Archive for the ‘india’ Category

Equity News Round Up 11th – 15th October

DOMESTIC NEWS

Economy

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•Food inflation eased marginally to 16.24% for the week ended September 25, from 16.44% in the previous week, as improved supplies lowered prices.

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Capital Goods

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•BHEL has bagged a `3,700-crore from Karnataka Power Corporation Ltd for setting up the 700 MW Bellary Thermal Power Station in Karnataka.

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•Lanco Infratech informed that its Vidarbha power project based in Maharashtra, has achieved financial closure. The company has raised debt to the tune of `5,549 crore to fund the project which has an estimated cost of around `6,936 crore. The rest of requirement is funded by equity of `1,387 crore.

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•Larsen & Toubro (L&T) has bagged `1,585 crore orders in July-September period from the construction segment. Of the `1,585 croreorders, `435 crore order is for construction of building projects fromleading developers while `781 crore orders is from “clients forconstruction of hotel, office building and add on orders from its ongoing airport and commercial building projects”.

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Automobile

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•Hero Honda has launched a limited edition of its 100cc motorcyclePassion Pro, priced at `46,300 (ex-showroom Delhi).

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Realty/ Construction

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•IVRCL Infrastructure and Projects said its various divisions have wonorders worth `1,120 crore from sectors including power and transportation. The company’s water division bagged the highest `451crore order, followed by `440 crore by building divisions,`136 crore by transportation division and `92 crore by power division.

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•Punj Lloyd Group has bagged a `539-crore contract from the state owned gas utility GAIL India for laying a natural gas pipeline from Dabholto Bangalore. The project will be executed over a period of 13 months.

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Pharmaceutical

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•Cadila has got approval from US health regulator to market high blood pressure treatment tablets, Losartan Potassium and Losartan Potassium and HCTZ in the American market. The US Food and Drug Administration approval has been granted to the firm’s subsidiary Zydus Cadila, for Losartan Potassium tablets in the strengths of 25 mg, 50 mg and 100 mg and for Losartan Potassium and Hydrochlorothiazide tablets in the strengths of 50/ 12.5 mg and 100/25 mg.

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Power

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•NTPC may invest over `10,000 crore to set up a 2,640 megawatt (Mw)thermal power project at Gidarbaha in Punjab. The Project shall be setup as regional power project by NTPC and would also be the company’s first in the state.

INTERNATIONAL NEWS

•US Pending Home Sales Index jumped more than four percent for asecond straight month, to 82.3 in August (2001 = 100). The prior month was revised to 78.9, shaving July’s gain to 4.5 percent. The readings point to a second straight jump for existing home sales which surged nearly eight percent in August.

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•US non-farm payroll employment fell by 95,000 jobs in September following a revised decrease of 57,000 jobs in August. Economists had expected employment to come in flat compared to the loss of 54,000 jobs originally reported for the previous month.

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•UK output price index rose 4.4% annually in September, compared with a4.7% gain in August. The increase was a touch higher than the expected 4.3% rise. Output prices gained 0.3% month-on-month after stagnating in August. Excluding food, beverages, tobacco and petroleum, output prices increased 4.6% annually.

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•The Japanese Cabinet approved a 5.05 trillion yen ($62 billion) new stimulus package to boost the economy amid widespread concerns that it could slip back into recession. The new package, which will befinanced by an extra budget, is aimed at addressing labor market issues,social welfare and healthcare services. The government is trying to finalize this additional budget by the end of this month.

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Weekly Update 11th – 15th October 2010

Beside Indian market all global markets closed in green in the week gone by on the expectation of policy easing by developed nations. Central banks resorting to purchase of debt and currency intervention in developedeconomies is flooding markets with liquidity and funds are flowing to Asia for higherreturns. Fed Chairman Ben S. Bernanke has signaled that Fed may announce thepurchase of more Treasuries as soon as their next policy meeting in November in aneffort to boost growth and reduce an unemployment rate.

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The Bank of Japan said this week it will establish a 5 trillion yen ($61 billion) fund to buy government bondsand other assets. It also cut its benchmark overnight interest rate for the first timesince 2008, dropping it to a range of zero to 0.1 percent. Joining the league European Central Bank President Jean- Claude Trichet too said that ECB policymakers are in the “same mood” as a month ago and for now remain committed tophasing out their unlimited lending program.With the economic activity gaining pace, it is believed that Indian market wouldcontinue to see overseas buying. Moreover Indian government plans to raise $8.9billion in the year ending March 31 selling state assets including Coal India, Steel Authority of India Ltd. and Indian Oil Corp. thereby giving more investment opportunities to investors.

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While many developed nations are intervening in the currency markets in order tostem the appreciation in the currency, Indian Finance minister is of the opinion thatthe situation has not gone to an extent at which there is a need to restrict portfolio or foreign direct investment. As a matter of fact Indian rupee gained 4.5 percent inSeptember. Finance Minister said “We should try to engage the countries innegotiations and build up a consensus through which the matter can be resolved andit cannot be resolved through confrontation.” The International Monetary Fundraised its 2010 economic growth forecast for India to 9.7 percent from 9.4 percent,citing strengthening local consumer demand.

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Since we have already seen a huge run up in the broader indices meaning moreparticipation coming from large cap stocks so now going forward we may expectmore activity in mid and small cap stocks. The result season is starting in the comingweek and corporate would give their guidance for the rest of the year which wouldset the future undertone of the markets. Nifty has support between 5950-5870 and Sensex between 19640-19200 levels.What a stunning rally gold has enjoyed recently on fear of inflation. It has hit many records in fewer days.

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Silver was not behind, it made life time high of `34898 on MCX and breached the mark of `35000 in spot market. Talk of quantitative easing by US and rate cut by BoJ are creating anxiety over currency devaluation and long-terminflation is keeping gold and silver on remarkable run up. After witnessing the bigswings of both side, we can say that trend of crude oil is little bit in indecision mode.However, bias should be on upside. Michigan Confidence, CPI and advance retailsales data of US may further provide the direction to metals and energy. Industrialmetals which have made upper trading range last week, are likely to trade up onweakening dollar index.

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NATURAL GAS……….. THE FUEL OF THE 21ST CENTURY

Natural gas has emerged as the most preferred fuel and vital component of theworld’s supply of energy due to its environmentally cleanest, safest and most useful nature, greater efficiency and cost effectiveness among all energy sources.Natural gas is a mixture of hydrocarbon gases. In its purest form, such as the naturalgas that is delivered to your home, is almost pure methane.

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Growing importance: We require energy constantly, to heat and cook food, and generate electricity. Due to clean burning and lower emission levels of potentiallyharmful byproducts into the air as compared to other fossil fuels, the importance of natural gas in our lives is growing constantly. The demand of natural gas has sharplyincreased in the last two decades at the global level. In India too, the natural gas sector has gained importance, particularly over the last decade, and is being termedas the fuel of the 21st Century.The industrial and electricity sector accounts for the greatest proportion of natural gas use across the world. The US residential sector consuming the second greatestquantity of natural gas.

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Global Production: According to U.S. Department of Energy, globally total provedreserves of natural gas is 6,254.364 trillion cubic feet (tcf) in 2009 with an increase of0.68% as compared to 2008. Russian federation has largest reserve of 1,680.00 tcffollowed by Iran and Qatar with 991.600 and 891.945 tcf reserve respectively. Russiais largest producer of natural gas with 23 tcf followed by USA with over 20 tcf. Majorexporters of piped natural gas are Russia (154 bcm), Canada (103 bcm) and Norway(93 bcm), the major importers are US (104 bcm), Germany (87 bcm) and Italy (75bcm). The major exporters of CNG are Qatar (40 bcm), Malaysia (29 bcm), Indonesia(27 bcm) and the major importers are Japan (92 bcm), South Korea (36 bcm) andSpain (30 bcm.)

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Production in India: Natural gas production in India grows at averaging 11.7percent per year. Total production is estimated to grow from 1.1 trillion cubic feet in2007 to 2.7 trillion cubic feet in 2015. Most of the production of gas comes from theWestern offshore area. The on-shore fields in Assam, Andhra Pradesh and Gujarat States are other major producers of gas. Fertilizer (41%) and power (37%) are themajor users of natural gas in India.

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Factors affecting demand for Natural Gas: There are two primary drivers thatdetermine the demand for natural gas in the short term-Weather and Fuel Switching.Natural gas demand typically peaks during the coldest months for heating homes anddips during the warmest months, with a slight increase during the summer to meetthe demands of electric generators. Hurricanes and severe weather also disrupt the supply.

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While most residential and commercial customers rely solely on natural gas to meetmany of their energy requirements, some industrial and electric generationconsumers have the capacity to switch between fuels. For instance, during a periodof extremely high natural gas prices, many electric generators may switch from using natural gas to using cheaper coal, thus decreasing the demand for natural gas.

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Generally the state of the U.S. economy can have a considerable effect on thedemand for natural gas in the short term, particularly for industrial consumers. When the economy is expanding or declining, the consumption of natural gas fromindustrial sectors is generally increasing or decreasing at a similar rate.Long term demand factors reflect the basic trends for natural gas use into the future.The analysis of factors that affect long term demand across all sectors arecomplicated.

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Probably the most important long term driver of natural gas demand isfuture residential heating applications. Due to the retirement of old nuclear,petroleum, and coal powered generation plants leaves a significant requirement fornatural gas use for electric generation to meet the commercial demand forelectricity generation and transportation.

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Outlook: Currently the future prices of natural gas in MCX are trading in sidewaysmanner. It has strong support at `170. Seasonal demand from mid oct can support therecovery upto `220 in mid term.

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Equity News 27th September – 1st October

DOMESTIC NEWS

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Economy

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·Food inflation, as measured by the Wholesale Price Index (WPI), rose to 15.46 per cent for the week ended September 11, primarily due to rise in prices of potatoes and onions. Food inflation stood at 14.77 per cent during the corresponding week in 2009 and at 15.1 per cent during the previous week ended September 4.
Realty/ Construction ·IVRCL Infrastructures & Projects Ltd (IVRCL) has bagged orders worth `750
crore for four laning and improvement of Karanji-Wani-Ghuggus – Chandrapur Road Maharashtra State Highway – 6&7 in Yavatmal and Chandrapur district on DBFOT basis.


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Cement

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·J K Lakshmi Cement would invest `1,800 crore over the next three-four years to double its cement production capacity to 10 million tonnes.

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Oil & Gas

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·GAIL India will make capital investment of around `40,000 crore ($8.8 billion) by 2014-15, mainly to expand its pipeline network and boost petrochemicals capacity.

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Telcommunication

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·Kavveri Telecom has bagged a contract worth `30 crore from one of the telecom operators for the supply of equipment and antennas. The order is to be completed within a year.

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·Bharti announced its entry into the fast-growing mobile handset business as group firm Beetel launched eight handsets in the price range of `1,750- 7,000. Bharti is India’s number one mobile service provider with over 140 million subscribers and the company recently acquired Zain Telecom in Africa to expand its footprint in 16 countries.

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Capital Goods

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·BHEL said it is in talks with SAIL and Vizag Steel to tie up for manufacturing high grade steel, while Korean steel maker Posco may join the proposed joint venture company as a technology partner.

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·Bharat Heavy Electricals Ltd has got a contract worth `2,665 crore ($583 million) to set up a 1,200 megawatts coal-fired power plant at Chhattisgarh in central India.

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Paint

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·Berger Paints India Limited has proposed to set up a paints manufacturing complex at Hindupur in Anantapur district of Andhra Pradesh comprising three units and involving an investment of around `350 crore.

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Pharmaceuticals

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·Aurobindo Pharma has received USFDA approvals for ampicillin and.sulbactam injections in bottle, single-use vial and bulk pack formats.

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Ampicillin and sulbactam is a sterile semi-synthetic penicillin product falling under the anti-infective segment.

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FMCG

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·Procter & Gamble India (P&G) is set to bring in one of its biggest global brands–Wella hair colour—as it looks to strengthen its health and beauty business in India. This is the first time that the detergents-to-diaper maker will enter the Indian hair colour market, which is dominated by L’Oreal India’s L’Oreal Excellence Crème and Garnier, and Godrej Consumer Products.

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INTERNATIONAL NEWS

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·US Fed left policy rates unchanged but appears to have begun preparations for additional easing-possibly at the post-election November FOMC. The fed funds target range was left unchanged at a range of zero to 0.25 percent and, again, the Fed stated that this rate is expected to remain low for an “extended period.”

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·US Housing starts showed unexpected strength in August with even the single-family component increasing. Housing starts in August jumped 10.5 percent after rising a modest 0.4 percent in July. The August annualized pace of 0.598 million units clearly topped analysts’ expectations for 0.550 million units and is actually up 2.2 percent on a year-ago basis. The gain in August was led by a 32.2 percent surge in multifamily starts, following a 36.0 percent increase in July. The single-family component rebounded 4.3
percent after dipping 6.7 percent in July.

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·US Existing home sales rose 7.6 percent in August to a 4.130 million annual rate, up substantially from July’s 3.840 million rate (revised from 3.830).

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Gains swept regions with supply coming down a bit, at a still extremely swollen 11.6 months. Prices are softening, down 1.9 percent to a median $178,600. The gain in sales was predicted by the pending homes sales report released early in the month, data that popped higher.

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Weekly Update 27th September – 1st October 2010

Indian Markets posted fourth weekly consecutive gains led by rising optimism of growth and portfolio investments. The run up in the market was phenomenal and beyond expectations of market participants. Global investors seems to be going more anxious about India consumption and growth, complemented by continued monetary accommodation by developed nations in  order to propel growth. Indian Government recently raised the cap of foreign investments by $ 5 billion in federal and corporate bonds with a residual maturity of over five years. The step is viewed very positively in the sense that the ease of limit in federal bonds will take out interest rate pressure from the banks. The ease in corporate bonds issued by companies in the infrastructure sector will fill the estimated financing requirement of $1 trillion in the five years to 2017.


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U.S. central bank kept its benchmark interest rate in the range of zero to 0.25 percent .The bank said that they are prepared to provide additional accommodation in the light of slower economic recovery. The statement raised the speculation that the bank may buy more treasuries down the year. Weaker growth has still kept the unemployment at above 9 percent levels and reflects that companies are still cautious. The U.S. markets surged to highest level since May as the orders for durable goods rose the double of market expectations.

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Another happening that market is keeping an eye on is the political pressure building on Obama administration to take a stance on the China’s currency policy. The yuan has appreciated about 2 percent against the dollar since the central bank said it would pursue a more flexible exchange. However U.S. wants to see more rapid and “significant” rise in the yuan’s value.

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With the visible positivity across the globe, Indian markets are maintaining up move and managed to close above the psychological mark of 6000 levels on the weekly basis. The weakness in the dollar index clearly strengthens the equity markets and lead to the fresh breakout especially in US and European counterparts.

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One should maintain the stance of buying on dips. The Midcap stock may provide handsome return in the near future. Nifty has support between 5900- 5810 and Sensex between 19640-19200 levels.

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It appears that bullion counter is taking advantage of every opportunity and making new highs now and then on rock solid fundamentals. Weaker than expected growth in manufacturing and services industries of euro zone, sovereign debt crisis in Ireland, plummeting dollar index amid some poor economic releases fuelled rally in bullions. Negative tone of global economy capped the upside of base metals and energy  counter, even fall in dollar index could not give much impact and they appeared shy to break the resistance. Local currency appreciation locked the movement of commodities. This week is full of event risk. GDP data of US and UK, consumer confidence data and employment data of US may give further direction to  commodities. Crude oil is witnessing lackluster trading and thus moving in range on ambiguity in the world economy. Energy counter needs big news for further direction. Spices should revive in this week.

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IDFC leads the gainers of group ‘A’ on BSE

Infrastructure Development Finance Company (IDFC) is currently trading at Rs 204.80, up by 9.15 points or 4.68% from its previous closing of Rs 195.65 on the BSE.

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The scrip opened at Rs 197.00 and has touched a high and low of Rs 205.30 and Rs. 196.00 respectively. So far 1985833 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 201.05 on 16-Sep-2010 and a 52 week low of Rs 139.80 on 04-Nov-2009.

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Last one week high and low of the scrip stood at Rs 205.30 and Rs 191.10 respectively. The current market cap of the company is Rs 29243.72 crore.

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The Institutions holding in the company stood at 86.68% and Non institution were holding 13.32% of stake respectively.

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The other top gainers of BSE group ‘A’ were DLF up by 4.86%, Centeral Bank up by 4.58%, Aban Offshore up by 4.57%, Federal Bank up by 4.48% and Everest Kanto up by 4.38%

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The Institutions and Non-Institutions holding in the company stood at 86.68% and 13.32% respectively.

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Infrastructure Development Finance Company (IDFC) is planning to mop up about Rs 3,400 crore via issue of long-term bonds which is expected to open in the first week of October. In this regard, the company has already filed the draft papers with the market regulator Securities and Exchange Board of India (SEBI).

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According to the Draft Shelf Prospectus, the said bonds will have the face value of Rs 5,000 and some part will be utilized for infrastructure lending. This will be the first public issue under the new rule that allows tax benefits for investment in long-term infrastructure bonds.

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The company has reported a net profit of Rs 319.71 crore for the quarter ending on June 30, 2010 against Rs 243.49 crore for the quarter ending on June 30, 2009, up 31.30%.

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The company provides financial assistance to various segments such as power, roads, ports, telecommunications, information technology, urban infrastructure, healthcare, education infrastructure, food and agri-business infrastructure, healthcare and tourism.

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Commodity Weekly Commentary 20th – 24th September 2010

Its seems that sky is the limit for bullion counter now a days, as prices surged high to their life time highs on domestic bourses. However, strong Indian rupee limit the upside movement in prices in both gold and silver. In international markets gold hit a record high above $1,280 per ounce last week, as currency market jitters and broader economic uncertainty enticed more investors towards the metal’s safe-haven credentials. The metal’s rise this year has been fueled largely by investor nervousness that stemmed from the fallout from the euro zone debt crisis and from economic data that has suggested global economic growth may be losing momentum.

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Base metals also surged high last week on weakness in dollar index and after reassuring comments from China’s central bank about its plans to keep monetary policy loose. In energy counter crude oil lost its esteem and traded down. Crude traded around $76 per barrel amid low U.S inventories, while Chicago pipeline leak continues weighing on prices as new Tropical Storm Karl threatens the Gulf of Mexican. The EIA report showed a drop in fuel demand by 1% to 19.5 MB. Gasoline also shed 694 thousand barrels to 224.5 MB. This comes at a time where imports have reached their lowest level in five months.

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Unlike metals, agro commodities fell like nine pin, even fall in dollar index could not supported them very much. It was not a good week for spices as sellers were more active than buyers in spot market. Future market reacted in the same fashion. Panic selling was continued in turmeric, jeera and chilli as well. Cardamom was also the victim of arrival pressure and closed down. Stockiest liquidation at higher levels dragged down chana futures on NCDEX as well. With declining prices of churi and korma, guarseed and guargum continuously traded southward.

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Wheat closed down on negative cues. Furthermore, traders preferred profit booking at higher levels in menthe futures. Strong crop projection of soya bean along with rise in crop projection of mustard seed crop in rabi season compelled oilseeds and edible oil futures to trade in negative zone. Higher domestic stocks, imports in the middle of arrivals in the domestic mandies further pressurized the oil seeds prices. As per expectation, the total crop size of soyabean in the current season is likely to be around 95 lakh tonnes, up 2% from last year.

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However there was a commodity which surprised the market with its nonstop three week upside on higher offtake amid tight supply and it was maize.

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Reliance Broadcast Network touches roof as its arm acquires Line V of DMRC

Reliance Broadcast Network is currently trading at Rs. 109.80, up by 5.20 points or 4.97 % from its previous closing of Rs. 104.60 on the BSE.

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The scrip opened at Rs. 109.75 and has touched a high and low of Rs. 109.80 and Rs. 109.75 respectively. So far 52,300 shares were traded on the counter.

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The BSE group ‘T’ stock of face value Rs. 5 has touched a 52 week high of Rs. 145 on 04-Dec-2009 and a 52 week low of Rs. 45.60 on 27-May-2010.

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Last one week high and low of the scrip stood at Rs. 109.80 and Rs. 96 respectively. The current market cap of the company is Rs. 506.47 crore.

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The promoters holding in the company stood at 61.47% while Institutions and Non-Institutions held 1.14% and 37.38% respectively.

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Reliance Broadcast Network (RBNL)‘s Out of Home (OOH) arm — Big Street — has acquired Line V of the Delhi Metro Rail Corporation (DMRC) for its outdoor advertising activities for a period of five year’s. The company has already acquired Line II and III of the DMRC. With the latest win, it now holds 40% of premium inventory in the DMRC network.

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The OOH market in India is estimated to be around Rs 1,700 crore. The company is looking to capitalize its OOH inventory with the Line V acquisition as DMRC attracts around 1.5 million commuters daily.

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The Anil Dhirubhai Ambani group company operates the Big 92.7 frequency modulation (FM) radio station . It runs 45 radio stations. The company was demerged from Reliance MediaWorks in August 2009.

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VEGA IMPACT IN OPTION PRICING FINAL PART :)

The Vega is highest in ATM option and slightly less at OTM and ITM options. The change in Implied Volatility will impact the most on the price of ATM option ascompared to the ITM and OTM options. The Implied Volatility can only impact the time value not the intrinsic value of the option so while comparing in betweenthe OTM and ITM options the OTM option’s Vega will be higher.

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The Impact of the Theta (time decay) to the Vega is negative. As the time passes if other thingremain unchanged the Vega decrease near to the expiration. As stated above the Vega valueis the most at ATM options and near to expiration the time value get decreased so does theVega. This is also called as Vega decay.

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The graph display that keeping all factors same(Volatility, price of underlying) the ATM Strikeoption of nifty the Vega on decreasing mode as it comes near to the expiration. When thedays left for expiration is 24days the Vega is 5.521 and 4.366 when it only 15 days are leftwhereas it is only 1.128 on the last day.There are various volatility strategies which options traders execute at the times of high/lowvolatility.

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For example, during times of earnings, elections or other major events thevolatility generally raise and to capture this opportunity the trader or investor buy strangle/straddle which is Vega positive strategy.Many traders time to time require adjusting their position to reduce the risk exposure in the market. This can be done by various ways it can be either adjustingvega with decreasing theta or adjusting vega with increasing the theta. If there is a large movement expected in the market then a buy call or put, debit spread,long strangle and long strangle adds the vega to the position but there will be risk of theta decay whereas on sideways market long ATM butterfly and long ATMcondor decrease the Vega as well as theta in the position.

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If the goal is to increase the vega and theta then the calendar spread, double calendar and Iron condorstrategy should be added to the portfolio whereas the sell iron condor, ATM Calendar and sell call or put are vega negative and theta positive strategies.In nutshell, the option trader/investor should understand the risks involved in it before entering into the trade and how the volatility impacts the position.Before entering into a trade one must have view about the direction and volatility. If there is an expectation of rise in volatility then long strangle, long straddle,debit spread, ratio and calendar spread should be followed whereas in expectation of fall in volatility one should go for short straddle, short strangle, creditspread, backspread and butterfly spread.

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SILVER……GROWING AVENUE OF INVESTMENT

Recently silver, known as poor’s gold, is gaining not only against the dollar and other old world currencies but also outperforming gold. Due to high prices gold is loosing its own attraction from common man and importance of silver as precious metals is gaining momentum. The declining trend of gold/silver ratio indicate that silver become better destination for investment. Like gold, silver has retained rally momentum due to recent poor economic data that has caused investors to purchase Silver as a “safe haven” alternative investment. The pickup of silver industrial demand due to the emergence and growth of a number of new end uses, and continued strong investment demand is pushing silver prices sharply higher.

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Like all metals, London Bullion Market is the global hub for silver trading, while the New York’s Comex Futures dominate the solver fund activity. The world’s largest silver backed exchange-traded fund, the i Shares Silver Trust, said its holdings rose to 9,280.40 tonnes by Sept. 1 from 9,151.03 tonnes on August 5.

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Global demand- supply of silver According to World Silver Survey 2010 , global silver mine production rose last year, by almost 4%, its seventh straight annual increase to reach a record high of 22,072 ton.Peru is the world’s largest silver producing country followed by Mexico, China, Australia and Bolivia. GFMS is forecasting a further mine production rise of 3 per cent this year.

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According to GFMS, In the last ten years, the world jewellery demand was down 8 per cent and silverware as much as 38 per cent. And because of technology changes silver use in photography sector had suffered a major fall of 62 per cent. But as strengthening of belief in silver as a precious metal is the 145 per cent demand gain since 2000. The industrial application of silver is almost 48 per cent of total silver use.

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Indian demand- supply of silver Though India is generally believed to have a great appetite for gold, Indians also love to possess silver in their homes for jewellery. India is voluminous importer of silver. Of the 4,000 tonnes that India used to import annually, around 2,600 tonnes was used to make jewellery and ornaments. MMTC is the largest importer of gold in the country. The firm’s silver imports fell by more than 44% in the fiscal year to end March 2010, as high prices dented demand. More than 60% of India’s silver demand comes from farmers.

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Last year silver demand dipped because the country experienced one of the worst monsoon seasons in over four decades. However, with much better monsoon this year, the situation is set to reverse and India’s appetite for silver has also been boosted because gold has become too expensive at current prices. According to official data, India’s silver imports in the first six months of 2010 are up 579%.

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From April this year, India has also started hallmarking of the white precious metal to ensure purity. With increasing amounts of impurities in jewellery being sold across the country, public sector trading major, Minerals and Metals Trading Corporation (MMTC) is banking on its branded jewellery, silverware gift items and coins to push up its market share.

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Like gold, silver has not enjoyed equal recognition from hedge funds, pension and retirement funds, insurance companies, and sovereign wealth funds– but this is likely to change as fund managers recognize silver’s relative value and simply wish to diversify their precious metals exposure.

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Outlook

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Good monsoon, high gold prices and global trends may help silver outperform the yellow metal in India. Better harvesting will underpin demand from the farming community this year. Since gold prices are trading over `19,000 per 10 gm, many rural families are now switching to silver.The weakening of rupee also supporting the prices.

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More and more people here are using silver as a speculative commodity play as many others are looking at it as a safe haven asset. The overall market sentiment is bullish for silver. So it could be a more decisive silver price breakout before the year ends to touch the level of `33500.

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