
and also due to institution like Nafed along with 12 other export
canalising agencies keeping the export price of onion unchanged at US $
495 per tonne at the starting of November to ensure availability of the
commodity in the domestic market.
The Central government is likely to provide subsidy dues of Rs 5000 to fertiliser industry during the current financial year. The total subsidy bill of 2007-08 is estimated to be Rs 48,000 crore including last year’s arrears of Rs 8,000 crore. Of this, Rs 36, 501 crore has been paid so far, which includes Rs 14,050 crore allocated in the first supplementary demand for grants. It is expected that approximately Rs 6000 of subsidy dues would be carried forward to the next financial year (2008-09). The
state government of Kerala has sanctioned package of Rs 14.62 crore as
compensation to farmers who suffered crop loss during the monsoon season.
The compensation amount has been fixed for each district based on the
norms evolved by the central government. As per the package, Wayanad
district would get Rs 3.40 crore; Thrissur (Rs 2.36 crore); Kozhikode (Rs
2 crore); Malappuram (Rs 1.52 crore); Palakkad (Rs 1.33 crore); Alappuzha
(Rs 1 crore); Kannur (Rs 84 lakh); Idukki (Rs 67 lakh); Ernakulam (Rs 42
lakh); Kollam (Rs 33 lakh); Pathanamthitta (Rs 32 lakh); Kasargod (Rs 20
lakh); and Kottayam (Rs 15.5 lakh). The
World Organisation for Animal Health (OIE) has declared United
Bank of India has launched a customer-friendly scheme namely, ‘United
Swarna Krishi Yojana’ on December 6, 2007 for augmenting direct
agricultural lending. The objective of the scheme is to provide quick
liquidity to individuals for taking up farming activities. The bank would
implement the scheme on a pilot basis through 14 selected branches in The
National Bank for Agriculture and Rural Development (Nabard) has
sanctioned Rs 12.39 crore from its Rural Infrastructure Development Fund
XIII (RIDF – XIII) to the state government of Kerala, as the assistance
for implementing eight rural infrastructure projects in the state. One of
the projects is construction of a fishing harbour at Thalai in Kannur
district involving an RIDF loan of Rs 10.26 crore and being implemented by
the Harbor Engineering Department. The other project is designed to enable
fishing vessels to operate even during rough weather, resulting into
considerable increase in the total number of fishing days providing an
additional income for the fishermen. During the current year, Nabard has
sanctioned 243 projects of Kerala with a total outlay of Rs 138.88 crore,
including an RIDF loan of Rs 114.81 crore. Also, the cumulative sanction
of assistance to the Kerala Government by Nabard under RIDF I to XIII now
has gone up to Rs 1,933.64 crore covering 2,935 projects. According
to United States Department of Agriculture (USDA), agricultural imports
from the Insurance ICICI Prudential Life Insurance policyholders can now pay their premiums through their mobile phones, anytime and from anywhere. The company has entered into a partnership with mChek, a Visa-certified secure and simple system, to enable its policyholders to pay their premium payment through a SMS any by using their credit cards. Birla Sunlife Insuracne have infused an additional capital of Rs 123 crore into its capital base. This enhance its capital to Rs 1000 crore as of 2003 to meet with its plan on capital expenditure to support expansion of infrastructure. Banking Nabard
has constituted a working committee under the chairmanship of its
executive director Amaresh Kumar, on capacity builsing requirements of
personnel of RRBs. Punjab
National Bank is looking to raise Rs 500 crore through sale of Upper Tier
II bonds. The 15-year bonds will have a coupon of 9.35 per cent with a
step-up of 50 basis points at the end of the tenth year.
Financial SectorFinancial
Market Developments Capital
Markets Primary
Market Bangalore-based real estate company, Brigade Enterprises Ltd, plans to enter the capital markets with an IPO of 1.66-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 December 10 to December 13. The price band is Rs 351-Rs 390 per equity share. The shares are listed on both the BSE and NSE.
Transformers and Rectifiers ( On December 06, 2007, Singapore-based subsidiary, Mercator Lines (Singapore) Ltd, registered a prospectus to its IPO of 270,191,126 shares by way of an international offering to investors, including institutional and other investors in Singapore and an offering to the public in Singapore including shares reserved for the directors, management, employees and business associates with Monetary Authority of Singapore (MAS). The maximum offering price for each share will be US$0.94. The subsidiary proposes to price the offering at the close of trade on December 11, 2007. The shares will be listed on main board of Singapore Stock Exchange. J.Kumar Infraprojects Ltd, a civil engineering and infrastructure development company, has filed its draft prospectus with Sebi to enter the capital market with an IPO of 65 lakh equity shares of Rs 10 each at a price to be decided through 100 per cent book building process. The shares will be listed on both the BSE and NSE. Secondary
Market Despite losing in only one out of five trading sessions, markets did not register new highs. The BSE Sensex closed at 19966 points, gained 3.11 per cent over a week and NSE Nifty closed at 5974 points for a week-on-week gain of 3.67 per cent after registering a new intra day high of 6042.
At the beginning of the week BSE Sensex rose to 19,603 points or 1.2 per cent, led by Reliance Energy, the nation’s second-biggest utility by market value, and on speculation that US Federal Reserve will cut interest rates which boost growth. The NSE Nifty also gained 102.25, or 1.8 per cent, to close at 5,865. On Wednesday BSE Sensex gained 208.57 points or 1.07 per cent to close at 19,738.07 points while the Nifty ended on a firm note on the back of selective buying across the sectoral heavy weights gaining 81.65 points or 1.39 per cent at 5,940 points. Among the sectoral indices of BSE, BSE-Reality, BSE-Bankex and BSE-IT were the best performers over the week.
The Securities
and Exchange Board of India (Sebi) relaxed rules for corporate bond issuances by
allowing debt instruments below the investment grade to collect funds through
public and rights issuances on November 03, 2007.
The market regulator also gave debt issuers the freedom to tap the market
with one credit rating, instead of the existing requirement of mandatory rating
by two different credit rating agencies, to reduce costs.
According to Sebi, the liberalised rules, which have come into place with
immediate effect, were aimed at facilitating the development of a vibrant
primary market for corporate bonds in
Sebi’s recent amendment to the investor protection guidelines makes it easier for companies that enjoy a measure of investor confidence to raise money from the public. These companies do not have to involve Sebi in the pre-issue formalities but only need to go through the stock exchange, which would oversee compliance with Sebi’s disclosure norms. Sebi’s reliance on market forces to keep companies in line is evident from the criteria that listed companies must satisfy before they can take the less onerous route to raising money from the public. One, the market value of public shareholding in these companies should exceed Rs 10,000 crore. Two, at least twice the traded value of shares bought and sold in the last six months at the designated stock exchange should equal two per cent of the value of shares outstanding during that period. According to Sebi, the stock Markets’ steep rise and fall in October and November were not triggered by any cartel. The market regulator has informed the finance ministry that it has not detected any “untoward patterns” behind the recent stock market ‘boom’. Sebi’s clean chit would assure retail investors to invest in Markets.
The total assets of Indian mutual fund houses declined by 3.49 per cent,
or Rs 18,786.57 crore, in November compared with the October numbers as banks
pulled out money from liquid schemes, which park funds in money market
instruments. According
to industry experts’ redemptions, even if small, also had an impact on the
decline in assets under management (AUMs). The total AUM of Indian mutual funds
stood at Rs 5,37,943.12 crore for the month of November.
However, there is no change in the five top slots, with Reliance Mutual
Fund and ICICI Prudential Mutual Fund occupying the first two positions in terms
of AUM, according the Association of Mutual Funds of India (AMFI).
Markets regulator Sebi on December 05, 2007 informed market intermediaries, including mutual fund houses and registrar and transfer agents (R&TAs), who cannot escape the blame for wrong or improper Know Your Clients (KYC) compliance and put the blame on third-party companies (outsourcing agents) for wrong or improper data on clients. According to Sebi if any lack of diligence and care in the maintenance of records is proved, the AMC (asset management company) and the intermediary will be held liable for violation of the Prevention of Money Laundering Act Rules. The Government may give its nod for non-Government provident funds and gratuity funds to invest up to 10 per cent of their investible funds in the stock markets next week, which give a further boost to the benchmark stock indices such as Sensex and Nifty 50. Besides enhancing the investment limits, the Government also propose to make eligible new instruments where these funds could be invested. The draft proposals were made public in September this year. Till now, these funds were allowed to invest up to 5 per cent of their investible funds in shares of companies that had an investment grade debt rating from at least two credit rating agencies. Derivatives
NSE has revised the contract size for 106 securities in the derivative
segment with effect from December 28,2007. Of these, the market lot of 92
securities has been revised downwards and other 14 revised upwards. The revision
for 83 securities would be for all month series, while for the rest 23, only
farther month contracts – i.e. March 2008 series, would be considered for
revision. The lot size has been
revised to meet Sebi guidelines, which prescribe a minimum value of Rs 2 lakh
for a contract. The introduction of 15 new securities has boosted already high volumes in derivative segment. The bullish trend that was established last week has also led to the return of operator volume. Overall sentiment appears to be upbeat given positive cost-of-carry across most of the futures segment. Index futures were traded at a premium. The open interest to total volumes was quite high, suggesting that traders are being more daring about leaving overnight positions. Every one of the key indices rose last week but the CNX IT and the junior outperformed the market, gaining more than 6 per cent each. The spot Nifty closed at 5974 with the December contract settled at 5989, January at 5980 and February at 5976. Open interest rose across all three contracts with February hitting 16,500. There is not enough differential to try calendar arbitrages. The December contract is likely to start lower on Monday unless there is a very strong market opening. The Junior closed at 11944 in spot and the December futures was settled at 11974. The CNX IT closed at 4711 in spot and the December contract settled at 4720. The Bank Nifty closed at 9796 and was settled at 9815. In the Nifty options segment, open interest expanded considerably across both puts and calls. In terms of open interest, the put-call ratio is 1.24, which would be read as bullish or neutral in the light of recent history. Option premiums are skewed with close-to-money (CTM) calls costing considerably more than CTM puts. CTM premiums have however eased down to levels where they look under-priced in terms of near-term historic volatility. This is unusual in a volatile market where an up trend which seems to be established.
The domestic derivatives market has reached maturity in the past six
years, established by the fact that investors now increasingly opt for trades in
options (both index and individual stocks). This can be seen from the sharp rise
in the settlement value of this derivative product in the last one year. The
total settlement value of exercised contracts in the options segment (both index
and individual stocks) has swelled ten-fold from Rs 641 crore in October 2006 to
Rs 6,698.4 crore in October 2007. Even the value of premiums settled in the
options segment grew at around 300 per cent over the same period. Market experts
attribute this to increasing investor sophistication in using options as a
hedging tool. They say this clearly indicates that the futures & options
(F&O) segment is becoming increasingly popular among various categories of
investors. According to data on the NSE website, the total settlement value in
October 2007 in the F&O segment stood at Rs 17,734.56 crore, posting a
growth of 600 per cent from Rs 2,532.84 crore a year earlier. The total
settlement in the derivatives segment of the NSE in fiscal 2006-07 was Rs
66,494.46 crore, while this year to October 2007; the figure already reached Rs
55,151.27 crore. Government
Securities Market Primary
Market On December 05, 2007, RBI auctioned 91-day and 364-day T-bills for the notified amounts of Rs.2,000 crore (out of which Rs.1,500 crore under MSS) and Rs.2,000 crore (out of which Rs.1,000 crore under MSS), respectively. The cut-off yields for 91-day and 364-day T-bills were 7.52 per cent and 7.71 per cent respectively. RBI is to re-issue 7.99 per cent 2017 and 8.33 per cent 2036 for Rs.5,000 crore and 2,000 crore, respectively on December 14, 2007 through price based auctions using multiple price method.
Secondary Market Bond yields softened propelled by renewed cross border capital flows and large purchases from banks faced with low credit off-take. Zero coupon yields have moved to lower levels across the curve as compared to the yields prevailing as on November 30, 2007. Yield shift was slightly more pronounced at the short end of the curve. The 1-10 year YTM spreads decreased by 3 bps to 11 bps. The yield of the benchmark 10-year security -7.99 per cent 2017 was at 7.87 per cent as against 7.90 per cent during the previous week.
The call
money rates, during the week, touched a peak of 7.75 per cent on
December 06 and dipped to
6 per cent on December 07, on the reporting Friday, as lower demand from
banks. Despite market players betting on the
central bank cancelling bond auctions for the coming week, RBI announced the
auction of two dated securities worth Rs 7,000 crore between Dec 7 and 14, 2007.
Though this announcement dampened the sentiment on the bond market, it drew
positives from low inflation data and expectations of a rate cut by the US
Federal Reserve. Yield on the 7.99 per cent bond maturing in 2017, ended flat on
Friday from its previous close at 7.87 per cent. At the liquidity adjustment facility (LAF) auction, central bank mopped up the entire amount on reverse repurchase window. At the three-day weekend LAF auction, the central bank accepted 11 bids for reverse repurchases for Rs 6965 crore.
Bond Market On November 07, 2007, the government announced the issuance of 8.30 per cent 2023 special fertiliser bonds for Rs 3,890 crore. The first tranche of the special bonds would be issued at par to 22 fertiliser companies as compensation towards fertiliser subsidy during the current fiscal year. The rate of interest on the Government of India Floating Rate Bonds, 2009(FRB, 2009) applicable for the half-year (December 6, 2007 to June 5, 2008) shall be 7.54 per cent per annum, which has been set by RBI on December 05, 2007. During the week under review, Punjab National Bank tapped the market by issuing upper tier-II bonds and perpetual bonds by offering 9.35 per cent and 9.75 respectively with a step-up of 50 bps if call is not exercised at the end of 10-years for an amount of Rs 500 crore for upper tier-II bonds for 15 years and 300 crore for perpetual bonds. Both the issues had been rated AAA by crisil and care. Tamil Nadu Electricity Board is tapping the market to mobilise Rs 200 crore through the issuance of bonds by offering 8.45 per cent for 7 years with a put and call at the end of 5th year. The bond has been rated A(SO) and A+(SO) by crisil and icra. Union Bank of India is tapping the market by issuing lower tier-II bonds to mobilize 400 crore by offering 9.35 per cent for 124 months, which has been rated AA+ by crisil and fitch. The bank also issued perpetual bonds by offering 9.90 per cent with a step-up of 50 bps if call is not exercised at the end of 10-years for an amount of Rs 200 crore. The issue had been rated AA+ and AA by crisil and fitch. Foreign
Exchange Market The rupee closed at Rs.39.41/USD on December 07, 2007 as compared with Rs. 39.67/USD as on November 30, 2007. The Rupee moved between Rs. 39.41 and Rs.39.56, with a standard deviation of six paise during the week. The six-month forward premia closed at 1.59 per cent (annualized) on December 07, 2007 vis-à-vis 1.03per cent on November 30, 2007. At the beginning of the week rupee rose to 0.3 per cent to 39.50 against the dollar and climbed to the highest in almost in two weeks as month end demand for dollars from refineries waned and crude oil prices dropped almost 12 per cent from a record on November 21, 2007. The rupee gained for the second week on speculation, overseas funds will increase holdings of equities after the benchmark stock index climbed above 20,000 for only the seventh time in its history. Record stock purchases by global investors helped push the currency to the strongest in almost a decade last month. Money managers based abroad are chasing higher returns in the South Asian country, which is expanding at the second-fastest pace among the world’s 20 major economies. The rupee is also set for the biggest annual gain since at least 1974. The rupee strengthened 0.5 per cent this week to 39.405 against the dollar, adding to last week’s 0.2 per cent advance, according to data compiled by Bloomberg. The closing level on Friday is the highest since November 21. Commodities
Futures derivatives
According to the International Cotton Advisory Committee (ICAC) report,
world cotton production for 2007-08 is projected lower at 26.1 million tonne as
against the estimated 26.75 million tonne for 2006-07. The decline of 2.5per
cent attributed to a fall in cotton area from 34.33 million hectare to 33
million hectare this year. In its latest release, ICAC has made significant
changes from its previous release in the case of estimates of production and
consumption at the global level and in leading countries like Commodity exchanges and the Forward Markets Commission (FMC) are awaiting the establishment of the ‘Warehouse Development and Regulatory Authority’ under The Warehousing (Development and Regulation) Act, for orderly development of commodity exchanges. The authority, when notified, would make warehouses accountable for the commodities stored in them, and make warehouse receipts negotiable instruments, enabling the farmers to get bank loans. The warehouses would be asked to produce electronically generated data on goods stored. Thus, the warehouses can be networked to find out the total stock of goods, decide on prices and potential availability, Prabhakar Patil, director, Forward Markets Commission said. According to Prabhakar Patil director of Forward Markets Commission, commodity exchanges and the Forward Markets Commission (FMC) are waiting for the implementation of ‘Warehouse Development and Regulatory Authority’ under Warehousing (Development and Regulation) Act, for orderly development of commodity exchanges. The authority notified that they would make warehouses accountable for the commodities stored in them, and make warehouse receipts negotiable instruments, enabling the farmers to get bank loans easily. Even warehouses would be asked to produce electronically generated data on goods stored. Thus, the warehouses can be networked to find out the total stock of goods, decide on prices and potential availability. The Rubber Board, a trade promotion body under the federal trade ministry, had written petition to the regulator of Forward Markets Commission (FMC), seeking checks to curb volatility in the rubber futures. According to chairman of the FMC, BC Khatua told Reuters that the Rubber Board had a problem with the circuit, which was providing- plus or minus 4 per cent. As per the board official rubber, board wanted to sought the daily upper and lower price fluctuation limits halved to be at 2 per cent from 4 per cent on the National Multi-Commodity Exchange. The Multi Commodity Exchange (MCX) would soon tie-up with Jalna-based Mahyco Seeds Limited and Syngenta for the distribution of agri and insurance products, especially for the crops at the doorstep of farmers with the assurance of quality. In the same manner, it would enter into an alliance with seed, fertiliser, and insurance Companies.
World wheat stockpiles will probably rise for the first time in 4 years
in 2008-09, because of increased plantings, which may help push down prices,
said Etsuo Kitahara, executive director, International Grains Council. Global
inventories of the grain are forecast to rise from 110 million metric tonnne end
of June ‘08, according to the council. As per Etsuo Kitahara, executive director of International Grains Council, world wheat stockpiles will probably rise for the first time in 4 years in 2008-09, because of increased plantings, which may help push down prices, and he also said global inventories of the grain have increase to 110 million metric tonnes as on June 08, 2007. Kevin Norrish, director of commodity research for Barclays Capital stated that Commodity prices would keep rising, with crude oil topping at US $100 per barrel next year against last month’s record of US $99.28 per barrel. While, Copper reaching a record as supplies of raw materials dwindle and demand increases from Asian countries. It is expected that copper would rise to 6.5 per cent on an average to US $7,800 per metric tonne next year, trading above the 2006 record of US $8,800. According to the United States Department of Agriculture (USDA), the country’s cotton output is projected to touch a record of 23.9 million bales during the marketing season of 2007-08 on an improved yield prospects in central and southern region. As on November 12, 2007, production forecasted of cotton has been raised by 9.33 per cent from last year after vetting the crop condition in major cotton growing states. The cotton yield prospects look bright in most growing areas because of good weather conditions during September-October cotton productivity in major growing states is estimated to go up in the range of 5-150 kg per hectare. Haryana is expected to witness the maximum increase in productivity with an estimated yield of 533 kg per hectare, up by 157 kg per hectare from last year. The Abhijit Sen committee, which was set up in the first week of March 2007 to suggest measures that would help farmers benefit from commodity futures and get a fair price from futures trading. The report was submitted after the current parliament session. As per the committee, there are two aspects of popularising the measures that would benefit farmers are warehouse receipt financing and setting up of national spot exchanges.
Ahmedabad-based National Multi Commodity Exchange (NMCE), the online
multi-commodity exchange, is set to receive Rs 100 crore of fresh capital
infusion. In the process, promoters
stake would come down to 18 per cent, while that of individual investors would
decline around 17 per cent. This
equity dilution is taking place to accommodate Bombay Stock Exchange (BSE),
which has been allotted new shares amounting to 26 per cent stake in the
exchange.
According to International Food Policy Research Institute food prices
will rise as climate changes hurt crops and demand gains in Asian countries. On
November 04, 2007 it released a report which says rising temperatures and food
consumption in nations such as
According to NCDEX report quoting World Bank data, agriculture commodity
prices globally have risen more steeply than metals in 2007. Wheat topped the
list with an average gain of 44 per cent to US
$229 per tonne between January - November 2007 as against that of the
average price of US $159 per tonne last year. Even Soyabean oil has risen to 43
per cent to US $856 per tonne in first 11 months of 2007 as against that of US
$598 per tonne in 2006. Soybean meal rose by 41 per cent to US $296 per tonne
during January –November 2007 as against that of US $209 a year ago. Corporate SectorTata
Motors, Unitech
Ltd., Kuwait
Petroleum Corp (KPC) is considering setting up of a multi-billion dollar world
scale integrating oil refinery cum petrochemical complex in FICCI
has demanded further reduction in customs duty on manufactured goods, as the
sector is already facing a slowdown due to an appreciating rupee and increase in
imports. The rupee appreciation has made imports cheaper and has increased
competition for the domestic manufacturing sector, which is already suffering
due to slow growth in exports and high interest rates. Information
Technology
For
the first time ever, the internet user base in GTL
International, the wholly owned subsidiary of GTL, has acquired 100 per cent
stake in Strategic Communication Services (SCS), a network deployment company in
Hyderabad-based
e-marketing solutions company, Ybrant Technologies, is acquiring Israeli online
media solutions company, Oridian, for $13 million (around Rs 52 crore). Telecom Three
leading GSM operators, Bharti, Vodafone-Essar have joined hands to set up an
independent tower company. While Bharti and Vodafone-Essar will each have 42 per
cent stake in the new company to be called
*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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