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Current Economic Statistics and Review For the
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Theme
of the week:
Economic Census – 2 Growth of Enterprises *
1. Introduction Central
Statistical Organisation (CSO) has been conducting Economic Census covering
all agricultural and non-agricultural establishments (excepting those
engaged in crop production and plantation) since 1977. The latest one, the
5th in this series of censuses was conducted during 2005-06 by CSO in
collaboration with State/Uts Directorate of Economics and Statistics.
However, the first census conducted in 1977 covered only non-agricultural
establishments with hired workers. All the subsequent censuses were more
enlarged covering both own account enterprises and establishments with hired
workers in agricultural and non-agricultural sectors. 2. Limitations NIC-1987
was used in the Third and Fourth Economic Censuses, whereas NIC-2004 was
used in Fifth Economic Census. Census 1980 does not cover 3.
All Enterprises An
institutional unit in its capacity as a producer of goods and services is
known as an enterprise. An enterprise is an economic transactor with
autonomy in respect of financial and investment decision-making, as well as
authority and responsibility for allocating resources for production of
goods and services. It may be engaged in one or more economic activities at
one or more locations. An enterprise may be a sole legal unit.
Fifth economic
census conducted by central statistical organization (CSO) in 2005 reveals
that there are 41.83 million enterprises in the country engaged in different
economic activities
other
than crop production and plantation. Out of which 25.54 million enterprises
forming about 61.1 per cent of the total enterprises were in rural areas and
38.9 per cent in urban areas. It can be seen from the Table 1 that the
number of enterprises grew from 18.41 million in 1980 to 41.83 million in
2005 i.e., between second economic census to fifth economic census. During
the period while in rural areas about 14 million enterprises has been added,
in urban areas about 9 million enterprises has been added. It can also be
seen from Table 1 that between 1998 and 2005 (4th EC to 5th EC) the addition
of enterprises in rural areas was faster at about 8 million enterprises. The
compounded annual growth rate between 1980 and 2005 worked about 3.4 per
cent with that in rural and urban areas showing same growth rate. Between
1990 and 1998 there was a decline in the growth rate of enterprises mainly
due to decline in growth in some large states viz., Andhra Pradesh, Haryana
and Madhya Pradesh coinciding with the economic recession experienced by the
country between 1996 and 1998. Thereafter in the next seven years when the
economy was buoyant mood (between 1998 and 2005) the growth was picked up
from 2.45 per cent to 4.69 per cent due to high growth rate reflecting
especially the higher growth rate in many northeastern states. The economic
census was not conducted in Assam during 1980 and Jammu and Kashmir in 1990
and to have a comparable data along the four census if one remove the data
pertaining to Assam and Jammu and Kashmir from all censuses and work out the
compounded annual growth rate, there is not much difference is visible
during the period 1980 and 2005 at about 3.3 per cent and it holds true for
both rural and urban areas. 4.
Agricultural Agricultural
Table
2 depicts the number of enterprises as per second to fifth economic
censuses.
It
can be seen that in rural areas the addition was much faster during the
entire censuses period i.e. 1980 to 2005. The compounded annual growth rate
during the 25 years at 6.1 per cent per cent with number of rural
agricultural enterprises more than quadrupling has been much faster than
that in urban areas and in 2005 agricultural enterprises in rural areas
formed about 94 per cent at 5.71 million enterprises. In urban area the
number of agricultural enterprises gone up from 0.17 million in 1980 to 0.37
million in 2005, but its share in total agricultural enterprises came down
by half during the period. The
initial plans did not take off the ground until the first coordinated
approach made by the Central Statistical Organization (CSO), GOI by
launching a plan scheme for ‘Economic Census and Surveys’ in 1976. The
scheme envisaged organizing countrywide census of all economic activities
(excluding those engaged in crop production and plantation) followed by
detailed sample surveys of unorganized segments of different sectors of
non-agricultural economy in a phased manner during the intervening period of
two successive censuses. The scheme envisaged conducting of economic
censuses periodically in order to update the frame from time to time to
capture rapid changes that occur in the unorganized sectors due to high
mobility and morbidity of small units and also on account of births of new
units. 5.
Non-Agricultural Enterprises Enterprises
engaged in economic activities other than those carried out by agricultural
enterprises are termed as non-agricultural enterprises.
About
19 million non-agricultural enterprises have been added during the 25-year
period ending 2005. Out of which about 9 million non-agricultural
enterprises were added between 1998 and 2005. At this level number of
addition both in rural and urban areas were more or less same. However,
while with a CAGR of 2.8 per cent between 1980 and 2005 in rural areas were
slower than that in urban areas, the case was opposite between 1998 and 2005
when in rural areas the non-agricultural enterprises rose faster with an
annual average growth of 4.6 per cent as compared to 3.7 per cent in urban
areas, indicative of the fact that non-agricultural enterprises in rural
areas are fast catching up with urban areas in actual number even though the
share of rural non-agricultural enterprises were 55.5 per cent in over all
non-agricultural enterprises ( Table 3). The faster increase of the
non-agricultural enterprises between 1998 and 2005 may be due to the fact
that increased tax concession facilities and better infrastructure
facilities extended by government to open manufacturing enterprises in rural
areas. 6.
Own Account Enterprises (OAE) An
enterprise without any hired worker on a fairly regular basis is termed as
an own account enterprise. Members
of the household normally run it.
Addition
of about 13 million own account enterprises i.e. from 13.25 to 26.10 million
during the 25 year period was the combined result of opening about 4 million
agriculture enterprise and 9 non-agriculture enterprises by the households
who want to conduct there business with their own family members. About 70
per cent of the addition has been in rural areas with an addition of 4
million agricultural enterprises and 5 million non-agricultural enterprises.
Urban area with 3.8 million additions during the period formed about 30 per
cent of the total addition. In rural areas growth was faster at 4.2 per cent
between 1998 and 2005 with agriculture enterprise growing by 7.7 per cent
during 1998-2005. As against this the growth of own account enterprises in
urban areas is the lowest at
1.83 per cent between any censuses (Table 4). The
trend was more or less same even with removal of 7.
Establishments The
establishment is defined as an enterprise or part of an enterprise that is
situated in a single location in which one or predominantly one kind of
economic activity is carried out. It is an economic unit under a single
legal entity. According
to economic census 1980 the number of establishments with hired workers was
about 5 million which grew 3-fold in the next 25 years to reach 15 million
establishments by 2005. The compounded annual average growth rate between
1980 and 1990 registered a growth of 3.9 per cent and thereafter growth rate
declined to 2.6 per cent by 1998 when fourth census were undertaken. Since
them consistent with over all economic growth in the next seven years,
number of establishments also accelerated by adding about 6 million
establishment during the period with the growth rate of 7.5 per cent between
1998 and 2005. The average annual growth rate during the twenty-five year
period works out to 4.5 per cent. Same trend was also seen both in rural and
urban areas (Table 5). Number
of agricultural establishment rose from 0.23 million in 1980 to 0.95 million
in 2005 with a CAGR of 5.8 per cent. The growth rate was the fastest at 14.4
per cent between 1998 and 2005. The
growth rate of establishment in rural areas during the 25-year period at
6.23 per cent was much faster than that in urban areas (Table 5). Between
1998 and 2005, the growth rate of agricultural establishment at 15.7 per
cent was the fastest among all type of establishments for the period.
Establishment
engaged in economic activities other than those carried out by agricultural
establishment are termed as non-agricultural establishment whose number rose
from 4.8 million establishments in 1980 to 13.9 million by 2005, an addition
of 9.1 million establishment during the 25-year period. a.
Directory Establishment (DE) An
establishment with hired worker, employing six or more persons daily on a
fairly regular basis is termed as directory establishment. The addition of
directory establishment between 1998 and 2005 at 0.2 million establishment
was very minimal. b.
Non-Directory Establishment (NDE) An
establishment with hired worker, employing less than 6 persons daily on a
fairly regular basis is termed as Non Directory Establishment whose number
augmented by 5.6 million during 1998 and 2005. Out of the total
non-directory establishment agricultural enterprises formed about 10 per
cent and non-agricultural enterprises formed other 90 per cent. with both
rural and urban area sharing the growth almost equally ( Table 6).
*
This note has been prepared by R.Krishnaswamy Highlights of Current Economic Scene AGRICULTURE As
per data released by Maharashtra Agriculture Ministry, acreage under
foodgrains, this year, has been 30,385 lakh hectares as against 52,580 lakh
hectares. Similarly area under pulses has been reduced to 16,667 lakh
hectares, which is just 62 per cent of the average area of the sowing.
Production of foodgrains in the state is expected to decline considerably by
60 per cent, as there were no rains for almost two months. Even in those
areas where sowings have taken placeto a large extent, kharif food
production would tumble resulting into loss of Rs 1,000 crore to around 11
million farmers in the state. The
central government would release 500,000 tonnes of sugar for the remaining
period of July- September 2008, in addition to the 4.8 million tonnes
released for the whole quarter, as sugar prices have moved up by 25 per
cent, since July to Rs 1800 per quintal. If sugar prices continue to rise,
government would release more sugar in the open market.
This is the first step taken by the government to check prices since
June 2006, when exports have been banned to curb domestic prices.
Food ministry has estimated that sugar production during the 2008-09
season would be 22 million tonnes. Sugar
exports from As
per the data complied by the Solvent Extractors’ Association of India
(SEA), overall imports of vegetable oils including edible and non-edible
oils during the first nine months of the 2007-08 oil season have displayed a
rise of 9 per cent to 41.39 lakh tonnes, compared with 37.81 lakh tonnes
during the same period of the previous season. Total edible oil import
between November 07-July 08 period, has reported a rise of 10 per cent to
36.29 lakh tonnes, compared to 32.98 lakh tonnes, last year. While import of
non-edible oil has registered an increase of 5.5 per cent to 5.10 lakh
tonnes, compared to 4.83 lakh tonnes, a year ago. Import of vegetable oil in
the month of July 2008, has decreased fractionally to 5.32 lakh tonnes,
compared with 5.4 lakh tonnes a year ago, while non-edible oil import was
reported to be at 38,939 tonnes compared to 32,688 tonnes during the same
period last year. As
per the report by National Commodity and Derivatives Exchange (NCDEX),
overall cotton production in the country in the coming season would be 32.5
million bales (1 bale =170kg) as against 31.5 million bales in the cotton
year 2007-08 (October-September), though the growth rate has dropped to 3.17
per cent. Acreage under cotton upto July 2008 is reported to be at 6.97
million hectares, as against 0.95 million hectares during the same period
last year. The US Department of Agriculture has projected that global
production for 2008-09 would be 117.9 million bales, displaying a deficit of
8 million bales, against the expected consumption of 125.9 million bales.
Moreover, the International Cotton Advisory Committee has stated that the
overall global cotton production is expected to decline by 5 per cent to
24.9 million tonnes in 2008-09 on account of a decline in both area under
cultivation and yield. Simultaneously, the carryover stock is also projected
to fall by nearly 12 per cent to 10.7 million tonnes in the current season,
resulting to rise in cotton prices. Harvest
of mentha has been completed in the main growing belt of Uttar Pradesh,
after incessant rains damaging the crops to some extent. This damage is
estimated to be in the range of 10-15 per cent. Some of the reports suggest
that some farmers in UP have stocked up the produce and are not selling it
in the market below Rs 650 per kg. This has impacted supply, which are
currently in the range of 500-600 drums (each of 180 kg) as against the
normal range of 1,000-1,100 drums during this season. Acreage under mentha
has substantially risen across the country, indicating that production would
be on a par with last year’s 33,000-35,000 tonnes. Traders are expecting
that crop size of mentha would be more than 40,000 tonnes this year.
According
to the latest estimates of Rubber Board, Coffee
is likely to be harvested early during this crop year (2008-09), almost a
month in advance, due to early arrival of rains and timely blossom showers.
On the basis of which Coffee Board has projected that the post-blossom crop
would be at 293,000 tonnes, Arabica and Robusta would amount to 100,000
tonnes and 193,000 tonnes, respectively. Arabica production during this crop
year (2008-09) would be higher by 7,500 tonnes (8.11 per cent) and Robusta
by 23,500 tonnes (13.86 per cent) over the post-monsoon forecast of 2007-08. As
per the data released by Tea Board, production of tea in the first six
months of 2008 has increased by 3 per cent to 345.68 million kg against
334.71 million kg in the same period last year, while exports surged by 15
per cent to 87.41 million kg, compared with 76.97 million kg on robust
demand from overseas market. In value terms, the exports earnings went up by
15 per cent to Rs 883.32 crore against Rs 766.75 crore in the corresponding
period last year. However, output of tea in the month of June has dipped by
3 per cent to 105.44 million kg as against 108.29 million kg in the same
month last year. But, exports have still surged to 13.74 million kg as
against 11.97 million kg last year and export earnings have surged to Rs
155.98 crore compared with Rs 127.93 crore in the same month last year. Wool
and Woollen Export Promotion Council (WWEPC) has reiterated that exporters
of woollen items this year are battling with high production cost, due to
rise in prices of raw material by 20-25 per cent and increase in cost of
freight and packaging material in the range of 10-30 per cent. Last year it
had incurred losses due to rupee appreciation. Exports of Woollen products
have drooped by 6.19 per cent in 2007-08 to Rs 1,800 crore from Rs 1,919
crore in 2006-07. The
US Court of International Trade (CIT) has issued an injunction order against
the decision of US Department of Commerce (DoC) to reduce the
country-specific average anti-dumping duty on warm water shrimp for According
to estimates by Marine Products Export Development Authority (MPEDA),
exports of seafood from Infrastructure The
Index of Six core-infrastructure industries having a combined weight of 26.7
per cent in the Index of Industrial Production (IIP) with base 1993-94
registered a growth of 3.4% (provisional) in June 2008 compared to a growth
of 5.2 % in June 2007. During
April-June 2008-09, there is a growth of 3.5% (provisional) as against 6.4%
during the corresponding period of the previous year. Crude
Oil production (weight of 4.17% in the IIP) registered a negative growth of
4.7% (provisional) in June 2008 compared to a negative growth rate of 1.8%
in June 2007. During April-June 2008-09, the Crude Oil production registered
a growth of (-) 0.2% (provisional) compared to (–)0.7% during the same
period of 2007-08. Petroleum
refinery production (weight of
2.00% in the IIP) registered a growth of 5.6% (provisional) in June 2008
compared to a growth of 9.9% in June 2007. During April-June 2008-09, the
Petroleum refinery production registered a growth of 3.3% (provisional)
compared to 13.3% during the same period of 2007-08. Growth
in Coal production (weight of 3.2% in the IIP) at 6.2% (provisional) in June
2008 compared to growth rate 0.9% in June 2007. Coal production grew by 8.4%
(provisional) during April-June 2008-09 compared to an increase of 0.6%
during the same period of 2007-08. Electricity
generation (weight of 10.17% in the IIP) registered a growth of 2.6%
(provisional) in June 2008 compared to a growth rate 6.8% in June 2007.
During April-June 2008-09, Electricity generation grew by 2.0% (provisional)
compared to 8.3% during the same period of 2007-08. In
June 2008, Cement production (weight of 1.99% in the IIP) registered a
growth of 3.8% (provisional) compared to 6.0% in June 2007. Production grew
by 5.8% (provisional) during April-June 2008-09 compared to an increase of
7.2% during the same period of 2007-08. Finished
(carbon) Steel production (weight of 5.13% in the IIP) registered a growth
of 4.4% (provisional) in June 2008 compared to 5.1% (estimated) in June
2007. Finished (carbon) Steel production grew by 4.5% (provisional) during
April-May 2008-09 compared to an increase of 5.4% during the same period of
2007-08. Inflation The
official Wholesale Price Index for 'All Commodities' (Base: 1993-94 = 100)
for the week ended 2nd August 2008 rose by 0.3 percent to 240.4
(Provisional) from 239.6 (Provisional) for the previous week.
The
annual rate of inflation, calculated on point to point basis, stood at 12.44
per cent (Provisional) for the week ended 02/08/2008 (over 04/08/2007 ) as
compared to 12.01 per cent (Provisional) for the previous week. The annual
rate of inflation stood at 4.39 per cent as on 04/08/2007 i.e. a year ago. The
index for this major group rose by 0.6 per cent to 249.5 (Provisional) from
247.9 (Provisional) for the previous week. The index for 'Food Articles'
group rose by 0.9 per cent to 238.1 (Provisional) from 236.0 (Provisional)
for the previous week due to higher prices of maize (4%), moong, condiments
& spices and urad (3% each), fruits & vegetables, jowar and
fish-marine (2% each) and masur, tea, bajra and arhar (1% each).
Due
to higher prices of raw rubber (5%) and raw tobacco, linseed and cotton seed
(1% each), the index for 'Non-Food Articles' group rose by 0.2 per cent to
246.7 (Provisional) from 246.3 (Provisional) for the previous week. However,
the prices of gingelly seed (3%) and raw wool (1%) declined.
The
annual rate of inflation, calculated on point to point basis, for ‘Primary
Articles’ and ‘Food Articles’ stood at 11.43 per cent (Provisional)
and 7.20 per cent for the week ended 02/08/2008 respectively and it was
10.13 per cent and 9.25 per cent respectively as on 04/08/2007 i.e. a year
ago. The
index of fuel, power, light and lubricants rose by 0.9 per cent to 380.4
(Provisional) from 377.0 (Provisional) for the previous week due to higher
prices of light diesel oil (16%), bitumen and furnace oil (8% each) and
aviation turbine fuel (3%). However, the prices of naphtha (2%) declined. The index for manufactured products declined by 0.05 percent to 206.0 (Provisional) from 206.1 (Provisional) for the previous week. The index for 'Food Products' group declined by 0.5 per cent to 211.8 (Provisional) from 212.8 (Provisional) for the previous week due to lower prices of imported edible oil (13%), rice bran oil (5%), gingelly oil and cotton seed oil (2% each) and oilcakes, groundnut oil and rape & mustard oil (1% each) Due
to higher prices of hessian & sacking bags (3%) and hessian cloth (2%),
the index for 'Textiles' group rose by 0.1 per cent to 141.6 (Provisional)
from 141.5 (Provisional) for the previous week However, the prices of
woollen cloth (1%) declined. The
index for 'Rubber & Plastic Products' group rose by 0.3 per cent to
164.4 (Provisional) from 163.9 (Provisional) for the previous week due to
higher prices of decorative laminates (13%).
The
index for 'Chemicals & Chemical Products' group rose marginally to 222.1
(Provisional) from 222.0 (Provisional) for the previous week due to higher
prices of bopp film (12%). Due
to lower prices of resins (all kinds) and acid (all kinds) (1% each), the
index for 'Chemicals & Chemical Products' group declined by 0.05 per
cent to 222.0 (Provisional) from 222.1 (Provisional) for the previous week.
However, the prices of caustic soda (sodium hydroxide) (1%) moved up.
The
index for 'Machinery & Machine Tools' group rose by 0.2 per cent to
175.8 (Provisional) from 175.4 (Provisional) for the previous week due to
higher prices of p.v.c. insulated cables (4%).
For the week ended 07/06/2008, the final wholesale price index for 'All Commodities’ (Base: 1993-94=100) stood at 236.5 as compared to 235.2 (Provisional) and annual rate of inflation based on final index, calculated on point to point basis, stood at 11.66 per cent as compared to 11.05 per cent (Provisional). Banking National
Housing Bank (NHB) has decided to acquire a 12.5 per cent in Mahindra Rural
Housing Finance (MRHF) a wholly-owned subsidiary of Mahindra & Mahindra
Financial Services (MMFSL) for an undisclosed sum. NHB will participate in
the capital raising programme of MRFH in the first two years. The
government has approved doubling of the authorized capital in the India
Infrastructure Finance Company IIFC to Rs 2,000 crore. A decision to this
effect was approved by the Union Cabinet to help the company leverage its
ability and enable it to build a strong resource base along with higher net
worth over a period of time. IIFC, a wholly-owned special purpose vehicle (SPV)
floated by the government, was set up with a paid-up capital of Rs 10 crore
and an authorized capital of Rs 1,000 crore. The company assists in
infrastructure development up to 20 per cent of the project cost. IIFCL has
set up a subsidiary in Finance
ministry has cleared the merger of State Bank of Saurashtra with the parent
State Bank of Financial
Market 1. Capital Market Primary
Market The
initial public offering (IPO) of Resurgere Mines and Minerals has been
oversubscribed by 1.16 times. The issue received bids for 51.4 lakh shares
against the 44.5-lakh shares on offer. The portion reserved for the
Qualified Institutional Buyer (QIB) has been subscribed 1.34 times, the
portion reserved for the Non-Institutional Investors (NII) has been
subscribed 2.41 times and the Retail Investors portion subscribed 0.39
times. On
August 13, 2008, the IPO of Austral Coke has been oversubscribed by 1.65
times; total bids received were 1.19 crore against the 72.6 lakh shares on
offer. The QIB portion has been subscribed 0.62 times, the NII portion 7.31
times and the retail investors’ portion a total of 0.68 times. Vishal
Information Technologies, a company delivering digitisation and e-Publishing
services, on its debut on August 11, closed at a premium of 29.73 per cent
from its listing price on the National Stock Exchange (NSE) and at a premium
of 29.3 per cent on Bombay Stock exchange (BSE).
In
a significant relaxation, the Securities and Exchange Board of India (SEBI)
changed pricing rules for qualified institutional placements (QIP) in view
of rising market volatility, and reduced the timeline of rights issues on
August 20, 2008. Chairman CB Bhave said that QIP issues could be priced on
the basis of the average price of two weeks before the issue, against the
earlier requirement of taking the higher of the average previous six
months’ or 15 days’ price. Industry sources estimate that 35 to 40 QIP
issues are stuck on pricing issues. The
government is considering allowing FIIs to invest in Indian Depository
Receipts (IDRs), which have got a lukewarm response from foreign companies
so far. The move, will increase demand for IDRs, thereby improving liquidity
in this market. Not a single foreign company has come to the local market
for raising capital since IDRs were introduced in 2004. One of the reason
for the IDR market not picking up is the bar on FII’s and Non-Resident
Indians (NRIs) from investing in these securities. SEBI has proposed that
FIIs and NRIs be permitted to make investment in IDRs. The existing SEBI
guidelines for IDRs specify that at least 50 per cent of the issue should be
subscribed by QIBs. Secondary
Market Weak
industrial production data and higher-than-expected inflation numbers halted
a five-week rally with the benchmark BSE Sensex declined by 443 points or
2.92 per cent to 14,724, while the Nifty lost 99 points or 2.2 per cent to
4,430 during the hoilday-shortened trading week. A slowdown in the
manufacturing sector pulled down domestic industrial growth in June 2008 to
5.4 per cent from 8.9 per cent a year ago and inflation zoomed to a 13-year
high of 12.44 per cent. The sentiment turned bearish after the Prime
Minister’s Economic Advisory Committee (EAC) trimmed its forecast for GDP
growth in FY09 to 7.7 per cent. On August 11 Stocks rose to the highest
since June, led by banks and real estate companies as the five-week slump in
commodity prices eased concern that the central bank will increase interest
rates further to stem inflation. State Bank of India (SBI), the nation’s
biggest bank, rose to the highest in more than two months. Among
the sectoral indices of BSE, interest sensitive sectors underperformed
during the week on the back of higher inflation and muted outlook by the
Economic Advisory Committee. Over the week, Reality and Bankex have lost 7.5
per cent and 5.2 per cent, respectively. Slowdown in industrial production
hit the capital goods stocks.
On August 11, 2008, NSE has conducted the first
round of mock electronic bidding process for implementing application
supported by blocked amount (ASBA), an alternative mode of payment for IPOs,
proposed by Securities and Exchange Board of India (SEBI). Eight banks —
Punjab National Bank (PNB), Bank of India (BOI), HDFC Bank, ICICI Bank, Axis
Bank, Union Bank of
According to SEBI chairman C B Bhave, capital
market regulator wants to reduce the time gap between the closure of an
issue and its listing. This process is aimed at removing refund-related
concerns and the grey market in IPOs. As a first step, it is proposed that
the application money can be debited only after shares are allotted and make
it mandatory for institutional investors to make full payment along with IPO
applications. This will not take long because the number of institutions is
relatively small and institutions can pay the full amount either by cheque
or can avail of the blocked account facility.
In one of the most innovative product launches
globally, domestic fund houses are gearing up to roll out funds that will
invest in frontier markets. Distressed by the falling spree of local
equities, fund managers are looking at various avenues of diversification.
At a time when emerging markets, including Even
as foreign institutional investors (FII) reduced their stake in some of the
leading companies during the quarter ended June 30, mutual funds were seen
buying those stocks and increasing their stake. According to the
shareholding pattern declared by the companies for the June quarter, foreign
funds opted to sell shares in as many as eight companies, which are part of
the BSE Sensex. The shares were later bought by mutual funds.
It is perhaps the first time when foreign and domestic funds took a divergent view of the market in the case of so many leading companies. In the case of Reliance Industries, the FIIs reduced their stake to 17.11 per cent as of June 30 against 17.83 per cent (March 30), mutual funds increased their stake from 2.72 per cent to 2.83 per cent during the same period. In Bharti Airtel, FIIs reduced their stake to 23.63 per cent in June 30 from 24.99 per cent in March. But mutual funds raised their stake in the company from 2.14 per cent to 2.89 per cent in the same period. Similarly, in HDFC where FII holding went down from 60.62 per cent in March to 59.09 per cent in June. Mutual funds have managed to raise their holding in the company from 3.61 per cent to 4.33 per cent. This trend has also seen in shares such as Bhel, Satyam Computer, Hindustan Unilever, Reliance Infrastructure, Hindalco and Ranbaxy. In some companies, however, both FIIs and mutual funds increased or decreased their stakes simultaneously. In some others, the deviation in shareholding was marginal.
The high-level coordination committee on
financial markets has decided that the Reserve Bank of India (RBI) and the
SEBI would collect and analyse data on Sovereign wealth funds (SWFs)
investments through the FDI and FII routes, and share it with the
government. On August 1, the coordination committee has been felt there is
merit in collecting and analysing data relating to SWF investments in Derivatives Derivative
volumes stayed high despite the apparent cutting of exposure by the FIIs.
The market see-sawed through the first three sessions before a downside
breakout. There has been a drop in open interest (OI) in the Nifty August
futures contract as over 4 lakh August Nifty were extinguished on August 14.
The market saw several sessions of range-trading between 4,500-4,650.
However, three lakh new September Nifty positions were opened as well. That
suggests healthy carryover. The Vix has been trading around 35 after moving
down early in the week. Almost all stocks lost ground on August 14 and most
stocks delivered negative returns over the week. The three Nifty contracts
and the CNXIT and BankNifty all settled at small premiums to the respective
underlyings. The BankNifty saw a massive drop of 6.5 per cent week-on-week
and CNXIT, which outperformed the overall market due to depreciating rupee.
The August PCR (put call ratio) in terms of OI has dropped to just below 1
and the overall PCR is at 1.1. Practically the entire future and option
(F&O) segment went into a downtrend on August 15. The Nifty August
future closed at 4435 against the previous week’s close of 4548, a decline
of about 2.4 per cent over the previous week’s close. The Nifty August
future witnessed wild swings around the spot Nifty intra-day and surrendered
some of its premium; commands a premium of just about five points as against
the previous week’s premium of 18 points. Implied
volatilities (IV) remained firm at about the 35 per cent level. While puts
IV declined to 32 per cent (37 per cent), calls IV rose to 37 per cent (35
per cent). The rise in calls implied volatilities is mainly due to the
emergence of call writers. 2.
Government
Securities Market Primary
Market On
August 13, 2008, RBI auctioned 91-day and 364-day T-bills for the notified
amounts of Rs 3,000 crore and Rs 2,500 crore (out of which Rs 1,500 crore
under MSS), respectively. The cut-off yields for 91-day and 364-day T-bills
were 9.15 per cent and 9.25 per cent, respectively. Secondary
Market The
inter-bank call rates ended the week at 8.35-8.50 per cent after hitting a
high of 9.50 per cent indicating the pressure on the cash conditions ahead
of a long weekend. Outflows toward bill auctions in an already deficit money
market kept demand high during the week. At the LAF, the RBI infused Rs
5,505 crore after lending an average of Rs 22,787 crore over the week while
absorbing only a miniscule amount of Rs 130 crore through the reverse repo
window. Prevailing positive factors were factored in and IP growth and
federal employee’s pay hikes triggered a reversal. Bonds got off the block
with a surge as crude prices continued to drop further. However, prices
appeared to have received support later. Trade volumes during the week
averaged about Rs 7,800 crore. On August 11, trade volumes had crossed the
Rs 10,000-crore mark, for the first time since 2004. Leading
credit rating agency Standard & Poor’s (S&P) is keeping a close
watch on domestic fiscal and monetary trends to take a decision on whether
to review the country’s sovereign rating. According to Takahira Ogawa,
director, sovereign & international public finance, S&P, the impact
of measures like farm debt waiver, high oil and fertiliser subsidy and the
implementation of the Sixth Pay Commission recommendation, during the fiscal
year can further add inflationary pressures which are caused by the external
developments and worsen the country’s fiscal situations. 3.
Bonds
Market According
to finance ministry official, the government is considering raising the
interest rate spread on external commercial borrowings (ECBs) to ease
difficulties that domesatic companies face in borrowing overseas. The move
follows demands from local industry for raising the cap, which is regulated
by the government. Yields
in the corporate bonds market were almost flat, as absence of surplus cash
kept traders away from the segment. Levels on the other non-SLR papers also
stayed steady albeit at elevated levels. P1+ 3-month CP rate was 10.87 per
cent from 10.78 per cent, sticking to a narrow range, but not rising further
despite deficit liquidity. During
the week under review, two non-development finance companies and a central
undertaking has tapped the market by issuing bonds.
Apart
from considering various measures such as different or modified rating
symbol for non-principal protected equity-linked debentures to highlight the
embedded non-credit risks, rating agency Crisil is also considering to
discontinue their ratings. So far, Crisil has rated three such debentures
and all of them carry 'AAA' ratings. Currently, all outstanding ratings of
such debentures are expected to remain under surveillance of Crisil. Since
there are prominent non-credit risks that can impact returns on these
instruments, Crisil rates them by using an 'r' as suffix to alert the
investors on the risk factors. To rule out the investors' misinterpretation
on ratings of such instruments, Crisil has thus decided to reconsider
assigning ratings to them.
In a move towards strengthening the corporate
debt market, the SEBI has issued a draft proposal to further simplify the
listing agreement for the debt securities. The new draft listing agreement
for debt securities prepared in consultation with stock exchanges, including
BSE and NSE, is one single document replacing the existing separate listing
agreements for debentures issued by a public issue and those which are
privately placed. According to the draft proposal, the listing agreement has
two parts. The part A contains eight clauses which are applicable where
equity shares of the issuer are already listed on the exchange and continues
to comply with the listing agreement for equity. 4.
Foreign
Exchange Market The
rupee depreciated by 2.25 per cent over the week to end at Rs 43.01 per
dollar despite starting off on a positive note. The rupee fell as the broad
dollar rally overseas took toll on sentiment and offshore rupee quotes
leading to an arbitrage gap. Meanwhile, the domestic stock market faced
losses putting more pressure on the rupee and the positive impact of lower
crude prices tapered off, for other factors to emerge and influence traders.
Premia were steady despite the sharp spike in the spot rate resulting in
annualised premia levels finishing the week lower. Concerned
over the role of sophisticated credit derivatives in the global financial
market turmoil, the RBI has told the finance ministry, that it does not want
to develop a market for these products unless a clear regulatory system
emerges internationally. The finance ministry has urged central bank to
consider at least launching plain-vanilla credit default swap (CDS)
instruments. A CDS is a credit derivatives contract between two parties,
with one making periodic payments to the other and receiving a promise of a
payoff in case of a default. 5.
Commodities
Futures Market The
Forward Markets Commission (FMC) is seeking legal powers to include
commodity brokers under the Prevention of Money-Laundering Act, 2002 (PMLA)
so that the commission can use its powers to curb illegal trading (dabba
trading) at the futures exchange-platforms and prevent money laundering. The
Prevention of Money Laundering Act is a legislation enacted to prevent money
laundering and provide for confiscation of property derived from, or
involved in, money laundering and for matters connected therewith or
incidental thereto
The National Commodity and Derivatives Exchange
(NCDEX) has launched the coriander futures contract, which will cater to the
requirements of value-chain participants. Coriander seed would be the fifth
spice to be launched on the exchange. Other spices listed on the exchange
include jeera, pepper, turmeric and chilli. The coriander futures will
initially have contracts for the month of October, December and April.
Members will have a position limit of 3,000 tonne while clients will have
1,000 tonne for all contracts, and the main delivery centre will be According
to a senior official of NCDEX, the exchange has approached some banks to
provide instant funds to certified emission reduction (CER) sellers on the
exchange in an attempt to revive carbon futures on NCDEX. The December CER
contract launched by the exchange in April evoked good response and has been
the top traded emission contract in the world in the initial months.
However, volume in the contract started dwindling from mid-July and in the
last three sessions only six lots (of 500 CERs) were traded on NCDEX.
On August 13, MD&CEO of NCDEX R Ramaseshan
said that the exchange would launch futures trading in thermal coal from
next month. NCDEX also plans to begin a second power exchange in joint
venture with the NSE. NCDEX Spot Exchange Ltd has already received
permission from NCDEX
will levy a special margin of 5 per cent on long positions for all running
contracts of sugar effective from August 1. According to the exchange, the
special margin will be over and above the existing margins.
Several leading commodity-derivative exchanges
in Asia, the The
NMCE is launching a new series for futures contracts in 13 commodities,
besides three ‘spread series’ in pepper, from August 16. The new
‘spread series’ in pepper will be available for futures trading, spread
over from August 16 through September 15, October 15 and November 15, 2008,
respectively. The new series in six commodities - cardamom, copra, cumin
seed, guar gum, gold and silver - will expire on November 15. The new series
in rape-mustard seed, coconut oil and sack will expire on December 15, kilo
gold on February 5, and that in pepper, castor seed (10 metric tonne) and
isabgul (psyllium seed) on February 14, 2009. NMCE provides an electronic
trading platform for futures trading also in guar seed, turmeric, menthol
crystal, raw jute and non-ferrous base metals, among other commodities. NMCE
is looking at reactivating trade in illiquid contracts and start futures
trade in new commodities over the next one-year as part of its expansion
process. According to CEO Anil Mishra the exchange is looking at futures in
spices, coffee, base metals, precious metals, oilseeds and energy as part of
expanding our product base. The exchange is set to launch robusta coffee
futures by the end of August and is also looking at coriander. Jeera, chilli,
turmeric and crude palm oil contracts that the exchange had launched
earlier, but were illiquid, will also be reactivated in next few months.
NMCE had already planned the launch of coriander futures, but delayed it
because MCX and NCDEX have started futures trade in the commodity. Contracts
in bullion, base metals and energy are also in the pipeline and will be
introduced in a year. The
major base metals, energy and bullion futures on the national bourses
continued to rule weak on the week ended on August 14. The prices on the
domestic bourse remained down by 3 per cent and copper declined as the
dollar's rebound reduced the appeal of commodities after a six-year boom.
Crude oil prices fell on Friday on the prospect of reduced energy demand
because Crude
oil is not the only commodity seeing a price correction on fears of an
economic slowdown. The same sentiment is driving prices of a range of
important industrial metals like copper, zinc, aluminum and the precious
metal gold. As a result, prices are now below what they were three months
ago. Even steel, which has
played a key role in all-round inflation, has softened from July levels,
though current prices are still higher than in May.
This
fall in most key commodity prices comes after a relentless climb in prices
for over two years. Western economists have said fast-growing Chinese and
Indian economies were largely responsible for this unprecedented rise in
commodity prices. With both the countries battling record inflation levels,
the demand for commodities is expected to see some moderation. Sector
analysts said there was an inventory pile-up of base metals like aluminum;
copper and zinc in anticipation of a slowdown in the demand and this had led
to a fall in prices. In
a study conducted by Confederation of Indian Industry (CII) on the possible
impact of commodity transaction tax (CTT), the imposition of tax would make
India’s commodity exchanges ‘uncompetitive’ and would adversely impact
the volumes in the range of 59 per cent to 18 per cent, depending upon the
commodities, within a short span of seven days of its imposition. The study
said gold volume will decline 59 per cent, crude oil may fall by 57 per
cent, chana by 56 per cent, copper by 53 per cent, and refined soybean oil
may decline by 18 per cent within the specified period of one week since the
levy. The study was conducted for a sample of five major commodities
representing a significant share of the derivatives market for a period of
two years between May 2006 and April 2008. The
finance ministry has raised concerns over a catch-all definition of
commodity derivatives on the grounds that it will lead to problems in
regulating currency, interest rate and credit derivatives. If its objections
find favour with the Union Cabinet, which is slated to discuss amendments to
the Forward Contracts Regulation Act (FCRA), commodity exchanges, which want
to launch contracts for trading in weather or rainfall, may have to shelve
their plans to do so. A clause in the Forward Contracts (Regulation)
Amendment Bill, 2008, which is proposed to be introduced in the Lok Sabha in
the next session, empowers the government to permit trading in any forward
contracts or options in goods. Corporate
Sector Panacea
Biotech is learnt to have bagged a $35 million drug supply order from UNICEF
to supply pentavalent vaccines, the first Indian company to get such a
contract. WHO has included Panacea Biotec’s pentavalent combination
vaccines in the list of pre-qualified drugs, paving the way for the Indian
company to supply the combination vaccines to global sourcing agencies. L&T,
in consortium with global technology partners, had bagged engineering orders
worth Rs 3,816 crore from various customers in the metals industry. Tata
Steel plans to build a plant in After
have signed up at least half-a-dozen partnerships for specialty formats,
Reliance Retail is now entering into a joint venture with leading European
supply chain specialist Wincanton for its food and grocery and hypermarket
business. Chennai-based
Orchid Chemicals and Pharmaceuticals has acquired majority control in
US-based drug firm Diakron Pharmaceuticals Inc, which has an exclusive
licence agreement for an anti-coagulant drug candidate, discovered and
developed by Merck & Co. Oberio
Group is planning to set up 10 more hotels in Volkswagen
Group, Europe’s biggest car group and part of Porsche, the most profitable
car maker, is evaluating the setting up of a research centre in Information
Technology Datacom
Solutions, the telecom services arm of the Videocon Group, is planning to
outsource its IT solutions on a revenue sharing basis. In
a largest acquisition till date, the Essar Group-owned Aegis Communications
has bought Philippines-based BPO PeopleSupport for $250 million. This is the
BPO firm’s eleventh acquisition in the last three years. The
Aztech software brand will be retired following its merger with MindTree.
The merger is expected to be completed in six to nine months. The entire
deal was valued at around $80 million. BPO
firm HOV Services consolidated net profit have declined by 68 per cent to Rs
1.33 crore for the first quarter ended June 30, 2008 as against Rs 4.14
crore in the corresponding quarter in the previous year. Cognizant
Technology Solutions has reported a 26 per cent growth in its net profit on
the back of higher revenues. The Nasdaq-listed IT and BPO service provider
has posted a net profit of $104 million for the quarter ended June 30, 2008
compared to $82.3 million during the same period last year. Telecom The Department of Telecom (DoT) has asked Idea Cellular to surrender one of the telecom licences it holds for the circles of Punjab and Karnataka as the company had acquired a controlling stake in Spice Communications for around Rs 2,700 crore in June, is now holding two licences in these circles on account of the acquisition. The DoT, however, ruled out any move to refund the licence fees paid by Idea after is surrenders the licence.
*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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