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Theme of the week: Initial History The
1993 UN-SNA commended the efforts
made in many countries to use
quarterly accounts broadly in
conjunction with short-term
indicators and subjective business
surveys. Though it has been one of
the objectives, In
India, the quarterly GDP estimates
received an added urgency only after
the Government of India subscribed
to the IMF’s special data
dissemination standards (SDDS),
according to which, amongst many
other data requirements, the
quarterly GDP estimates are required
to be compiled and released every
quarter, effective December 31,
1998. As per the advance calendar
prescribed under the SDDS, the
quarterly GDP estimates have to be
released by the national statistical
authority on the last working day of
each quarter, the estimates relating
to the previous quarter (CSO 1999).
Accordingly, the CSO began compiling
the quarterly GDP estimates by major
industry groups both at constant
(1993-94) and current prices and
released them for the first time on
June 30, 1999 (see CSO’s press
release of the same date and also
CSO 2001).
Subsequently, these quarterly
estimates were continued as per the
1999-2000 series. These quarterly
estimates, constructed on the basis
of indicators for the quarterly
performance of various sectors of
the economy, are now available
continuously for about 13 years
beginning with the four quarters of
1996-97, the latest being for the
second quarter (July-September) of
2008-09. The methodology of preparing quarterly estimates involves three steps. First, preparation of quarterly estimates at constant prices for the benchmark year. The benchmark year is dynamic and refers to the latest year for which fully revised annual GDP estimates and quarterly data on the indicators are available. For the first set of quarterly estimates released by the CSO, the benchmark estimates referred to the year 1996-97 and for the current series, it is 1999-2000. Second, preparation of quarterly estimates for the reference quarter at constant prices. Finally, estimation of the implicit price deflators for the reference quarter to derive the quarterly estimates at current prices. A detailed note on the methodology of quarterly estimates has been published by the CSO as a special statement appended to the NAS 1999: 213-221 (CSO December 1999). This methodology has been further explained by Kulshreshtha and Kolli 2000. Data
Gaps There
are no doubts that serious data gaps
exists in regard to both organised
and unorganised segments of various
economic activities at quarterly
intervals including data on
workforce.
The NSSO was examining the
feasibility of generating quarterly
data on employment and unemployment
from their annual thin sample
surveys on the subject as the SDDS
prescribed such a compilation.
But, so far from the few
pilot studies conducted no concrete
recommendations have emerged (see
also Asthana 1999). Yet another major estimation problem arises from agriculture wherein the production process is split into a quarter when large intermediate inputs are used, and the following quarter when crops are harvested (Banerjee and Chakrabarti 1980). Thus, “the harvest stage approach”, i.e. to record the output of the crops in the quarters in which they are harvested, is adopted for official estimates; this assumes that the entire production of a particular state/season/crop occurs in the harvesting period as documented in the Indian Crop Calendar, 1998. In reality, a substantial amount of value added is generated in the sowing season, particularly that in the form of wages and payments of interest. Correspondingly, there are also intermediate costs incurred in the sowing season (which are deductibles from gross output). Furthermore, by adopting this method the total estimated agriculture production during the four quarters of a financial year (April to March) would be different from the one relating to the agriculture year (July to June). However, for national accounting purposes, the CSO has been taking the total crop production of an agriculture year as such for the corresponding financial year. Therefore, in order to ensure consistency between the quarterly GDP estimates and the annual GDP estimates, the agriculture production estimates in the four quarters of a financial year are adjusted on a prorata basis so that the total of four-quarter production in the financial year becomes the same as the total production in the agriculture year (CSO 1999). Quarterly
Estimates of Expenditure Components
of GDP
Along with the quarterly
estimates of GDP, the CSO began
publishing for the first time from
2007-08 onwards its estimates of
expenditures on GDP comprising
consumption expenditure and capital
formation as normally measured at
current prices. These estimates are
compiled using the data on
indicators available from the same
sources as those used for compiling
GDP estimates by economic activity,
detailed data available on
merchandise trade in respect of
imports and exports, balance of
payments, and monthly accounts of
the central government. The components of consumption expenditure relate to (i) private final consumption expenditure and (ii) government fiscal consumption. Gross capital formation (GCF) estimates have three components, namely, gross fixed capital formation (GFCF), change in stocks, and acquisition of valuables. Quarterly
and Half-Yearly Growth
Tables
1 and 2 present quarterly estimates
of GDP and sectoral GDP and
compositions of expenditures on GDP,
respectively, both at constant
(1999-2000) and current prices.
As shown in Table
1, the
growth rates in real GDP at 7.6 %
and 7.9 % have turned out to be the
lowest since 2006-07; earlier in the
previous eight quarters the
quarterly growth rates have been
ranging from 8.8% to 10.1 %.
All major sectors have faced
deceleration in the latest two
quarters as compared with the growth
rates in the preceding quarters.
Amongst the sectors, the
growth rates in agriculture and
allied activities have suffered a
setback.
The growth rates of 2.7% and
3.0% compare unfavourably with the
rates generally ranging from 4.0% to
6.0% except for a few quarters when
the rates were lower at 2.7% or
2.9%.
Another major sector to show
a distinct fall is manufacturing,
with the growth rates in it at 5.0%
and 5.6% being unduly low compared
with 8.8% to 12.8% (except for once
when it was 5.8%).
This setback to the
manufacturing sector is the most
disquieting aspect of the Indian
growth scenario now.
The expectations have been
that a healthy growth pattern would
be one in which the manufacturing
sector would grow at a rate of 10 to
12 % per annum.
Such growth would have
considerable forward and backward
linkages in the economic system.
Apart from agriculture and
manufacturing, the disappointing
performance is to be seen in two
major infrastructure areas, namely,
‘mining and quarrying’ and
‘electricity, gas and water
supply’.
In these areas, the quarterly
growth in the latest two quarters
under reference has ranged from 2.6%
to 4.8%.
The infrastructure sectors
have remained the bane of
Interestingly, in the midst
of disappointing growth performance,
the one real-sector related area
that is holding on with decent
growth is ‘construction’.
With its growth rates of
11.4% and 9.7% in the first two
quarters of 2008-09, the sector has
performed even better than its
performance in some of the earlier
quarters when the growth rate ranged
from 7.1% to 13.1%.
It should be admitted that
the growth of 7.6% and 7.9% in the
first two quarters in aggregate GDP
have been better than expected. In
agriculture, reports have indicated
that there would be some setback to
the agricultural growth during
2008-09 as a whole, with kharif
output registering absolute declines
and rabi showing improved output.
As stated above, the
manufacturing output has shown
disappointing performance. The
relatively higher growth than
expected has been essentially due to
higher than expected improvement in
the various components of the
services sector.
The sub-sector ‘trade,
hotels, etc.’ has registered a
growth of about 11% each in the
first-two quarters of the current
year and the sub-sector
‘financing, insurance, etc.’ a
little over 9% each.
The third category of
‘community, social and personal
services’ is the one that is
showing an accelerated growth in the
first two quarters this year –
8.4% and 7.6% against 5.2% and 7.7%
in the corresponding quarters of
2007-08. Trends
in Gross Capital Formation (GCF)
As shown in Table
2, the
presentation of expenditure
components makes for an interesting
reading of the current macroeconomic
developments.
The most revealing aspect is
the sizeable increase in the rate of
investment in the economy.
The rate of gross capital
formation (GCF), which was at 32.5%
in 2005-06, increased to 33.9% in
2006-07 and to 35.2% in 2007-08.
And now the quarterly
estimates place the estimate at
38.7% for Q2 of 2008-09,
which is a commendably high rate of
investment in the economy.
Correspondingly, the gross
fixed capital formation (GFCF) has
reached 35.3% from 29.2% in 2005-06.
The above rates of capital
formation are based on 1999-2000
price estimates.
When the same are worked out
based on current prices, the rates
of capital formation jump further.
The GCF rate touches 41.2% in
Q2 of 2008-09, thus
showing an extra 2.5 percentage
point over the constant price
estimates.
This indicates that capital
goods prices have risen at a faster
rate than the general price level or
the GDP deflator (data in Tables 1
and 2 to be compared). References
Asthana
M D (1999):
‘Data Gaps for Monitoring
Economic and Social Change in Banerjee,
B R and S K Chakravarti (1980):
‘Estimates of Quarterly
Agricultural Income in EPW
Research Foundation (2004): National
Accounts Statistics of CSO
(1999): National
Accounts Statistics, September. CSO
(2001): National Accounts
Statistics, July. Kulshreshtha,
A C and Ramesh Kolli (2000): ‘On
Development of Methodology of
Compiling Quarterly Estimates of
Gross Domestic Product’, The
Journal of Income and Wealth, IARNIW,
Vol. 22, No.1, January Highlights of Current Economic Scene AGRICULTURE
According
to Agriculture Ministry, the sown
acreages under all major rabi crops
have increased significantly,
barring rice, moong, urad, kulthi,
linseed and safflower. Wheat
planting has just started picking
up, with 173.7 lakh hectares being
covered so far, against last year's
coverage of 154.27 lakh hectares.
Acreage under wheat has gone up in
the regions of Uttar Pradesh,
Haryana Gujarat, Rajasthan and
Karnataka, while it is trailing
behind marginally in Punjab, Madhya
Pradesh and
Rice
procurement in the ongoing kharif
marketing season (October-September)
is up by about 25 per cent over last
year’s corresponding purchase.
This improvement in procurement can
be attributed partly to an
additional hike in the minimum
support price (MSP) and partly to
bumper output. Procurement of rice
as on December 2, 2008 stood at
11.54 million tonnes. Rice
procurement in almost all states,
excluding Haryana has exceeded the
total procurement level that
attained during the same period a
year ago. It is projected that
during kharif season 2008-09, rice
production would be around 83.25
million tonnes. India’s
rapeseed crop for 2008-09 is
expected to rise by two-third to 7
million tonnes as against 4.2
million tonnes a year ago, as most
of the farmers have opted for
sowings of this crop due to higher
market prices as against those of
other oilseeds like groundnut and
soybean. Coverage under rapeseed is
likely to be around 5.8 million
hectares during October 1 - November
27, 2008, up from 5.2 million tonnes
a year ago. Analysts expect that
higher rapeseed output would reduce
imports of edible oil, as this crop
meets 15% - 16% of the country’s
edible oil demand. Imports from the
country in the oil year upto October
is reported to be at 6.3 million
tonnes, up from 12.5 % from 5.6
million tonnes in the previous year,
led by surge in palm oil imports.
Imports in October alone have risen
by 24% to 827,000 tonnes, the
largest monthly purchase in 14
years. Low prices and expectations
that government would impose an
import tax on crude vegetable oil
and raise duty on refined oils
triggered heavy buying. According
to the monthly data released by
Solvent Extractors Association of
India (SEA), total export of
oilmeals during April-November 2008
reported to be around 33.15 lakh
tonnes from 23.07 lakh tonnes in the
same period last year, posting an
increase of 44%. This rise is
attributed to an increase in exports
of soya meal, rape oilmeal and
groundnut meal. Oilmeals export in
the month of November increased to
6.48 lakh tonnes over 5.9 lakh
tonnes in the same period last year
mainly due to rise in soya meal
shipments. Exports of soyameal in
November, jumped to 6.22 lakh tonnes
from 4.80 lakh tonnes during the
same month of 2007. There was
decline in the exports of all other
oilmeals such as rapeseed meal, rice
bran extraction, castor seed
extraction during the month of
November. National
Agricultural Co-operative Marketing
Federation (Nafed) has raised
minimum export price (MEP) of onion
for December for most destinations
by US $25 per tonne because of a
considerable rise in volume as well
as in domestic prices of onion in
the wake of robust export demand.
Onion exports have more than doubled
to over 1 million tonnes during the
first seven months of the current
financial year that ends in March.
West Asia, As
per the figures released by Cotton
Corporation of India (CCI), cotton
arrivals as on December 3, 2008 in
the cotton year ending September
2009 have fallen by 22% to 6.67
million bales compared to 8.55
million bales in the same period
last year, following a drop in the
arrivals from Nashik,
the largest grape-growing region in
the country, contributes 55% to the
country’s total grape exports and
75 per cent of The
crop survey conducted by the
directorate of cocoa, arecanut and
spices development (DASD) has
forecast that pepper output from the
country during 2008-09 would fall by
10 per cent over the previous year
due to erratic weather conditions
and diseases. The combined output in
the three states (Kerala, Karnataka
and Tamil Nadu) is likely to touch
51,000 tonnes in 2008-09 as against
57,000 tonnes in 2007-08. Pepper
output during 2008-09 is expected to
fall by 21 per cent in Kerala over
the previous year due to unusual
early rains and a plant-disease. In
Karnataka, the output is expected to
increase by 38 per cent to 20,200
tonnes as against 14,600 tonnes over
the previous year. In Tamil Nadu,
pepper output is likely to drop by
45 per cent to 6,000 tonnes in
2008-09 as against 11,000 tonnes
produced last year. According
to figures released by Tea Board,
production of tea has increased by
3.7 % touching 832 million kg during
the January-October 2008 as against
802 million kg a year ago.
Production of tea increased by 21
million kg in south Inflation The annual rate of inflation, calculated on point to point basis, stood at 8.40% for the week ended 22/11/2008 over same period of the previous year as compared to 8.84% for the previous week and 3.11% during the corresponding week of the previous year. The index for Primary Articles rose by 0.1% to 250.5 from 250.2 for the previous week. The index for Food Articles group rose by 0.4% to 245.6 from 244.6 for the previous week due to higher prices of coffee (6%), fish-marine and masur (3% each) and rice, eggs, arhar, fruits & vegetables and gram (1% each). However, the prices of maize and bajra (3% each) and ragi and tea (1% each) declined. The index for Non-Food Articles group declined by 0.6% to 234.3 from 235.8 for the previous week due to lower prices of raw rubber (17%) and raw cotton (1%). However, the prices of sunflower and raw silk (1% each) moved up. The annual rate of inflation, calculated on point-to-point basis, for Primary Articles stood at 11.98% as compared to 11.90% in the previous week. It was 4.68% a year ago. The annual rate of inflation for Food Articles stood at 10.43% for the week ended 22/11/2008 as compared to 9.93% in the previous week. It was 3.01% as on a year ago. Fuel, Power, Light & Lubricants group index declined by 2.3% to 345.0 from 353.3 for the previous week due to lower prices of furnace oil (23%), aviation turbine fuel (14%), naphtha (13%), Light diesel oil (11%) and bitumen (8%). The index for the Manufactured Products group declined by 0.2% to 203.1 from 203.5 for the previous week. The index for Food Products group declined by 0.9% to 199.8 from 201.6 for the previous week due to lower prices of oil cakes (7%) and soyabean oil (6%). However, the prices of gur and coffee powder (3% each) and sugar (1%) moved up. The index for Textiles group declined by 0.1% to 141.7 from 141.8 for the previous week due to lower prices of texturised yarn (5%). Rubber & Plastic Products group index declined by 0.2% to 167.9 from 168.2 for the previous week due to lower prices of pvc fitting & accessories (11%). The index for Chemicals & Chemical Products group declined by 0.1% to 223.7 from 223.9 for the previous week due to lower prices of p.v.c. resins (8%) and calcium ammonium nitrate n-content (2%). The index for Non-Metallic Mineral Products group rose by 0.1% to 218.3 from 218.1 for the previous week due to marginal increase in the prices of cement. Due to lower prices of pipes & tubes (5%) and steel ingots (plain carbon) (3%), the index for Basic Metals Alloys & Metal Products group declined by 0.2% to 283.6 from 284.1 for the previous week However, the prices of zinc ingots (2%) moved up. The index for Machinery & Machine Tools group declined by 0.1% to 177.0 from 177.1 for the previous week due to lower prices of telephone instruments (46%). The index for Transport Equipment & Parts group rose by 0.3% to 177.3 from 176.8 for the previous week due to higher prices of crank shafts (6%) and other automobile spare parts (3%). The final wholesale price index for All Commodities (Base:1993-94=100) stood at 241.3 as compared to 240.7 and annual rate of inflation based on final index, calculated on point to point basis, stood at 12.08% as compared to 11.80% respectively. Insurance Aegon Religare Life Insurance Company Ltd., has sold around 8,000 policies of ‘Aegon Religare Guaranteed Return Plan’ so far aggregating a premium of Rs 11.2 crore. Reliance
Life Insurance, the country’s
fourth largest private life insurer,
is expanding its business abroad.
The company has approached IRDA to
guide its overseas expansion plans
as there are no regulations
regarding the same as of now. Life
Insurance Corporation (LIC)
has hiked its stake in Voltas
Ltd to 10.04 per cent from 9.58 per
cent earlier.. Financial
Markets Capital
Markets Primary Market On December 04, 2008, Securities and Exchange Board of India (SEBI) allowed the validity of an initial public offering (IPO) approval from three months to one year, following requests from issuers. SEBI granted greater flexibility to corporates for their fund-raising plans, and also outlined measures to ease redemption pressure on mutual funds. The new rule could come as a relief for many corporates, who were forced to defer their IPOs even though they had obtained SEBI’s approval. SEBI has also stipulated that companies will have to update the document with fresh numbers and any other material changes whenever required. The board also approved electronic trading of “rights entitlement”(RE) in stock exchanges. The right entitlement will now be made available in demat form for all shareholders holding the underlying shares in demat form. Secondary
Market With
the exports declining by 12 per cent
year-on-year in October, weak
November auto sales and negative
global cues dampened the domestic
bourses to remain under pressure
during the week. Hopes of stimulus
package and expectations of a
further rate cut by the central bank
to boost the economy helped key
benchmark indices reduce early
losses. The market edged lower in
three out of five trading sessions.
The BSE 30-share Sensex lost 128
points or 1.4% to 8,965 for the week
ending Friday, 5 December 2008.
Small and mid-cap stocks
outperformed the Sensex. The S&P
CNX Nifty declined 40.7 points or
1.5% to 2714 during the week. The
BSE Mid-Cap gained 46.5 points or
1.6% to 2,893 and the BSE Small-Cap
index rose 25.8 points or 0.8% to
3,323.5 in the week. The
global markets meltdown has pulled
the valuation numbers for local
corporates to its lowest in the past
five years. As per media sources,
204 of the BSE-500 companies are now
quoted below their FY08 book values
i.e. assets minus liabilities. This,
when the average return on this net
worth (for the BSE-500 universe) is
18%, more than the prime lending
rate of banks. The list of companies
quoting at a discount to their book
values includes names like Tata
Steel, Tata Motors and GE Shipping.
Shares of banks like ICICI Bank,
Dena Bank and Bank of Baroda, which
have sound operations, are quoted
below the book value. In
a bid to strengthen investor
protection norms, the SEBI has
directed stock exchanges to maintain
a security deposit of 1% of the
amount of securities offered, to
public or shareholders, by the
issuer companies. The regulator
further directed the exchanges to
set the anomalies right and get the
exchanges and bank guarantees in
position within the next three
months. SEBI had noted that the
exchanges had been lax in
maintaining bank guarantees given by
companies before listing and several
guarantees had expired. SEBI said in
a statement that, Clause 42 of the
listing agreement mandates that
every company proposing to issue new
securities shall deposit, before the
opening of the subscription list,
with the designated exchange, an
amount calculated at the rate of 1%
of the amount of securities offered
for subscription to the public and
to the holders of the existing
securities of the company. In yet
another move to ease the liquidity
pains and deepen the market and also
perk up volumes, the SEBI is
extending the cross margining norms
to all participants across the
market. Earlier on May 5, 2008, the
regulator had allowed institutional
investors to avail this facility.
According to these norms, the
positions of traders in both the
cash and derivatives segments to the
extent they offset each other shall
be considered for the purpose of
cross margining, as against having
separate margins for both the
categories. According to the new
norms, the facility is extended to
the index futures position and
constituent stock futures position
in derivatives segment, the index
futures position in derivatives
segment and constituent stock
position in cash segment and stock
futures position in derivatives
segment and the position in the
corresponding underlying in the cash
segment. According
to a study by Crisil, the retail
securitisation market in The assets under management (AUM) of the mutual fund industry continues to take a major hit in November as corporates withdraw heavily from fixed maturity plans (FMPs) and liquid funds. Except Tata mutual fund and UTI mutual fund, the AUM of all other fund houses dipped drastically during the month. According to Amfi, Reliance mutual fund has maintained its top position in the pecking order. But, its AUM dipped by 4.6% or Rs 3,277 crore and stands at Rs 67,816 crore. Likewise, HDFC mutual fund ranked second. It’s AUM stood at Rs 44,262 crore, down 2.7% or Rs 1,217 crore. UTI mutual fund was one of the two fund houses, which saw a rise in AUM. The fund house jumped to the third position, pushing ICICI Prudential mutual fund to the fourth place. UTI mutual fund’s AUM stood at Rs 38,358 crore, gaining 0.2% or Rs 74.5 crore. Derivatives
The
SEBI is considering to allow
exchange-traded interest rate
futures (IRFs) in January 2009. The
regulator is also in view of
launching an exchange-traded
corporate bond market in a couple of
months. SEBI wholetime member TC
Nair opine that, IRFs would help in
moderating the costs of funds
besides enabling financial sector
entities to hedge their interest
rate risk The Reserve Bank of India
(RBI) said in its mid-term monetary
policy review in October that IRF
contracts would be launched in early
2009 along with the supporting
changes in the regulatory regime.
The plan is to introduce these
contracts based on the 10-year
government bond yield and would
allow foreign institutional
investors (FIIs) to take only long
positions. The overall limit for
FIIs would be capped at $4.7
billion. The
NSE Nifty November future declined
2.2% or at 2711 against its previous
week’s close of 2772. It also
surrendered its premium in the
process and closed at a discount of
about three points over the spot.
The cumulative FII position as a
percentage of total gross market
position in the derivative segment
as on December 4 stood at about 34%.
FIIs have indulged in alternate
bouts of buying and selling during
most part of the week. They now hold
index futures worth Rs 6,126.88
crore and stock future worth Rs
9,143.61 crore. Their index options
holding stood higher at Rs 11,070.33
crore. Put-call ratio (PCR) of the stock options market on the NSE increased to 0.39 in November 2008, from 0.15 in January 2008. The rise in the ratio reflects a bearish sentiment in the market, whereby sellers have outnumbered buyers since the beginning of the year. The volume of call options decreased from 93.5 crore in January to 40.26 crore in March; thereafter, it increased to 74.3 crore in May. Volumes decreased further in June and July, at 64.8 crore and 60.4 crore respectively. However, during the month of August, the volume of call options increased to 78.84 crore, and thereafter decreased steeply to 38.1 crore in November '08. On the other hand, the volume of put options decreased from 13.7 crore in January to 9.7 crore in February. It decreased further to 8.2 crore in March. But, in the month of April, volume was up to 8.49 crore; it eventually fell to 14.9 crore in November. Similarly, in terms of value, call options showed a steady decline from Rs 27,301 crore during January to Rs 12,101 crore to Rs 5,375 crore in November. The value of put options also followed a similar trajectory. Total value decreased from Rs 3,596 crore in January to Rs 2,150 crore in November. Government
Securities Market Primary
Market RBI auctioned 91-day and 364-day T-bills for the notified amounts of Rs 3,000 crore and Rs 1,000 crore, on December 3, 2008. The cut off yield has been set for both the T-bills at 6.3% and 6.6%, respectively. The
RBI fixed the rate of interest on
the Floating Rate Bonds (FRB) 2009,
on December 4, 2008 applicable for
the half-year (December 6, 2008 to
June 5, 2009) at 7.54% per annum. Secondary
Market Call
rates were little changed during the
week, steadying in the range of
6-6.2%, as banks appeared to have
covered their positions well in
advance initially, resulting into
lower demand later in the week. The
yield curve sustained the downward
move on the back of a crowd of
positive factors led by ample
surplus cash in the money market.
The expectation that interest rates
would be cut backed the bonds
market. Lower inflation rate had
little impact on bonds showing that
market had factored in lower
inflation, especially with a cut in
fuel prices anticipated. Petrol and
diesel price cuts were announced
after trading hours. After fuel
price cuts and subsequent Liquidity
Adjustment Facility (LAF) rates cut,
bond traders may look for more
action. Absence of cut in cash
reserve ratio could disappoint the
market, leading to a small
correction. Bond
yields headed further down as banks
rushed to buy up securities
anticipating a reduction in the
RBI’s policy rates. Traders said
bonds were also buoyed by the surge
in deposits and falling
international oil prices. Bank
deposit accretions are currently
taking place at about Rs 4,000 crore
per day. Time deposits this year
have surged by 16% this year as a
result. During the corresponding
period of last year, the growth was
just 13%. As a result, demand for
government securities continued to
dominate the banking system. The
slight dips in credit off take also
helped bonds. Several large
corporates held back from drawals
from their credit lines in
anticipation of weekend rate cuts.
This, along the surge in deposits,
created a temporary liquidity
overflow. This translated into
recourse to the reverse repurchase
window at the weekend LAF auction,
which touched Rs 45,095 crore. The
undertone in the markets remained
positive, as average trade volumes
remained at Rs 17,000 crore a day or
double the daily equity turnover of
the NSE. This is the highest level
that bond volumes have reached.
Clearly, this trend reflected the
acceleration in deposit inflows into
the banking system. The acceleration
was also evident from the resources
mobilised by public sector banks
through Certificates of deposits
during the week. At least Rs 2,000
crore was raised through one year
CD, as corporates moved to banks
even at rates as low as 9%. Bond
Market Corporate
bond yields showed a significant
movement, tripping suddenly with
liquidity conditions having improved
drastically during the week. The
influence of other positive factors
also finally trickled down into the
segment. During the week under
review, one bank and five corporates
tapped the market through issuance
of bonds to mobilise Rs 4,025 crore.
Indian
Oil, Hindustan Petroleum Corporation
and Bharat Petroleum Corporation (HPCL)
have been allowed to sell their oil
bonds to the RBI (as part of its
special market operations) and meet
their forex needs for crude and
product purchases. According to top
oil industry sources, the move will
ensure that not too much forex moves
out of the banking system. It could
also be intended to prevent high
volatility in the rupee. On an
average, the three oil majors buy
crude worth $3 billion a month (Rs
15,000 crore) of which IOC accounts
for over half of this amount with
HPCL and BPCL taking up the balance. As the credit crunch bites the
economy, short-term fund
mobilisation by banks and companies
have fallen sharply as investors
turn away from issues of certificate
of deposits (CDs) and commercial
papers (CPs). As per latest data
released by the Reserve Bank of
India on Friday, banks and financial
institutions issued CDs worth Rs
1,999 crore during the fortnight
ending November 6 and Rs 1,863 crore
in the previous fortnight. This is
far lower than Rs 12,016 crore of
CDs issued for the fortnight ended
October 10. The fortnightly mop up
from CDs has been above Rs 7,000
crore since August end, but declined
sharply from mid October. The amount
of commercial paper issued by
companies too has gone down
drastically beginning mid-October,
reflecting lower appetite for these
papers. Companies raised Rs 2,065
crore for the fortnight ended
November 6, down from Rs 6,909 crore
during August 29 and September 12.
The fortnightly issuance of CDs and
CPs has usually been in above Rs
5,000 crore but has now dwindled
down to sub-Rs 2,000 crore level.
CDs and CPs are two primary
instruments through which banks and
companies raise short-term
resources. Declining interest rates
too has expectedly dampened the
investor interest. Foreign
Exchange Market The rupee rose to Rs 49.58 per dollar from a previous week’s close of Rs 50.09 per dollar. Earlier, the rupee fell to a low of Rs 50.65 per dollar, but recovered to end in the sub-50 area which is also a psychological mark. Annualised forward premia remained edgy throughout the week, with traders uncertain on the rupee direction. Forward premia also retreated, as refineries that had already covered their exposures. The only customers taking forward covers were capital goods importers and corporates with cross-border liabilities. Forward premia for one, three, six and 12 months ended the week at 4.95% (7.46% previous weekend), 3.58% (4.64%), 2.48% (2.98%) and 3.76% (3.75%). Short forward, three- day, premiums, however, widened to 5.89% (4%). Currency Derivatives The MCX-SX INR December futures opened stronger on strength seen in Asian markets in the beginning of the week. One month offshore Non-Deliverable Forward (NDF) contracts were at 50.50/65 per dollar, weaker than the onshore spot rate. The December futures contract ended higher at 50.43 on the currency derivatives segment of the MCX Stock Exchange (MCX-SX) on December 2. The December contract resumed lower due to sharp losses seen in Asian stock markets. One-month offshore NDF contracts were at 51.35/50, weaker than the onshore spot rate. Supports for December contract are at 50.15 followed by 4990, while the resistance are seen around 50.95 followed by 5120 levels and January futures closed towards 50.65 and registered a volume of 96.385 crore. Supports hold between 49.55/65 followed by crucial support at 49.10, Resistance are around 50.90 followed by 5130 levels. The MCX-SX active December contract registered volume increase of around 21.16% over the previous session. Commodities
Futures Derivatives The
Forward Markets Commission (FMC) has
prepared a set of top priorities for
the short-term. The three top
priorities are the passage of
Forward Contracts (Regulation)
Amendment (FCRA) bill 2006,
restoration of futures trading in
the four banned commodities such as
wheat and rice, and establishing a
full governance structure in place
after the passage of FCRA Act. The
commission has decided to take up
these market-level reforms at the
next round of structural changes for
the entire commodity ecosystem. A
task force formed by the FMC to
strengthen regional commodity
exchanges has favoured the
upgradation of such exchanges to
national bourses on a selective
basis. The ‘national’ status
would be accorded only to exchanges
that meet parameters like enhanced
net worth, demutualisation, proper
warehousing and delivery facilities,
increased investment for improvement
of infrastructure and enrolment of
new members. The task force on
Regional Commodity Exchanges (RCEs),
which was constituted in July 2007
by the FMC with the objective to
study the present status of regional
commodity exchanges and find out
lacunae in the existing framework,
submitted its report last week.
Among other recommendations, the
task force also suggested in
bringing uniformity and
professionalism to the functioning
of RCEs by evolving model byelaws.
India has 17 regional commodity
exchanges, most of which deal in a
single agricultural commodity such
as gur, castorseed, soy oil and
pepper, apart from the three
national commodity exchanges, namely
the Multi Commodity Exchange (MCX),
the National Commodity and
Derivative Exchange (NCDEX) and the
National Multi Commodity Exchange (NMCE).
The
turnover at Indian commodity bourses
rose 39% to Rs 31.54 lakh crore from
April 1 to November 15 from the
year-ago period, data from FMC
showed. However, turnover fell 8% to
Rs 1.67 lakh crore in the fortnight
ending November 15, FMC data
revealed on Friday. The Total
turnover in bullion trading in the
period more-than-doubled to Rs 17
lakh crore, while trading in agri
commodities fell 31% to Rs 3.85 lakh
crore. Active trading was seen in
gold, crude oil, silver and copper
in the energy and metals segment
during the period. Rapeseed, guar
seed, soybean, turmeric and pepper
saw maximum trading among agri
commodities. Commodity
markets regulator FMC, allowed
exchanges to restart trade in the
four suspended commodities from
December 8. The government had
suspended trading in soy oil,
chickpea, rubber and potato in May
to rein in rising prices. The ban
expired on November 30, 2008. Prices
of four commodities futures which
resumed trading on Thursday after a
more-than six-month-long suspension
at all national commodity exchanges,
showed mix trends. While soy oil and
chana traded weak when the session
opened, rubber and potato remained
firm. By close of the day’s
session at the MCX, potato (Tarekeshwar)
contract went up by more than 11% to
Rs 477.40 per tonne for the March
2009 contract, while the refined soy
oil Feburary 2009 contract closed
down by 4.86% to Rs 447.15 per 10
kgs. The rubber March futures rose
by 3% to Rs 5,981 per quintal, while
chana for February 2009 delivery
closed at Rs 2226 per quintal. Of
the four suspended commodities,
potato was largely traded on MCX
platform, while chana and soy oil
were actively traded on NCDEX and
rubber on NMCE. At open, soy oil for
January 2009 delivery fell by 2.71%
at Rs 447.55 per 10 kg on the NCDEX.
Rubber on the MCX and NMCE platforms
opened firm. Refined soy oil was one
of the big-volume grossers in almost
all exchanges before trading was
suspended. The
business volume of agri-commodity
bourse NCDEX is expected to rise
significantly following the launch
of refined soy oil contract, which
is one of the key volume drivers for
the exchange. On the first day of
the trading at NCDEX January 2009
contract; refined soy oil contract
registered about 50,000 tonne
volume. Soya oil is one of the
biggest volume generators for NCDEX.
The business volume of NCDEX had
fell by over 50% after the
government had suspended futures
trading in soy oil in May, along
with three other items for four
months which was later extended till
November 30. The volume stood at Rs
34,993 crore in October against Rs
93,361 crore in April this year. Edible
oils such as palmolein, soyabean and
crude fell in the national capital
during the week on emergence of
selling by stockists on back of
weakening trend on the global front.
Bucking the general weak trend,
groundnut and sesame oils showed
some strength on retailers demand
for the ongoing marriage season and
recorded fresh gains. As selling
pressure continued to gather
momentum, some non-edible oil also
lost substantial ground on lack of
buying from industrial units.
Trading sentiment turned bearish
after reports of palm oil in Indian
Energy Exchange and Power Exchange Financial
Technologies Ltd. promoted Indian
Energy Exchange (IEX) and NSE-NCDEX
promoted Power Exchange India (PXI)
are currently struggling to survive
in the tight electricity market when
the peaking shortage is 14% and
energy shortage is 8%. According to
the compilation made by the Power
Grid Corporation and Central
Electricity Regulatory Commission,
IEX, which commenced trading on June
27 in its first month of operations,
registered a total volume of
69,774-megawatt hours (mwh) with a
daily average volume of 2,250 mwh.
While, PXI that started operations
from October 23 has recorded total
volume of 12,900 mwh with a daily
average volume of 390 mwh in its
first month of operations. In its
first month of operation, IEX had
achieved more than 440% of turnover
of what was achieved in the first
month of PXI. In the last one month
from October 23 till November 24,
PXI has recorded total volume of
12,900 mwh with a daily average
volume of 390 mwh. Whereas, IEX
registered a total volume of
4,66,813 mwh and daily average
volume of 14,145 mwh during the same
period. Interestingly, volume on IEX
has been steady and trades have been
recorded on all trading days
compared to PXI where no volume was
reported on 12 days, out of 31 days
in the month. In the last 1 month of
operation, IEX had 97% market share
against 3% of PXI. For November, the
power has been traded at IEX at the
price ranging between Rs 6 and Rs
9.50 per unit and at PXI, the price
was between Rs 5.50 and Rs 8.70 per
unit. Banking National
Agriculture and Rural Development (Nabard)
has sanctioned Rs 186.31 crore for In
order to incentivise the credit flow
to farmers, the central government
has raised the interest assistance
provided to public sector banks by 1
– 3 per cent for up to Rs 3 lakh
short-term crop loan to
agriculturalists in the current
fiscal. Corporate In
a judicial interpretation that could
make foreign acquisitions costlier
in Vodafone
now has the option to file an appeal
in the Supreme Court and thereby
extend the stay on I-T
department’s show-cause notice,
for another eight weeks. L&T’s
newly formed Buildings &
Factories Operating Company – part
of its construction division – has
bagged large value orders
aggregating around Rs 1,450 crore in
the third quarter of 2008-09 for the
construction of IT and office space
buildings including add on orders
from ongoing works at its airport
projects. After
the commercial vehicle segment, it
is the turn of utility and passenger
car maker Mahindra & Mahindra
(M&M) to shut some of its plants
on account of slowdown in demand.
The manufacturing plants of M&M
at Reliance
Retail, a subsidiary of Information
Technology Amidst
fears of lower spending on IT by
global corporations, the underlying
optimism of the Indian IT and ITeS
industry of increased outsourcing to
the country owing to the slowdown is
becoming to show some promise.
Dallas-headquartered Affiliated
Computer Systems Inc (ACS), the
world’s largest BPO company in
planning to expand its Telecom Of
the next 250 million Indian cellular
subscribers, approximately 100
million (around 40 per cent) are
likely to be from rural areas, and
by 2012, rural users will account
for over 60 per cent of the total
telecom subscribers base according
to a report jointly released by CII
and Ernst & Young (E&Y). As
per TRAI data, subscriber additions
in rural areas exceeded additions in
the metros. In the first nine months
of 2008, the four metros together
added 10.3 million subscribers,
while the rural areas added over
11.3 new cellular subscribers. Tata Teleservices Ltd has launched telecom services in Jammu & Kashmir and will invest Rs 100 crore in phase-I of expansion in the circle. Tata services will provide coverage in 29 towns of J&K, while 36 more towns will be covered shortly.
*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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