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Current Economic Statistics and Review For the
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Theme
of the week:
Economic Census – 3 Special Characteristics of Enterprises*
One
of the main tasks of a national statistical system is to provide the
country’s planners and policy makers with information on various aspects
of economic, social and related activities in terms of their contributions
to national economy and life on a time series basis. Information on some
activities, though small in terms of contribution but huge in terms of
absorbing employment, was sparsely available through surveys and studies.
Economic Censuses conducted by the Central Statistical Organisation (CSO)
strives to mitigate this deficiency to a great extent as it tries to give
more or less comprehensive information such as number of enterprises in
rural and urban areas, the number of persons employed, etc. These censuses,
in addition to giving basic information on different characteristics of
individual enterprises, provide detailed structural features, viz., (i)
whether enterprises are of seasonal or perennial character, (ii) whether
enterprises are using power/fuel or not, (iii) whether enterprises are
operating from fixed premises or not, (iv) what is the ownership character
of industries with details of social groups owning them, and (v) how are the
industries distributed according to size of employees. Earlier
two notes on the subject briefly discussed the objective, scope and
strengths and weaknesses of the Economic Census studies and the trend growth
of enterprises along the different censuses. This note, the third in the
series, throws up a picture of some specialised characteristics of
enterprises as revealed by the census results. 1.
Seasonal and Perennial Enterprises a.
All enterprises (agricultural and non-agricultural enterprises) Table 1 gives a comparative picture of growth rates of seasonal and perennial enterprises as between the successive censuses over the past 25 years. Obviously, the
perennial
enterprises have always dominated and also grown at a faster pace. The
number of such perennial enterprises have expanded from 17.3 million in 1980
to 39.6 million in 2005, that
is, by 22.3 million or at a compounded annual
growth rate (CAGR) of 3.38 per cent. During
the same period 1980-2005, as 1.1 million seasonal enterprises have been
added at a CAGR of 2.8 per cent. In both seasonal and perennial enterprises,
the growth has been slightly higher in rural areas than in urban areas. The
growth was faster between the latest two censuses i.e., between 1998 and
2005. Secondly,
in both rural and urban areas, the rate of growth of own-account enterprises
has been much slower than the growth in establishments with at least one
hired labour. The CAGR in own-account perennial enterprises during the
25-year period at 2.87 per cent was much lower than that of 4.5 seen in
perennial establishment with at least one worker. Thus, the share of
seasonal enterprises was only 6.1 per cent in 1980 and it has slid further
from 6.1 per cent in 1980 to 5.1 per cent in 2005. The substantial fall in
own-account seasonal enterprises especially in urban areas during 1998-2005
was the main reason for the declining trend.
This reflects the substantial structural changes taking place in the
economy. A negative CAGR of 0.73 per cent was witnessed in own-account
seasonal enterprises. Even urban seasonal establishment also registered a
declining growth rate over the censuses. b)
Agricultural Enterprises (excluding crop husbandry) The
number of seasonal agricultural enterprises rose from 209,000
in 1980 to 808,000 enterprises according EC-2005 . However the growth
rate registered a declining trend over different censuses. Between 1980 and
1990, CAGR was 8.2 per cent which declined to 5.0 per cent in the period
1990-1998 then to 2.7 per cent during 1998-2005. The
average annual growth rate during the 25-year period works out to 5.6 per
cent. However, the number of perennial agricultural enterprises steadily
rose during the period with a compounded annual average growth rate of 5.9
per cent during the 25-year period. The trend was the same both in rural and
urban areas. While the trend depicted by own-account enterprises was same as
that depicted by all enterprises, the seasonal agricultural
establishment with at-least one hired worker
there was a notable increase between 1998 and 2005 (Table 2).
c)
Non-Agricultural Sector There
was an increase in the number of seasonal non-agricultural enterprises from
903,000 to 1,409,000 between 1980 and 2005, the CAGR between the censuses
decreased from 2.2 per cent during 1980-90 to 0.03 per cent during
1998-2005. Overall CAGR was only 1.8 per cent during the 25-year period
(Table 3). The perennial non-agricultural enterprises more than doubled
during the 25-year period 1980-2005. While
the number of seasonal own-account non-agricultural enterprises rose from
699,000 in 1980 to 925,000 in 2005, own-account perennial non-agricultural
enterprises increased from 11450 thousands to 20880 thousands during the
period 1980 to 2005.
Perennial
non-agricultural establishment almost tripled between 1980 and 2005 by
adding 8.9 million perennial non-agricultural enterprises with at least one
hired worker. 2.
Enterprises Using Power/Fuel If
any or more sources of power/fuel are specifically used for carrying the
entrepreneurial activity (other than for lighting or heating the premises) ,
it is considered as power/fuel used. The different sources of power/fuel are
electricity, coal/soft coke, petrol/diesel, firewood, kerosene, animal
power, non-conventional energy (bio gas, solar and wind energy) and atomic
power. Enterprises using none of this type of power/fuel are categorized as
operating without power. a)
All Sector (agricultural and non-agricultural sector) Overall
growth of enterprises using power/fuel had increased from 4.3 per cent
(1980-1990) to 7.2 per cent (1998-2005). The overall growth during 25-years
period works out to 4.9 per cent. While the growth in own-account enterprise
using power/fuel at 4.2 per cent was less than that of all enterprises that
of establishment with at least one hired workers was a clear one per cent
more than 4.9 per cent growth witnessed in all enterprises (Table 4).
b)
Agricultural Enterprises Table
5 depicts the number of enterprises using power/fuel in agriculture sector
both in rural and urban areas. The
number of enterprises using power has gone up from 68,000 in 1980, then to
138,000 in 1990 , further to 257,000 in 1998
and finally to 541,000 by 2005. At this level the CAGR works out to
11.2 per cent during 1998-2005 and overall CAGR during the period 1980 to
2005 stands at 8.7 per cent. The share of agricultural enterprises using
power steadily increased from 4.7 per cent in 1980 to 8.9 per cent in 2005. An
increasing trend growth is witnessed among rural enterprises, also with the
number of agricultural enterprises using power/fuel going up from 61,000 in
1980 to 496,000 in 2005 with an overall annual average growth rate of 8.8
per cent during the 25-year period. But, in urban areas it was fluctuating
though the number of enterprises did go up. The number of agricultural
enterprises using power/fuel in urban areas increased from 7,000 in 1980 to
18,000 in 1990 and then to 23,000 in 1998 and finally to 45,000 in 2005.
The
trend is uniform in respect of both own-account enterprises as well as
establishments with at least one hired workers. But the growth rate was
faster at 9.6 per cent in case of own-account
enterprises as compared to that of establishment (7.1 per cent) during
1980-2005. c)
Non-Agricultural Enterprises It
can be seen from Table 6, that during the 1980-2005 period an addition of
6.6 lakh non-agricultural enterprises using power took place; as against
this an addition of 12.9 lakh non-agricultural enterprises not using power
took place during the 25-year period. The CAGR during the period works out
to 4.8 per cent in the case of enterprises using power and 2.6 per cent in
the case of enterprises not using power/fuel. The
number of non-agricultural own-account enterprises using power/fuel
augmented by 3.0 lakh during 1980-2005 with a CAGR of 3.9 per cent. As
against this, Non-agricultural establishment with at least one hired worker
using power/fuel grew at CAGR of 5.9 per cent during the period.
3.
Enterprises with Fixed Premises a)
All Sectors The
enterprises operating without fixed premises have shown a growing trend. The
number of such enterprises from 3.3 lakh in 1980 increased to 7.3 lakh in
2005 an addition of 4.0 lakh in 25-year period. As against this, those
conducting their activities from fixed premises rose by 19.3 lakh during
1980-2005.
It
can be seen from Table 7 the own-account enterprises operating from fixed
premises rose faster than that conducting their activities without fixed
premises. In case of establishments with at least one hired worker working
with out premises grew at CAGR 7.3 per cent during 1980-2005 and that with
premises at a comparatively slower pace of 4.2 per cent. b)
Agricultural Sector
The
number of agriculture enterprises rose with premises grew at CAGR of 6.6 per
cent during 1980-2005 and that working without fixed premises rose with a
CAGR of 4.0 per cent. While own-account premises working from fixed premises
grew faster at a CAGR of 6.8 per cent during 1980-2005, that in the growth
of establishments with at least one hired worker operating without premises
grew faster at a CAGR of 6.7 per cent (Table 8). c)
Non-Agricultural Sector Non-Agricultural
enterprises, both operating from fixed premises as well as without premises,
more than doubled during 1980-2005 with a growth rate of about 3 per cent in
each case. The same kind of trend was witnessed both in rural and urban
enterprises.
Own-account enterprises registered the same kind of trend. But
establishments with at least with one hired worker conducting business
without fixed premises almost tripled from 4.5 lakh in 1980 to 12.6 lakh in
2005, with a growth rate of 7.4 per cent per year.
As against this, enterprises with premises rose with a CAGR of 4.2
per cent during the 25-year period 1980-2005 (Table 9). *
This note has been prepared by R. Krishnaswamy Highlights of Current Economic Scene AGRICULTURE As per the data compiled by Agriculture Ministry, sowings of foodgrains in the on-going kharif season upto August 17, 2008, has been decreased for all major crops except rice and soyabean as compared to last year, despite of revival recorded in the south west monsoon by the last week of July. Total area covered under the principal kharif crops has fallen by 3.25 per cent to 844.3 lakh hectares over the corresponding period of the last year. Coverage under rice has increased by 10.02 per cent to 282.1 lakh hectares as against 256.4 lakh hectares covered last year. Sowings of kharif pulses have been hit very badly by 15.04 per cent to 89.8 lakh hectares, compared to 105.7 lakh hectares covered during the last season. Acreage under coarse cereals has dipped by 11.85 per cent to 171.1 lakh hectares as against 194.1 covered a year ago. In case of non-food crops, the area covered under various oilseeds, cotton, sugarcane and jute has declined by 0.36 per cent to 163.9 lakh hectares, 5.29 per cent to 85.9 lakh hectares, 16.79 per cent to 44.1 lakh hectares and 10.84 per cent to 7.4 lakh hectares, respectively.
According
to the latest study undertaken by Central Organisation for Oil Industry and
Trade (COOIT) coverage under group of oilseeds has witnessed a marginal
decline of 0.58 lakh hectares to 16.39 million hectares as on August 18,
2008, as compared with last year, though it has surpassed the sown acreages
by around 2 per cent from 14.43 million hectares as on August 1, 2008, due
to improved rainfall and extended sowings in major producing states like
Maharashtra, Andhra Pradesh and Gujarat. It is expected that if there would
be further revival of rains then production of oilseeds this year would be
similar or even exceed last year’s output. The
central government is planning to offload 5-6 million tonnes of wheat and 1
million tonnes of rice by the last week of August 2008, to curtail price
volatility in the domestic market. The allocation of rice and wheat would be
attributed for both open market sales and to consumers above the poverty
line (APL) through ration shops. Wheat would be put up for sale through a
process of open tendering by FCI to flour mills and bulk consumers. This
foodgrains would be sold at prices between the prevailing APL and open
market rates. This scheme would be starting from September 2008 to March
2009. Further, they are also planning to scrap subsidy on exports of sugar
from September 2008, to curb domestic prices that have risen since August. Good production and high procurement of foodgrains (wheat and rice) this year is expected to swell buffer stocks next year. Wheat buffer stock upto April 1, 2009 is likely to rise to 7.86 million tonnes, double from last year’s stockpile, on account of record wheat procurement in 2008. Stocks of rice at the starting of next marketing year is also expected to rise by 20 per cent to 6.24 million tonnes, more than the usual buffer norm of 5.2 million tonnes. The high foodgrains stock in central inventories ensures that prices would remain under control, negating the need of imports. Central
government has partially relaxed restrictions on the exports of seed-quality
maize and non-basmati rice. Export of these would be permitted only if
exporters submit a certificate of registration from an authorised state
seed-certifying agency, saying that these seeds are not fit for human
consumption or feeding animals. Export packets of these would be labeled as;
‘seeds are treated with chemical insecticides and cannot be used for food
or feed purposes’. The
central government had directed National Agriculture Cooperative Marketing
Federation (Nafed) to purchase maize from
According
to official sources, government is likely to increase the minimum support
price (MSP) of cotton by 40 per cent for the cotton year 2008-09. Prices of
medium long staple cotton are likely to be increased to Rs 2,500 per quintal
from the current MSP of 1,900 per quintal. Similarly, the prices of long
staple cotton are expected to be raised to Rs 3,000 per quintal, which
currently rules at Rs 2,030 per quintal. Since the beginning of the current
cotton year (October-September), the prices of Shankar-6 variety of cotton
have augmented by 41.5 per cent to Rs 28,300 per candy (1 candy=356 kg) in
July 2008 from Rs 20,000 per candy in October 2007.
In
order to contain rising sugar prices in the domestic market, the central
government has planned to 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. In
addition to it food ministry shot notices to 252 sugar mills for not
submitting the monthly return on sugar sold from the dismantled 2 million
tonnes buffer stock. Even mills were asked to submit return on dismantled
buffer by August 25, 2008. Owing to which sugar prices in the domestic
market have fallen by 5 per cent to Rs 1,700 per quintal. The price of sugar
futures for September delivery at the National Commodity and Derivatives
Exchange has also reported a fall of 3.75 per cent since August 11, 2008 to
Rs 1,789 per quintal. Food ministry has estimated that provisional
production of sugar would be around 22 million tonnes for 2008-09. Output of
sugar in the current season is estimated to be at 26.5 million tonnes, along
with an estimated carryover stock of 11 million tonnes. Total availability
of sugar for the 2008-09 season would be around 33 million tonnes, as
against the consumption demand of 22 million tonnes. Spices
board would be setting up a park in Tobacco
board has estimated that production of tobacco in the state of Karnataka
would display an increase of 5.2 per cent to 100 million kg, over 95 million
kg last year. . Acreage under tobacco cultivation this year is reported to
be around 85,000 hectares. Karnataka is the second largest producer of
tobacco after Andhra Pradesh, which on an average produces 150 million kgs
annually. Indian
Jute Mills Association (IJMA) reiterated that jute industry has registered a
record production in jute goods of 1.77 million tonnes in 2007-08, on
account of 30 new medium-sized jute mills in Andhra Pradesh followed by
surge in demand from mills in Bengal, when the markets opened after a
three-month closure, due to strike from January 5 to March 8, 2007.
Production of jute goods this year has surpassed the earlier record
of 1.62 million tonnes in 2002-03. Domestic consumption of jute goods has
reported to be higher to 1.54 million tonnes, while exports were 207,000
tonnes. As
per the state government data of The
central government would import 3 lakh tonnes of unprocessed poultry 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 per cent in June 2008 compared to a growth of 5.2
per cent in June 2007. During
April-June 2008-09, there is a growth of 3.5 per cent (provisional) as
against 6.4 per cent during the corresponding period of the previous year. Crude
Oil production having a weight of 4.17 per cent in the IIP, registered a
negative growth of 4.7 per cent in June 2008 compared to a negative growth
rate of 1.8 per cent in June 2007. During April-June 2008-09, the Crude Oil
production registered a growth of (-) 0.2 per cent compared to (–) 0.7 per
cent during the same period of 2007-08.
Petroleum
refinery production having a weight of 2.00 per cent in the IIP, registered
a growth of 5.6 per cent in June 2008 compared to a growth of 9.9 per cent
in June 2007. During April-June 2008-09, the Petroleum refinery production
registered a growth of 3.3 per cent compared to 13.3 per cent during the
same period of 2007-08. Growth
in Coal production (weight of 3.2 per cent in the IIP) at 6.2 per cent in
June 2008 compared to growth rate 0.9 per cent in June 2007. Coal production
grew by 8.4 per cent during April-June 2008-09 compared to an increase of
0.6 per cent during the same period of 2007-08.
Electricity
generation (weight of 10.17 per cent in the IIP) registered a growth of 2.6
per cent in June 2008 compared to a growth rate 6.8 per cent in June 2007.
During April-June 2008-09, Electricity generation grew by 2.0 per cent
compared to 8.3 per cent during the same period of 2007-08. Cement
production (weight of 1.99 per cent in the IIP), registered a rise of 3.8
per cent in June 2008 compared to 6.0 per cent in June 2007. Production grew
by 5.8 per cent during April-June 2008-09 compared to an increase of 7.2 per
cent during the same period of 2007-08. Finished
(carbon) Steel production (weight of 5.13 per cent in the IIP) registered a
growth of 4.4 per cent in June 2008 compared to 5.1 per cent in June 2007.
Finished (carbon) Steel production grew by 4.5 per cent during April-May
2008-09 compared to an increase of 5.4 per cent during the same period of
2007-08. Inflation The
official Wholesale Price Index for 'All Commodities' (Base: 1993-94 = 100)
for the week ended 16th August 2008 rose by 0.2 per cent to 240.4
from 239.6 for the previous week.
The
annual rate of inflation, calculated on point to point basis, stood at 12.44
per cent for the week ended 16/08/2008 (over 18/08/2007) as compared to
12.63 per cent for the previous week. The annual rate of inflation stood at
3.99 per cent a year ago. The
index for the major group of Primary Articles remained unchanged at its
previous week level 249.6. The index for 'Food Articles' group rose
marginally to 238.8 from 238.7 for the previous week due to higher prices of
moong (3 per cent), condiments and spices (2 per cent) and tea, masur and
urad (1 per cent each). However, the prices of mutton and maize (1 per cent
each) declined. The
index for 'Non-Food Articles' group declined marginally to 245.2 from 245.3
(Provisional) for the previous week due to lower prices of gingelly seed (2
per cent) and copra, raw silk and castor seed (1 per cent each). However,
the prices of raw rubber (2 per cent) moved up.
The
index for 'Minerals' group declined by 0.3 per cent to 646.7 (Provisional)
from 648.4 (Provisional) for the previous week due to lower prices of fire
clay (22 per cent), asbestos and barytes (6 per cent each). However, the
prices of felspar (60 per cent) and steatite (6 per cent) moved up. The
index for the major group, Fuel, Power, Light & Lubricants declined by
1.1 per cent to 376.2 from 380.4 for the previous week due to lower prices
of naphtha (9 per cent) and furnace oil (6 per cent). However, the prices of
bitumen (2 per cent) moved up. The
index for Manufactures Products rose by 0.1 per cent to 206.6 from 206.4 for
the previous week. During the week, the index for 'Food Products' group rose
by 0.2 per cent to 212.5 from 212.0 for the previous week due to higher
prices of sugar (4 per cent) and khandsari (1 per cent). However, the prices
of imported edible oil and rice bran oil (3 per cent each), oilcakes (2 per
cent) and groundnut oil, cotton seed oil and sunflower oil (1 per cent each)
declined. The
'Textiles' group index rose by 0.3 per cent to 144.2 from 143.8 for the
previous week due to higher prices of other cotton yarn (6 per cent), cotton
grey cloth & canvas (4 per cent) and hessian & sacking bags and
hessian cloth (1 per cent each). 'Paper
& Paper Products' group rose by 0.1 per cent to 200.6 from 200.4 for the
previous week due to higher prices of map litho paper (2 per cent).
The
index for 'Chemicals & Chemical Products' group rose marginally to 222.0
from 221.9 for the previous week due to higher prices of caustic soda
(sodium hydroxide) (2 per cent). However, the prices of p.v.c. resins (6 per
cent) declined. The
'Non-Metallic Mineral Products' group declined by 0.05 per cent to 216.1
from 216.2 for the previous week due to marginal fall in the prices of
cement. For
'Basic Metals, Alloys & Metal Products' group, the index rose by 0.1 per
cent to 299.1 from 298.9 for the previous week due to higher prices of
foundary pig iron, basic pig iron and ms bars & rounds (1 per cent
each). However, the prices of lead ingots (7 per cent) and zinc ingots and
other iron steel (1 per cent each) declined.
For 'Machinery & Machine Tools' group rose by 0.2 per cent to
176.2 from 175.8 for the previous week due to higher prices of computer
& computer based systems (17 per cent) and electric motors (3 per cent).
The final wholesale price index for 'All Commodities’ (Base: 1993-94=100) for the week ended 21/06/2008, stood at 237.7 as compared to 237.1 and annual rate of inflation based on final index, calculated on point to point basis, stood at 11.91 per cent as compared to 11.63 per cent reported earlier vide press note dated 04/07/2008 Banking Bank
of Baroda has revised interest rates with effect from August 4, 2008 on
domestic rupee term deposits for various maturities for deposits of less
than Rs 15 lakh. ICICI
Bank is launching a private equity fund within the next 6 months in order to
focus on small and medium enterprises (SME). The initial corpus for the fund
is likely to be around $200 million. At present, around 8-9 per cent of the
bank’s total loan portfolio is for the SME sector and is growing at a rate
of about 2-3 per cent every year. Financial
Market 1.
Capital Markets Primary
Market The
Initial Public Offering (IPO) of Bharat Sanchar Nigam Ltd (BSNL) is expected
to take precedence over the capital raising proposals of the public sector
general insurance companies. The plans are now awaiting amendments to the
General Insurance Business (Nationalisation) Act of 1972 and the Insurance
Act of 1938. According to sources, the Government has not opposed to the
capital raising plans of the four general insurance companies — New India
Assurance Company Ltd, National Insurance Company Ltd, Oriental Insurance
Company Ltd and United India Insurance Company Ltd. BSNL has proposed to
dilute about 10 per cent stake through the IPO and has the support of the
Communication Ministry and the Finance Ministry. However, the union is
opposing it and had also threatened to go on a nationwide strike several
times. While BSNL management had earlier withdrawn the IPO plans following
opposition from the union, it has renewed its efforts to list the shares on
the bourses after the Left parties withdrew support to the UPA Government.
The Bombay
Stock Exchange (BSE)-listed Adhunik Metaliks Ltd is planning to raise Rs
250-300 crore by listing its subsidiary Orissa Manganese and Minerals Ltd (OMM)
by end of the year.
According to
the data provided by Venture Intelligence, there were less private equity
(PE) -backed IPO across sectors, but more funds were raised in the first
half of this calendar year compared with the corresponding period last year.
During the first half of 2008, there were six PE-backed companies that went
public compared with nine during the corresponding period last year.
Similarly, there was only one venture capital-backed (VC) IPO this year when
compared with three last year. Secondary
Market Weak
global markets kept the domestic market under pressure throughout the week.
The market slid considerably during the week and despite a partial revival,
it ended in the negative territory. The surge in domestic inflation rate,
resurgence of crude oil prices to $121/barrel and sluggish trend across
global markets resulted in local equities closing lower, for a second
consecutive week The BSE Sensex lost 2.19 per cent or 323 points and closed
at 14,401 points. The National Stock Exchange’s (NSE) Nifty declined by
103 points or 2.3 per cent to 4,327 in the week under review. Among
the sectoral indices of BSE, all the indices underperformed over the week.
Interest rate sensitive sectors like reality and banking declined 4.24 per
cent and 3.58 per cent, respectively, as inflation rose to a 16- year high
of 12.63 per cent. The
foreign institutional investors (FIIs) and mutual funds have been major
investors in debt, primarily in treasury bills (TBs) and short-term
corporate papers including commercial papers and certificate of deposits.
According to the Securities and Exchange Board of India (SEBI), the equity
market has remained subdued during the fortnight starting August 1. The FIIs
invested Rs 561 crore in the debt market during the period, while
withdrawing Rs 7.2 crore from the equity market. The mutual funds were net
buyers in debt instruments, to the tune of Rs 3,477 crore, while selling
around Rs 822 crore in the equity market. The
SEBI is likely to finalise the guidelines for a separate SME (?)exchange by
the end of this fiscal. The board is also considering the proposal to
increase the limit of initial paid-up capital of the SMEs participating in
the exchange beyond Rs 10 crore. The
SEBI is examining a proposal to raise the equity holding limit in stock
exchanges from 5 per cent to 15 per cent. The revised cap would be
applicable for single investors, both local and foreign. The decision to
revisit the existing norms on investment in stock exchanges has been
prompted by the fact that the current cap on equity holdings could act as a
deterrent to potential promoters of new exchanges. Both the capital market
regulator and the government want to foster competition among bourses to
prevent a monopoly. NSE will launch currency derivatives on August 29. NSE will be the first exchange to launch currency futures after receiving an in-principle approval from the Securities and Exchange Board of India (SEBI). This will be for the first time that even retail investors with no exposure to foreign exchange will be able to take a call on the rupee’s movement with dollar. Trading in currency futures will take place between 9 am and 5 pm. A daily mark-to-market settlement will be based on the futures closing price and will be done on a T+1 basis. The final settlement will be on the last business day of the month and will be based on RBI’s reference rate on the last trading day.
The
combined stake of FIIs in the top 500 Indian companies has dropped to a
two-year low of 18.18 per cent as on June 30, 2008 from a high of 19.86 per
cent in the corresponding period last year. The fall is due to the sharp
decline in the market value of shares coupled with a record outflow of Rs
60,000 crore in the first half of the calendar year 2008. Mutual funds saw a
marginal drop in their stake from 3.93 per cent to 3.88 per cent, though
they were net buyers of Rs 6,500 crore worth of shares. Domestic
institutions, including banks, financial institutions and insurers, have
raised their holdings from 5.67 per cent to 5.88 per cent in the same
period. The stake held by public and other corporate bodies has dropped from
17.06 per cent to 16.73 per cent in the period. The promoters’ group,
including government ownership of state-owned companies and ownership by
multinational companies, has increased by over 185 basis points to 55.33 per
cent, largely on account of many domestic promoters jacking up shares
through creeping acquisitions, preferential offers and listing of new
entities where promoter-holdings were as high as 80 per cent. With
concerns over the credit quality of Indian companies on the rise, most
domestic mutual funds are taking no chances and are trimming exposure to
company debt papers with lower investment ratings. In the last six months,
debt fund managers, handling liquid, liquid plus schemes and fixed maturity
plans (FMPs), have cut holdings in such corporate papers, with credit
ratings at BBB and below, in favour of the ones with higher ratings. .
Industry officials and watchers said mutual funds have been forced to wind
up holdings in some of the lower-grade papers also because of investors’
increased aversion to such risky investments. Though these papers fetch
higher returns than the ones with higher investment grade, several investors
prefer the latter, fearing loss of capital in the event of default by
companies. With cash flows of several smaller companies likely to slow in
the event of a slack in business, investors are worried about credit
defaults from companies in the future. Derivatives The
derivatives market continued to register high volumes despite very low
interest in the spot market and disinterest from the FIIs. Although they
have been net sellers through 2008, they have maintained major derivatives
exposures throughout with combined positions usually about 40 per cent of
all outstandings which has dropped to around 34 per cent. In the past three
sessions, a massive number of August Nifty futures have been extinguished
though there has been reasonable carryover. The Nifty August future lost
another 2.5 per cent over the week to close at 4324.1 points against its
previous week’s close of 4434.9. The Nifty September future ended further
low at 4320.15, suggesting rollover of short positions. The rollover of
Nifty open interest positions from the current month to September series has
been about 16 per cent, which is quite low considering the rollover figures
on previous occasions. About
17 per cent of all futures open interest (OI) are in September contracts.
All September index futures are priced extremely close to August contracts.
The CNXIT, Midcap-50 and the Junior don’t have much OI. There is also a
fair carryover trend in the Bank Nifty. The VIX has settled into a groove of
32-36. In the options market, OI has expanded across mid and far month while
it has dropped quite noticeably in near month. The August put-call ratio (PCR)(in
terms of OI) is exceedingly low at 0.8 and the overall PCR is also low at
1.02. Prima facie, this is a bearish signal. Around 26 per cent of OI is in
December 2008 and beyond.
The new 39
counters that entered the derivative segment on August 21, 2008, lost
between two per cent and seven per cent. There was no trading on two of
these stocks while 18 others saw trades below 50. 2.
Government Securities Market Primary
Market Reserve
Bank of India (RBI) has re-issued 8.24 per cent 2027 for Rs.6,000 crore on
August 22, 2008, at the cut-off yields of 9.86 per cent through multiple
price based auctions method. On
August 20, 2008, RBI auctioned 91-day T-bills for the notified amounts of
Rs.3,000 crore and 182-day T-bills for the notified amounts of Rs.1,500
crore (out of which Rs.1,000 crore under MSS). The cut-off yields for 91-day
and 182-day T-bills were 9.15 per cent and 9.32 per cent, respectively. Secondary
Market The
overnight call rates quoted at high of 9.80 per cent for most part of the
week reflecting the pressure on funds. Banks were cautious ahead of the RBI
bond auction with the mid-week T-bills sales already having drained cash
from the system. Bond yields remained stable in nervous trading amid
tightening liquidity and advancing international oil prices. The 10-year
benchmark yield moved in a wide range. The yield rose to a high of 9.20 per
cent during the week but eased later to 9.14 per cent. After a positive
start, the sentiment has hit by higher crude prices that triggered
inflationary fears and prompted traders to cut positions in the absence of
any other positive triggers reflected by low volumes. Liquidity continued to
be tight, adding further pressure on bonds. Better than expected cut-off at
the bond sold late in the week helped the market to end on a positive note.
The tight liquidity prompted recourse to the RBI’s repurchase window. At
the weekend liquidity adjustment facility auction, the recourse to the repo
window was Rs 32,675 crore, from 27 bidders. The liquidity in the money market remained tight on August 20, triggering inter-bank call rates to rise to an intraday high of 9.70 per cent. The funds crunch also led to banks rolling over their certificates of deposits (CDs) at 10-15 basis points higher to mobilise resources. The RBI infused around Rs 39,000 crore into the financial system under the repo window on August 20 In
a move that will streamline the process of corporate bond issues, the SEBI
has put out a draft listing agreement for the issuance of debt securities,
prepared in consultation with the BSE and NSE. The disclosures in the draft
listing agreement are based on the principle that if an issuer’s equity is
already listed, such an issuer only makes minimal incremental disclosures
specific to the debt issuance. In cases where only the debt securities are
listed, reasonably elaborate disclosures, albeit lesser than equity, are
prescribed. 3.
Bonds Market Corporate
bond yields were slightly higher, especially at the near segment similar to
the trend of the risk-free curve. After braving RBI’s tight monetary regime to curb double-digit inflation, domestic banks now face possible downgrades by rating agencies. S&P subsidiary Crisil, Icra (in which Moody’s has a stake), Fitch Ratings and Care Ratings have all launched a review of domestic banks with a view to undertaking possible downgrades. “Fitch is in the process of reviewing the ratings of 20-22 state-owned banks and 10-12 private and cooperative banks,’’ confirmed Fitch Ratings India managing director Amit Tandon. Rating agencies reckon that continued monetary tightening as well as deteriorating asset quality and profits will squeeze domestic banks in the months ahead 4.
Foreign Exchange Market The
rupee had a volatile week losing 2 per cent at one point before recovering
in the last couple of sessions to Rs 43.43 per dollar. The rupee shed 1.4
per cent on a week-on-week basis against the dollar despite appreciating for
two days in a row. The rupee fell all the way to 43.87 per dollar from last
week’s Rs 43.01per dollar, as global oil prices rose and stock markets
weakened. Given the high volatility in the spot, forward premia also jumped
with big gaps. One month and three month forward premia moved up to 5.26 per
cent (2.58 per cent) and 4.66 per cent (4.58 per cent). The 6-month
annualised premium ended at 3.84 per cent from 4.16 per cent. Surging
demand for dollars in the foreign exchange market on August 21, pushed the
spot rupee to lose 19-20 paise to reach an intraday low of Rs 43.86 against
the greenback in the first half of the trading session. Towards the end, the
spot rupee recovered to close at 43.70-71 to a dollar. The spot rupee fell
to a 17-month low of 43.70 against the dollar after opening weaker at 43.07,
compared to the closing of 43.00 last week. According to dealers, there was
acute shortage of dollars as the market remained shallow after a long
weekend. During
the week ended August 15, forex reserves fell by $3.8 billion to $296.21
billion mainly on account of an appreciation of the dollar against other
currencies. Foreign exchange reserves went above the $300-billion mark in
February this year and touched an all-time high of $316.17 billion in the
week ended May 23. Reserves have, however, declined for the last six weeks.
The latest figures from the Reserve Bank of India (RBI) showed that the
country’s foreign currency assets declined by $3.7 billion to $285.98
billion. 4.
Commodities Futures Derivatives The
finance ministry is likely to reduce the commodities transaction tax (CTT)
rate introduced in the Union Budget 2008-09. The tax is yet to be notified,
though it has been approved by the Parliament in April 2008. The
notification has been held up due to opposition from various quarters,
including Agriculture Minister Sharad Pawar and the Prime Minister’s
Economic Advisory Council (EAC). The EAC is of the view that the prescribed
rate of tax is too high for a nascent market and fears that commodity trade
may shift to overseas markets.
A 2.5 per cent
margin increase in silver on the Multi Commodity Exchange (MCX) effective
August 16 kept a section of traders away from the current volatile market.
Consequently, the total turnover of the white metal for delivery in
September nosedived 11 per cent to Rs 962.57 crore on August 18. Commodity
regulator Forward Markets Commission (FMC) has sought details from National
Multi Commodity Exchange (NMCE) on Reliance Money’s proposal to acquire 26
per cent stake. The regulator has also asked for information on the action
taken to avoid a potential conflict of interest with Reliance Anil Dhirubhai
Ambani Group’s other commodity ventures.
Indiabulls
Financial Services is set to close a deal with HDFC Bank, Yes Bank and
Delhi-based India Potash to offload around 35 per cent stake in the
commodity exchange it is setting up with public sector company MMTC. A
source close the development said the three players are expected to pick up
around 10 per cent each in the venture, with MMTC holding 26 per cent and
Indiabulls the remaining 40 per cent stake. According to FMC guidelines, no
investor can hold over 40 per cent stake in a national exchange. It had also
said institutions connected with financial and commodity markets may be
allowed to hold up to 20 per cent, while foreign investors can hold a
maximum 5 per cent equity in Indian exchanges.
Goldman Sachs,
Fidelity International and Inter Continental Exchange (ICE) have got time
till June 30, 2009 to reduce their foreign investment exposure to within 49
per cent of total equity and pare their stakes in Indian commodity exchanges
to 5 per cent. Goldman Sachs holds a 7 per cent stake in the National
Commodity & Derivatives Exchange (NCDEX), while ICE owns 8 per cent in
the exchange. Similarly, Fidelity has a 9 per cent stake in the MCX, with
Citigroup, Merrill Lynch and NYSE Euronext owning 5 per cent each. The
exchanges need to furnish a compliance report to the government detailing
the equity structure by June 30, 2009, the commerce ministry said in a
statement on August 21. The
ban on trading in certain commodity futures may be revoked by October if the
government accepts the recommendations of the Forward Markets Commission.
.Last year, the government had delisted tur, urad, wheat and rice. The
regulator suspended trading in rubber, potato, chana and soya oil in May
this year. The delisting was indefinite, while trading was suspended for
four months till September 6. The moves were aimed at taming inflationary
expectations as the government was under political pressure on farm futures
trading. FMC chairman B C Khatua said, “We have sent a detailed factual
and analytical report to the Union government explaining the situation.”
The National
Commodity and Derivatives Exchange (NCDEX) is planning to launch futures
trading in thermal coal by September 10, the exchange’s Chief Business
Officer Unopam Kausik said on August 23. Initially, the exchange plans to
introduce a contract lot size of 100 tonnes and the trading centre will be
in
Except gold
futures, crude oil, silver and copper futures on the national bourses turned
higher on week ended on August 22, mainly following the firm trend in the
overseas markets. Gold futures on MCX finally settled marginally higher
following strong crude oil prices. Crude oil spot in the
Maize, both in
spot and futures market, is bearish today on lack of demand from the poultry
and starch industries ahead of new arrivals in the next two weeks. In
futures market, September delivery of maize tumbled by one per cent to Rs
939 a quintal on NCDEX counter owing to weak sentiments in the spot market.
The October contract dipped by 1.25 per cent at Rs 877 a quintal. Spot
prices, which were ruling at above Rs 1,000 a quintal level two days back,
fell sharply to Rs 994 a quintal at Nizamabad in Andhra Pradesh, the main
centre for maize trading in the country. Insurance The
private sector life insurer, Bajaj Allianz Life Insurance, has launched a
new product, ‘Fortune Plus’, which comes with a unique investment,
‘Asset Allocation Fund’, where one doesn’t have to worry about
switching funds in case the market condition changes. Rather, the
company’s fund managers will monitor the mix of assets in the fund and
will mange the mix in such situations to maximise one’s returns. Also, the
product promises more than 100 per cent allocation on completion of 10 years
of association with the company. Corporate
Sector The
Aditya Birla group plans to increase production at its copper concentrate
mines at Nifty and ABG
Shipyard has decided to set up a Hindustan
Zinc has lined up an investment of Rs 3,600 crore for its expansion plans
which include commissioning of 210 ktpa zinc smelter, 100 ktpa lead smelter
and setting up of 160 MW of captive power plants with fully integrated
mining capacities. Berger
Paints, the second largest paint producer acquired Bolix SA of Media
and entertainment company UTV Software Communications acquired 80 per cent
stake in California-based gaming company True Games Interactive.
Toyota
Kirloskar Motors (TKM), the subsidiary of Japanese auto giant Toyoto Motor
Corporation, plans to set up an engine manufacturing facility in Information
Technology Bartronics
Telecom Idea
Cellular, has turned almost debt-free following transactions with private
equity firm Providence Partners and Telekom Malaysia (TM).
Mumbai-based
Telecom solutions provider Spanco Tele Systems & Solutions has bagged a
Rs 70 crore contract from the Orissa government for setting up state wide
area network (SWAN), which will connect government offices in nearly 300
districts and blocks with the state headquarters. In a move that would see STD tarrifs dropping even further, TRAI has recommended ‘unrestricted internet telephony’, which once implemented would enable calls from personal computers (PC) to fixed line and mobile phones. Internet telephony in the current form only permits PC to PC calls. The move would enable internet service providers (ISPs) to provide full telephony services. However, mobile service providers like Bharti, Reliance and BSNL are expected to feel the heat with increased competition. In fact, the GSM industry body, COAI expressed unhappiness over the move stating that the move doesn’t ensure a level playing field and created a bias in favour of the ISPs as they would not require a unified access service licence to provide the services.
*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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