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Current Economic Statistics and Review For the
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Theme
of the week:
Situation Assessment Survey: Some Aspects of Farming 3. Land Use Pattern Among Farmer Households *1.
Introduction National
Sample Survey Organization, (NSSO), at the instance of Ministry of
Agriculture conducted a special survey known as Situation Assessment
Survey in their 59th round conducted during January-December
2003. This survey reveals different aspects of farming including the
pattern of usage of land possessed by farmers. In
its report No. 496, titled ‘Some aspects of farming’, NSSO has
published data on the use of land whether owned or leased by farmer. This
note third in the series of analyzing the results of Situation Assessment
Survey of Farmer attempts to analyses the pattern of use of possessed land
by farmar households. 2.
Concepts and Definitions Farmer
is a person who operated some land and was engaged in agricultural
activities on any part of that land during the 365 days preceding the date
of the survey. Farmer
households
were defined as one, which had at least one farmer. Agricultural
activities
include cultivation of field and horticultural crops, growing of trees or
plants such as rubber, cashew, coconut, pepper, coffee, tea, etc., animal
husbandry, fishery, bee-keeping, vermiculture, sericulture, etc. Crop
seasons
are generally identified by the months of harvesting of a crop during a
normal year. Kharif season includes both autumn kharif or early kharif and
winter kharif or late kharif. Generally, harvesting months of the early
kharif and the late kharif season extend over August to October and
November to January, respectively. Hence in general, the crops, which are
harvested during August to January, were considered as crops of kharif
season. Similarly, the rabi season includes both rabi and zaid rabi or
summer rabi and the crops are harvested during February –April and
May-June, respectively. Thus, a crop harvested during February to June was
treated as crop of rabi season. However, there are departures from this
general rule in the case of some crops grown in certain region. For
example, rice in Tamil Nadu is harvested thrice and the 3 harvests are
termed as autumn, winter and summer crops. Respective harvesting period of
3 crops is September to February, January to April and May to June. Hence
autumn and winter paddy were taken as the kharif crop. Similarly, in
Karnataka autumn and winter paddy
harvested in September to December and November to March are considered as
kharif crops. Generally,
kharif rice, jowar, bajra,maize,ragi, sugarcane, kharif sesamum,
groundnut, castor seed, cotton seed tobacco and jute are termed as kharif
crops and wheat, rabi jowar, barley, gram, rabi sesamum and linseed are
termed as rabi crops. Since most of the principal crops are grown in only
one season, there is little difficulty in ascertaining the crop season of
a particular agricultural operation. Hence, crop season of such a crop
determined on the basis of its month of harvesting. Owned
Land: A
plot of land is considered to be owned by the household if the right of
permanent heritable possession with or without the right to transfer of
title, is vested in a member or members of the household. Land held in
owner-like possession under long term lease or assignment is also
considered, as land owned. Leased
Land:
Land given to others on rent or free by owner of the land without
surrendering the right of permanent heritable title is defined as land
leased out. All private land encroached upon by household is treated as
leased in land. Otherwise
Here
possession is without the consent of the owner. Orchards:
A
piece of land put to production of horticultural crops is regarded as
orchard; if it is at-least 0.10 hectare or having at least 12 trees
planted on it.
A plot is considered exclusively for an orchard or plantation, if
it is being operated in both seasons provided some trees/plants remain
standing on the land for the major part of each season, even though the
perennial orchard/plant crop usually harvested in only one season. A
plot engaged in other activities, other than crop production, like
livestock, poultry, pisciculture, etc., is treated as being operated for
as long as it continued to carry out the activity. Hence, a plot used for
livestock is considered as being operated in both seasons provided some
livestock is maintained in the major part of each season. 3.
Use of Possessed Land According to Activity About 96.2 per cent of land used for farming during kharif and 95.1 per cent of farming land in rabi were used for cultivation, including horticulture, sericulture and vermiculture. Proportion is slightly higher for leased-in land ( 98.2 per cent in kharif and 97 per cent during rabi) than owned land ( 96.1 per cent for kharif and 94 .9 per cent in rabi ) (Table 1). The
share of fishery is comparatively higher for leased land
than for own land After cultivation and allied agriculture ,
farmers used more land for orchards and plantation at 3-4 per cent of
owned land and 0.8 – 1.2 per cent of leased land.
Utilisation
of land for dairy activity seems to go up from 0.35 per cent in kharif to
0.55 per cent in rabi season, not because of comparatively intense dairy
activity had taken place during the rabi season, but is due to the
cultivated land during kharif season which is left vacant during rabi
season is reported as used for
dairy farming. 4.
Distribution of Farmers by Use of Land and Activity At
all-India level, 87.5 million farmer households or about 98.0 per cent
engaged in different agricultural activities using 93.7 million hectares
of land during kharif season and the
agricultural activities were of low order in rabi season with
77.2 million farming households i.e., 86.4 per cent of farmer
households engaged in agricultural and allied activities using 65.8
million hectares (Appendix
1). While
there was moderate is decline in the share of agricultural and allied
activities between kharif and rabi seasons in north, north-eastern,
eastern and central regions ; the fall was substantial in western and
southern regions. In western region,
5. Distribution of Farmer Households Classified by Land Used for cultivation Appendix
2 presents the number of farmer households who prefers cultivation and
use of land possessed by them for cultivation. It can be seen from the
appendix that the number of
farmer households prefer of cultivation during rabi season has been lower
as compared to that in kharif season though the percentage of the land
used by the farmer for cultivation is almost the same in both seasons. The
declining preference for cultivation by farmers during rabi season may be
due to the fact that many crops which are cultivated during kharif season
are not cultivated in rabi season About
80.4 million farmer households out of 89.4 million farmer households (90
per cent) used 93.7 million hectares or 96.2 per cent of their possessed
land for cultivation during kharif and about 64.1 million farmer
households ( 71.8 per cent) devoted 62.5 million hectares or 95.1 per cent
of their land for cultivation during rabi season at all-India level. Among southern states, Kerala with about 25 per cent of the land used during both kharif and rabi seasons, is the lowest user of land for cultivation among all states in India, though 44/45 per cent of farmers prefer cultivation during both seasons. In all the southern states, though there is a fall in number of farmers preferring cultivation in rabi season, the land utilization is almost the same in both seasons. In
6.
Distribution of Farmer Households According to Usage of Land for Orchard
and
At
all-India level about 8.4 per cent farmer household in kharif season and
7.4 per cent farmer household in rabi season devoted 3.1- 4.0 per cent of
their land for orchards and plantations. There are some kind orchards and
plantation in all states. However, there are some striking features in
their activities in states like Kerala, Nagaland and Megalaya ( Appendix
3).
In Kerala,
about 85 per cent and 80 per cent farmer households operated about 72-74
per cent of their possessed land by engaging in orchards and plantation
activities during kharif and rabi seasons. Forty seven per cent of
households in Meghalaya engaged 40.5 per cent of their land in kharif and
56 per cent rabi season for orchard and plantation. In Nagaland, 55 per
cent of farmer households engaged in orchard and plantation activities in
comparatively less area of land (about 24 per cent). 7. Pattern of Usage of Land for Dairy Farming By Farmer Households
Dairy
farming, as an allied activity, is followed by 33.5 million farmer
households in kharif season
and 36.8 million farmer households in rabi season by utilising about 0.35
per cent of their possessed land in kharif and 0.55 per cent in rabi
season.
Comparatively
more farmer households in Haryana, Punjab, Uttar Pradesh, Utranchal and 8. Pattern of Usage of Land for Goat and Sheep Farming By Farmer Households
About 6 to 7
per cent of farmer households were engaged in goat and sheep farming in
about 0.05 per cent of their operated land in both seasons at all-
However, in
Tamil Nadu, 9. Number of Farmer Households and Percent Use of Possessed Land for Piggery, Poultry, Beekeeping, Fishery and Farming of Other Animals
Piggery is
mainly found among the farmer households in north-eastern region. They
devoted about 2,662 hectares of their land for this activity. In all other
regions piggery is virtually absent. Thus, a small
per cent of land is utilised for piggery by about 0.5 million
farmer households in both seasons at all-India level (Appendix
6).
Similarly,
in the case of poultry and duckery (Appendix
7) and bee keeping (Appendix
8), the same trend is witnessed in both seasons.
At
all-India level, about 1.1 million households in both seasons utilised 0.2
per cent to 0.3 per cent of their possessed land for fisheries. Many
farmer households in
Land
devoted to farming of other animals was very small at 0.1 per cent in both
seasons but farmers engaged in these activities accounted for
5.2 – 5.6 million in kharif and rabi seasons (Appendix
10). 10. Usage of Land for Farming by Social Groups
Percentage
break-up of farmed area over 5 broad groups, cultivation and allied
activities, orchard and plantation, dairy, fishery and other farming is
shown in Table 2 for 4 social groups : Scheduled Tribes (STs), Scheduled
Caste (SC), Other Backward Caste (OBC) and Others.
There were
some differences among social groups in percentage of farmed area devoted
to different agricultural activities; but majority of area ( 95 to 97 per
cent) has been under cultivation in respect of all social groups.
The share of
cultivation during rabi season at
97 per cent for scheduled castes is higher compare to 95 per cent for
other social groups (Table 2)
The share of
fishery has been the lowest for scheduled tribes and highest for scheduled
castes.
The share of
dairy farming during rabi season has been more than that of kharif season
for all social groups and it is the highest for scheduled tribes.
The share of
other farming which includes farming of goats, sheep,
pigs, poultry and other animal farming except dairy, fishery,
sericulture and vermiculture is much higher for scheduled tribes than for
the other social groups.
The
share of orchard and plantation has been the lowest for scheduled castes.
The share of orchard in rabi seson is more than that in kharif season for
all social groups at about 4 per cent except
for scheduled caste ( 1.8 per cent). 11. Pattern of Usage of Land for Farming Classified by Sources of Income If
farmer households are grouped by their major sources of income, namely,
cultivaton, farming other than cultivation, other agricultural activities
and all other sources of income, then
the difference in land use pattern of farmed land among these groups
become quite prominent. Thus, the percentage of farmed area devoted to
cultivation during both seasons was about 97 per cent for the group with
major source of income from ‘cultivation’, but only 82 per cent and 65
per cent for those with major source of income from farming other than
cultivation in kharif and rabi season respectively (Table 3).
Share of
land use for orchards, dairy and fishery were highest for farmers who
derived their income from farming other than cultivation and other
agricultural activity compared with farmers who derive their income from
cultivation and from all other sources.
* This
note has been prepared by R. Krishnaswamy
Highlights of Current Economic Scene AGRICULTURE According
to latest Crop Weather Watch Report published by Ministry of Agriculture
as on January 04, 2008, rabi sowings have seen a drop in coverage of major
crops due to dry weather and virtually
no rains in the whole of central and north-west India. Farmers,
during the current rabi season so far, have sown 265.71 lakh hectares as
against that of 274.65 lakh hectares during the corresponding period last
season and 279.84 lakh hectares for the whole of 2006-07. The
wheat plantation, so far during this year, has covered 270
lakh hectares as against
that of 280 lakh hectares during the same period last year.
As per the projection by India Metrological Department (IMD), there would
be rainfall in the second week of January in According
to the notification dated on December 27, 2007 issued by Directorate
General Of Foreign Trade (DGFT), the central government has hiked the
minimum export price of rice (MEP) to US $ 500 per tonne (Rs 20,000), an
increase of US $ 75 over the
earlier MEP. As per All India Rice Exporters Association, prices of rice
have jumped by 10-15 per cent since the MEP was imposed, forcing the
government to hike it further. It is expected that this move would affect
the exports, leading to loss of markets to countries such as
As
per the notification by central government dated on December 26, 2007,
India has lifted up 36 per cent import duty on wheat flour paving the way
for free import of the commodity. This has been made effective since
December 26, 2007. It is expected that such a move would be detrimental to
domestic flour milling industry in the long run because it would be
dependent on imports. This move was perhaps driven by the government’s
failure to import wheat in sufficient quantum.
According
to Chennai Port Trust, Pos Harmony, a bulk carrier with 51,209 tonnes of
Canadian red wheat has arrived in Chennai, which would be released for
distribution in the first week of January 2008. Another bulk carrier with
a similar quantity is expected to arrive with in the second week of
January. Food Corporation Of According
to Food Corporation of India (FCI), Indian government agencies have
procured 15.74 million tonnes of paddy by January 1, 2008 as compared with
that of 16.46 million tonnes during the same period last year. The
procurement in terms of rice equivalent has stood at 13.13 million tonnes
as compared with that of 13.39 million tonnes a year ago, while the rice
stock, as on December 1, 2007, has reached at 10.05 million tonnes. The
notification issued by the finance ministry has indicated that import duty
would be scrapped on more than 4,800 items from the 4 neighbouring least
developed countries (LDC), viz., The
central government has cut the minimum export price (MEP) of onion by US $
50 per tonne to US $ 200 per tonne, with an effect from January 1, 2008;
so as to make exports more competitive in the global market and to contain
the declining trend in the domestic market specially in Nashik mandis,
where arrivals are heavy and prices have drastically been sloping down.
Railway authorities have decided to provide additional rakes for
transportation of onion from the state of
In
Uttar Pradesh, 2 private sugar mills have currently owed more than Rs 900
crore as payment arrears towards cane growers against the State Advised
Price (SAP) for the (October-September) 2006-07. Mills had bought Rs
9,091.94 crore worth of cane, whereas they have so far disbursed Rs
8,190.34 crore, translating into arrears of Rs 901.6 crore. On the other
hand, there are those that have paid up 95 per cent or more Mawana Sugars
(Rs 24.44 crore), DCM Shriram Consolidated (Rs 15.04 crore), DSC Shriram
Industries’ Daurala unit (Rs 7.32 crore) and Dalmia Cements Group (Rs
5.48 crore). The remaining companies/groups have made the full SAP-based
cane payment. According
to As
per Oil World forecast, India is set to increase vegetable oil import
especially palm oil, as its domestic oilseed production cannot cope with
rising demand. It is expected that India is likely to import nearly 5.62
million tonnes of edible oil and fats in (October-September) 2007-08,
which has been 0.11 million tonnes higher from 5.51 million tonnes during
(October-September) 2006-07. India is likely to turn to palm oil import in
2007-08 with the country’s imports forecast expected to rise to 4.04
million tonnes from 3.66 million tonnes in 2006-07. On the contrary, the
soy-oil imports are likely to fall to 1.35 million tonnes from 1.46
million tonnes and that of sunflower oil to 40,000 tonnes from 220,000
tonnes. Coir
exports have increased sharply during April-November 2007, despite rupee
appreciation by 12.5 per cent against the dollar. Exports of coir products
have increased by 20.47 per cent to 1,18,158 tonnes. However, in rupee
terms, it went up by a meager 2.5 per cent as compared with the same
period last year. In value terms, the total exports have stood at Rs
387.11 crore. Coir and its products are exported to more than 97 countries
the world over. The National
Egg Coordination Committee (NECC) on behalf of the poultry industry have
asked the central government to ban all maize exports by private traders
and exporters, because they have grabbed large quantity of exports and
hoarded the stocks to speculate in the forward market. This has even led
to unreasonable increase in prices affecting 3.2 million people engaged in
the poultry farming in the country. From an average price of Rs 500-550
per quintal in 2005-06 maize prices are now ruling at Rs 800-900. Even
though the volume of maize exports is insignificant it still affects
market sentiments. Hence, NECC has urged the government to channelise the
maize exports through state agencies such as state trading corporation. The
state-owned Kerala Shipping and Inland Navigation Corporation (KSINC) has
set to launch its first full sea going fisheries research vessel at
Thoppumpady.
The vessel would be constructed for the Central Institute of
Fisheries Technology. This would be one of the biggest vessel ever being
built by KSINC at a cost of Rs 2.50 crore and equipped with modern
communication equipment such as satellite compass, auto pilot, magnetic
compass, fish hold and blast freezer to store minus 55 degree centigrade.
The main fish hold has 2 tonne capacity. The
National Bank for Agriculture and Rural Development (Nabard) has
sanctioned Rs 537.24 crore to Andhra Pradesh under the Rural
Infrastructure Development Fund. Of which 1,159 projects would be
undertaken in the areas of minor irrigation, roads and school
infrastructure. In addition, to it Rs 148.67 crore from the current
assistance would go to horticulture projects covering 22 districts. With
this, the total sanctions under RIDF-III in 2007-08 would stand at Rs
962.34 crore and the total Nabard assistance to the State in the whole
year would touch Rs 8,568 crore. Industry The
growth of 13.3 per cent in manufacturing sector pushed up the index of
industrial production by 11.8 per cent during October 2007 as against 4.5
per cent in October 2006. Mining sector and electricity sector grew by 3.7
per cent and 4.2 per cent during the month. Out of the 17 industries,
sixteen industries has registered positive growth. The only industry
group, which have registered a negative growth Metal products and Parts.
As per use-based classification, the sect oral growth rates in October
2007 over October 2006 are 6.2 per cent in basic goods industries, 20.5
per cent in capital goods and 14.2 per cent in intermediate goods.
Consumer goods rose by 12.5 per cent due to substantial increase in the
production of consumer durables and consumer non-durables. Consumer
durables which was languishing since May 2007 has reported a smart
turnaround in October 2007 with a growth of 9.3 per cent as against a
marginal rise of 0.2 per cent in October 2006. Infrastructure The
index of six core infrastructure industries having a combined weight of
26.7 per cent in the index of industrial production registered a slower
growth of 4.5 per cent as compared to 9.9 per cent in October 2007. The
dismal performance of crude petroleum which decline by 0.1 per cent as
against a growth of 9.3 per cent last year, and comparatively lower growth
performance of refinery products, electricity, cement, stee lall
contributed for the lower rate of growth. However, coal production for the
third month in succession registered a faster growth with its production
rate registering a growth of 9.2 per cent in October 2007 as against a low
growth of 1.9 per cent in October 2006.l Inflation The
annual rate of inflation calculated on a point to point basis, stood at
3.50 per cent for the week ended December 22, 2007 as compared to 3.45 per
cent for the previous week or 5.78 per cent as on December 23, 2006.
Primary Articles group declined marginally to 222.4 from 222.7 for the
previous week. Food articles group decline due to lower price of
gram,moong urad, barley, ragi
and rice.Index of Fuel, power, light and lubricants rised by 0.5 per cent
due to high prices of furnace oil, bitumen and naptha.The index of
manufactured products rose by 0.1 per cent due to higher prices of bread
and bun, bran, butter and cotton seed, maida, rice bran oil, coconut oil
and atta. The
final WPI for all commodities had been revised upward from 215.1 to 215.4
for the week ended October 27, 2007. As a result the rate of inflation
calculated on a point to pint basis stood at 3.11 per cent as compared to
2.97 per cent provisional. Public FinanceRevenue
receipts of the Centre till November 2007 at 274,633 crore was 56.5 per
cent of the budget estimates of Rs. 486,422 crores. While plant
expenditure was 54.9 per cent, non-plant expenditure was 62.8 per cent of
the budget estimates. The buoyant collection of direct taxes viz.,
individual taxes and corporate tax which pushed up the revenue receipts
during the year kept the fiscal deficit at 63.8 per cent of the budget
estimates. Banking Like
insurance agents, recovery agents too, will have to undergo compulsory
training to be eligible for the job. This has been indicated by RBI in its
draft guidelines on regulating recovery agents. The central bank has come
with draft guidelines, following the criticism against bank recovery
methods adopted by them. The banking regulator has said that a certificate
course will be soon be developed by IBA, along with Indian Institute of
Banking and Finance (IIBF) for direct sales, marketing and recovery
agents. Once the course is introduced, banks will have to ensure that over
a period of one year, all their recovery agents undergo training and
obtain a certificate from IIBF. RBI has also advised banks to use Lok
Adalats for recovery of personal loans, credit card loans or housing loans
with less than Rs 10 lakh. The central bank has asked banks to inform
borrowers about details such as telephone numbers and names of recovery
agents. The
RBI has finally cleared the long-pending transfer of Thailand-based
Surachan Chawla’s 38 per cent stake in Catholic Syrian Bank. However,
the central bank has made it clear that Chawla can hold 10 per cent of the
bank’s equity, at the most, and will have to compulsorily sell the
remaining 28 per cent to comply with the norms on single-entity
shareholding in a bank. The RBI’s views on the transfer of Chawla’s
shares have been forwarded by it to the Supreme Court, which had recently
asked the central bank to take a fresh look at the bank’s shareholding.
The apex court will now have to give its verdict on the transfer of the
shares. Chawla had appealed to the Supreme Court after neither the Foreign
Investment Promotion Board (FIPB) not the RBI approved the transfer of
shares he bought from CSB’s director in 1994. The
RBI has cancelled the licence of Kolhapur-based Ravi Co-operative Bank,
prohibiting it from carrying out any banking activities after it failed to
present a viable plan of action for its revival. The
RBI has canceled the certificate of registration of two Kolkata-based
companies, New Theatres and Graphic Finance as these companies have opted
to exit from the non-banking financial institution business. United
Bank of State
Bank of Financial
Sector Capital
Markets Primary
Market Future
Capital holdings Ltd is all set to hit the primary market with an initial
public offering to raise Rs 490 crore which has been fixed the price band
for its IPO at Rs 700-765 per share. The IPO is expected to open in mid
–January this year, offers 64.23 lakh equity shares of 10 each. Reliance
Power Ltd is scheduled to open its IPO on January 15 and close on
January18, which offers 26 crore shares to raise between Rs 10,500 crore
and Rs 11,500 crore is the largest issue to hit the Indian Primary Market.
The company, a subsidiary of Reliance Energy has fixed the price band for
its IPO at Rs 405-450 per share. They have offered 5 to 10 per cent
discount to retail investors. Shares
of BGR Energy Systems Ltd, a company manufacturing equipment for power,
oil and petrochemical companies, almost doubled on the first day of its
trading. It debuted at a premium of 75 per cent against the issue price of
Rs 480 on the NSE. During the day, the scrip touched a high of Rs 922.70
and closed at Rs 901.45. The company witnessed a total turnover of Rs
73,959 lakh, as per the NSE data. On the BSE, it debuted at a premium of
66.8 per cent and closed the day at Rs 901.30. As
per Assocham, real estate companies mopped up the most amount through
initial public offers (IPOs) on stock exchanges during 2007. Assocham
President Venugopal Dhoot said that despite high interest rates, the real
estate sector remained buoyant during 2007 primarily because of the strong
underlying demand, aggressive marketing, entry of new players and upsurge
in retail and multiplexes. This is reflected by the highest share occupied
by the sector in the IPO market during the year. Property developers
mobilised as much as 42.7 per cent of the total funds through IPOs. Of the
Rs 34,119 crore raised in the primary market from January 1, 2007, till
mid-December, Rs 14,591 crore was raised by realty firms. DLF mobiled Rs
9,187 crore, Housing Development and Infrastructure Rs 1,707 crore, and
Puravankara Projects Rs 858.7 crore. It
said nine real estate companies raised money through public issues, which
also included IVR Prime Urban Developers (Rs 778 crore), Omaxe (Rs 650
crore), Brigade Enterprises (Rs 671 crore) and Akruti Nirman (Rs 361 crore).
Power and telecom sectors mopped up Rs 4,519.18 crore and Rs
2,964.06 crore respectively during the year, it said.
Secondary
Market According
to draft regulations on insider trading issued by Sebi on the first day of
2008, short-term profits from any share transactions made by an insider
will have to be surrendered to the company. Insiders associated with
accompany whose buy and sell transactions in that company’s shares
happen within a time span of six months will have to surrender any profits
made to the company itself. After
a long gap, the Reserve Bank of India (RBI) on Tuesday allowed registered
foreign institutional investors (FIIs) and their sub-accounts to
short-sell, lend and borrow equity shares in Indian companies. This
finally paves the way for short-selling in the Indian equity market, which
was banned in 2001. According
to bankers, even if the market regulator had given its nod for
short-selling in December 2007, the RBI permission was needed since FIIs
need to lend and borrow equity shares to participate in short-selling.
This is because participation by FIIs in lending and borrowing of
shares for short-selling requires clearance from the Foreign Exchange
Management Act (Fema). This move is expected to improve liquidity and
depth in the Indian capital markets. Sebi
had already given its nod for short-selling in December 2007, which it had
banned in 2001. Short-selling,
which is an essential feature of all developed markets, is the sale of
securities that an investor does not own. Investors undertake
short-selling when they feel that the prices of shares are overvalued.
They execute short-sales on expectation that prices of shares that
they have sold will come down. Since Sebi had allowed delivery-based
short-selling, the transaction will be completed with physical delivery of
sales. This in turn needs lending and borrowing of shares.
RBI has allowed the FII participation in short-selling as well as
borrowing and lending of equity shares in sectors compliant with the
current foreign direct investment policy. Short-selling is restricted to
equity shares that are in the ban list or caution list of RBI.
Over
the week under review, BSE- Sensex spurted 1,000 points and ended positive
in four of the five trading sessions. The Sensex surged 5.45 per cent to
20,206.95 points, Nifty jumped 5.43 per cent to 6,079.70.
Among
the sectoral indices of BSE except for BSE IT and BSE Teck all the other
indices gained over the week. Among the gainers, BSE- PSU was the highest,
which the rally led by companies in the oil, power, banking, fertiliser
and shipping space. BSE- FMCG, BSE-oil and gas were the other top gainers
on account of rising crude prices. The
Sebi barred mutual fund houses from charging entry load from investors,
who buy schemes directly from funds and not through a distributor, agent
or broker with effect from January 4. At present, the industry average for
entry load is 2.25 per cent of the initial investment. Asset management
companies (AMCs) selling schemes either through internet, mutual fund
offices or their collection centres, can benefit from the new rules.
“Keeping in mind the interests of investors and to facilitate the
growth in mutual fund industry, with effect from January 4, 2008,
investors making applications for investments in mutual fund schemes
directly without routing them through any distributor, agent or broker,
that is, through the internet, submitted to AMC, collection centre or
investor service centre would not be subject to entry load,” as per the
Sebi circular. The regulator said the waiver will also apply to additional
purchases done directly by the investor under the same folio and switch in
to a scheme from other schemes if such a transaction is done directly by
the investor. In
2007, which saw several hiccups – unwinding of yen-carry trades in
February, sub-prime turmoil in August and participatory note curbs in
October – the BSE Metal Index was the best performer among all indices
with a gain of 121.47 per cent, followed by the Capital Goods Index, which
posted 117 per cent this calendar. BSE
Oil & Gas, which rose 115 per cent this year, also had a robust
performance, thanks to the rising prices of Reliance Industries this year.
Reliance Industries, a heavyweight on the index, gained by 125 per cent
(or Rs 1,600 per share) from Rs 1,281 to Rs 2,881 this year.
The PSU Index has clocked a growth of 73.5 per cent with NTPC and
MMTC leading the herd. Consumer Durables Index surged 94 per cent. Banking
Index returned 61 per cent this year with private banks such as ICICI and
HDFC Bank remaining in the limelight.
Some of the worst performers in 2007 were healthcare, FMCG and the
IT sector. FMCG has grown only 20 per cent this year followed by
healthcare which gave 16 per cent returns. The BSE IT Index was the worst
as it showed negative returns of 14.09 per cent this year. Auto and
Technology indices posted only a marginal increase, growing by 2 per cent
and 9 per cent respectively. The
Sebi chairman , M Damodaran, said that public sector companies will have
to comply with Clause 49 of the listing agreement for stock exchanges.
Clause 49, which came into effect on January 1, 2006, stipulates
that listed companies fill 50 per cent of their boards with independent
directors if they have an executive chairman and one-third if they have a
non-executive chairman. However,
few government-owned companies have met the Clause 49 stipulation.
Damodaran’s comment came after RS Sharma, chairman and managing director
of the country’s largest public sector company, Oil and Natural Gas
Corporation (ONGC), said Clause 49 should be relaxed for public sector
companies because the appointments are made by the government and take
time.
Derivatives Index
futures traded at a premium over the week. While the Nifty generated
enormous volumes and open interest (OI) in all three contracts, other
indices had liquidity only in the near-term.
The CNXIT was the only loser and its closing price of 4592 was at a
marginal discount to the settlement price of 4591. The BankNifty was up 4
per cent and closed at 10233 with the January contract settled at 10292,
incidentally it moved above five figures for the first time. The Nifty
Junior was up 5.7 per cent and closed at 13069 and it was settled at
13164. The Nifty itself closed
at 6274 with the January contract settled at 6264, February at 6261 and
March at 6250. The differentials between the three contracts are
negligible. The
new Mini-Nifty contract saw a little less volatility than the normal
Nifty. Incidentally, since the NSE's own data suggests that retail
interest generates over 60 per cent of overall volumes, the rationale for
creating this smaller lot is a bit weak. But its very existence gives us a
tool for tracking possible differences between retail and big-player
attitudes. The "Mini" generated a fair amount of volume and OI.
In contrast to the Nifty itself, it also saw a lot of profit-booking in
the latter stages of Friday. Hence, institutional (including operator) and
retail perspective on the short-term market direction may be divergent at
the current moment. In
the Nifty options market, OI has expanded across all segments and the
put-call ratio in terms of OI is in the 1.4 range. In terms of premiums,
out-of-money puts and calls are priced pretty much the same but
in-the-money calls are more expensive than in-the-money puts.
The
Securities and Exchange Board of India (Sebi) allowed the introduction of
mini-contracts on Sensex and Nifty last week, which will help individual
investors to hedge risks of a smaller portfolio at lower levels of risk in
terms of smaller level of possible downside compared with a big size
contract. For instance, at the
current level of Nifty, the value of one contract (where the lot size is
50) is above Rs 3 lakh. On a mini-Nifty, it will be Rs 1.22 lakh as the
minimum lot size on the new contract is set at 20 by NSE.
Similarly, an investor on the Sensex contract currently pays about
Rs 40,000-45,000 as margin per contract (market lot is 25). For mini-Sensex,
it will be about Rs 8,000-9,000 (market lot is 5).
“Mini contracts will attract big volumes only if there is a
significant arbitrage opportunity between the mini and the normal
contracts,” said Alex Mathews of Geojit Financial Services.
“Small investors, however, can find mini-contracts attractive as
trading on the mini-Nifty will suit them,” he said.
According to Mathews, there exists an anomaly in the mini-Nifty
contract. “While investors can buy mini-contracts, there are no
mini-contracts available on the 50 individual stocks that are components
of the index. This will restrict investors from playing the arbitrage game
between mini-Nifty and the constituents in the mini-Nifty index. We expect
mini-contracts on the index constituents to be introduced in future to set
right this anomaly.” Another
dealer in a local brokerage house said BSE would continue to struggle to
attract volumes in mini-Sensex derivatives, as most traders opted for NSE
due to the big trading volumes on its F&O segment. “BSE needs to
attract big traders to its F&O segment. Once the exchange starts to
generate big volumes, more and more people will begin to look at Sensex
and mini-Sensex derivatives,” he said.
Globally, mini-contracts are able to attract investors in a big way
due to their higher liquidity and the ability to get in and out of a trade
quickly with low impact cost. Chicago
Mercantile Exchange, one of the leading derivatives exchanges in the
world, provides wide range of E-mini futures contracts on broad-based and
liquid indices such as the Nasdaq 100, S&P 500, S&P Midcap 400 and
Russell 2000. For example, the
E-mini S&P 500 futures contracts, which is one of the broad-based and
most liquid contracts, is one fifth the size of the standard S&P 500
futures contract. Trading
in the mini-indices of Sensex and Nifty got off to a decent start on
Tuesday with both the products attracting trading interest from investors.
But the big surprise on the first day of trading was the
performance of mini Sensex of the BSE. The mini-Sensex clocked more
trading turnover (in terms of value) than NSE’s mini-Nifty on Tuesday,
taking marketmen by surprise. The
total trading turnover on mini-Nifty stood at Rs 65.66 crore whereas the `Chhota’
Sensex was able to attract a volume for Rs 116.18 crore.
In terms of number of contracts transacted, however, NSE’s
mini-Nifty saw a bigger volume of 1,06,800 contracts compared to Chhota
Sensex’s 56,825. “We were determined to ensure that Chhota Sensex
became more popular with our clients in the first day itself. Traders may
also have spotted big arbitrage opportunity between the Sensex derivatives
and mini-Sensex, given that the F&O (futures & options) in BSE is
less liquid compared to the NSE’s derivatives segment,” said a BSE
member. Since
its entry into F&O segment, the three NSE indices were not able to
attract big volumes. For instance, the derivatives volume in CNX100 is
just Rs 6 lakh on Tuesday. On Nifty Junior, the trading volume stood at Rs
8.58 crore and on Nifty Midcap50, the trading volume was Rs 2.46 crore. Government
Securities Market Primary
Market RBI
was set rate of interest for floating rate bonds maturing in 2017 at 7.92
per cent per annum on January 1,2008. The rate of interest is applicable
from January 2,2008 to July 1, 2008. On
January 02, 2008, RBI auctioned 91-day and 364-day T-bills for the
notified amounts of Rs.500 crore and Rs.1,000 crore respectively. The
cut-off yields for 91-day and 364-day T-bills were 7.02 per cent and 7.39
per cent respectively. Six
State Governments announced the auction of 10-year paper maturing in 2017
through an yield based auction using multiple price auction method on
January 3, 2008. The auction will be conducted on January 7, 2008 for an
aggregate amount of Rs. 5833.30 crore. The
Government of Secondary
Market Bond
yields continued fell for the second consecutive week, propelled by inward
capital flows. According to Top bankers, the softening of yields was also
largely on account of low credit off-take, as more banks preferred
investments. At the weekend liquidity adjustment facility auction, there
were 33 bids for the reverse repurchases of the RBI for Rs 32,275 crore.
The short-term rates declined over the week; the call rates edged lower
from 7.06 per cent to 5.71 per cent and CBLO rates fell from 7 per cent to
4.45 per cent. The 1-10 year YTM spreads increased by 21 bps to 33 bps.
The yield of the benchmark 10 year security - 7.99 per cent 2017 was at
7.7466 % as against 7.8199% during the previous week.
RBI
has permitted undertaking of the cover leg of shortsale transactions even
outside the NDS-OM platform, i.e., on the telephone market or through
purchases in primary issuance. The sale leg of short sale transactions
shall, however, continue to be undertaken on the NDS-OM platform only. RBI
has decided to allow undertaking of the cover leg of the 'WI' transactions
even outside the NDS-OM platform, i.e., through telephone market. Bond
Market Sebi
has proposed fast tracking of debt issuance for listed companies as well
as mandatory listing of private placement of debt in its new draft
regulations for simplifying the primary issuance process for corporate
bonds. The aim is to create corporate debt market to be more vibrant,
dynamic and transparent in the country. IDFC
Ltd tapped the market by issuance of bonds by offering 8.88 per cent for 3
years and 8.95 per cent for 5 years, for an amount of Rs 550 crore. The
bond has been rated AAA by icra and fitch. According
to Mr. S.V Narasimhan IOC’s Director Finance, IOC may have to sell oil
bonds worth Rs 2000 crore this month due to soaring crude prices, which
may compel the Indian Oil Corporation to sell its bonds to offset revenue
losses incurred due to retailing fuel below the cost price.
Foreign
Exchange Market The
rupee closed at Rs.39.32/USD on January 04, 2008 as compared with
Rs.39.44/USD as on December 28, 2007. The Rupee moved between Rs.39.32 and
Rs.39.45, with a standard deviation of 5 paise during the week.
The rupee firmed due to of inward remittances by institutional
investors particularly East Asian FIIs, diversifying exposures into According
to the RBI's 'Sources of Accretion to Foreign Exchange Reserves in April-
September 2007 have been foreign investment, external commercial
borrowings (ECBs) and short-term credit. Taking into account the valuation
gain of US$13.7 billion, foreign exchange reserves recorded an increase of
US$48.6 billion during April-September 2007 (US$13.7 billion during
April-September 2006). Commodities
Futures derivatives On
January 03,2008, nearly half of the top traded Indian commodity futures
touched new highs due to global cues and significant reduction in trading
margins. On the NCDEX 17 out
of 30 top traded commodities by volume were at contract highs, while on
MCX, 13 out of 30 top traded futures hit contract highs. National
Multi-Commodity Exchange (NMCE) has announced the launch of new series for
future contract in base metals, menthol crystal and raw jute. The March
2008 contract in the six non-ferrous metals – aluminium ingot, nickel
prime, copper, zinc, lead and tin – introduced for trading on Tuesday,
expires on March 31. Similarly, the April contract in menthol crystal was
also introduced the same day but expires on April 30. However, the May
2008 contract in raw jute expires on May 30, NMCE said in a release here.
The non-ferrous metals are at present simultaneously traded in different
monthly contracts on NMCE terminals, up to three months in advance, each
expiring on the last trading day of respective calendar month. Menthol
crystal contracts run up to four months and that in raw jute up to five
months. Even
as the bill amending the Forward Contracts (Regulation) Act is delayed,
the Forward Markets Commission (FMC), the commodity market regulator, has
suggested changes in guidelines for setting up exchanges. The move is
likely to delay the MMTC-India bulls consortium’s proposed commodity
exchange. The existing
guidelines are rudimentary in nature and do not address important issues
like launching commodities on the platform within the stipulated timeframe
or them remaining illiquid once the permission is granted to the exchange.
The suggestions revolve around trading practices, investments,
clearing and deliveries. Insurance Bajaj
Allianz Life Insurance Company has infused Rs 175 crore to meet solvency
requirements and infrastructure expenses. The infusion will see the
company’s capital base growing to Rs 875 crore. The company has garnered
a new business premium of over Rs 3,000 crore and issued over 21 lakh
policies between April and November 2007. Corporate
Sector Grasim
Industries Ltd, the flagship company of the Aditya Birla Group, is
foraying into fast-moving consumer goods (FMCG) segment. The company will
operate in three categories – skincare, homecare and babycare. The
company has been working on the project for the past two years. German
manufacturer Audi is the latest entrant into the bandwagon that is led by
DaimlerChrysler and BMW. Audi The
country’s top two steel producers, Steel Authority of India (SAIL) and
Tata Steel signed an agreement for setting up a 50:50 joint venture (JV)
for coal mining within Telecom Nokia
Siemens Network has bagged a multi-million Euro contract from Bharti
Airtel for deployment of a single interactive voice response platform
across all 23 circles. The solution will enable Bharti to deliver services
such as voice, SMS, televoting, call management, caller ring back tone and
voice portal. The
government may soon demand return of the excess spectrum operators of GSM-technology
mobile service hold beyond the eligible limit. The move follows a
government decision last week to allot additional spectrum, the radio
frequencies that enable wireless communications based on the TRAI
subscriber-linked criteria. Information
Technology As
a part of its global expansion plans,
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