Highlights of  Current Economic Scene

AGRICULTURE  

As per the latest report by Food and Agriculture Organisation (FAO), India ’s paddy output is likely to rise marginally by 1.39 per cent to 145.5 million tonnes in 2008 as compared to 143.5 million tonnes last year. The total cereal output would increase to 257.9 million tonnes this year as against 255 million tonnes last year. While the data collected by Ministry of Agriculture reiterates that the area under paddy has increased by 5.45 per cent so far this season to 92.35 lakh hectares as against 86.9 lakh hectares during the same period a year ago.  Area under coarse cereals and pulses would go up by 9.01 per cent to 87.35 lakh hectares and 30.85 lakh hectares, respectively.

Private traders and big corporate houses like ITC and Cargill have procured only 11.7 lakh tonnes of wheat by June 2008 as compared to 20 lakh tonnes last year. Of total procurement by private traders, ITC and Cargill have mopped up 5.4 lakh tonnes and 1.2 lakh tonnes of wheat, respectively, as against the corresponding quantities of 8.2 lakh tonnes and 3.8 lakh tonnes purchased last year. The state agencies, so far, have procured nearly 225 lakh tonnes of wheat from farmers.

Shortfall in rains in Maharashtra since the end of June 2008 has reduced sowing areas of the current Kharif season to half of the total area as compared with previous year. As per the data available with the State Agriculture Ministry, sowings in the state up to June 18, 2008 has taken place only on 32.9 per cent of the total cultivable area as compared with 57.4 per cent during the corresponding period last year. Of the total area under cultivation, coverage under cereals has taken place in 20.8 per cent of areas as against 42.7 per cent last year. In case of pulses, sowings took place in 22.3 per cent of the total area under cultivation as against 52.7 per cent a year ago. It is projected that sowings of oil seeds are higher this year as against other crops. Oilseed are planted on 55.5 per cent of the total area under cultivation, lower than last year’s coverage of 83.8 per cent. Acreage under cotton is considerably low at 39.2 per cent of the cultivable area as against 66.7 per cent, previous year. Unlike other crops, which are sown in June –July, sowing for cotton in Maharashtra starts in the month of May.

Cotton prices have shot up in both domestic as well as international market due to short supply. Owing to which farmers in Andhra Pradesh have received Rs 3 7, 000 per quintal in the month of July 2008 as compared with Rs 2,400- Rs 2,500 per quintal last month. Cotton sowings completed so far account for almost 70 per cent of 900, 000 hectares, the total area covered under cotton during the corresponding period of last year. Around 55 per cent of the cotton crop has already germinated. It is expected that coverage under cotton would touch 1.1 million hectare. If rains would get delayed in cotton growing areas, then farmers are expected to go for resowing. Around 25 per cent of the summer crop cultivated in Nellore and Prakasam districts is estimated to reach the market by few weeks.

Poor rains during the current kharif season would spoil cotton production in central India ; over 70 per cent of the regions comprising of Gujarat, Maharashtra and Madhya Pradesh is expected to plunge their production. The central regions have contributed over 60 per cent of the total output in 2007-08, followed by 19 per cent from south and north zones, respectively. According to the latest statistics available from the ministry of agriculture, the coverage under cotton, as on July 18, 2008, has dropped by 17.88 per cent at 5.81 million hectares as compared with 6.99 million hectares during the same period last year. As per the industrial specialist, overall acreage under cotton last year was 9.55 million hectares with an average yield of 560.44 kg per hectare. Gujarat produced 112 lakh bales of cotton with yield at 756.76 kg per hectares up by 35 per cent from the country’s average. It is expected that even this year, Gujarat would have 5-10 per cent increase in productivity, which would offset the overall reduction in cotton production.  International Cotton Advisory Council has estimated that India would produce 33.2 million bales in 2008-09.

Raw jute prices are expected to gain in 2008-09 (July – June), as the acreages under raw jute crop is substantially lower than that of last year and crop getting destroyed to some extent due to occurrence of floods at the early stage of plantation. As per the market sources, production of raw jute in 2008-09 is pegged at 75 lakh bales (each bale is of 180 kg). Total availability of raw jute in the country for the 2008-09-jute year would be around 100 lakh bales, including a carry forward stock of 20 lakh bales and likely import of 5 lakh bales from Bangladesh . Total consumption of raw jute this year is estimated to be around 108 lakh bales as against 106 lakh bales last year. This expected increase in consumption has been attributed mainly to an increase in the demand for jute goods both hessian and sacking.  The central government has increased the minimum support price  (MSP) of raw jute by Rs 195 per quintal over that of last year.

Acreage under sugarcane in Maharashtra has got affected adversely due to monsoon failure, which is expected to be worst drought since 1972 and also because of diversion taking place to more remunerative crops such as soybean and maize. Unavailability of rains for cane areas would tend to lose weight and drying of sucrose content of cane, leading to lower sugar recoveries, resulting to lower sugar output in 2009-10 season. As per the notification by Maharashtra State Cooperative Sugar Factories Federation (MSCSF), that prolonged dry spell in some of the regions of the state has induced farmers to convert their standing cane for fodder. Some reports have reiterated that demand for fodder in Ahmednagar, Solapur, Pune and Nasik districts are currently fetching a rate of Rs 125-130 per quintal, more than Rs 100-odd that farmers got for the fully mature cane supplied to factories this season. In 2008-09, the production is expected to dip to 560 lakh tonnes and cane crushed by factories is estimated to be 500 lakh tonnes. Taking an average recovery of 11.4 per cent as against 11.94 per cent in 2007-08, sugar output would fall from 90.96 lakh tonnes to 57 lakh tonnes. With sugar prices hitting rock bottom and mills paying less to growers, cane acreage is likely to dip further to 6.5 lakh hectares, which translates into 450 lakh tonnes of cane at 70 tonnes per hectare. Thus, not more than 400 lakh tonnes would be available for crushing, which, at 11.5 per cent recovery, would give 46 lakh tonnes of sugar.

As per Maharashtra State Co-operative Sugar Factories Federation Ltd., sugar production in 2008-09 (October-September) is estimated to fall by 20 per cent to 217 lakh tonnes as against 273 lakh tonnes last year. It may slip further by 14 per cent to 187 lakh tonnes in 2009-10. Consequent to the fall in output, sugar prices are expected to rise to Rs 1,600 per quintal from Rs 1,485. In Maharashtra, sugar output is estimated to drop by 38 per cent to 57 lakh tonnes as against 92 lakh tonnes last year, in Uttar Pradesh by 14 per cent to 65 lakh tonnes (76 lt), in Karnataka to 25 lakh tonnes (28 lt), in Tamil Nadu to 20 lakh tonnes (25 lt) and in Andhra Pradesh to 10 lakh tonnes (13 lt). India ’s raw sugar is in great demand in the international market and fetches a premium of US $25 per tonne, as they are dextrin-free. India exported about 40 lakh tonnes of sugar this season in which Maharashtra accounted for 22 lakh tonnes. Of the total exports, raw sugar totalled to 63 per cent, while white sugar to 37 per cent.

All India Coffee Board Exporter Association has portrayed that coffee production in India , is expected to plunge by 5 per cent from 293,000 metric tonnes as forecasted earlier by coffee board, due to prolonged dry spell in growing regions. It is predicted that low harvest in India , which exports 80 per cent of its output, may support robusta coffee prices that have fallen by 5 per cent in the month of July 2008. According to London based International Coffee Organisation, global coffee production would rise by about 9 per cent next season led by Brazil .

Andhra Pradesh is falling short of the average rainfall needed for normal kharif sowings. The situation in districts like Khammam, Guntur , Anantapur, Chittoor and Srikakulam is better off, while Kurnool , Ranga Reddy, Kadapa, Medak, Nalgonda and Mahboobnagar districts have recorded scanty rains, threatening the kharif schedule. Kharif sowings up to July 16, 2008 have been completed on 23.43 lakh hectares as against 36.55 lakh hectares covered on the same day last year. The state government has asked all the district collectors to recruit enumerators for the agricultural insurance scheme and work on the modalities. Farmers are expected to get crop insurance taking the village as a unit. This would be computed based on the main crops cultivated in each district.

Andhra Pradesh Jute Development Centre would be setting up Rs 100-crore Jute Park at Sabbavaram in Visakhapatnam district. This park would consist of four major jute industries and several small and medium enterprises, which would be making value-added products of jute.

Major salt producing states of Gujarat and Rajasthan have seen a decline in production due to unfavorable weather conditions.  This has even hit supplies to other states, resulting rise in prices of common salt to Rs 10 per kg in Kanpur . The price of pulverized salt has risen by 25 per cent to around Rs 8-10 per kg depending upon the brand, while uncrushed salt has gone up by Re 1 to Rs 4 per kg. Gujarat and Rajasthan contribute around 85 per cent of the total salt produced in the country.

Industry

Index of Industrial Production (IIP) with base 1993-94 for the month of May 2008 registered a growth of 3.8% higher as compared to the level in the month of May 2007. The cumulative growth for the period April-May 2008-09 stands at 5.0% over the corresponding period of the pervious year.

The Mining, Manufacturing and Electricity sectors for the month of May 2008 registered growth rates of 5.2%, 3.9% and 2.0%, respectively, as compared to May 2007. The cumulative growth during April-May, 2008-09 over the corresponding period of 2007-08 in the three sectors have been 5.6%, 5.3% and 1.7% respectively, which moved the overall growth in the General Index to 5.0%.

In terms of industries, as many as eleven (11) out of the seventeen (17) industry groups (as per 2-digit NIC-1987) have shown positive growth during the month of May 2008 as compared to the corresponding month of the previous year. The industry group ‘Beverages, Tobacco and Related Products’ have shown the highest growth of 31.1%, followed by 12.3% in ‘Transport Equipment and Parts’ and 9.5% in ‘Basic Chemicals & Chemical Products (except products of Petroleum & Coal)’. On the other hand, the industry group ‘Wood and Wood Products; Furniture and Fixtures’ have shown a negative growth of 30.7% followed by 10.4% in ‘Rubber, Plastic, Petroleum and Coal Products’ and 9.0% in ‘Jute and Other Vegetables Fibre Textile (except Cotton)’.

As per Use-based classification, the Sectoral growth rates in May 2008 over May 2007 are 3.0% in Basic goods, 2.5% in Capital goods and 1.2% in Intermediate goods. The Consumer durables and Consumer non-durables have recorded growth of 4.4% and 8.1% respectively, with the overall growth in Consumer goods being 7.2%.

Infrastructure

The Index of Six core-infrastructure industries having a combined weight of 26.7 per cent in the Index of Industrial Production (IIP) (base 1993-94) registered a growth of 3.5% (provisional) in May 2008 compared to a rise of 7.8 % in May 2007.  During April-May 2008-09, the growth of 3.5% (provisional) was almost half to that of 6.9% during the corresponding period of the previous year.

Crude Oil production (weight of 4.17% in the IIP) registered a growth of 3.2% (provisional) in May 2008 compared to a negative growth rate of 1.6% in May 2007. The Crude Oil production registered a growth of 2.1% (provisional) during April-May 2008-09 as against a decline of 0.1% during the same period of 2007-08.

Growth in Petroleum refinery production  (weight of 2.00% in the IIP) at 0.1% (provisional) in May 2008 is miniscule compared to growth of 14.9% in May 2007. The Petroleum refinery production registered a growth of 2.1% (provisional) during April-May 2008-09 compared to 15.0% during the same period of 2007-08.

Impressive growth of 8.3 per cent in coal (weight of 3.2% in the IIP) in May 2008 compared to growth rate 0.5% in May 2007 has been the only silver lining in an otherwise bleak performance.. Coal production grew by 9.3% (provisional) during April-May 2008-09 compared to an increase of 0.5% during the same period of 2007-08. 

Electricity generation (weight of 10.17% in the IIP) registered a growth of 2.0% (provisional) in May 2008 compared to a growth rate 9.3% in May 2007. Electricity generation grew by 1.7% (provisional) during April-March 2008-09 compared to 9.0% during the same period of 2007-08.

Cement production (weight of 1.99% in the IIP) registered a growth of 3.8% (provisional) in May 2008 compared to 9.9% in May 2007. Cement Production grew by 5.4% (provisional) during April-March 2008-09 compared to an increase of 7.8% during the same period of 2007-08.

Finished (carbon) Steel production (weight of 5.13% in the IIP) registered a growth of 5.2% (provisional) in May 2008 compared to 8.4% (estimated) in May 2007. Finished (carbon) Steel production grew by 4.5% (provisional) during April-May 2008-09 compared to an increase of 5.6% during the same period of 2007-08.

Inflation

Wholesale Price Index for 'All Commodities' (Base: 1993-94 = 100) for the week ended 19th July 2008 rose by 0.1 percent to 239.3 (Provisional) from 239.0 for the previous week.

The annual rate of inflation, stood at 11.98 percent for the week ended 19/07/2008 (over 21/07/2007) as compared to 11.89 percent for the previous week. The annual rate of inflation stood at 4.65 percent as on 21/07/2007 i.e. a year ago.  

The index for Primary articles major group rose by 0.1 percent to 247.7 from 247.5 for the previous week. The index for 'Food Articles' group rose by 0.1 percent to 235.9 from 235.7 for the previous week due to higher prices of moong (4%), urad (3%), arhar (2%) and condiments & spices and gram (1% each). However, the prices of fish-marine and tea (1% each) declined. Prices of  ‘Non-Food Articles' group declined marginally to 245.2 from 245.3 for the previous week due to lower prices of gingelly seed and rape & mustard seed (1% each). However, the prices of linseed (2%) and raw rubber (1%) moved up. 

The annual rate of inflation, calculated on point-to-point basis, for ‘Primary Articles’ stood at 10.24 percent (Provisional) for the week ended 19/07/2008. It was 10.69 percent as on 21/07/2007 i.e. a year ago. Annual rate of inflation for ‘Food Articles’ stood at 5.78 percent for the week ended 19/07/2008. It was 9.53 percent as on 21/07/2007 i.e. a year ago.  

The index for this major group remained unchanged at its previous week's level of 376.3  

The index for this major group rose by 0.2 percent to 205.9 from 205.5 for the previous week. The index for 'Food Products' group rose by 0.6 percent to 212.6 from 211.4 for the previous week due to higher prices of oilcakes (2%) and sugar and khandsari (1% each). However, the prices of rice bran oil (2%) and gingelly oil and groundnut oil (1% each) declined. 

The index for 'Textiles' group rose by 0.9 percent to 140.9 from 139.6 for the previous week due to higher prices of cotton yarn-cones (3%) and cotton yarn-'hanks (2%). However, the prices of hessian & sacking bags and hessian cloth (2% each) and synthetic yarn (1%) declined. 

The index for 'Paper & Paper Products' group rose by 0.2 percent to 199.8 from 199.5 for the previous week due to higher prices of map litho paper (2%) and other boards (all kinds) (1%). 

The index for 'Non-Metallic Mineral Products' group rose marginally to 215.4 from 215.3 for the previous week due to marginal increase in the prices of cement. 

The index for 'Basic Metals, Alloys & Metal Products' group rose marginally to 299.0 from 298.9 for the previous week due to higher prices of other iron steel (4%) and lead ingots (2%). However, the prices of zinc (4%) and zinc ingots (3%) declined. 

The index for 'Machinery & Machine Tools' group rose by 0.1 percent to 175.2 from 175.0 for the previous week due to higher prices of power driven pumps (4%) and other electrical equipment & systems and boilers, its parts & accessories (1% each). 

For the week ended 24/05/2008, the final wholesale price index for 'All Commodities’ (Base: 1993-94=100) stood at 231.2 as compared to 229.8 (Provisional) and annual rate of inflation based on final index, calculated on point to point basis, stood at 8.90 percent as compared to 8.24 percent (Provisional) reported earlier vide press note dated 06/06/2008.

Banking

The RBI has asked banks to keep their mobile payment services on hold till it issues final guidelines for such transactions. Banks can, however, continue to provide basic services such as mobile alerts for credit or debit entry, balance enquiry or other services that are in the nature of providing information. The RBI has asked banks to dissociate themselves from any mobile-based money transfer service that has not received the regulator’s “explicit approval” or is not covered by its guidelines.

The National Housing Bank (NHB) is drawing a roadmap including prudential norms to buy home loans from banks and housing finance companies (HFCs) and securitise the portfolio at a later date. The scheme is aimed at providing liquidity by releasing capital locked up in the home loan portfolio. The roadmap is expected to be ready in 2-3 months and is aiming to start operation by March next year.

LIC Housing Finance, the mortgage arm of Life Insurance Corporation of India (LIC), is set to foray into the venture capital arena and intends to start Rs 500 crore real estate fund by the end of this financial year. The company has reported a 124 per cent increase in its net profit to Rs 105 crore for the quarter ended June this year, compared to Rs 47 crore in the corresponding quarter last year.

Financial Market

Capital Markets

Primary Market

Nu Tek India Ltd, a telecom infrastructure services provider, is entered the capital market with an initial public offering (IPO) of 45 lakh equity shares of Rs 10 each. The offer is open for subscription from July 29 and will close on August 1 with the price band of Rs 170 to 192. The company plans to raise between Rs 85 crore and Rs 90 crore. The issue will comprise a fresh issue of 35-lakh equity shares and an offer for sale of 10-lakh equity shares.

As per the financial statements of the companies that recently tapped the capital market, it has been observed that bulk of the amounts have not been utilised and have been parked in fixed deposits with banks or in debt schemes. A total of 32 companies mopped up Rs 40,148 crore for their expansion plans, but could utilise only Rs 23,603 crore so far (Table 1). According to available information, realty, telecom and logistic companies have used the money for the pre-determined purposes, while power, port and securities and finance companies have used only a portion of the IPO resources and parked the remaining amount with banks and debt funds.

Secondary Market

The key benchmark indices extended gains for the third straight week for the week ended July 25, 2008, buoyed the UPA government winning confidence vote in parliament, sharp correction in crude oil and short covering of derivative positions. The fall in the last two sessions has taken away most gains posted in the early part of the week. Still the BSE Sensex gained 640 points or 4.69 per cent to 14,275 on week on week basis. The BSE Mid-Cap index rose 333.20 points or 6.35 per cent to 5,572.59. The BSE Small-Cap index advanced 322.89 points or 5.01 per cent to 6778.78. The NSE Nifty edged up 220 points or 5.36 per cent to 4,312 over the week. The Defty rose 6.7 per cent as the rupee strengthened a lot.

All the sectoral indices of BSE recorded remarkable earnings over the week. Among them Bankex and PSU were the highest gainers with more than 9 per cent.

Finance Minister P Chidambaram on July 23, 2008 said that the government would try to speed up key financial sector reforms, including insurance legislation, and would reach out to other parties to ensure smooth passage in Parliament for key legislation. It is expected that financial sector reforms—covering pension, insurance, banking and the bond market—will spur investment and could add as much as 1.5 per cent to India ’s economic growth. The passage of the insurance Bill would enable companies in the sector to increase foreign investment to 49 per cent from the present 26 per cent. Other pending Bills seek to remove the 10 per cent cap on the voting rights of foreign investors in non-state banks and open up the pension business to foreign direct investment.

According to Crisil report, many asset management companies (AMCs) are sitting on huge piles of cash or cash equivalents, with some equity-oriented funds holding as much as 40 per cent of their assets in cash, due to downturn in the stock market which has lost over 30 per cent from its January peak.  The country's largest fund house, Reliance Mutual Fund, is holding an average of over 33 per cent cash in three of its funds - Reliance Equity (39.25), Reliance Natural Resources (32.30) and Reliance Diversified Power (30.13).

Derrivatives

The derivative segment has been gone through with massive volatility and consistently high-volume, given the confidence vote followed by the blasts in Bangalore . The sentiment has weakened noticeably despite the overall gains. Daily volatility has spiked above the danger mark and the VIX has risen to above 40. About 25 per cent of Nifty futures are already in mid and far month contracts and above 38 per cent of option open interest is also parked in contracts beyond July. About 38 per cent of their outstanding positions are in index options. The put-call ratios (PCR) are bullish as the overall PCR (in terms of OI) is at 1.37 and falling while the July PCR is 1.31. Most index futures are running at slight premium to the spot index. There is higher than normal liquidity in the Bank Nifty and the CNXIT, where there is already evidence of carryover.

Government Securities Market

Primary Market

On July 23, 2008, RBI auctioned 91-day and 182-day T-bills for the notified amounts of Rs.3,000 crore (out of which Rs.2,500 crore under MSS) and Rs.1,500 crore (out of which Rs.1,000 crore under MSS), respectively. The cut-off yields for 91-day and 182-day T-bills were 7.71 per cent and 9.06 per cent, respectively.      

RBI re-issued 8.24 per cent 2018 for Rs.6,000 crore on July 24, 2008, at the cut-off yields of 9.08 per cent.  

Secondary Market

Inter bank call rates ruled between 8.96-9.39 per cent during the week. Bond yields softened over the week, despite high inflation as global oil prices eased. As per traders, improved inward flows from foreign institutional investors (FIIs) due to relaxed external commercial borrowing (ECB) norms supported the bonds. Since the beginning of the special market operations (SMO), the Reserve Bank of India continuously supported the refineries with foreign exchange against purchase of oil bonds or special government securities which supportyed the bonds.

Liquidity remained tight during the week, which has been evident from the weekend liquidity adjustment facility (LAF) auctions, where the recourse to the repurchase window has been Rs 43,260 crore. The tight liquidity has also reflected at the weekly Treasury bill auctions. The cut-off yield on the 91-day T-bill has been 9.06 per cent or 56 basis points above the repo rate of 8.5 per cent. The expectations of a further hike in the repo rate and cash reserve ratio (CRR) during the review of the monetary policy on July 29, kept the 10-year yield to maturity at 9.16 per cent on a weighted average basis. On July 21, 2008, bond yields ended at 9.06 per cent  their lowest in more than two weeks, aided by the recent fall in global oil prices from record peaks, but concerns over political uncertainty curbed the move The yield on the benchmark 8.24  per cent note due April 2018 fell 10 basis points to 9.02 per cent on July 23. The spread between the 91-day T-bill and the 10-year weighted YTM towards the weekend has been just 10 basis points. Average daily trade volume, improved to Rs 5,000 crore during the week, largely on account of RBI’s oil bond purchases as part of the SMO and LIC switches for purchase of the 8.28 per cent 2032 security at an YTM of 9.66 per cent.

Bond Market

BHW Home Finance Ltd tapped the market by issuing bonds to mobilise Rs 50 crore by offering 10.85 per cent for 5 years. The bond has been rated AA+ by Icra.

The finance ministry has proposed a mechanism to improve the tradability of domestic convertible bonds, under which the equity option can be traded separately. According to market players, this will enable a portion of the debenture to be traded separately, even at a discount, and address the needs of different classes of investors. The ministry has asked SEBI to implement the measure, which has been announced by finance minister P Chidambaram in Budget 2008-09 as part of efforts to expand the domestic market for corporate bonds. The move is expected to be implemented by September 2008. In another market-friendly move, the ministry is planning to ease the norms governing the pricing formula for American Depository Receipts (ADRs) and Global Depository Receipts (GDRs).

Foreign Exchange Market

The rupee appreciated to Rs 42.23 or 2.25 per cent since July 11. On July 23, strong foreign exchange inflows pushed the rupee-dollar exchange rate to close at a two-month high of  Rs 42.08 per dollar after opening at Rs 42.45, as crude oil dropped for a second day. The rupee rallied on speculation that winning the trurt vote by UPA will introduce changes including giving overseas companies a bigger role in the local financial industry. The spot rupee gained around 1.6 per cent over previous days close of Rs 42.74. Yet, forward premia remained firm. One, three, 6, 9 and 12-month forward premia were 7.10 per cent, 5.97 per cent, 4.69 per cent and 3.67 per cent, respectively.

Commodity Derivatives Market

A Parliament Standing Committee panel on agriculture has recommended in Lok Sabha that futures trade in agricultural commodities should be discouraged as speculative trade leads to artificial rise in prices. In its 41^st report, the panel said that though futures offers a good hedging mechanism, it has not benefitted small farmers in India so far. The committee has also called for expediting the setting up of a stronger forward markets regulator for commodities, which would have powers on the lines of SEBI. As per the report, 82 per cent of the farming community in India is constituted of small and marginal farmers who are resource-poor and not aware of the pros and cons of the speculative price discovery in forward market trading, hence unable to take its advantage.

On July 21, 2008, maize prices crossed Rs 1,000 a quintal mark both in spot and futures market spurred by the expectation of a hike in support prices and shortfall in output though the government has banned exports to increase domestic supplies and bring down prices. According to market sources, maize active July 2008 contract prices have jumped up by 18 per cent to trade around Rs 971 per quintal in the last one-month on strong domestic demand.

On July 22, 2008, the National Multi-Commodity Exchange (NMCE) has taken a decision to set a 30-day deadline for the BSE to comply with the stake acquisition norms and make payments as per the mutually agreed guidelines. However, the commodity exchange's board has agreed to allow a short period of extension to BSE, if it shows adequate interest to pay the acquisition amount to NMCE. While according to Jagdish Capoor, the new chairman of BSE, the deal may be honoured within a couple of weeks, after the clarification of legal issues.

Multi Commodity Exchange (MCX) launched coriander seed (coriander) futures on July 28. The whole machine-cleaned variety of Badami coriander will be delivered at ex-Kota mandi with base price quoted in rupees per quintal inclusive of all taxes and expenses but excluding value-added tax. Dhania futures kick-started on the exchange on a positive note at Rs 9,671 per quintal taking cues from strong spot market and futures prices were ruled firm on the first day of trading.

The sharp surge in gold futures on MCX, since April 1 has symbolised the investors alternative avenues to park their funds on commodity markets due to consistant decline in the stock markets. The MCX near-month gold contract price has risen from Rs 11,521 per 10 grams on April 1 this year to around Rs 13,203 per 10 grams in just over three months. Gold prices have vulnerable to reach $1,000 a troy ounce in global markets, which are pushing up local prices. The volume of gold traded on the exchange surged to around 583.7 tonnes in the last 15 days of the April-June quarter from around 425.4 tonnes in the first 15 days of the quarter. In value terms, the metal rose to around Rs 728 billion from around Rs 503 billion. A spike in returns from gold exchange-traded funds (ETFs) also gives an indication of the preference for gold as a majority of the gold ETFs listed on the stock exchange posted a return of close to 20 per cent in the last two months.

The politically influential sugar cooperatives of Maharashtra , have started taking position in leading commodity futures exchanges alarmed by the likely fall in sugar production in the 2008-09 and 2009-10 crop marketing seasons. Of the more than 150 sugar co-operatives in Maharashtra , six have already begun futures trading for six months at the MCX and National Commodity and Derivatives Exchange (NCDEX).

According to data released by FMC, the total turnover of all 3 national commodity exchanges and 19 regional exchanges in the country during July 1-15, doubled to Rs 2,36,846 crore from Rs 1,17,028 crore against the previous year. Of this, 87.90 per cent has been contributed by MCX. The turnover went up to Rs 13,53,173 crore against Rs 10,14,845 crore during the corresponding period in 2007-08. 

Insurance

The Insurance Regulatory Development Authority (IRDA) is planning to issue a notice to Life Insurance Corporation of India to stop the latter from allowing policyholders to nominate “strangers” (those who are not close relatives) and religious institutions as beneficiaries of life policy claims. Recently, the corporation had decided to allow its policyholders to nominate strangers and religious institutions as beneficiaries for their insurance policies. Recently, LIC has changed its nominee norms after a large number of policyholders requested permission to nominate people who are not immediate family members or religious institutions as beneficiaries. Industry experts and IRDA officials, however, believe that the corporation’s move could be the ‘beginning of a disaster’.

Corporate Sector

Mumbai-based Nissan Copper Ltd is planning to set up a Greenfield plant of 12,000 metric tonnes per annum, near its existing manufacturing facility at Silvasa.

Videocon Retail, a part of the Venugopal Dhoot-promoted Videcon Industries, plans to invest Rs 800 crore to expand its electronic retail format, Next Retail and Plannet M, the mobile, music, entertainment and lifestyle chain in the next three years.

The country’s largest car-maker Maruti Suzuki’s net profit has dipped by 6.8 per cent to Rs 466 crore for the first quarter ended June 2008 as against Rs 499 crore in the corresponding period last year, mostly on account of rising raw material costs, a change in accounting norms and a loss from derivative instruments.

Reliance Industries Ltd (RIL) has reported a 13 per cent rise in its net profit to Rs 4,110 crore for the first quarter ended June 2008 as against Rs 3,360 crore in the corresponding period last year, as RIL was able to sell its products at higher prices and also owing to doubling of export sales.

The government has imposed a steep anti-dumping duty on imported picture tubes for colour TVs from China , Malaysia , Thailand and Korea after it found that these countries were “dumping” the product into India . The duty will range between Rs 4,369 on a cathode ray colour picture (CPT) depending on size of screen. The companies affected by the notification include Samsung ( Malaysia ), LG ( Korea ), Irico Group Electronics ( China ) Shenzen Samsung ( China ). The decision was based on primary findings of the designated authority in the commerce ministry. The findings showed that the goods were being exported to India below their normal value, causing “material injury to the domestic industry”. 

External Sector

Exports during May 2008 had been US $ 13782 million as against US $ 12210 million in May 2007 registering a growth of 12.9 per cent. As against this Imports was valued at US $ 24548 million as against US$ 19313 million recording a growth of 27.1 per cent.

In rupee terms, while export increased by 16.6 per cent , import flared up by 31.3 per cent.As a result trade deficit was estimated at US $ 10766 in May 2008 million higher than the deficit at US $ 7103 million during May 2007Oil imports were estimated during May 2008 at US$ 8465 million  and non-oil imports at US $ 16083 million was 50.8 per cent and 17.4 per cent higher than that in last year

Telecom

The Department of Telecommunications (DoT) has raised questions about the merger between Idea Cellular and Spice Telecom violating key clauses on intra-circle merger and mobile licence conditions.

The government may suspend the DTH licence of Bharti Group’s broadcasting company, Bharti Telemedia, for non-compliance with the foreign direct investment (FDI) norms and breaking the cross media ownership regulations.

*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.