Posts Tagged ‘food articles’

Weekly Update 29th March – 02nd April

The domestic markets had a mixed week; it started weak following RBI hiking the repo and reverse repo by 25 basis points each and growing concerns from the 16-nation Euro zone—first over conflicting signals from the currency bloc on resolving Greece’s debt problems and second over Fitch Ratings lowering Portugal’s sovereign credit outlook.

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But, concluded the week on green zone buoyed by continued liquidity inflow and earnings optimism; both the indices Sensex & Nifty, saw the highest closing levels in more than two years. FIIs bought stocks worth Rs 12125.81 crore this month till 25 March 2010.

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On the whole, over the last few months the confidence of global & domestic investors has resulted in an excellent run up in the domestic markets. Closer home, further rate hike together with hike in CRR is expected in order to anchor inflationary expectation in the next RBI meet which is scheduled on 20th April.

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Increasing capacity utilisation and rising commodity and energy prices are exerting pressure on overall inflation. Taken together, these factors heighten the risks of supply-side pressures translating into a generalised inflationary process. Food inflation in India dipped marginally falling to a five-month low.

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Inflation for the Food Articles group dropped to 16.22% in the week ended March 16, as compared to 16.3% in the previous week. While it is largely anticipated that this time around the increase in interest rates would not be a spoil sport for the markets as the signs of recovery in the growth are promising. Data on Industrial production & more specifically the acceleration in the growth of the capital goods sector points to the revival of investment activity.

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Expectations of the good corporate results as indicated by buoyant advance tax figures & the forecast for the southwest monsoon for 2010 is likely to play a catalyst role for the next direction of the market. On the global economic front; in a bid to restore confidence in their common currency, all 16 euro zone leaders have reportedly agreed to provide joint financial assistance to the debt-laden Greece in tandem with the IMF.

In the US front, Unemployment increased in 27 states in February and dropped in seven, a sign the labor market needs to pick up across more regions to spur consumer spending and sustain the economic recovery.

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Trend of world stock markets is up though China is showing some weakness along with some weakness in commodities. US dollar index rise above 81 has brought uncertainty in world markets and the Euro zone problem in Greece is giving uncertainty to Euro. One should trade carefully in such markets. Nifty has support between 5150-5050 and Sensex between 17200-16800 levels..

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Commodities are moving on their own fundamentals. Recent blow up in dollar index could not give much impact on the commodity prices as it was expected earlier in market. However, with the recent rise in dollar index, upside in commodities seems to be limited. Commodities are now expected to trade in a range after a volatile week. Expected improvement in employment data from US is likely to cap the downside. Agro commodities can perform mix. Spices, especially turmeric and pepper may trade in a range after an upside rally. Same trend may go with chana futures as well whereas guar may firm further.

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Stay Tuned for More Updates :)

INFLATION – “THE SILENT CREEPER” Final Part

Hello Friends here we come up with an extension of our previous blog, INFLATION

–  “THE SILENT CREEPER” Part 2.

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INFLATION – “THE SILENT CREEPER” Part 3

In previous Blog we had touched upon the possible Measures to check inflation.

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Now in this part we would look into other concerns in Indian economy regarding the parameters to check inflation.

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Concerns in Indian Economy Regarding Inflation :

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Apart from reasons and measures to check inflation, other concern in Indian economy is the parameters to check inflation.

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It is well known that India is the only country which considered WPI (Wholesale Price Index) while rest of the countries measured CPI (Consumer Price Index).

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WPI consists of 435 goods over 1993-94, as base year in which the weightage of food items is only 16%, which has large weightage of consumer spending in India.

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Though WPI in India is still in single digit, if we consider CPI it is already in double digit due to dearer farm articles and their higher weightage in measures.

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In CPI, food articles have 50% weightage.

Hence there is a wide gap between the weightage of food articles of WPI and CPI, which are unable to give the clear pictures.

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Furthermore, 2/3rd of the price quotations used to calculate the WPI are sourced from only four metros.

Hence to get the real picture, area should be widened.

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comparison between food inflation and WPI from January, 2008 to October, 2009.

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In the above chart, it is a comparison between food inflation and WPI from January, 2008 to October, 2009.

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Line chart is representing WPI monthly inflation whereas bar chart is indicating food article inflation.

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It appears that food article inflation is on continuous rise while WPI monthly inflation saw both side movements.

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It has started its northward journey in the month of March-April and it is still continued.

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Arrival of kharif crop is less likely to cool it as we are expecting 18% decline in kharif crop.

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Hence downside will be limited, rather it may move in a range with upside bias.

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The words of future RBI (Reserve Bank of India) has revised its outlook for inflation and expecting that it should be between the range of 5% to 6-6.5% for the year ending March 2010.

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There is a fear in the economy that the real impact of almost 18% drop in kharif rice production is to reflect in inflation.

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It would occur when kharif produce; rice, pulses, oilseeds and cereals would start coming in the market.

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With witnessing favourable weather conditions, economy is expecting strong rabi produce, which may cool off inflation of food articles to some extent.

However, we cannot rule out the possibility adverse weather.

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Ultimately what matters is final produce and yield.

Government has to take care of everything like, demand –supply equilibrium, money supply, distribution etc.

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Otherwise it will become nightmare for “aam admi” and hamper the economic growth.

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🙂

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A monsoon hit to the economy!

A monsoon hit to the economy!

With every passing day, hopes of a normal monsoon are receding.

Along with poor rainfall, hopes of better economic performance in 2009, too, may suffer a washout.The situation is one of concern.

Everyone now has fingers crossed about the next crucial 20 days. Surely, instead of see-sawing between hope and despair each time rains play truant, India ought to deal with the problem of its monsoon-dependence scientifically.

Representing around 17 per cent of India’s GDP, agriculture has averaged nearly 4 per cent growth over five years.The sector was expected to buoy India’s overall growth, hit by the global crisis.

Manufacturing is down. Exports are down. If the monsoon does disappoint, farm production will fall at about the worst possible time.

Nearly 70 per cent of Indians depend on farming. Many handling summer-sown crops like rice, soybean, sugarcane and cotton would be impacted, as also dealers in food and cash crops.

Rural demand has been robust. A poor monsoon could change that. Food prices are already high. They could hit the roof. Within the WPI, the food articles inflation stood at 8.65%.  Inflation for sugar and sugar products stood at a whopping 33.29%.  Poor rainfall will ensure that this problem continues.

Irrespective of how the situation plays out, studies on monsoon patterns indicate a generally erratic and weakening trend.Yet India’s output of water-intensive crops is to grow exponentially in future, implying massive groundwater depletion in wheat and rice-growing states.

Managing water resources – harvesting, extraction, storage or recycling – can’t but be top priority. Woefully inadequate irrigation infrastructure needs overhaul.

India can learn a lot from technologically innovative Israel, a model of efficient water management. Consider drip irrigation, which avoids evaporation by keeping the soil moist underground.

Also, power subsidies encourage waste of water. Their calibrated rollback is required, as also strict use of water meters.

Finally, there’s need to boost manufacturing to meet growth targets and ease dependence on agriculture.

By World Bank estimates, our water demand will outstrip supply by 2020. Staving off such a scenario will require more than propitiating the rain gods.

It is Need of hour that India’s dependence on the monsoons has to be cut down and minimized.