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Current Economic Statistics and Review For the
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Theme
of the week:
Port Infrastructure*
Port: Significance of Maritime Transportation Maritime transportation has always remained critical for the development of world trade since time immemorial. The international transportation of merchandise goods is dominated by the maritime sector (comprising of shipping and port infrastructure) for its ability to offer the most economical (energy efficient) mode of transportation over large distances. While shipping refers to physical process of transporting goods and cargo using three basic modes – land, air and sea, a port is a node in transport networks. However, ports can be considered to be more than just a node in a transport system, as they provide an interface between the ocean transport and land-based transport. A seaport is an area with maritime and hinterland access that has developed into a logistics and industrial centre, playing an important role in global industrial and logistics networks (Larissa M. van der Lugt, et al, 2005). Thus, in broader terms, ports are single organisational units with multi-dimensional activities integrated within the logistics chain for providing services to maritime trade. Port is not a single entity. It comprises of many sub- categories and enterprises. These include stevedores, road and rail freight forwarders, warehouse operators, container terminal operators, container repairers, custom agents, dockworkers, ship chandlers, bankers, lawyers, etc. The port infrastructure also stimulates shipping industry; ship building, ship repair and ship breaking industries, maritime equipment industry, dredging and offshore industry as well as fishing and aqua culture industry. A port often serves as a location for value added logistics and other economic activities. For instance, ports provide space for warehouses and other logistics related facilities and services. Thus, they are often seen as engines behind regional economic development. In fact, the economic importance of a port is largely determined by its success in attracting additional economic activities. This can be observed by the fact that the performance of ports is increasingly measured in added value terms instead of throughput tonnes (or containers) (Larissa M. van der Lugt, et al, 2005). Both classical economists like Adam Smith (1766) and the pioneers of development economics like Myrdal (1957) and Hirschman (1980) mentioned that port based development strengthen the classic sequence of specialisation --> division of labour --> productivity --> transport infrastructure --> extent of market (Chudasama K.M. and Dr. Kota Sudhakar (2007)). Global Scenario Globally, sea-borne trade is handled through more than 3,000 ports, from single berth locations handling a few hundred tonnes to multipurpose facilities handling up to 300 million tonnes per annum. World sea-borne trade, according to estimates of ‘Review of Maritime Transport 2007’ published by UNTACD, has increased by 4.3 per cent in 2006, reaching 7.4 billion tonnes of loaded goods. World container trade has doubled in last seven years and reached a level of 1120 million tonnes, in 2006. Crude oil accounted for 26.9 per cent of total goods loaded, while petroleum products represented 9.2 per cent. The larger balance of world goods loaded (63.9 per cent) was made up of dry cargo, including bulk, breakbulk and containerised goods. A geographical breakdown of total goods loaded by continent highlights the continued preponderance of Asia, with a share of 39.1 per cent followed in descending order by America (21.5 per cent), Europe (19.6 per cent), Africa (10.7 per cent) and Oceania (9.1 per cent). World container port throughput grew by 13.4 per cent to reach 440 million TEUs in 2006 after stumbling slightly in 2005 with 8.7 per cent growth after a gain of 12.8 per cent in 2004. Developing countries handled 265.4 million TEUs, or 65 per cent of the world total in 2006; this is up from 62.1 per cent for 2005. In 2006 there were 62 countries with a throughput of above 100,000 TEUs, and 24 countries with double-digit growth in 2006 compared with 22 in 2005. Together the top 20 world container ports handled 208.7 million TEUs, 51 per cent of the world total. According to Shipping Statistics Yearbook 2006, (USA), Shanghai (China) has emerged as the largest port in terms of volume of cargo handled (537 metric tonnes) followed by Sinagpore (448.5 freight tonne) and Rottardam of Netherlands (378.4 metric tonnes). Indian Scene Maritime transport, which accounts for approximately 95 per cent of the country’s trade in terms of volume and 70 per cent in terms of value, has been an important natural resource for intra-regional trade in the country. Along with a coastline of around 7,517 kms spread over the western and eastern shelves of the mainland and also along the islands, maritime transport has been carried out through 12 major ports and 200 minor ports in India. The classification of Indian ports into major, minor and intermediate has an administrative significance. As maritime transport falls under the ‘concurrent list’, following the federal economy structure, major ports are administered by the Central Shipping Ministry, while the minor and intermediate ports are administered by the relevant departments or ministries in the nine coastal states. All the major ports are regulated under the major Ports Trust Act, 1963, except for the newly constructed Ennore Port, which is run by a company named Ennore Port Ltd. registered under the Companies Act, 1956.
The major ports include Kolkata (including Dock Complex at Haldia), Paradip, Visakhapatnam, Chennai, Ennore and Tuticorin on the East Coast and Cochin, New Mangalore, Mormugao, Jawaharlal Nehru at Nhava, Mumbai and Kandla on the West Coast. They primarily offer a combination of dedicated bulk terminals, some specialized container terminals and several cargo berths. State-wise bifurcation of non-major ports is given in table1.
Notwithstanding this, all major ports handle 3/4th of the total traffic. Among them, Vishkhapatanam, Kandla, Mumbai, Chennai and Kolakata (including Haldia) ports together have a share of 60 per cent or more in the total traffic handled during 1996-97 to 2007-08. The contribution of Vishakhapatanam port has ranged between 12 – 16 per cent, that of Kandla port 10.5-17 per cent and of Chennai port between 10.5 – 14.1 per cent. The other ports have not displayed much variation in their corresponding shares indicating a possibility that their capacities have fallen short of accommodating increasing volume of traffic.
The non-major ports, as on March 31, 2007, have an aggregate capacity to handle 228.3 mtpa traffic, led by Gujarat which has capacity to handle 182 million tonnes of cargo per annum, followed by Andhra Pradesh (18.5 mtpa) and Goa (11.7 mtpa) and Maharashtra (11.1 mtpa). The total required port capacity by 2011-12 is estimated at around 1,500 mtpa. The major ports are expected to add about 500 mtpa by this period, the non-major ports are likely augment their capacities by 610.85 million tonne per annum during the same period taking the total non-major port handling capacity to 839.168 mtpa or approximately 46.5 per cent of the aggregate capacity as against 26.6 per cent at the beginning of the eleventh five-year plan period.
Commodity-wise
Traffic handled at Major Ports POL group of commodities form the
largest part of the cargo handled by major ports. It had accounted for 43.2 per
cent of the total cargo handled in 1996-97 (Annexure 1). Over the decade, its
share has declined to 32.5 per cent in 2007-08. Another two important
commodities traded include iron ore and coal, which together form around 30 per
cent of the cargo handled during the period under review. Noticeably, each of
the major ports is known and specialised in handling different types of cargo.
For instance, in case of Share of
Ports in Import, Export and Transhipment As for handling of import, export
of cargo and transhipment, Jawaharlal Nehru port is the only port that has
witnessed increase in its share in all the three respects. With regard to the
import cargo in the year 2006-07, there are 6 major ports i.e., the Chennai
port, the Haldia port, the Jawaharlal Nehru port, the Kandla port, the Mumbai
port, and the Visakhapatnam port, which have registered a share more than the
average share of 7.8 per cent, as compared to the year 1999-2000 when only five
major ports, i.e., the Chennai port, the Haldia port, the Kandla port, the
Mumbai port and the Visakhapatnam port, registered a share more than the average
share of 7.7 per cent (Table 4). With regard to the export cargo, only five
major ports in the year 2006-07, namely, Chennai port, the Mormugao port, the
Jawaharlal Nehru port, the Paradip port and the
In case of transhipment activities,
port of Kandla and port of Vishakhapatanam, which had the largest share of 37.6
pr cent and 31.7 per cent in 1999-2000, have seen sharp declines by 2006-07 and
have accounted for 16.6 per cent and 4.5 per cent of the toptal transhipped
cargo, respectively. On the contrary,
Commodity composition of the overall trade has shown that petroleum products have seen decline in its share in import, while coal has experienced fall in terms of exports. However, container cargo has witnessed increase in its share, both in terms of import as well as exports (Table 5).
The progress in the total container
traffic in the country can be observed from Table 6. Container traffic has
increased from 27.7 million tonnes in 1999-00 to 73.4 million tonnes in
2006-07. Only two major ports—the Chennai port and the Jawaharlal Nehru
port—have registered increase in their respective share in handling container
traffic during 1999-00 to 2006-07. In fact, Jawaharlal Nehru port alone has
handled 55.6 per cent of container cargo in 2006-07. The share of
Other
Performance Indicators Two important parameters that need to be observed carefully while measuring the performance of major ports are average turnaround time and average output per ship berth, which help measure productivity of the ports. Fast turnaround for the ships at the ports would give the ships more time for sailing. This correspondingly helps ships earn more freight. Moreover, exporters and importers would be required to maintain fewer inventories and they could also save on expenditures such as freight rates, arbitrarily fixed charges such as Terminal Handling Charge (THC) and Container Detention Charge (CDC) in ports as determined by the ship owners, and other costs such as interest on capital (Larissa M. van der Lugt, et al, 2005).
A port-level comparison reflects
that all the ports have improved the efficiency by reducing the average
turnaround time of the ships. Of all the major ports, ports of Chennai, Cochin,
Ennore, Jawaharlal Nehru and New Manglore have their average turnaround time
less than the group average (3.5 days). The average turnaround time of all the
ports in 1999-00 was 4.8 days and the number of major ports that experienced
average turnaround time less than the group-average were As for, the average output per ship day, it has improved for all the major ports over the same period with Jawaharlal Nehru port registering an outstanding performance with average output per ship day growing by 183 per cent from 5905 tonnes in 1999-000 to 16727 tonnes in 2006-07. This shows that despite the congestion and overcrowding, the ports are positively responding to the changing competitive environment by improving the operation efficiency.
(*: This note has been prepared by Miss Pallavi Oak). References ·
Chudasama K.M. and Dr. Kota Sudhakar (2007), ‘Managing
Maritime Infrastructure: Lessons from UAE and · Larissa M. van der Lugt and Peter W. de Langen (2005), ‘The changing role of ports as locations for logistics activities’, Journal of International Logistics and Trade, Vol.3. No.2, December · Ministry of Shipping, Road Transport and Highways, ‘Annual Report 2006-07’ Department of Shipping ·
Sajikumar (2007), ‘Indian Ports: Post-Liberalization
Performance’, The ·
United Nations
Conference on Trade and Development (UNCTAD) Secretariat (2007),
‘Review of Maritime Transport 2007’ · Various Media Sources · Economic Survey, Various Issues
Annexure 1: Commodity-wise Traffic At
Major Ports I.1 Volume of Cargo in million tonnes POL Fertilisers Finished Fertliser Raw Material Foodgrain Coal
Other Cargo Total 1996-97 98.08 3.346 3.833 3.256 33.047 34.872 50.823 227.257 1997-98 104.004 4.85 7.963 3.021 40.732 41.831 49.258 251.659 1998-99 107.444 4.664 8.105 3.571 34.288 42.762 50.886 251.72 1999-00 116.704 5.541 6.408 2.719 36.09 42.492 61.969 271.923 2000-01 108.347 3.028 9.076 1.989 40.46 53.361 64.844 281.105 2001-02 103.175 3.492 10.469 3.856 45.756 50.066 70.765 287.579 2002-03 109.63 2.881 10.286 8.514 50.555 52.076 79.587 313.529 2003-04 122.163 2.857 8.973 6.831 58.81 53.538 91.627 344.799 2004-05 126.442 3.846 10.215 3.812 76.195 59.694 103.542 383.746 2005-06 142.087 6.624 10.297 2.092 79.171 67.941 115.355 423.567 2006-07 154.339 7.928 9.49 5.005 80.585 71.125 135.31 463.782 2007-08 168.897 10.612 6.052 2.903 91.974 64.725 174.077 519.24 Source: CMIE
Infrastructure 2008 I.2 Percentage Share in Total Traffic POL Fertilisers Finished Fertliser Raw Material Foodgrain Coal
Other Cargo Total 1996-97 43.2 1.5 1.7 1.4 14.5 15.3 22.4 100.0 1997-98 41.3 1.9 3.2 1.2 16.2 16.6 19.6 100.0 1998-99 42.7 1.9 3.2 1.4 13.6 17.0 20.2 100.0 1999-00 42.9 2.2 2.5 1.1 14.3 16.9 24.6 108.1 2000-01 38.5 1.1 3.2 0.7 14.4 19.0 23.1 100.0 2001-02 35.9 1.2 3.6 1.3 15.9 17.4 24.6 100.0 2002-03 35.0 0.9 3.3 2.7 16.1 16.6 25.4 100.0 2003-04 35.4 0.8 2.6 2.0 17.1 15.5 26.6 100.0 2004-05 32.9 1.0 2.7 1.0 19.9 15.6 27.0 100.0 2005-06 33.5 1.6 2.4 0.5 18.7 16.0 27.2 100.0 2006-07 33.3 1.7 2.0 1.1 17.4 15.3 29.2 100.0 2007-08 32.5 2.0 1.2 0.6 17.7 12.5 33.5 100.0 Source: CMIE
Infrastructure 2008 I.3 Growth in
traffic (in per cent) POL Fertilisers Finished Fertliser Raw Material Foodgrain Coal
Other Cargo Total 1996-97 1997-98 6.0 44.9 107.7 -7.2 23.3 20.0 -3.1 10.7 1998-99 3.3 -3.8 1.8 18.2 -15.8 2.2 3.3 0.0 1999-00 8.6 18.8 -20.9 -23.9 5.3 -0.6 21.8 8.0 2000-01 -7.2 -45.4 41.6 -26.8 12.1 25.6 4.6 3.4 2001-02 -4.8 15.3 15.3 93.9 13.1 -6.2 9.1 2.3 2002-03 6.3 -17.5 -1.7 120.8 10.5 4.0 12.5 9.0 2003-04 11.4 -0.8 -12.8 -19.8 16.3 2.8 15.1 10.0 2004-05 3.5 34.6 13.8 -44.2 29.6 11.5 13.0 11.3 2005-06 12.4 72.2 0.8 -45.1 3.9 13.8 11.4 10.4 2006-07 8.6 19.7 -7.8 139.2 1.8 4.7 17.3 9.5 2007-08 9.4 33.9 -36.2 -42.0 14.1 -9.0 28.7 12.0 Source: CMIE
Infrastructure 2008 Agriculture The central government as on
October 16, 2008 has approved for Rs 50 per quintal bonus for paddy, over and
above the already declared minimum support price (MSP) payable during the
current kharif marketing season (October-September) 2008-09. Additional hike in
the MSP would lead common variety of paddy to fetch Rs 900 per quintal and
Grade ‘A’ variety to earn Rs 930 per quintal. These rates would be applicable
for the entire marketing period 2008-09. The increased MSP, however, has been
lower than Rs 1000-1050 per quintal range recommended by the Commission for
Agricultural Costs & Prices. Procurement of paddy by six government
agencies and traders in According to the latest report by Food
and Agricultural Organization (FAO) of the United Nation, country’s total paddy
output is estimated to increase to 147 million tonnes during 2008 as compared
to 144.6 million tonnes in 2007.The Kharif season that contributes around 80
per cent of the total output, is expected to produce an extra 15 per cent paddy
this year which would be around 110 million tonnes as against 96.35 million
tonnes last year. Wheat output would rise by 4 per cent to 78 million tonnes in
2008 as compared to 75 million tonnes during last year. This would mark as the
highest output level during last 8 years and would be 2.2 million tonnes higher
than the previous record set last year. This improvement can be attributed to
favourable weather conditions and increased inputs available during the main
growing season. On the contrary, diversion of area to more remunerative crops
including wheat and rice would result into a downward production forecast of
coarse grains to 37.7 million tonnes this year from 39.7 million tonnes last
year. Thus, According to the state government of Uttar Pradesh, State Advised Price (SAP) for common variety sugarcane to be crushed during the current season that has begun this month would be around Rs 140 per quintal as against Rs 125 a quintal last year. Similarly, SAP for early variety sugarcane has been fixed at Rs 145 (up from Rs 130) and for rejected variety, it would be Rs 137.50 per quintal (from Rs 122.50). Ban imposed on exports of maize this
year is coming to close on October 15, 2008, as government has not extended it
any further. The overall import of vegetable oils
(edible + non-edible) during the first eleven months of the oil year (Nov-Oct)
2008 has risen by 13 per cent to 5,429,247 tonnes as compared to 4,802,153
tonnes during the same period a year ago. In view of the lean crushing season, import
of vegetable oils is likely to be around 6 to 6.50 lakh tonnes in the month of
October, as kharif oilseeds crop would be available for crushing in November.
The total import of edible oils is likely to be in range of 53 to 53.5 lakh
tonnes and non-edible oils would be around 6.5 lakh tonnes. It is estimated
that overall import of vegetable oil for the oil year 2007-08 would be around
60 lakh tonnes (including import of vanaspati of 50,000 tons) as compared to
55.9 lakh tonnes in 2006-07. Country's cotton production for the
current season is estimated to rise marginally by 2.22 per cent at 32.2 million
bales (1 bale = 170 kg) as against 31.5 million bales last year. The acreage
under the crop has fallen by 3.09 per cent to 9.26 million hectares as compared
with 9.55 million hectares last year. Cotton Advisory Board (CAB) reiterated
that despite fall in coverage under cotton, most of the acreage is covered by
Bt Cotton owing to which yield is expected to increase in the cotton year
2008-09 (October-September) more than last year. It is estimated that Bt cotton
has captured 75 per cent of the total acreage this year as against 67 per cent
last year. The average yield per hectare is estimated to be at 591.14 kg per
hectare, up by 5.48 per cent, as against last year’s 560.44 kg per hectare.
Output of cotton in north and central regions are estimated to fall by 8.51 per
cent and 1.54 per cent, respectively. Contrary to it, south zone would
outperform this year by 24 per cent at 7.3 million bales as against last year’s
5.9 million bales. According to figures compiled by Cashew
Export Promotion Council of India (CEPCI), exports of cashew kernel has shown
an upward trend for the six-month period ended September 2008 during the
current financial year by registering a jump of 44.5 per cent to Rs 1,585.61
crore compared to the corresponding period last year. The rise was mainly
attributed to a 67 per cent increase in the prices of the commodity in the
international markets. In volume terms, exports went up marginally by 2.6 per
cent to 58,647 tonnes compared to the same period last financial year.
Exporters have experienced a huge jump of 40.85 per cent in unit value
realisation to Rs 270.36 per kg compared to the same period last year. The
country’s 3,500 cashew-processing units, which are largely dependent on imports
of raw cashew nut, have imported 420,270 tonnes in the first six months of the
year, a rise of 7.54 per cent compared to the corresponding period last year.
Value of imports of raw nuts went up by a whopping 81 per cent to Rs 1,728.08 crore
in April to September 2008 compared to the same period last year. The unit
value of each kilogram of cashewnut rose by 68.24 per cent to Rs 41.06 during
the period against the same period last year. Import of pepper from
According to the Tea Board, exports in
terms of volume have increased by 4 per cent to 18.47 million kg in August as
against 17.78 million kg in the year-ago period. While shipments in the first
eight months of this year shot up by 20 per cent to 124.04 million kg, compared
with 106.64 million kg in the corresponding period last year, due to a
shortfall in output from major producer country The central government has permitted to cultivate imported
variety of shrimp, namely, Litopenaeus Vannamei shrimp species in the country.
It has also given direction to constitute monitoring committees at various
levels to inspect the farms in which this imported variety of shrimp would be
cultivated. According to the latest estimates of
the Department of Commerce (DoC), Industrial Production The General Index stands at 273.0, which is 1.3% higher as compared to the level in the month of Aug 2007. The cumulative growth for the period April-Aug 2008-09 stands at 4.9% over the corresponding period of the pervious year. Mining, Manufacturing and Electricity sectors for the month of Aug 2008 stand at 162.2, 282.4, and 221.6 respectively, with the corresponding growth rates of 4.0%, 1.1% and 0.8 % as compared to Aug 2007. The cumulative growth during April-Aug, 2008-09 over the corresponding period of 2007-08 in the three sectors have been 4.1%, 5.2% and 2.3% respectively, which moved the overall growth in the General Index to 4.9%. Seven out of the seventeen industry groups (as per 2-digit NIC-1987) have shown positive growth during the month of Aug 2008 as compared to the corresponding month of the previous year. The industry group ‘Transport and Equipments and Parts’ have shown the highest growth of 11.2%, followed by 8.9% in ‘food products’ and 8.0% in ‘Basic Metals and Alloys’. On the other hand, the industry group ‘Wool, Silk and Man-made Fibre Textiles’ have shown a negative growth of 14.9% followed by12.3% in ‘Metal Products and Parts’. Sect oral growth rates in Aug 2008 over Aug 2007 are 3.9% in Basic goods, 2.3% in Capital goods and (-)6.2% in Intermediate goods. The Consumer durables and Consumer non-durables have recorded growth of 5.1% and 5.0% respectively, with the overall growth in Consumer goods being 5.1%. 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 stood at 240.1 in July
2008 and registered a growth of 4.3 per cent compared to a growth of 7.2 per
cent in July 2007. During April-July 2008-09, six core-infrastructure
industries registered a growth of 3.7 per cent as against 6.6 per cent during
the corresponding period of the previous year. Crude Oil production (weight
of 4.17 per cent in the IIP) registered a negative growth of 3.0 per cent in
July 2008 compared to a growth rate of 0.9 per cent in July 2007. The Crude Oil
production registered a growth of (-) 0.9 per cent during April-July 2008-09
compared to (–) 0.3 per cent during the same period of 2007-08. Petroleum refinery
production (weight of 2.00 per cent in the IIP) registered a growth of 11.8 per
cent in July 2008 compared to growth of 4.7 per cent in July 2007. The
Petroleum refinery production registered a growth of 5.4 per cent during
April-July 2008-09 compared to 11.0 per cent during the same period of 2007-08. Coal production (weight of
3.2 per cent in the IIP) registered a growth of 5.5 per cent in July 2008
compared to growth rate of 1.1 per cent in July 2007. Coal production grew by
7.7 per cent during April-July 2008-09 compared to an increase of 0.8 per cent
during the same period of 2007-08. Electricity generation
(weight of 10.17 per cent in the IIP) registered a growth of 4.5 per cent in
July 2008 compared to a growth rate of 7.5 per cent in July 2007. Electricity
generation grew by 2.6 per cent during April-July 2008-09 compared to 8.1 per
cent during the same period of 2007-08. Cement production (weight of
1.99 per cent in the IIP) registered a growth of 8.8 per cent in July 2008
compared to 9.4 per cent in July 2007. Cement Production grew by 6.5 per cent
during April-July 2008-09 compared to an increase of 7.7 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 1.9 per cent in July 2008 compared to 10.8 per cent (estimated) in July 2007. Finished (carbon) Steel production grew by 3.8 per cent during April-July 2008-09 compared to an increase of 6.8 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 4th October 2008 declined by 05 per cent to 239.6 from 240.7
(Provisional) for the previous week. The annual rate
of inflation, on point to point basis, stood at 11.44 percent for the week
ended Oct 4, 2008 as compared to 3.22 percent during the corresponding period a
year ago. Index of Primary Articles, major group, rose by 0.2 percent due to higher prices of bajra, ragi, fruits and vegetables, castor seed and gingelly seed. The annual rate
of inflation, calculated on point-to-point basis, for ‘Primary Articles’ stood
at 12.68 percent as compared to 4.99 percent a year ago. The index for fuel power, light and lubricants remained declined marginally due to lower prices of naphtha, avaiation turbine fuel and funace oil. The index for manufactured products dipped by 0.5 percent due to of fall in food products prices by 2.4 per cent. For the week ended 9/08/2008, the final wholesale price index for 'All Commodities’ (Base: 1993-94=100) stood at 241.1 as compared to 240.7 (Provisional) and annual rate of inflation based on final index, calculated on point to point basis, stood at 12.82 percent as compared to 12.63 percent. Financial MarketsCapital Market Primary Market Alkali Metals
Ltd has decided to extend the last date for its initial public offering (IPO)to
October 15 from its scheduled to close on October 10 and cut the price band to
Rs 86-103 from Rs 90 to Rs 105 a equity share
due to adverse market conditions. State-run Oil India Limited's (OIL) IPO has been put off by at least a month in view of the choppy market conditions. OIL was to launch its IPO of 2.64 crore equity shares on November 10, but the reversal of fortunes on the stock markets has resulted in a rethink on its timing. Secondary Market The BSE Sensex declined below 10,000-points mark despite several initiatives taken by RBI to inject liquidity into the system due to weak global sentiments and concerns of a slowdown in GDP weighed heavily on market sentiments. Further, CRR rate cut of 100-basis points by Reserve Bank of India (RBI), a lower inflation number at 11.44 per cent and stable crude oil prices failed to lift sentiments. Weak global sentiments, unimpressive results from the likes of Satyam, HCL Tech ensured that the BSE Sensex dropped below the five-digit mark to touch the lowest level in the last two-years. The stock market regulator's decision to raise margins in the derivatives segment also weighed on investor sentiment. The BSE Sensex declined by 552 points or 5.25 per cent to 9,975 points during the week. The BSE Mid-Cap index fell 3.57 per cent at 3,544.84 and the BSE Small-Cap index fell 4.31 per cent at 4,167.86. Both the indices outperformed the Sensex. The S&P CNX
Nifty fell 205.60 points or 6.26 per cent to 3074.35 in the week. Among the sectoral indices of BSE, Metal, Oil and Gas and Capital goods index shed 11.3 per cent, 10.9 per cent and 9.3 per cent over the week as concerns of a slowdown in the economy. In a key change
in its stance, the Securities and Exchange Board of India (SEBI) is keeping its
options open on banning short sales, which a section of brokers believe are
responsible for the collapsing stock market. The benchmark BSE Sensex fell
below 10,000, first time since July 2006. The regulator is studying the data
before taking a final decision. Short selling or "shorting" refers to
the practice of selling shares that the seller does not own at the time of the
sale with the intent of buying it later at a lower price. Short-sellers attempt
to profit from expected decline in share prices. The market regulator has so
far maintained that there is no need to ban short selling, ignoring growing
pressure from a section of brokers to do so. These brokers believe that a
cartel is "shorting" to pull the market down at a time when foreign
institutional investors (FIIs), under pressure in their home countries, have
been selling consistently since September 15, when Lehman Brothers, one of the
largest investment banks in the Data released by
the SEBI on the details of the securities lent for short sales or derivative
instruments that have a similar effect, by the FIIs reveals that there were
strong short positions build-up between October 7 and October 10. Numbers
reported by 17 FIIs reveal a build up of short positions in the market from
October 3 till October 10, when the market witnessed one of its largest fall of
around 16 per cent. In a bid to help
the domestic mutual fund industry, which is reeling under a severe liquidity
crisis, the RBI has decided to allow them to raise funds against certificate of
deposit (CDs). RBI relaxed the CD guidelines in the backdrop of the redemption
pressure being faced by mutual funds, allowing them to seek loans against CDs
or surrender them to banks before maturity. The relaxation would be subject to
the SEBI (Mutual Funds) Regulations, according to which, “A mutual fund shall
not borrow except to meet temporary liquidity needs of the mutual funds for the
purpose of repurchase, redemption of units or payment of interest or dividend
to the unit holders.” The central bank
will also conduct a special 14-day repo auction, at which it would infuse Rs
20,000 crore to meet the liquidity requirements of mutual funds. A bailout
package of Rs 20,000 crore through the short-term lending route to help mutual
funds meet their liquidity needs and overcome redemption pressure may actually
send investors scurrying to mutual funds to redeem their units. A big slice of
FIIs offloading in the stock market over the past two months is believed to be
on account of sale of borrowed shares under participatory notes (P-Notes). On
October 15, SEBI said that, sales by FIIs and their sub-accounts are also
possible on account of the securities being lent by these FIIs/sub-accounts
abroad. The regulator also said the position of securities lent by these
entities abroad shall be shared on a consolidated basis twice a week — every
Tuesday and Friday. Derivatives Banning of PN stock-lending increases possibility of short-covering which means disproportionately large bounces in this low-volume market. The past two weeks, prices have fallen so fast, option traders have trouble due to the lack of quotes at the south end of option chains. The week started on a bright note, it ended very weak. Since breaking the 3,800 level the Nifty has fallen 750 points inside 10 sessions. This incorporates one strong pullback and several sessions of sideways trading. The bear onslaught, which became prominent in the second half of the week, spoiled the positive mood with which the market began on Monday. Both Nifty and Nifty futures breached their important technical supports during Friday’s sharp slump. The Nifty October future closed well below the spot Nifty, registering a fall of over 7 per cent during the week. November month Nifty future however was at a premium to spot. It closed at 3087.7 points against Nifty’s close of 3074.35 points. That said, this premium however has dwindled quite sharply when compared with last week on the back of rollover of short positions. Volatility has risen sharply with intra-day movements of 200-250 points. The VIX at 46 says implied volatility is also very high. The FIIs continue to hold around 35-40 per cent of all derivative outstandings while being consistent sellers in cash. Trading is concentrated on the Nifty. The downtrend has been pretty much spread across all industries but stocks with high leverage and high FII holdings have lost more ground. Settlement is two weeks away and though margins have been hiked, Index derivatives are at discounts or very small premiums to underlyings. The Nifty put-call ratio (PCR) (in terms of open interest (OI)) stands at 0.55 for October and at about 0.7 for all Nifty option OI. The PCR is very low and bearish and hedge ratios are very high. The cumulative FII positions as percentage of total gross market position on the derivative segment as on October16 increased to 37.83 from last week’s 35.79 per cent. This indicates that retail and domestic players have reduced their activity in the market.
Government
Securities Market Primary Market On October 15, RBI auctioned 91-day T-bills and 182 day T-bills for the notified amount of Rs 5,000 crore and Rs 2,000 crore, respectively. The cut off yield for 91-day T-bills and 182 day T-bills were 8.69 per cent and 8.68 per cent, respectively. Secondary Market The overnight inter bank rates remained steady in 6.5-7 per cent range, below the repo rate as the liquidity in the system was adequate to meet requirements. In G-sec market, yields eased after the finance minister’s statement that regulators would work on more measures to improve liquidity. Expectations of improvement in liquidity spurred buying in the market. Despite subsequent easing of call rates, yield on G-sec firmed on concerns over a cut in the SLR which would reduce demand for G-sec. Traders offloaded bond portfolio resulting in 10-yr benchmark yield rising to 7.91 per cent. Yields eased drastically after the 100 bps cut in CRR and bonds staged a rally across all maturities. The drop was sharpest in the 10-year maturity paper. Lower inflation figure of 11.44 per cent also boosted the sentiments. Bonds went into a tizzy with the RBI releasing cash reserves and pumping in liquidity to prop up anxious markets. Traders said that sagging oil prices had little impact. In money market, call rates eased as a slew of measures by RBI, along with the release of the first instalment of farm loan waiver, injected close to Rs.1,45,000 crore into the system. The rates substantially declined to hover close to reverse repo rate. Daily repo injection under LAF by RBI has declined to Rs. 7,000 crore from a high of Rs. 90,000 crore witnessed earlier during the month. RBI’s special repo facility witnessed daily injection of about Rs. 3,500 crore. Weighted average call and Collateralised Lending Obligations (CBLO) rates declined substantially to 6.94 per cent and 6.22 per cent respectively at the end of the week vis-à-vis previous week’s closing levels of 19.69 per cent and 11.97 per cent respectively. RBI said it would conduct a special 14-day repo auction for 140.30 billion rupees ($2.9 billion) on Friday to enable banks to meet liquidity needs of mutual funds. The central bank is holding the special repo auction every day until available funds of 200 billion rupees had been utilised. The liquidity influx dragged down call money rates to 7 per cent towards the end of the week, away from double-digit figures. The drop was more pronounced in the CBLO markets. CBLO volumes at around Rs 25,000 crore per day were higher than call trade volumes of about Rs 22,000 crore. Average daily trade volumes during the week were down to Rs 7,700 crore. The outlook remained positive with more liquidity infusion measures expected during the next few days ahead of the peak season. The buy-sell spreads were just about 5-10 basis points implying high demand. Among the liquidity infusion measures expected were some redemption of market stabilisation scheme securities. Bond Market During the week under review, Bank of India tapped the market by issuance of upper tier II bonds to mobilise Rs 500 crore by offering 11.15 per cent for 15 years and 11.65 per cent if call is not exercised, and call at the end of 10th year. The bond has been rated AA+ by Crisil.
Foreign
Exchange Market Decline in stock market, appreciation of the dollar against major currencies along with accelerating dollar demand on account of FII selling and offshore deals led to further weakening of rupee. The rupee moved in tandem with the stock market on October 17, falling to its lowest close in over six years. The rupee ended the day at Rs 48.89 against the dollar, which had last closed at these levels in June 2002. FIIs, during the week, made net sales equivalent to $1.8 billion. The sales kept the rupee-dollar exchange rate at Rs 48.68. The drop would have been far sharper but RBI intervention helped rupee recover to end the week at Rs 48.89 per dollar – 43 paise below previous week's close of Rs 48.46 per dollar. The intervention was done partly through swaps, sell and buyback later. The swaps and hedging by oil companies pushed up forward premia. Premia for one, three, six and twelve months firmed slightly to 1.48 per cent (0.74 per cent), 0.66 per cent (0.16 per cent), 0.49 per cent (0.08 per cent) and 0.45 per cent (0.14 per cent). The foreign exchange reserves fell by close to $10 billion during the week ended October 10, a record fall mainly due to heavy dollar sales by the central bank to stem the fall in the value of the rupee. According to data released by the RBI, total foreign exchange reserves, including gold and SDRs, dipped to $274 billion during the week ended October 10 from $291.9 at the end of September. This is the third straight week that the forex stockpile has fallen in tandem with the market slide. Commodities
Futures derivatives Maintaining a 'cautious' approach prior to inviting foreign capital due to the recent turmoil in the international financial markets, the commodities market regulator - Forward Markets Commission (FMC) - said that private equities (PEs) fund and hedge funds would not be allowed to participate in the commodity exchanges in the country. According to BC Khatua, chairman, FMC, in due course of time, FMC would like to invite FIIs into commodity exchanges in their terms. But they are against short-term high return seeking funds participating in the commodity trading. Maize hit the upper circuit of 2.98 per cent at Rs 846 a quintal on good buying interest at lower levels besides rise in spot prices amidst thin arrivals. Turmeric rose 1.98 per cent to Rs 3,562 a quintal on the back of short covering after recent down side movement. Soybean rose 1.06 per cent to Rs 1,667 a quintal on short covering. National Spot
Exchange Ltd (NSEL), promoted by Financial Technologies and National
Agricultural Co-operative Marketing Federation, started online spot trading on
October 15. NSEL offers online platform for trading in agriculture and
non-agriculture commodities. Initially Gold, Gold Mini, Silver and Cotton will
be available for trading. NSEL has already received license from governments of
Maharashtra, Karnataka and On the MCX platform, gold, silver and crude oil prices declined sharply on the week ended on Friday on heavy sell off by market participants, as investors in the world market remain largely cautious about the near-term outlook, given continued signals the global economy is headed for a potentially deep recession. Gold declined to a one-month low on speculation that investors will sell the precious metal to cover losses in other markets and crude oil prices witnessed a heavy sell off during the week on account of falling demand and fear of recession in the US, Europe and Japan. Wednesday's inventory data showed a more than expected rise in crude oil stocks and a build up in gasoline stocks, which put pressure on oil prices. The base metals pack declined last week, as poor macroeconomic data coupled with concerns over demand put pressure on metals. The MCX Crude oil November contracts were down by 12 per cent to trade at Rs 3,537 per barrel on Friday over the previous week. With prices falling sharply, Organization of the Petroleum Exporting Countries (Opec) has decided to take quick action and will hold its meeting in the next week. Banking German lender Dresdner Bank AG, which was acquired by its
rival Commerzbank last month, has decided to surrender the approval received
from the RBI to open a banking branch in Mumbai and would continue to operate
from its representative office. Buoyed by higher net interest income (NII) and fee-based
income, Axis Bank posted a net profit of Rs 403 crore during the second quarter
of 2008-09, as compared to Rs 228 crore during the corresponding period last
year. RBI has asked banks to provide adequate credit to SMEs. RBI
said it has come to its notice that in view of somewhat tight liquidity
conditions in the domestic market in the recent past, some of the banks have
been averse to disbursing working capital limits and term loans (including
short-term loans) to their clients against the sanctioned limits even in cases
where the drawing power is available in the client’s account and all the terms
and conditions of the sanction of the loan stand compiled with. Backed by robust growth in net interest income and
fee-based income, HDFC Bank has registered a net profit of Rs 528 crore for the
second quarter ended September 30, 2008 as against Rs 368 crore, during the
corresponding period last year, showing an increase of 43.3 per cent. Corporate Chennai-based discount retail chain Subhiksha Trading
Services, is planning to invest up to Rs 1,000 crore to fuel its expansion
plans, including its foray into new verticals. The company is mulling various
options including diluting part of the promoters stake in favour of financial
investors to raise funds. Reliance Brands, a part of Reliance Industries Ltd has
announced a 51:49 joint venture (JV) with Italian lifestyle firm Diesel
International. Diesel will hold 51 per cent stake in the JV, which will launch
Diesel brand in GMR has announced the completion of the acquisition of 50
per cent stake in InterGen NV, a leading global power generation company. Despite a pressure on profitability in some segments like
its electrical business, L&T has posted a net profit of Rs 460 crore for
the quarter ended September 30, 2008, registering an increase of 32 per cent
over the corresponding quarter of previous year. The company has also posted
gross sales of Rs 7,776 crore for the quarter ended September 30, 2008,
registering an increase of 40 per cent over the corresponding quarter of the
previous year. Amid global financial turmoil and slowdown in the domestic
economy, the company has performed well by securing fresh orders totaling Rs
12,453 crore during the quarter, registering a year-on-year growth of 74 per
cent. Venture capital (VC) investment in Nalco is planning to set up a Rs 10,000 crore smelter
project at The woes of the cement sector have started to come to the
fore as Information Technology HCL Technologies
registered a net profit of Rs 356 crore, up 15.5 per cent over the same
period in the last fiscal. The company’s total revenues stood at Rs 2,369
crore, a rise of 38.6 per cent compared to the corresponding period last year. Making its foray into the European and African region,
Financial Technologies has acquired a 90 per cent stake in Ace Group for US$
22.5 million (about Rs 109 crore). US-based IT major Computer Science Corporation (CSC) plans
to increase its headcount in NIIT Technologies recorded a 13 per cent increase in its
revenue at Rs 259 crore for the second quarter ended September 30, 2008
compared to same period last fiscal. During the period the company’s net profit
stood at Rs 37 crore, up 7 per cent compared to the corresponding period of the
previous fiscal. Despite a challenging quarter, Satyam Computer Services has
reported a net profit of Rs 581 crore, a year-on-year increase of 42 per cent
and a sequential increase of 6.1 per cent for the second quarter of the current
financial year. Telecom
*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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Chart ‘A’
displays aggregate capacity at all major ports (in million tonnes per annum)
and traffic handled by them during last six years. In 2001-02, around 83.6 per
cent of the capacity has been utilised. IN the succeeding years, as the rate of
capacity augmentation was lower than rate of traffic growth, as much as 96.5
per cent of the capacity had been utilised in 2004-05. However, in the
following two years with the growth in the cargo traffic lagging behind that in
capacity augmentation, the year 2006-07 saw capacity utilisation of touching 92
per cent. The aggregate capacity of major ports as on March 31, 2007 was 504.75
million tonnes per annum (mtpa). Capacity-wise ranking of major ports reveals
that port of Kandla, which has a capacity to handle 61.3 million tonnes of
cargo as on March 31, 2007, stands at number one position followed by port of
Vishakhapatanam (58.5 million tonnes) and port of Paradip (56 million tonnes).