Archive for July, 2010

SBI strikes 52-week high on partnering with Oxigen Services

State Bank of India (SBI) is currently trading at Rs. 2502.20, up by 29.00 points or 1.17 % from its previous closing of Rs. 2473.20 on the BSE.

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The scrip opened at Rs. 2465.00 and has touched a new high and low of Rs. 2519.90 and Rs. 2450.50 respectively. So far 490137 shares were traded on the counter.

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The BSE group ‘A’ stock of face value Rs. 10 has touched a 52 week high of Rs. 2519.90 on 30-Jul-2010 and a 52 week low of Rs. 1644.00 on 30-Jul-2009.

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Last one week high and low of the scrip stood at Rs. 2519.90 and Rs. 2401.00 respectively. The current market cap of the company is Rs. 159324.02 crore.

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The promoters holding in the company stood at 59.41% while Institutions and Non-Institutions held 28.71% and 8.59% respectively.

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Public Sector Lender, State Bank of India (SBI) has tied up with recharge and billing services company, Oxigen Services and its supported company Sahyog Microfinance Foundation to offer banking services to customers through its Kiosk banking system by connecting directly to SBI’s core banking system by Oxigen web retailers.

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This move is being seen as the banking major’s attempt to reach out to ‘unbanked masses’ and help them open accounts, avail loans and make investments through web-based kiosks. Meanwhile, the services will be facilitated by Sahyog Microfinance Foundation which will appoint existing Oxigen retailers as Customer Service Points to carry out the banking services. The service will be rolled out initially in Delhi-NCR and Mumbai and will be taken nationwide in due course.

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Presently, three kiosk banking outlets have been opened up in villages in NCR region namely at a village near Jangpura, Gurgaon and Noida. The customers will also be able to get auto/home loans and loans against property and gold, get NSC/KVP certificates, invest in mutual funds, and activate different accounts current, term deposits and recurring deposits at these locations.

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Theta Value of Options Final Part :)

Continuing the final part from where i have stopped writing……………. 🙂

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At-The-Money options have the maximum time value, because intrinsic value can begin to rise at this point.

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.The graph here indicates that the (absolute) value of Theta is highest at 2.67 for Nifty 5400 Call, which is At-The-Money (ATM) strike (which is at present the closest strike to the underlying’s spot value), as the strikes move away from ATM, and gets deep into the money or deep out of the money Theta and time value tends to decrease.

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Coming to the relationship between time value and the length of time remaining to expiration, time value of an option decays at a non-constant rate, as its expiration date approaches and becomes worthless after that date. This rate of time decay is known as Theta, which measures the amount by which option’s value decreases per day.

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Theta values are negative for all options as options are always losing time value while moving towards expiration, till options take zero time value at expiration. At expiration Theta wipes out all time value leaving the options with no value or some degree of intrinsic value. The most important characteristic of Theta is that it is not constant, as date of expiration comes closer, Theta increases, implying that the amount of time value decreasing from the option’s premium per day accelerates with each passing day.

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As you can see from the graph the rate of decay (Theta) is lower in the contracts expiring in more distant months. The August 5400 Nifty call (which has 34 Days remaining to expiry), have a Theta value of -2.67; meaning this option is losing Rs.2.67 in time value each day. This rate of decay is lower for each forward month, e.g. September 5400 call (69 days remaining to expiration) has a Theta of – 2.12. But in case of the present July 5400 call option, (with volatility and price of the underlying held constant) the rate of loss of time value accelerates as the call option gets nearer to expiration (i.e., the rate of decay is much faster on the option near to expiration than with a lot of time remaining on it). With 6 days remaining to expiration Theta is -5.03, and with 1 day remaining to expiration value of Theta has increased to 8.32.

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Considering time value and its dependence on volatility, higher volatility gives rise to higher time value as increased uncertainty about underlying’s price near expiration, tends to increase Theta.

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In conclusion, while trading options one has to consider Theta decay risk carefully as the option price may fall exponentially near expiration. However option traders can turn time value decay into profits by trading net selling option strategies which always have positive position Theta as income will be generated through time value option premiums even if the underlying remains stationary and range bound and options expire worthless. Covered Call or Covered Put Writing, Calendar Spreads, Call or Put Ratio Spreads, Call or Put Credit Spreads, Short Strangle or Straddle and even simple Call Writing and Put Writing are few common option strategies which have positive position Theta.

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Theta Value of Options Part 1 :D

In this article we try to discuss how time decay affects option pricing over time, though it is considered a significant risk factor, understanding the dynamics of time decay in option itself may reveal how to use it for incurring profits. As we  already know, most options have  a limited life span, i.e. till its expiration date. The option expiration date is the date after which the option contract becomes void and right to exercise it no longer exists. For all stock options listed on the National Stock Exchange, the expiration date falls on the last Thursday of the expiration month (except when that Thursday is a holiday, in which case it will be brought forward by one day to Wednesday).

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Not only do options expire on the set expiration date they also keep loosing their value over time. This phenomenon of loosing time value overtime is called time value decay. The risk related to time value decay of option price can be hedged by choosing options which are to expire in more distant months, where there is longer time remaining to expiration. This can slow down the rate of decay but one has to pay higher premiums on forward month options, which subjects it to higher Delta risk of more loss from wrong-way price movement and higher Vega risk which can arise from adverse changes in volatility.

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.The graph displayed here clearly shows that keeping volatility and price of the underlying constant, for the same At-The-Money strike of Nifty 5400 Call, for different expiry months the premium increases as the time remaining to expiration increases. For September expiry, when there are 69 days remaining to expiration the premium is `211, as we move towards August expiry the premium has decreased to `143.20 as only 34 days are left to expiration. Finally comparing it with present month expiry of July the Premium is lesser at `69.15 when there are 6 days remaining to expiration (which also includes some intrinsic value).

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The premium or the option price paid to acquire any option has two components: intrinsic value and time value (also known as extrinsic value). The intrinsic value depends on the moneyness of the option. Only if the option is In-The-Money it will have intrinsic value. At-the-money options and Out-of-the-money options have no intrinsic value. The second component of the option premium is time value, the time value depends upon the length of time remaining to exercise the option, the moneyness of the option, as well as the volatility of the underlying’s market price. In case of In-The-Money options, the time value decreases as the option goes deeper into the money, for Out-of-The-Money options, as they have no intrinsic value, time value is the same as option price.

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Wait for the final part 😀

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FOOD SECURITY BILL, 2010……………. “Half baked, still cooking”

The Food Security Bill, proposed by National Advisory Council (NCA) is likely to be taken up during the month-long monsoon session of Parliament beginning on July 26, 2010. The 14- member NAC, headed by Congress chief Sonia Gandhi was constituted on 1st June and is expected to advise Indian government on various social programmes like food security guaranteeing cheap grains such as rice and wheat.

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On The Menu

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As a matter of fact, India suffered one of the worst droughts in 2009, resulting to low production of foodgrains. The burnt feeling of inflation is still being felt across India.

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India’s annual food inflation rose to 12.81% for the week ended July 3, 2010. The proposal aims to insulate the poor against surging inflation in the country where about 37% of the 1.2 billion population lives below the U.N. estimated poverty line.

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The Working Group on the proposed National Food Security Bill made a presentation. The NAC deliberated on the proposal of the Working Group and reached an initial agreement on the following:

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i. While time-bound universalisation of foodgrain entitlements across the country may be desirable, initial universalisation in one-fourth of the most disadvantaged districts or blocks in the first year is recommended, where every household is entitled to receive 35kgs per month of foodgrains at `3/kg.

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ii. In the remaining districts/blocks, coverage of universal PDS with differentiated entitlements (in terms of quantity and issue price), would progressively be expanded to all rural areas in the country over a reasonable period of time. There shall be a guarantee of 35 kgs of foodgrains per household at `3 a kg for all socially vulnerable groups including SC/STs, and 25 kgs for all others, at an appropriate price. There would also be a category that would be excluded based on transparent and verifiable criteria. Further details of this basic framework will be formulated by the NAC.

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iii. In urban areas, eligible households (identified by criteria developed by the Planning Commission based on the recommendations of the Hashim Committee), including slum-dwellers and the homeless, will be entitled to 35 kg per month at `3/kg.

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iv. Existing allocations for APL in the remaining districts/blocks should not be reduced.

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v. Comprehensive nutrition support schemes for infants, pre-school children, school children, welfare hostel students, adolescent girls, pregnant women, streetchildren, homeless, the aged and infirm, differently-abled, those living with leprosy, TB and HIV/AIDS etc., together with community kitchens and destitute feeding will be initiated throughout the entire country.

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The mainstay of the proposed Food Security Act is making available 25 kg of grains a month for `3/kg to the BPL (Below the Poverty Line) families across the country. The conservative estimates of the government are around 30 per cent of the population. More realistically, it is close to 75 to 80% people.

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Financial Implication India already provides cheap grains and pulses to nearly 180 million poor or low-income families through a public distribution system that will cost nearly $12 billion in the year to end-March 2011, accounting for about 1 percent of GDP and 5 percent of total government spending.

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Although there are no official estimates yet, the new scheme will definitely add to the subsidy burden. A Deutchse Bank report said the incremental cost could be about $1.27 billion, raising total food subsidy costs to around 1.1 percent of GDP in the current 2010/11 financial year and widening the fiscal deficit. The Centre spent `1,31,025 crore on food, fuel and fertiliser subsidies in FY10 and expects to bring down such payments to `1,16,224 crore in FY11 to cut fiscal deficit to 5.5% of GDP from 6.9% in the previous financial year.

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But Montek Singh Ahluwalia, the deputy chairman of India’s Planning Commission, has said the proposed food security bill will not lead to any breach of the 2010/11 fiscal deficit target.

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Tug-of-war

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The real challenge in implementing this scheme is an uncertain output from the country’s rain-dependent agricultural sector. Recently, govt. announce the fourth advance estimates, where the Agriculture Ministry has marginally revised downwards its estimates of the size of the 2009-10 wheat crop — from 80.98 MT to 80.71 MT (million tonnes).

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Accepting this proposal may divert the grains to the poor families’ kitchen instead of wasting tonnes of grains lying in the open space or near the railway tracks.

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Weekly Update 26th – 30th July 2010

The markets witnessed good buying in the week gone by as the corporates from U.S. to Europe showed good performance raising the confidence in the strength of the global economic growth. Continuous buying by the foreign institutions and the strength in the developed markets helped stocks to scale 29 months high. U.S. Fed chief Ben S. Bernanke said that central bank would take additional action if the world’s largest economy does not continue to improve.

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European Banks Stress test result showed that from a sample of 91 European banks, representing 65% of the European market in terms of total assets, 7 banks would see their Tier 1 capital ratios fall below 6%. The focus of the test was mainly to assess the ability of the banks to absorb possible shocks on credit and market risks, including sovereign risks over a 2 years horizon, until the end of 2011. The test revealed that the aggregate Tier 1 ratio, used as a common measure of banks’ resilience to shocks, under the adverse scenario would decrease from 10.3 percent in 2009 to 9.2 percent by the end of 2011 (compared to the regulatory minimum of 4 percent and to the threshold of 6 percent set up for this exercise). However investors are still ambiguous about the credibility of the test as it ignores the majority of banks’ holdings of sovereign debt assuming a case of no default by Greece or any other European country.

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India Inc. has so far shown good performance. The net profit of 339 companies that have declared results has grown by 25.5 percent and sales have shot up by 17.8 percent compared to corresponding quarter last year. The annual monsoon rains improved 24 percent from the deficit in the previous week, but were still 17 percent below normal in the week to 21July 2010, as per the data of the India Meteorological Department on Thursday, 22 July 2010. The seasonal monsoon rains during 1 June to 22 July 2010 were 12 percent below normal.

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The expectation of another 25bps hike in policy rates has already been built in the market. Market would take a cue from what RBI says in its monetary policy on 27th July about the health of domestic market and the steps in its act of balancing growth while anchoring inflationary expectations.

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Trend of Indian Stock Markets is up since a month and now the world markets are also participating in the rally. The rise in Base metal commodities is giving more steam to the rally as that is a reflection of increasing demand for metals in the industry. Nifty has support between 5315-5250 levels and Sensex between 17700- 17500 levels.

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Better than expected earnings amid optimistic equity market bestowed the much needed direction to the commodity market and thus it headed for biggest gain since March. In the meantime, dollar is going down and likely to trade in a negative territory as investors are moving back to the risky asset, which is appearing more promising in current context. Gold is narrating the same story and it is moving in a range with downside bias. Gold silver ratio has declined as silver outperformed gold, getting support from terrific rise in base metals prices. Energy complex has ignored the negative news and shore up on better results and strong technicals. But yes, it’s a time to book profit in spices as they are overbought now, especially pepper.

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“The Costliest And dreadful Affair”…Final Part :)

Continuing the Hurricane “costliest & dreadful affair”…………….. 🙂

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“Major affected areas”…it’s a nightmare for North and South America, and it comes from north-African low pressure systems and moves west. The Caribbean, Mexico, and United States are most often hit by hurricanes. Nearly half of U.S. oil refining capacity is located in hurricane affected areas.

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“Dreadfully risky business for insurance companies”…I hope every year insurance companies pray for clear weather for hurricane affected area. Imagine, insurance companies paid $66 billion for Katrina loss and it was the costliest disaster in the history of insurance. Louisiana accounted for 63 percent of insured losses and Mississippi accounted for one-third. On the contrary, it’s a boon for construction industry.

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“Makes big hole…effect on economy”… hurricane like other natural disasters, disturb the economic activity of regions in many ways as business activity is interrupted and infrastructure is destroyed. Approximately, single hurricane Katrina cost around $125 billion, with $66 billion in insured losses. It affected 19% of U.S. oil production. Power and energy companies’ financial condition gets damaged due to hindrance in production and supply activities amid storm restoration costs. Shipments also get affected and we know that nearly two-thirds of all oil processed by the region’s refineries arrives via ship, hence any natural disturbance will result in supply disruption. The Gulf’s ports are trading points for over 20% of cargo tonnage in the US.

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“Destruction…the ripple effect of hurricane”… just imagine the total loss, done by hurricane in US that single hurricane Katrina and Rita destroyed 113 offshore oil and gas platforms and damaged 457 oil and gas pipelines. Hurricanes Katrina and Rita reduced oil production by 103 million barrels and natural gas output by 610 billion cubic feet. But this is not enough; Katrina also struck the heart of Louisiana’s sugar industry, with an estimated $500 million annual crop value and made 75000 people homeless. Entergy New Orleans also filed for bankruptcy protection on September 23, 2005.

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“Impact on commodity…higher energy keeps inflation at higher side”… hurricane affected areas produces about 15% of US supply of natural gas and 7% of its oil. The Gulf of Mexico is responsible for 13% of the U.S. natural gas production (and 30% of its domestic crude oil production). Any supply disruption gives a leap to the crude and natural gas prices. By and large we observe price of crude oil and natural gas augment during the period of June to October. It’s a very active time for speculators and we can see the changes in front month contracts based on weather forecasts. Crude already zoomed up to the level of $87.15 on 3rd May, 2010. Now it headed towards quarterly decline since 2008. But there are major factors, which will keep the fire on in energy complex. Hurricane Alex has already hit this season and 20 more hurricanes of different categories are expected to hit in 2010. Hence any news of hurricane would fuel the prices. Driving season in US has already begun, which is the time, when money managers prepare to pull their sleeves to build a large position in crude. Furthermore ongoing summer season can give additional strength to the prices. Hence these factors will keep the crude prices at higher side but any weak economic indicator will cap the upside.

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In nutshell, nobody desires to get up with the news that hurricane is heading towards Louisiana when the entire world is struggling to overcome its financial problem. Whenever hurricane season starts it hoist, there is a fear of price rise of crude oil, which is not at all upbeat for the economies already in poor health. Traders start to quit their short positions. When you see a significant changes in the position of traders near June or July months, then you can assume simply that hurricane is about to knock the US field and money managers are preparing for a wild movements!!!

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“The Costliest And dreadful Affair”…Hurricane 1

It was only two months back when European debt crisis   wreked havoc on EU and the rippled effect was seen in other countries as well. Till date, many nations are still fighting with the financial problem, at the same time met department gave another jolt to the world and announced the unwelcomed and killer hurricane season.

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Hurricane…. derived from huracan, the Carib god of evil is once again become the headlines and racing the heart beat of people of affected areas, economists , government and all.  The forecast is expecting for a very active 2010 season with above-normal threats on the US coastline. This news is not at all encouraging for world economy, especially when world economy is under attack of financial tsunami. Let’s have a look on the details of this deadly hurricane which is a regular visitor every year and give crucial impact on the health of economy…

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“Timings, which does matter”… generally hurricane season starts from June and end in October. But very peaked season is from “August to October”; especially “early to mid-September” is the pinnacle. But of course, it is not mandatory that Mother Nature will follow the same calendar every year; remember hurricane Wilma hit on 21st and 22nd October, 2005. Weather specialists are predicting an above-average activity for the 2010 Atlantic hurricane season. Alex, first hurricane of 2010 already showed its existence.

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“Very attention-grabbing naming in chronological order”… they are named alphabetically. First tropical storm or hurricane starts by A, then B…and in this order. List contains hurricane names that start from Ato W, but exclude names that start with a “Q” or “U.” There are six lists which rotate. Changes occur in list only when there is a hurricane, which is extremely dangerous, after that the name retires and another hurricane name replaces it. Even in 2010 list, there are certain changes; viz- Charley was replaced by Colin, Frances was replaced by Fiona, Ivan was replaced by Igor, and Jeanne was replaced by Julia.

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“Category…grading of damages”…there are five category of storms viz.1, 2, 3, 4 and 5. Category 5 storms are the most catastrophic hurricanes that can form. On an average it forms once in three years, if we talk about Atlantic basin. Only four times — in the 1960, 1961, 2005 and 2007 hurricane seasons — have multiple category 5 hurricanes formed. However, on larger canvas between 1924 and 2007, 32 hurricanes have been recorded at category 5 strength. An average season usually has 11 storms, six hurricanes, and two major hurricanes.

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To be continued…………………

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CASTOR SEED………. “Obsessed With Profit”

Castor, being a non-edible oilseed, has economic importance of its oil yielding seeds.Usage of castor seed products has grown tremendously over the years due to their biodegradable and eco-friendly nature. Looking at the profit it has given to the portfolio, it seems like the nature has blessed the investors, as if money sprouting out of the shiny seeds of castor plants.

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Consumption Pattern: The average Indian consumption of castor oil is 100,000 ton per year. The Indian variety of castor has 48 % oil content of which 42% can be extracted,while the cake retains the rest. On an average soap makers accounts for 25,000 ton while paint and allied sectors consumes 35,000 ton of the Indian consumption. In internal combustion engines, castor oil is renowned for its ability to lubricate under extreme conditions and temperatures, such as in air-cooled engines. The lubricants company Castrol takes its name from castor oil. Castor seed meal is offered in bulk & in plastic bags.

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Domestic scenario: India’s castor production fluctuates between 0.6 to 1 million tonnes a year. Castor is sown in August and harvested in Dec-Jan every year with majority of arrivals coming after February. Gujarat accounts for over 80% of India’s castor seed production, followed by Andhra Pradesh and Rajasthan.

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FACTS & FIGURES

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•Total area under Castor crop in India for the year 2009-10 is 7.40 lakh hectares. It has decreased by 10% as compared to previous year.

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•Estimated total production of Castor Seeds in India for the year 2009-10 is 9.34 lakh tonnes. It has decreased by 4% as compared to previous year.

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•Average yield for the year 2009-10 is 1261 kg/hectare as against 1180 kg/hectare during the year 2008-09. It has increased by 7% as compared to previous year.

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Kharif sowing: This kharif season the acreage under castor seed is far below the normal area of 8.130 lakh hectares. However, the good news according to the latest sowing data is that farmers have planted 1.252 lakh hectares which is more than the 1.115 lakh hectares covered at this time last year, are shifting from castor seed to cotton. The spurred kharif sowing figures of 66.090 lakh hectares under cotton as compared to 48.470 lakh hectares last year, itself depict that farmers this time have brought in more land under cotton. The reason being is the reaping profits from the later.

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EXIM scenario: Every month 40,000 tonnes castor oil and 5,000-8,000 tonne castor derivatives leave for foreign shores from India, From India castor oil is exported through mainly Kandla port. India exported more than 2.25 lakh ton castor seed till June this year compared to 1.22 lakh ton in same period of previous year. In May India exported 54000 ton castor oil. China imported 90000 ton castor oil in June only this year. Indian Government is providing 5% tax rebate to castor seed & oil exporter under Vishesh krishi and gram udyog yojana.

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…….. At the futures trade (Source: Forward market commission)

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•The Rajkot Commodity Exchange Ltd., Rajkot – The near month contract (i.e. June 2010) was quoted at its highest at Rs.3490/- per 100 kg on 30.6.2010 and at its lowest at Rs. 3159/- per 100 kg on 16.6.2010. During the fortnight, the total value of trade was Rs.354.95 crore. The net open position in the near month contract was at its highest at 25 MTs on 16.6.2010.

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•Bombay Commodity Exchange Ltd., Mumbai – The near month contract (i.e. August 2010) contract was highest price at Rs. 3522.00 on 30.6.2010 and lowest price at Rs.3256.00 on 16.6.2010. During the period, the total value of Castor seed was Rs.2.20 crore.

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Current scenario: Due do increase in demand in international markets, the prices of castor seed has increased by almost 15% recently and crossed the level of Rs 700/ 20 kg first time. Despite good monsoon in castor seed growing states the prices is not likely to go down as better demand from US, China and Europe.

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The snap shot of the future markets shows that the price is at a year high at Rs. 3748/ quintal giving a return of whooping return of 32% as on 13th July, 2010 from the year beginning. The forward month contract are in contango situation. The upward momentum can remain intact until the arrivals of new crop.

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Weekly Update 19th – 23rd July 2010

The concerns over recovery in global economy resurfaced in investors mind as China economy grew 10.3 percent in the second quarter showing moderation from 11.9 percent expansion in the first quarter. In U.S., consumer confidence dropped in July to the lowest level in the year to 66.5 from 76 in previous month and factory output too fell by 0.4 percent in June.

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The minutes released by the office of the Federal Reserve said that “The economic outlook had softened somewhat and a number of members saw the risks to the outlook as having shifted to the downside”. The statement and weak data only added to the worries and led to the decline in most of the global markets.

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India’s Industrial Production growth came surprisingly low to 11.5 percent in May from a year earlier and the April growth was revised downward to 16.5 percent from 17.6 percent. It is expected that the Industrial Production will remain close to double digits as some of the leading indicators like vehicle sales remained buoyant in June.

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Keeping a vigil on the liquidity and in order to ensure smooth credit lines for both government and corporate to sustain the growth momentum, RBI has further extended the second liquidity adjustment facility (SLAF) on a daily basis till July 30, 2010. Strong credit growth in Banking system and Industrial production together with high food inflation may influence RBI to raise policy rates by another 25 bps in its first quarter review on 27th July.

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The latest statement by the IMD that the monsoon up to 15 July has so far been 14 percent below the long period average is a cause of concern.July, especially being the most important month for sowing the Kharif crops has led to the alteration of earlier beliefs that going ahead food inflation will moderate.

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Mostly world markets are in downtrend though Indian stock market is still in uptrend. The base metal commodities are not able to rise which is showing the underlying uncertainty in the markets. One should be cautious in such markets.

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Nifty has support between 5280-5220 levels and Sensex between 17600-17400 levels.Indian markets have gone up substantially in last one and half month and dollar index has fallen sharply from higher levels but the Indian rupee has not moved much which is a sign of concern as rupee should have strengthened in such an environment.

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Lack of clarity with reference to the direction of world economy is painting a hazy picture for commodity market. Even uncertain outcome of economic releases and result of second quarter is giving little direction to the commodities. Investors are refraining to make large position in current situation. This week, we have important data form UK and Canada. Housing data can give further direction to base metals. Bullions can trade in a slim spread. Expiry of July contract in NCDEX may result in more volatility in all agro commodities. After witnessing a multi week high some spices may see a pause in rally.

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Petrol Prices to be Revised Uniformly

The government owned oil marketing companies – Indian Oil, Hindustan Petroleum, and Bharat Petroleum – will be reviewing petrol prices on a monthly basis, and any decisions regarding changes in prices will be on consensus basis within the public sector. This means that petrol prices will be uniform at the retail pumps of public sector companies. Private companies may however choose to differ.

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However, the government has made it clear that it will not be completely deregulating diesel prices for now. It had hiked diesel prices by Rs 2 last month while petrol prices were made market determined. Earlier it was expected that despite diesel prices still involving a subsidy of around Rs 2, they will too move in tandem with crude oil prices.

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A lot of political opposition to the move along with increasing inflation may have been responsible for the retreat by the government. Diesel is used largely by the transport sector as well as the farm sector and a further price hike would therefore push up prices of almost all other products. The government is already struggling to tackle surging food prices and therefore probably wants to wait till the inflation comes down.

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The decision was taken at a meeting called by the petroleum secretary S. Sundareshan to deliberate on price revision frequency and also on how the publicly owned OMCs will coordinate on the matter. “Petrol price will be reviewed monthly after a mutual consultation among the three (government owned) oil marketing companies. There is no need for revision of prices now. We will follow this mechanism for three months from now,” said Indian Oil director S V Narasimhan after the meet.

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There will be no revision however for the current month. Also, the oil companies have not announced any particular date for price revision to prevent any hoarding by the black marketers, who may try to store the petrol in anticipation of a fuel price hike and result in problems for masses.

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With regard to the determination of price of diesel the Petroleum Secretary said, “Right from the beginning we have been saying that the price of petrol will be market-determined and the oil companies will take the decision themselves. The decision of oil companies would be based on factors like what is the competition doing and whether prices will be determined jointly or on individual basis.”

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On issue of whether the private companies like Reliance Industries and Essar too will harmonise their decisions with the government OMCs he said, “We are given to understand that everyone has adopted a wait and watch policy for next few months until the situation stabilises. At present, there is no scope for price revision of petrol.” He also categorically stated that “government was not thinking on revising diesel prices for now.”

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With regard to another crucial aspect of oil sector, the sharing of subsidy burden between companies and government he said that for the first quarter of 2010-11, the upstream companies such as ONGC and Oil India will shoulder a burden of about Rs 6,000 crore. The total under-recovery for the quarter is expected to be about Rs 20,000 crore.

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