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Current Economic Statistics and Review For the
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Theme
of the week:
Situation Assessment Survey: Some Aspects of Farming
1. Knowledge, Preference and Awareness of Technological and Institutional Developments in Farming *According
the Survey, a farmer has been defined as a person who operated some land
(owned or taken on lease or otherwise possessed) and is engaged in
agricultural activities on any part of that land during the 365 days
preceding the date of the survey. Farmer households are defined as one,
which have at least one farmer. Agricultural activities include
cultivation of field and horticultural crops, growing of trees or plants
such as rubber, cashew, coconut, pepper, coffee, tea, etc., animal
husbandry, fishery, bee-keeping, vermiculture, sericulture, etc. The
report on farming covers certain aspects like farming practices, farmers
awareness of technical and institutional development in farming, resource
availability and use, distribution of farmed area and irrigated area over
different kinds of farming activity and energy used by farmer households
various activities. Based on the results of this survey, a theme note has been prepared earlier covering ‘indebtedness of farmers’ The current note is the second in the series covering some aspects of farmers’ profile liketheir educational background, farmers’ attitude to farming, and farmers’ awareness of and access to modern technology, self-help groups, cooperatives, crop insurance and sources to procure seeds. I. Magnitude of Farmer Households: The Basic PictureAs per the survey, out of
147.9 million rural households, 89.4 million or 60.4 per cent are farmer
households. The southern region states namely, Andhra Pradesh (42 per
cent), Karnatka (58 per cent), Kerala (44 per cent), and Tamil Nadu (35
per cent) had considerably lower percentages of farmer households than
all-India average obviously reflecting better economic diversification of
the region away from farming. Two north- eastern region states of
Arunachal pradesh (8 per cent) and Tripura (39 per cent) had also very low
percentages of farmer households, but this is due to limited scope for
agiculture. On the other hand, in another 12 out of 27 states, 75 per cent
of the rural households were farmer households. In Region wise, broadly these
proportions thus reflect the advanced scope for agriculture ( northern and
western regions), agriculturally poor and also generally economically poor
states (central and eastern states) and the relatively better progress
recorded both in agriculture and non-agriculture activities.
2.
Educational Level Table 2 gives the number of persons aged 7 years or more who were engaged in farming in 2003 by ten levels of education as well as the correspondent distribution of all members of farmer households. Only courses successfully completed are considered in ascertaining the educational attainment of a person.
Out of the 131.1 million male farmers about 65 per cent were literate and out of 88.1 million female farmers only 31 per cent were literate. More or less the same trend is witnessed among all members of farmer households. Out of the 65 per cent literate farmers about 8 per cent had studied at least upto higher secondary and the ratio for females were less than two per cent. In 15 states out of the 27 states, the percentage of literate farmers was more than the all-India average of 65 per cent. States like Kerala (94 %), Mizoram (92 %) and Nagaland (90%) topped the literacy list among male farmers. The above states also top the list among female farmer literacy (Table 3).
3.
Awareness of Different Concepts a Bio-fertilisers: Bio-fertilisers are not soil nutrients by themselves. They act as a catalyst or direct agents in making the plant nutrients available to the soil. Bio-fertilisers carry some bacteria living in an organic base. Some examples are Rhizobium, Azotobactor, Phosphate Solubalizing Bacterial (PSB) etc. Out of the estimated 89.4 million farmer households, only 16.1 million farmer households (18% of total) were aware about bio-fertilisers. Awareness about bio-fertilisers was very high in Nagaland (70%), Kerala (55 %), and Tamil Nadu (47 %) (Table 4). b Minimum Support Price(MSP): Minimum support price has been announced by the Government of India with a view to ensuring remunerative prices to the farmers for their produce on the basis of the recommendations of Commission for Agricultural Costs and Prices (CACP). The farmers perceive these prices as a guarantee price for their produce from the government. The government at the commencement of the season announces the prices, to enable the farmers to pursue their efforts with the assurance that the prices would not be allowed to fall below the level fixed by the government. MSP are fixed at incentive level, so as to induce the farmers to make capital investment for the improvement of their farm and to motivate them to adopt improved crop production technologies to step up their production and by their net income. The procurement agency pays the minimum support prices to the farmers for their crops. The important procurement agencies are Food Corporation of India (FCI) for foodgrains like rice and wheat, Jute Corporation of India (JCI) for Jute, Cotton Corporation of India (CCI) for cotton and National Agricultural Co-operative Marketing Federation of India Ltd. (NAFED) for pulses and oilseeds. Of the total 89.4 million farmer households, 62.8 million (70.4%) were unaware about minimum support price. But 16.9 million farmer households not only know about MSP but also knew the detail of the procurement agency. Another 8.8 million farmer households know about MSP but not aware about the procurement agency.
Among states, awareness of the MSP and procurement agency by farmer households has been widespread among the farmer households of Haryana (43.6%) and Kerala (41.6%) (Table 4). C.
World Trade Organization (WTO): WTO is
the only global international organisation dealing with rules of trade
between nations. Administration of trade agreement, negotiations and
handling trade dispute and monitoring national trade policies, technical
assessment and training for development, cooperation with other
international organisation are the main objective of WTO. It is the result
of Farmer
households numbering 82.2 million or 92 per cent of total farmer
households at all- 4.
Farmers Liking for Farming At all-India level, about 60 per cent of the farmer households reported that they liked farming (Table 5). The remaining 40 per cent were of the opinion that given a choice, they would take up some other career. Among this 40 per cent farmers, 27 per cent farmers do not like farming because the returns are not worthwhile; about 8 per cent reported that farming has been very risky. Only two per cent were reported that they do not like farming because of lack of social status. There was a striking similarity among major states where farmers reported their liking for farming. More than 70 per cent of farmer households in Arunachal Pradesh (72.1%), Meghalaya (77.4%), and Andhra Pradesh (75.4%) reported that they like farming as a profession.
5.
Membership of Farmers Organisation/ Self Help Group (SHG)
Only 2.2 per cent of farmer households in rural Farmers
organisation and Self help group are most prevalent only in southern
states and some states in north-eastern region. Further, to some extent
among farmer households of West Bengal and
6.
Crop Insurance
At
the all-India level, only 4 per cent of farmer households reported ever
having insured their crops. Among those who had never insured their crops,
a very large proportions – 56 per cent were unaware about the practice
of crop insurance. While 16 per cent have reported not interested, 24 per
cent said that the facility has not been available to them. A small
percentage of farmers (3 per cent) felt that they could not afford to pay
the insurance premium. Among
states, farmer households of Gujarat ( 19 %)
and 7.
Services of Co-operatives At
the all-India level, the survey has revealed that 17.6 million farmer
households (19.7 %) have reported availing the services of co-operatives
societies. A major portion of the farmer households numbering 71.8 million
(80.3%), reported not availing the services of the co-operative societies.
Among them a major portion 69.9 per cent were not even members of any
co-operative society. Table
8 shows state level data on the number of farmers availing services of the
co-operative societies. It can
be seen from there that the farmer households of north eastern region
states and eastern region states have reported less than the all
8.
Seeds: Usual Source of Procurement
At the
all-India level, 45.3 per cent of farmers depend upon farm-saved seeds.
Another 46.5 per cent usually purchase their seeds and 4.9 per cent
acquired through exchange, i.e., in lieu of the crop produced by the
household.
State/UT
level details are given in Table 9. Purchase of seeds was most common
method of procuring seeds in Andhra Pradesh ( 80 per cent of households)
followed by Rajasthan (72 per cent) , 9.
Seeds: Frequency of Replacement of Seeds
At
the all-India level, 26.2 million farmer households (29 per cent) reported
they were replacing their seeds varieties every year. 27.2 million farmer
households were replacing their seeds varieties every alternate year and
every third year, 18.2 million ( 20 per cent) farmer households were
replacing their seed varieties. 14.7 million ( 16.5 per cent) farmer
households were replacing their seeds only every fourth year.
Table 10 gives state level information about the farmer households
tendency to replace seeds. In five states, viz., Rajasthan, Arunachal
Pradesh,
*This
note has been prepared by R. Krishnaswamy Highlights of Current Economic Scene AGRICULTURE As
per data compiled by the Food Corporation of India (FCI), central
government agencies have procured 14.23 million tonnes of paddy by
December 16, 2007 as compared to that of 15.04 million tonnes during the
same period last year. The procurement in terms of rice equivalent has
stood at 10.81 million tonnes as compared with that of 11.37 million
tonnes during the same period last year. National
Agricultural Cooperative Marketing Federation of India Ltd (Nafed) is
expecting the arrival of 48,000 of yellow peas by December 22, 2007 of
Canadian origin, while state owned trading firm PEC is awaiting for the
shipment of about 45,000 tonnes of pulses which is expected to reach
Indian ports by December-end. Consequently, with the supply increasing in
the domestic market, prices of pulses are likely to ease in the short run. According
to Solvent Extractors’ Association of India (SEA), edible oil imports
have surged by 38 per cent in November 2007 to 347,320 tonnes as compared
with 252,242 tonnes during the same month last year, due to 75 per cent
jump in the imports of crude palm oil (CPO). The country has bought
314,611 tonnes of CPO during November 2007 as against that of 180,036
tonnes a year ago. In the refined oil segment, RBD palmolein imports have
soared to 445 per cent to 30,014 tonnes from 5,500 tonnes last year.
However, imports of Olein have slumped to one-third to 995 tonnes in
November this year as compared with 2,956 tonnes during same period last
year. The import of vegetable oil during the same period has reported to
stand at 427,912 tonnes as compared with 302,034 tonnes last year. The
imports are comprised of 347,320 tonnes of edible oil and 80,592 tonnes of
non-edible oil. Meanwhile, for the first time in the last five years, the
country did not import crude soybean oil because of its high international
prices. The difference in prices between the local and the imported
soybean oil was as high as Rs 40 per 10 kg. According
to estimation undertaken by Indian Sugar Mills Association (ISMA) during
the current season (2007-08), the production of sugar would be lowered
from initial projection of 33-34 million tonnes to 30-31 million tonnes
due to crushing delay and lower yields in certain states. The output is
expected to cross 28 million tonnes produced during last season. The
central government in association with the Asia Development Bank (ADB)
have planned to introduce a project, under which agri business centres
(ABCs) would be opened in the districts of Maharashtra and The
central government has fixed a tariff for poppy seeds (khus-khus) of US $
5,398 per tonne in an attempt to check its illegal imports into the
country. This is to check under invoicing and selling of the seeds at US $
1,500 per tonne when its price in According
to Coir Board, India International Coir Fair (IICF) has generated export
orders worth of Rs 45 crore through the participatory buyers. Around 106
buyers from 33 countries visited the Coir Fair, which had 75 stalls
showcasing coir products. There were about 100 serious buyers and spot
orders worth Rs 15 crore were placed and trade inquiries worth of Rs 105
crore were placed for materializing during short- to medium-term. As per
the board, orders were sizable considering the total exports during
2006-07, which was of Rs 605.16 crore. According
to Rubber Board, synthetic rubber output during April- September 2007-08
has fallen down by about 1.1 per cent but consumption has risen by 6.1 per
cent due to higher demand from auto tyre makers. It is anticipated that
production in April-September 2007-08 was declined to 49,903 tonnes from
50,434 tonnes a year ago. Total consumption has risen to 143,145 tonnes
from 134,855 tonnes during the same period. While demand from the
automotive tyre sector has grown by 8.3 per cent to 94,352 tonnes from
87,156 tonnes. According
to coffee board, post-monsoon
estimates have revealed that Indian coffee production has dropped by 9.96
per cent (or by 29,000 tonnes) at 2.62 lakh tonnes as against that of the
post-blossom estimates of 2.91 lakh tonnes. The production loss has been
attributed to the heavy monsoon rains resulting into drop of berry owing
to wet feet conditions coupled with high-speed winds. Coffee production in
Karnataka has been worst hit with the extent of crop loss being 71 per
cent followed by Kerala (28 per cent), however, there was no production
loss in Tamil Nadu. Post-blossom forecast predicts that production of
arabica in the country is likely to decline by 8.19 per cent to 92,500
tonnes and Robusta by 10.91 per cent. Farmers
associations have urged the central government to lift the ban on futures
trading in wheat, urad, tur and rice as it would provide farmers more
flexibility in their market operations and consequently better price
realisations. This would further lead to development of the futures market
making an impact on the spot market structure and its practices by
bringing efficiency to the supply chain machinery and developing grading,
processing, warehousing, and other analysing facilities. Consortium
of Indian Farmers association (CIFA) has suggested the government to make
agricultural research in the country more relevant for crops like tur (Arhar);
so that yield can be increased, as its annual production is stagnant at
2.3 million tonnes as against that of an annual demand of 2.6 million
tonnes. The gap between demand and supply are being met through imports. Indian
Council of Agricultural Research (ICAR) has granted Rs 24.09 crore to
National Academy of Agricultural Research and Management (NAARM) for the
National Agricultural Innovation Project (NAIP). Main objective of this
project is to combine the strengths of the public and private institutions
to raise agricultural incomes through efficient management of value chain,
to provide livelihood security and to enhance the competitive advantage of
Indian agriculture. A workshop would also be organised for integration and
finalisation of work plan and to divide the responsibilities among the
collaborative institutions. It is expected that about 50 representatives
from IIM-Lucknow, NIRD, MANAGE, and ASCI from As
per the notification by central government dated on December 19, 2007, the
government has initiated an optional compounded levy scheme for pan masala
and pan masala containing tobacco (gutkha). The scheme has provided for
payment of duty on the basis of number of packing machines installed in
the factory premises of manufacturer of these goods. It has stipulated an
option for payment of Rs 12 lakh as duty, per month per packing machine
per line for gutkha pouches of retail selling price (RSP) up to Rs 1.50
and Rs 10 lakh for pan masala pouches carrying retail-selling price (RSP)
up to Rs 1.50. Different duty slabs have been provided for pouches priced
up to Rs 6. In case of multiple track or line packing machines, the rate
of duty would be multiplied accordingly. According
to latest report by Food and Agriculture Organisation (FAO) of the UN,
around 37 countries are facing acute food shortage on account of conflict
and natural disasters. These have been compounded by unprecedented price
hikes for basic food items due to low stocks; droughts and floods linked
to climate change, high oil prices and increased demand for bio fuels. It
is projected that the total cost of imported food for low-income food
deficit countries (LIFDCs) in 2007 would be nearly 25 per cent higher than
2006 surpassing US $ 107 million. So, it has appealed to all governments
and international community to take vital steps to protect the poor
countries from negative impacts of rising food prices and to boost crop
production in the most affected countries. Industry Inflation The annual rate of inflation calculated on a point to point basis, stood at 3.65 per cent for the week ended December 8, 2007 as compared to 3.75 per cent for the previous week or 5.63 per cent as on December 9, 2006. Primary
Articles group declined marginally to 223.2 from 223.3 for the previous
week. Index
of Fuel, power, light and lubricants remained stationary at the previous
week’s level of 328.6 and the index of manufactured products also
remained unchanged at its previous week’s level of 188.3. Banking NABARD
has tightened norms to scrutinize audit reports of state-wise deposits of
State Co-operative Agriculture and Rural Development Banks (SCARDBs) and
District Central Co-operative Banks (DCCBs). According to Nabard’s
decision, the audit reports received from these co-operative banks would
be subjected to qualitative scrutiny. Nabard would see whether the
contents and coverage are in tune with its guidelines on various aspects,
particularly adherence to the audit classification norms, alignment of
audit rating with supervisory ratings, coverage of issues as per audit
report guidelines, compliance to prudential norms, preparation of the
balance sheet as per the statutory requirement. In
a bid to fund its high growth in the country, German major Deutsche Bank
has increased the capital base for group operations by Rs 2,155 crore. The
capital infusion will take Deutsche Bank group’s total capital in Financial
Sector Capital
Markets Primary
Market Government-owned
Oil India Ltd, the country’s second largest oil and gas company, has
filed its papers with Sebi for an IPO that will partially dilute
Government’s stake in the company. The shares will be listed on both BSE
and NSE with the share price of Rs 10 each for cash at a price to be
decided through a 100 per cent book-building process for 2,64,49,982
equity shares. Porwal
Auto Components Ltd, engaged in manufacturing and selling SG and CI
castings for the automobile sector, on the last day of its IPO was
subscribed 1.03 times across the price band on both the BSE and NSE. It
received a total of 5,16,650 bids. The qualified institutional investors
portion was subscribed 0.21 times, the non-institutional investors were
subscribed by 0.48 times while the retail investors where subscribed by
2.44 times. The
initial public offering (IPO) of Mundra Port and SEZ Ltd (MPSEZL), which
hit the capital market in November, was subscribed by 116 times and became
the largest-ever grosser in Indian corporate history with more than Rs 2
lakh crore, and also demonstrated another new record as the number of
retail investor-applicants from the southern States increased five times. The
stock of Jyothy Laboratories Ltd, got listed on the NSE at a premium of
29.71 per cent at Rs 895 against the offer price of Rs 690.On BSE it made
its debut at a premium of 15.79 per cent at Rs 799. On the NSE, the stock
traded at a high of Rs 895, and closed at Rs 794.05, whereas on the BSE
the stock closed at Rs 793.70.The total shares traded were 51,36,540
shares and 36,65,147 shares on the NSE and BSE respectively. Nearly
half of the companies that have filed documents with the Sebi for IPOs
during the past two years are yet to hit the market. Market sources cite
several reasons, including change in business plans, lack of government
guidelines on foreign equity participation in certain sectors,
observations by the regulator and other resource-raising options like
private equity funding, for the phenomenon. KNR
Constructions Ltd, an infrastructure project development company, is to
enter the capital market soon with an initial public offering of 78,74,570
equity shares of Rs 10 each for cash at a price to be decided through a
100 per cent book-building process. The company has filed its Draft Red
Herring Prospectus with Sebi. Secondary Market Due
to negative global cues, the week started with a huge fall on Monday, when
the BSE sensex closed 770 points lower. During the week, the markets
remained volatile and closed with minor gains on Thursday, as market was
closed on Friday due to Bakrid. Mid-caps and small-caps, which were
outperforming the large frontline stocks in the last few days, were also
in correction mode, as the breath turned negative. Over the week, the BSE
Midcap index corrected 4.85 per cent. At the beginning of the week, BSE
sensex recorded its biggest single-day fall in four months. The BSE sensex
shed 3.84 per cent, to 19,261.35, which is the biggest fall in the index
since August 16, when it fell 642.7 points (4.2 per cent). The NSE Nifty
dived 270.7 points, or 4.48 per cent, to 5,777, the largest ever points
fall for the index. The previous biggest fall was on May 18, 2006, when
the index fell 246.20 points. The
markets plunged on concerns that rising inflation in the All
the sectoral indices of BSE declined over the week except on BSE IT and
BSE Healthcare. Profit taking contained the surge on the capital goods and
metal scrips. These two sectors posted the highest one-year returns among
indices. Over the week, the BSE Midcap index corrected 4.85 per cent. IT
stocks which were facing selling pressure gained as the rupee took a knock
vs the dollar. Technology,
auto, FMCG and pharmaceutical stocks may be the most battered sectors of
the Indian stock market this year. But
select mutual fund schemes were able to notch up good returns despite
being in these sectors by tweaking the investment mandate and smart
stock-picking within the mid- and small-cap segments.
The BSE sensex gave nearly 38 per cent returns this year, even as
IT, auto and pharma indices gave poor returns in 2007 on the rupee
appreciation, fears of a Booming
equity markets have enabled mutual funds to collect a record sum in new
fund offerings (NFOs) in this calendar year.
Fund houses collected in excess of Rs 27,500 crore in 2007, with
several ongoing or just-concluded equity-oriented NFOs yet to announce
their collection figures. The money mopped up through NFOs last year was
Rs 28,970 crore. Infrastructure and global funds hogged the limelight this
year, with funds such as SBI Infrastructure Fund Series-1 (Rs 2,536 crore),
Fidelity International Opportunities (Rs 1,557 crore), ICICI Prudential
Indo Asia Equity Fund (Rs 1,000.72 crore) and Tata Indo Global
Infrastructure (Rs 2,200 crore). Jasdaq
Securities Exchange Inc, According
to Takashi Tsutsui, chief executive officer of the Tokyo-based bourse,
Jasdaq aims to lure Indian companies to sell Japanese Depositary Receipts
on its Neo Market for technology stocks. Tsutsui said he hopes to reach a
formal agreement as early as next month.
We see opportunities to use our experience in the global market and
we can do that by allying with exchanges around the world. The
Securities and Exchange Board of India (Sebi)-promoted National Institute
of Securities Markets (NISM) is all set to become a central registry of
all intermediaries in Indian capital markets. In the long term, NISM will
be the central registry of every person working in the financial markets
and it will serve as a pool of information to know the advisor’s history
for employers and investors alike, said one of the panelists at a workshop
organised by Sebi and chaired by its chief M Damodaran. The NISM has been
made responsible to co-ordinate the task of certification in Indian
securities markets that would also include maintenance of a complete
database of all market participants who have been certified by it. Sebi
has suggested that the RBI will be the right authority to regulate private
equity (PE) investments in the country.
In a letter to the government, Sebi has stated that as PE
investments are mostly made in unlisted companies, it has to depend on RBI
for the information. RBI
maintains the data on PE investment for monitoring the inflow and outflow
of funds, while the stock market regulator has the authority to collect
data for listed entities or companies either operating in primary or
secondary capital markets.
On
December 20,2007 Sebi allowed short selling of shares by all classes of
investors, both institutional and retail. Short selling had been banned by
the regulator in the wake of the Ketan Parekh scam in 2001. Short selling
refers to the sale of stocks which the seller does not own at the time of
selling. To provide for settlement of shares sold short, Sebi was also
providing a mechanism of securities lending and borrowing (SLB) for all
market participants. A
committee of directors of IFCI Ltd has decided to issue about 12.374 crore
new equity shares at a price of Rs 107 per share (including premium of Rs
97 per share) to public sector banks and financial institutions (FIs).
These shares are to be issued towards the conversion of zero coupon
optionally convertible debentures (ZCOCDs) amounting to Rs 1,323.99 crore
held by various public sector banks and FIs. Derivatives
Sebi
may be worried about FIIs punting in the derivative segment of the Indian
stock market, but retail investors have not only taken to it just as
avidly but also outrank every other category of investors. At the National
Stock Exchange retail investors accounted for nearly two-thirds of the
derivatives turnover for October 2007, the latest month for which such
data is available. They contributed 64 per cent to the turnover while
proprietary trading broking members of the NSE accounted for roughly 25
per cent and institutional investors, both domestic and foreign, came a
distant third with around 11 per cent. This is not a one-off phenomenon as
the data for the earlier months too showed retail investors’
contribution hovering around these levels. On
December 17, 2007, Sebi invited comments from market signaling the
regulator’s intention to move fast on the proposed products before
December 21, 2007. The Sebi board, at its meeting on November 14, 2007
cleared the introduction of seven new products, namely, mini-contracts in
equity indices, options contracts with longer life/tenure, F&O
contracts on volatility index, options on futures, F&O contracts on
bond index, exchange-traded currency (foreign exchange) F&O contracts
and exchange-traded products involving different strategies. In a note,
put on its website, Sebi explained details on each of the products, which
formed the crux of the Sebi’s Derivatives Market Review Committee headed
by Rammohan Rao. The
support between Nifty 5675-5750 seems quite strong and there is further
support at 5600. Monday saw one of those meltdowns where sympathetic
vibrations lead to collapses in every global market. The Nifty lost over
300 points intra-day before it turned from the depths of 5740. It dropped
further on Wednesday when it hit 5676. By the end of a truncated week, the
Nifty closed at 5766.5 points for a loss of 4.65 per cent. The Defty was
down 5 per cent as the rupee lost ground. The Sensex was off 4.34 per cent
at 19162.57 points. The Nifty Junior was down 5.21 per cent. Declines far
outnumbered advances. Volumes were exceedingly high on Monday and Tuesday
as there was panic selling. The BSE 500 was off 4.7 per cent while the CNX
Midcap lost 4.86 per cent. The CNX IT did however, gain marginally due to
the rupee decline. The Nifty closed at 5766.50 in the spot market and it
was settled at 5789.55 in the December series, at 5776.7 in the January
series and 5767 in February. About 5 lakh December series were closed out
and nearly 6 lakh in January positions were opened. The difference between
December and January can certainly be traded by a long January and short
December position. The difference between the spot and the December
contract could be indicative of a market that is expected to trend up
somewhat next week. In the
Nifty Junior, the spot closed at 11648 while the December contract settled
at 11706 and January at 11695. There is about 51,000 open interest in the
January contract. The differential between the futures is too small to be
traded. The premium of the futures to spot could again indicate a
reasonably optimistic market position.
The
Bank Nifty took a hammering last week and closed at 9245 in spot. The
December and January contracts were settled at 9312 and 9351.5
respectively with the January open interest being about 25,000.
The CNX IT rose a little on the back of rupee weakness and closed
at 4594 in spot with the December and January contracts settled at 4601.35
and 4531.75 respectively and a January open interest of 77,000. The Bank
Nifty may be due for a bounce and the CNX IT is also looking mildly
positive. The CNX IT also offers a reasonable calendar spread of long
January, short December. In
the Nifty options market, the put-call ratio in terms of open interest has
fallen to 1.08, which is a slightly dangerous signal. Generally, a low PCR
suggests an overbought market but in relative terms, 1.08 is a neutral
level. In the Nifty puts, the open interest has expanded in both December
and January series, which is interesting since there are just three
sessions to go for settlement. However, in the Nifty calls, there has been
a contraction in the December open interest coupled to a larger expansion
of open interest in January.
Government
Securities Market Primary Market Eleven
State Governments auctioned 10-year paper maturing in 2017 through an
yield based auction using multiple price auction method on December 18,
2007 at cut-off yields ranging from 8.39-8.58 with the lowest for Tamil
Nadu and Uttarakhand and the highest for Jammu & Kashmir. On
December 19, 2007, RBI auctioned 91-day and 364-day T-bills for the
notified amounts of Rs.500 crore and Rs.1,000 crore
respectively. The cut-off yields for 91-day and 364-day T-bills
were 7.35 per cent and 7.66 per cent respectively.
Secondary
Market Call
rates ended at 4-4.25 per cent, down from 7.5-7.7 per cent previously
since bankers had already covered their borrowing requirements in advance.
Outflows towards corporate tax payments exerted pressure on the tight
liquidity conditions forcing call rates to remain firm. However, the
impact of outflows was felt to be less than initially feared. Apart
from tax payments, other large outflows were not scheduled during the
week, keeping call rates under control.
Bonds softened in the week by thin trading as credit offtake slowed
down ahead of a long holiday season. According to traders, volatility in
the foreign exchange market had little impact on bonds, as domestic
factors overwhelmed exit by foreign institutional investors. Yields eased
on hopes that cash conditions would return to they normal levels in the
New Year backed by government spending. The 10-year yield ended at 7.87
per cent, three basis points down from the previous week’s close of 7.90
per cent. At
the weekend liquidity adjustment facility auction, banks took recourse to
the RBI’s repo window for Rs 22,370 crore. There were about 20 banks and
primary dealers who took recourse to the RBI’s repurchase window. But
bankers said the recourse to the repo window was also largely driven by
the refiners accessing their credit lines for settling their maturing oil
import bills. In fact, refiners’ recourse also resulted in hardening of
rates at the Collateralised Borrowing Lending Obligations markets, where
the weighted average rate for the weekend was 6.88 per cent, though the
rate was considerably lower than the RBI’s repo rate of 7.75 per cent. Bond
Market Power
Finance Corp tapped the market by issuing bonds to mobilise Rs 200 crore
for 3 years through book building, to be linked to 1 year Gilt yield for 5
and 10 years. The bond has been rated AAA by crisil and icra. Dena
bank is tapping the market by the issuance of perpetual bonds by offering
10.05 per cent for call at the end of 10 years for an amount of Rs 100
crore. The bond has been rated
A by crisil and fitch. Demand
for commercial papers (CPs) is on the rise with mutual funds investing
more in such short-term instruments. The total amount of outstanding CPs
issued by companies rose by about 80 per cent to Rs 42,183 crore on
October 31, 2007, against Rs 23,521 crore during the same time last year.
According to Mr Arvind Chari, Fund Manager, Fixed Income, Quantum AMC,
there is a latent demand from mutual funds for commercial papers and
certificate of deposits as these are typically short-term instruments and
they fit the overall maturity profile. The demand for CPs, however, falter
when the mutual funds are hard pressed for cash particularly during the
time of advanced tax outflows or tight liquidity conditions in the market. Foreign
Exchange Market Due
to strengthening of dollar and a slump in global stock indices, the rupee
slipped to two-week lows. FII inflows turned negative as markets
approached the year-end and the holiday season. Although the unit opened
strong at 39.33/$, it later slipped to as low as 39.67/$ intra-week.
The rupee closed for the week at Rs.39.57 per US Dollar on December
20, 2007, as compared with Rs. 39.35 per US Dollar as on December 14,
2007. The rupee moved between Rs. 39.37 and Rs.39.57, with a standard
deviation of 10 paise during the week. The six-month forward premia closed
at 1.53 per cent (annualized) on December 20, 2007 vis-à-vis 2.02 per
cent on December 14, 2007. Commodities
Futures derivatives According
to B C Khatua, chairman, Forward Markets Commission (FMC), an alternative
market to sell agricultural commodities, which could scale up the income
of farmers, was only possible through their direct participation in
futures trading with the help of representative institutions. Khatua said
that commodity exchanges and FMC were working on various models of
aggregation that would institutionalise the direct involvement of farmers
in commodity futures. This could enable better price discovery and
efficient risk management. The
regulator in the past had hinted that it was in the process of identifying
aggregators who could participate in comexes on the behalf of farmers. According
to Rajesh Agrawal, Soybean Processors Association of India, The
Central government, in association with the Asia Development Bank (ADB),
is planning to open 60 agri business centres (ABCs) in NTPC,
the country’s top power generating firm, expects to float a joint
venture firm with NCDEX, PFC and others by month-end for the purpose of
setting up Wheat
rose above $10 a bushel for the first time, leading other grains and
oilseeds higher in a food price spiral that threatens global economic
growth. NCDEX
has withdrawn the additional margins imposed on pepper, jeera, chana, guar
gum, guar seed, red chilli, mentha oil and maize with effect from December
24,2007 as per the directives received from the Forward Markets Commission
and in terms of the Bye-laws, Rules and Regulations of the Exchange. Commodity
markets have remained relatively strong in the current year with price
performance of select commodities setting new record or reaching
multi-year highs. While tightening demand-supply fundamentals influenced
the crude market, gold attracted considerable investor interest for a host
of reasons. Agricultural commodities too displayed unprecedented price
action, supported by burgeoning demand from the bio fuels sector and lower
production following competition for acreage and weather aberrations. India
Inc is expected to witness a slowdown in sales growth during the third
quarter of the financial year 2008 to 13 per cent compared to a sales
growth of 24.7 per cent witnessed during the December 2006, quarter
according to CMIE. The slowdown in sales was largely on account of a
significant slowdown in sales expansion in sectors like chemicals, food
products, commercial vehicles, auto ancillaries, aluminum and a
modernization in the robust growth of sectors like cement, steel, metals
and hotel industry. Banking, construction, telecom, air transport and
NBFCs are expected to witness a healthy growth during the quarter. One
of the country’s largest supermarket chain the $3.4 billion conglomerate
RPG’s subsidiary Spencer’s is going for an image makeover. In a
strategic shift, the company is moving from running discount stores to
that of an upmarket, premium retailer. Spencer’s would be pumping Rs
3,000 crore into its retail network in the next few years. ABG
Shipyard, one of Telecom Nokia
Siemens Networks (NSN) has won a $150 million contract from the
country’s third largest private mobile operator, the Aditya Birla
group’s Idea Cellular Ltd., to build and provide managed services for a
Greenfield GSM network in
*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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