Posts Tagged ‘economic’

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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Weekly Update 26th – 30th April 2010

Domestic markets started the week on a negative note on the back of the Greek debt issues and Goldman Sachs fraud issues, but managed to close in the positive terrain supported by firm US markets in line with less than expected hike in Policy Rates & Cash Reserve Ratio by RBI to tame the inflation; Policy rates and CRR increased by 25 bps each. The food price index rose 17.65% in the 12 months to April 10, marginally higher than an annual rise of 17.22% in the previous week. Moreover IMF announcement of India`s growth at 8.5% for the calendar 2011 boosted the sentiments.

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Additionally, announcement of government recapitalization of PSU banks stimulated banking sector and banking stocks were among the major gainers of the week. Good corporate numbers, expectation of good monsoon together with buying by foreign institutions kept the momentum intact for the rest of the week. Going forward market participants globally would be closely watching G20 finance chiefs plan to withdraw economic stimulus as the recovery strengthens.

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The IMF this week said that rising government debt is one of the biggest threats to the world economy.

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Forecast of normal monsoon season by Indian Meteorological department may keep the sentiments positive in the coming week but volatility may rise ahead of the expiry. On the global front, the UK’s economy grew at a slower than anticipated pace in the first quarter. In US, sales of new homes surged by 27 percent in March and orders for most durable goods climbed, indicating the U.S. economy is speeding ahead into the second quarter. Greece troubles that kept the markets jittery especially for the payments approaching in the month of May came to an end after it said that it has sought a relief aid from the European Union to save it from a default.

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US stock markets kept the rally intact which held the other world markets and did not let them fall.

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Shanghai remained under pressure as commodities saw some pressure and profit booking at higher levels. Indian stocks are seeing more strength in cash stocks and banking stocks. Nifty has support between 5200-5100 levels and Sensex between 17400-17200 levels.

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This week is full of event risk, especially from US economy side. Gradually, commodity is retreating from the higher levels but it will be too early to say that it is giving a clear indication for the approaching time. But yes, upside is limited.

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Negative expectation of US GDP figure for the first quarter may hammer the prices. If dollar index trades above the level of 82 then it would keep gold to be in sideways territory. Copper saw three weeks nonstop downside and it is expected to see more downside. Range trading in crude oil is indicating the saturation at the higher levels and market needs big news to see further upside..

China May Become World Largest Economy by 2030 : Report

China May Pip USA to Become World largest Economy by 2030

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As per the latest report by Deutsche Bank, the economic and financial status of emerging market economies such as India and China will continue to do well in the future and the recent downturn will help accelerate the trend.

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Report also suggests that the (BRIC) economies” increasing size will be making itself increasingly felt in the world markets, ranging from trade and investment to commodity markets.

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Meanwhile, the BRIC economies of Brazil, Russia, India and China are likely to achieve significant growth in future.

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Meanwhile, BRIC nations are already ranked among the top 10 on a PPP (Purchasing Power Parity) basis.

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The impressive economic growth rates and greater participation in global trade and financial flows by the BRIC economies are re-shaping the global economic and financial architecture of these economies.

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It is expected that with the constant present growth of the BRIC economies, political, economic and financial realities  of the world is going to change to the extent that China will replace the US as the World’’s largest economy by 2030.

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All the four big BRIC economies carry at least one investment grade rating, currently, at the same time.

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Moreover, China’’s and Russia’’s international status has been enhanced due to their substantial holdings of government controlled foreign assets.

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China May Pip USA to Become World largest Economy by 2030 : Report

China May Pip USA to Become World largest Economy by 2030

As per the latest report by Deutsche Bank, the economic and financial status of emerging market economies such as India and China will continue to do well in the future and the recent downturn will help accelerate the trend.

.

Report also suggests that the (BRIC) economies” increasing size will be making itself increasingly felt in the world markets, ranging from trade and investment to commodity markets.

.

Meanwhile, the BRIC economies of Brazil, Russia, India and China are likely to achieve significant growth in future.

.

Meanwhile, BRIC nations are already ranked among the top 10 on a PPP (Purchasing Power Parity) basis.

.

The impressive economic growth rates and greater participation in global trade and financial flows by the BRIC economies are re-shaping the global economic and financial architecture of these economies.

.

It is expected that with the constant present growth of the BRIC economies, political, economic and financial realities  of the world is going to change to the extent that China will replace the US as the World”s largest economy by 2030.

.

All the four big BRIC economies carry at least one investment grade rating, currently, at the same time.

.

Moreover, China”s and Russia”s international status has been enhanced due to their substantial holdings of government controlled foreign assets.

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🙂

WEEKLY COMMENTARY

Bulls added more strength to precious metals and base metals while energy and most of the agro commodities back pedaled during the last week. Fear of crisis in Dubai resulted in more capital inflow in precious metals, which resulted in nonstop seven week rally in gold.

It made a high of 18294 and $1226.40 on MCX and COMEX respectively. However, in the later part of the week, we saw a halt in rally and prices corrected marginally on Friday. On Friday, December contract expired on MCX, because of which it traded down. Silver followed the footsteps of gold.

Many base metals made higher trading range last week on improvement of economic releases, except nickel. Lead performed better on technical support. Similar to precious metals, base metals saw profit booking on Friday. Red metal copper fell from its 14 months high.

After the release of U.S. inventory data, which showed crude and gasoline inventories jumped last to last week, crude tumbled down. It breached the mark of $76 per barrel last week. Natural gas also slipped for the same reason of inventory rise amid low demand. Guar pack traded sideways to bearish bias in the week gone by.

Upside movement was capped in prices as investors booked their profits at higher levels. However, slack demand in physical market also added bearish sentiment to the market. In spices pack; pepper, jeera and turmeric along with chilli got hammered and settled in red territory.

Chilli futures settled down for the fourth consecutive week on account of reducing participation in the physical market. Harvesting of fresh produce has already been started and the ongoing dry weather is favorable for the post harvesting activities.

Turmeric prices once again settled down as demand is not picking up and traders are waiting for the arrival of fresh stock which may add bearish momentum to the trend. After witnessing three week rally, pepper prices cooled down in the week gone by on an account of profit taking and continuity of weak export demand.

Jeera futures which got under pinned and gained for seven straight weeks also took a breath of relief and settled down in absence of fresh cues due to closure of major spot market at Unjha for some local festivals.

Lack of buying activity on the futures platform also led to the fall in prices. In oil seeds section; soya bean futures started the week with positive note but later on some profit booking at higher levels pressurized prices to settle near the opening price. Mustard seed futures ended the week on positive note on firm demand in spot market.

BULLION TURNING TO BILLION

Gold has always been one of the favorite avenues for investors to put their money during any economic uncertainty. We’re into a new phase of this bull market that’s been going on since 2004. Factors like the credit crisis, ups and downs in the global economy, the response of the governments and the monetary authorities set up a very positive environment for gold, not only in the near term, but many years to come.
On the contrary,jewelry demand, however, has fallen off a cliff—it’s almost non-existing right now and a lot of scrap is coming into the market due to very high prices. This is also one of the reasons for which we had witnessed some range bound moves in gold prices in past few months. (Two dynamics in the gold market were pulling against each other as strong investment demand and very weak jewelry demand.
Gold is up by roughly 250% since 1999 and approx. 25% from Sept. 2008 till date as we’re seeing money coming into the gold sector. I think the gold market is out of crisis mode. It has been recognized as an alternative, as a safe haven hedge. Sentiment among investors, especially individuals, is very positive. It’s mainly high net worth individuals who are buying the stuff up with a long-term view. Over the period of time we have also seen that investors are putting more and more money into gold as an investment. However, this increase in investment has come from tiny levels. Retail investment in gold remains tiny comparative to investments in equity and bond markets. Also, the physical gold market is such a tiny market comparative to equity, bond, currency and derivative markets that even small flows from these massively larger markets can result in outsize moves up in the gold price in future.

Gold has always been one of the favorite avenues for investors to put their money during any economic uncertainty.
Gold Coin

We’re into a new phase of this bull market that’s been going on since 2004. Factors like the credit crisis, ups and downs in the global economy, the response of the governments and the monetary authorities set up a very positive environment for gold, not only in the near term, but many years to come.

On the contrary,jewelry demand, however, has fallen off a cliff—it’s almost non-existing right now and a lot of scrap is coming into the market due to very high prices. This is also one of the reasons for which we had witnessed some range bound moves in gold prices in past few months. (Two dynamics in the gold market were pulling against each other as strong investment demand and very weak jewelry demand.

Gold is up by roughly 250% since 1999 and approx. 25% from Sept. 2008 till date as we’re seeing money coming into the gold sector. I think the gold market is out of crisis mode. It has been recognized as an alternative, as a safe haven hedge. Sentiment among investors, especially individuals, is very positive. It’s mainly high net worth individuals who are buying the stuff up with a long-term view. Over the period of time we have also seen that investors are putting more and more money into gold as an investment.

However, this increase in investment has come from tiny levels. Retail investment in gold remains tiny comparative to investments in equity and bond markets. Also, the physical gold market is such a tiny market comparative to equity, bond, currency and derivative markets that even small flows from these massively larger markets can result in outsize moves up in the gold price in future.

A Letter by a Common Man to India’s PM :)

A Letter by a Common Man to India's PM :)

Dear Mr. Prime Minister

Greetings,

Soon after you swear in as the PM of India and your initial steps, post your appointment, had exactly fitted the requirements of the situation.

But there was a sad development too : Induction of few ministers in your team whose integrity was widely suspect and who, as per their own affidavits of election nominations, were going under investigations for criminal offenses.

You must be aware being a former top civil servant, that if superior of any government employee has expressed even the slightest doubt about his honesty and integrity in his performance appraisal record, then same Govt employee is barred from promotion and sensitive posts or even retired compulsorily from service before his time.

Ministers who wield power and authority over thousands of crores of rupees worth of public assets and whose decisions can make a whole lot of difference between progress and disaster, need to be, like Caesar’s wife, above suspicion. It is surprising how you overlooked this fact while constituting ministries in both your terms of office.

No Compromises !!

‘We, the People,’ the acknowledged sovereign masters in democracy, can only hope that your own vigilance and the idealism and acute sense of right and wrong of the young blood you have inducted into the ministry will help to contain and terminate any acts of malfeasance and misuse of power.

Occasionally, though, to our disappointment, you also take recourse to the age-old excuse of politics being the art of the possible. This has been serving as a cover for corrupt politicians to hide their many sins.

Ideals and principles are not incompatible with clean politics and good governance. In India itself, there have been leaders, alas, though few, who have proved that accountable and fair governance is possible.

Actually, there was, and is, no need for you to make the kind of compromises that are the bane of the country’s politics. You have received a thumping mandate as a prime minister this time and you could have acted as a tough PM in this regard.

Accursed black hole

The respect and trust for you among Indian masses have in fact contributed to the impressive victory for Congress party. The parties in the Opposition are in disarray, and are unlikely to pose any problem in the foreseeable future. You, therefore, are in an unchallengeable position to give a determined drive to the formulation and execution of policies that you judge as the best for the country.

You have got the task of to take the country forward in all directions that matter: Political, economic, social, scientific, technological, fiscal, monetary, budgetary. No doubt you would have received plenty of suggestions and ideas as India has never suffered from any dearth of bright ideas on what needs to be done.

But real issue is not about bright ideas but rather India’s policy maker’s shaky grip on the methods of getting them done within the proposed time frames and cost estimates.

The result is that all the promises held out to the people at large vanish into the accursed black hole of failure of implementation.:(

In nut shell, lack of attention to know-how makes a over indulgence of know-what purposeless.

All who go through India’s ills and cures enumerated in the President’s Address, for instance, will find themselves in full agreement with each one of them.

For the laudable intentions contained in the Address to turn a reality, and reach their benefits to the aam aadmi, it is must for you to inculcate in your ministers a work culture that encourage and adherence to prudence, propriety and probity within their spheres of action.:)

The observations that follow are to help you to that end.

Independent and Transparent committees to evaluate tenders

There is a persistent and growing belief among all sections of aam aadmis by whom your government and party swear that huge sum is demanded and given as bribes for allocation of contracts for purchases and sanction of projects. Any new project or purchase announced, an aam aadmi presumption runs like that purpose of project is just to facilitate high personages in authority to make money, not to serve project’s real interest.

Better make all financial transactions absolutely transparent and pass evaluation of tenders above, say, Rs 100 crores, to an independent committee of former officials of the Comptroller and Auditor General of India (CAG) nominated jointly by the CAG and the Chief Vigilance Commissioner, and go by its findings, besides giving them wide publicity in the Web sites of the respective ministries.

Relentless Monitoring

Effective leadership consists in relentless monitoring and follow-up of orders without remaining content with merely issuing them. It will be great if you can regularly devote little time to review pending matters with ministers.

If you can make your ministers as well as the chief ministers to adopt this practice, it will surely result in an immediate flow in the tempo of action leading to swift service delivery and timely completion of projects. It will also put babudom on notice that there will be zero tolerance for arrogant response towards the aam aadmi.

Accustom Minister to think of Nation not constituencies

Until about 40 or so years ago, Central ministers used to visit every part of India to gauge a personal idea of the prevailing situations and mingle with the aam aadmis to know of their grievances and gain profit from their suggestions.

Nowadays, whether it is the central or state minister, either because he lacks self-confidence or because he is uncomfortable with English or local language, he rarely, if ever, ventures into the rest of the country. His obsession is mostly with channeling funds and jobs to his constituency or his native state.

Accustoming ministers to think of the nation as a whole will help rid the narrow politics of regionalism.

Reviving orientation camps for ministers

Rajiv Gandhi conceived the brilliant idea of a retreat in which ministers, elected representatives, bureaucrats, officers of the police and defence forces and eminent achievers of the civil society would spend a couple of days engaged in informal and friendly exchanges of views, ideas and experiences.

This helped in their cultivating a better understanding of their field of action and built up a better connection in forging a collective front on issues and problems facing the country.

I would earnestly urge you to revive this practice for developing a synergistic approach which may lead to effective and expeditious implementation of projects and schemes.

Reviving Inter-State and Zonal Councils

Mechanisms like zonal councils and the inter-state council, envisaged by India’s far-sighted Constitution makers for mutual reinforcement of the Centre and the states and contingency planning, have remained unused and ad hoc responses to situations have become the rule.

It is high time they were made into potent instruments for building a common front, regardless of parties in power, against present and future challenges.

I shall continue to be in touch with you as and when necessary.

Yours sincerely:

A Common Man 🙂