Posts Tagged ‘currencies’

Weekly Update 18th – 22nd October 2010

Most of the world markets rallied in the week gone by on the buzz of further quantitative easing by U.S. Without giving details about the strategies on how the central bank will act its Nov. 2-3 meeting, Federal Reserve Chairman Bernanke said additional monetary stimulus may be warranted because inflation is too low and unemployment is too high.

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Fed is considering ways for raising inflation expectations to encourage people to believe that prices will start rising at a faster pace so that they would spend more of their money now. Retail sales in U.S.climbed more than forecast as purchases rose 0.6 percent following a 0.7 percent gain in August and manufacturing in the New York region expanded in October at a faster pace than anticipated.

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China’s Shanghai Composite Index saw gains of 8.5 percent on the anticipation that China’s banks show strong earnings growth this quarter as the lending has beaten the forecast. Moreover the strong exports growth of 25.1 percent in September mirrors the strong underlying economic momentum. The country’s foreign-exchange reserves, the world’s largest, surged by a record to $2.65 trillion at the end of September.

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India’s wholesale price index rose to rose 8.62 percent in September from a year earlier after an 8.5 percent gain in August. Manufactured product inflation and Food price inflation rose by 0.3 percent and 1.6 percent respectively in September fromthe previous month. RBI Chief Subbarao said that inflation in India is being “quite stubborn,” a sign that controlling prices remains the central bank’s priority.

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Reserve Bank Deputy Governor Subir Gokarn signaled the central bank may intervene in the currency markets to shield exporters from the strengthening rupee. The capital account showed a surplus of $17.5 billion in the quarter to June 30, compared with a record shortfall of $13.7 billion in its current account.

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Foreign investors have so far poured approximately $23 billion in stocks and 10 billion indebt this year. Industrial production expanded by 5.6 percent in August after seeingan expansion of 15.2 percent in July.Going next week the main attraction for retail investors would be the primary market with Mega IPO of Coal India slated to open on 18th October. As Infosys has already rung the bell with positive surprise in terms of earning growth, the investors would now look forward to numbers of companies like L&T, HDFC, Bajaj Auto, etc that are scheduled to announce numbers next week.

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Nifty has support between5870-5950 and Sensex between 19200-19640 levels.With expecting second round of monetary easing, investors dumped dollar and endowed other investment avenues. Commodities extended a rally to the highest intwo years and CRB closed near the mark of 300. The dollar fell to its lowest in 10 months against a basket of currencies and breached the mark of 77. Five week continuous downfall enhanced metals and agricultural commodities.

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Gold gave heroic performance and made another life time high. It rose more than 25% in 2010.Silver is also trading near 30 year high. However, being prudent investors, one should book profit in gold and silver, considering safe trading. Base metals are expected to trade in a range. Crude oil should trade in range $80-85 in short run on mixed fundamental. OPEC has decided to keep the production quota unchanged in last meeting. Agro commodities should trade with high volatility ahead of expiry of October contract.

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Cracking “Da – Futures – Code” Final Part

Continuing the final part 🙂

  • Small Speculator : Non- reportables  are small users of futures markets are more likely to be speculators than hedgers. In other words, they’re everybody else who participates in the futures markets — the proverbial “little guy.”

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The commercials do switch sides from time to time, which offer a tremendous opportunity for small traders. The commercials are not always right in terms of making profit from their long or short positions, but they should always be watched for their behavior.

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ANALYSIS “Da – Futures – Code”

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An easy and important way for an individual to examine this report is to watch out for the actual positions of the categories of traders– specifically the net position changes from the prior report.

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For example, by examining the open interest records of commercial traders in crude as compared to prior week, implies that money  managers cut net crude oil long positions on  the New York Mercantile Exchange in the week to 172,121 in the week through June 22 from 177,653 in the period to June 18. Long positions have declined by 5532 since last week and short positions have increased by 6701.

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This seems to indicate that there is some decline in bullish sentiment. This is a signal that, investors buying sentiments is cooling off and one needs to become more cautious about their risk exposure with tighter stops or protective options.

Analyzing the data from COT report, it is seen that soybean futures market is caught between the bulls & pressure. There is an increase of net long position by 9462 and shorts have decreased by 5279 from the period of June 18-22, resulting to recovery of net positions placed on downside.

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However, looking at the broader picture, the area of net positions still remains in the negative area which implies that speculators are with mixed sentiments over this counter & some are committed to the long side of the soybean futures in the near term. The fundamental factor also supports that La Nina “leads to a reduction in the crop size” may hurt soybean crops in the U.S., between early August and February, likely curbing yields..

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Therefore, keeping track of what speculators are doing with the weekly Commitment of Traders Report and by examining the levels of bullishness trend overseas in near term, and accordingly manage the portfolio and follow the changes on a weekly basis.

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Commitment of Trader’s Report……. Cracking “Da – Futures – Code” Part 1 :)

Years passing by and with the increased vagaries of world economies whether it be Greece, Italy, Hungry in Euro zone or high jobless claims, lower housing starts in U.s, Currencies, other macro factors like monsoon , a typical speculative fever is getting over the commodities futures market these days and has become a ubiquitous headline.

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So, it is very important for an investor to know the market sentiment whether it is bullish, bearish or plain neutral. Understanding the same one can handle its position tactfully and also profit from it by simply looking at the bigger picture and not get drifted away. So, now the question is ” How do you gauge the market sentiment?”

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THE COMMON MAN’S LAW

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Before finding the answer to this question, let’s understand  the common thought that when prices go up, investors want to buy more contacts and producer want to sell more of what they are trading and vice versa.

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The traditional commercial consumer/ producer cares about the prices. A producer has a cost involved in production and if the price drops below that production cost, they are going to lose money. So they hedge around that production cost. An enterprise on the other hand obviously needs the commodity for their business; if prices move higher, they will increase their hedging to protect themselves. This is an important law of world we live in.

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TRACKING CHANGES

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Many commodities groups like oilseeds complex, base metals, bullions on the national bourse, etc. track the price movements on the international exchanges. The data provided by the exchange on daily basis daily includes lots of information as amount of future contracts outstanding, volumes traded, their strike price and date of maturity. This is useful as far as it goes, but the data sheet has its own limitations. As we all know that all futures contracts have two sides- a long and short. Now, this is where the The Commitment of  Traders (COT) report released weekly by the commodity futures trading commission (CFTC) in the US is useful because it tell us much about whether speculators are long or short..

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The C.O.T report is released weekly-every friday afternoon. The report has three categories of market-user: commercials, non commercials and non reportable.

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  • Commercial Hedgers: Traditionally, as the commercials”the big guys” (like farmers, miners, international businesses and processors) are seen as entities using the market for hedging business risks. They are generally believed to have the best fundamental supply and demand information on their markets, and thus position their trades accordingly. The high large-speculative position denotes a real commitment to the trend.

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  • Non- Commercials: The non-commercials are assumed to represent speculative interest. An example of a large speculative account might be a large commodity pool (a fund) that trades futures for speculative profit.

Stay Tuned for the final part 🙂

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India’s Total External Debt Touched $243 Billion

India’s Total External Debt Touched $243 Billion

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India’s total external debt rose by 8.1% to $242.8 billion at the end of September 2009 from $224.6 billion at March-end 2009.

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The long term debt increased by 10.6% to $200.4 billion, while short term debt declined by 2.3% to $42.4 billion.

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Most of the increase in the debt ($8.3 billion or 45.6%) is due to depreciation of dollar against major global currencies, out of total increase of $18.2 billion, according to a finance ministry statement.

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The total external financial assets increased by $21 billion to $378.6 billion at September end 2009 over the previous quarter.

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Total external financial liabilities increased significantly by $32.7 billion over the previous quarter and stood at $476.4 billion at Septemberend 2009.

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Direct investment and Portfolio investment in India increased by $11 billion and $10.2 billion respectively over the previous quarter.

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Long-term debt at $ 220.4 billion accounted for 82.5% of the total debt.

As a positive development, India’s short term debt, which had increased sharply between March 2005 and March 2008, went down by $985 million to $42.4 billion at September-end.

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The decline was seen in all the components of short-term debt except trade related credits for period above six months and up to one year

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Short-term credit, that is a credit of less than 180 days, short-term liabilities of banking system and investment of foreign central banks and other global financial institutions in government’s treasury bills is considered bad for economy.

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Bear and Bull – Part 1

Hello Friends here we come up with our another write up on “SMC Gyan Series” 🙂

Have you all ever wondered that what exactly this Bull and Bear Market is ?

 

Bull markets and bear markets...what are they?

Bull markets and bear markets...what are they?

What are they? What do they look like? What’s the origin of this terminologies?

Lets Talk about it

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When we talk about bull and bear stock markets it reminds us that it’s a zoo out there. And, like any zoo, there are quite a few wild species to be found 😉

The first two are the bulls and the bears.

Bull market is when stock prices are climbing strongly and a Bear market is when they’re languishing.

Bear Market

To be more precisely, in finance, a bear market is a market condition that occurs when the prices of shares decline or are about to decline.

Figures may vary, but if prices decrease by 15 to 20% then the market is assumed as a bear market.

In general, a bear market resumes if the government goes into recession and if the inflation rate is high.

Bull Market

A bull market is a condition of a financial market of a group of securities in which prices are rising or are expected to rise.

The term “bull market” is most often used to refer to the stock market, but can be applied to anything that is traded, such as bonds, currencies and commodities.

Bull markets are characterized by optimism, investor confidence and expectations that strong results will continue.

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Myth About Bull and Bear Markets

One common myth is that the terms “bull market” and “bear market” are derived from the way those animals attack a foe, because bears attack by swiping their paws downward and bulls toss their horns upward.

This is a useful mnemonic, but is not the true origin of the terms.

Long ago, “bear skin jobbers” were known for selling bear skins that they did not own; i.e., the bears had not yet been caught.

This was the original source of the term “bear”.

This term eventually was used to describe short sellers, speculators who sold shares that they did not own, bought after a price drop, and then delivered the shares.

Because bull and bear baiting were once popular sports, “bulls” was understood as the opposite of “bears.” I.e., the bulls were those people who bought in the expectation that a stock price would rise, not fall.

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Stay Tuned for more on this where we would touch upon if bull and bear markets are inevitable and what are the basics investors should keep in mind while trading in bear and bull market.