Posts Tagged ‘market’

NATURAL RUBBER

Natural rubber and the different types of synthetic rubbers are used in many different end-products. The most important is the tyre sector taking about half the total consumption. Currently, the only commercially important source of natural rubber is latex cultivated from the Heve a brasiliensis tree.


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Global production and consumption

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Thailand is the largest natural-rubber producer and exporter in the world followed by Indonesia and Malaysia, which together produced almost 70 percent of the natural rubber in the world. Other important producing nations are India, Vietnam and China.

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According to International Rubber Study Group global natural-rubber production is forecast to rise by 6.1% to 10.25 million tonnes in 2010 and by a further 7.3% to 11.0 million tonnes in 2011. But currently the world is headed for a shortfall in production due to rains and floods in the rubber-growing region of Thailand and Indonesia.

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Global rubber consumption reached 23.1 million tonnes in the twelve months to June 2010, 11.2% higher than at the same point in 2009, reflecting a recovery in the demand for vehicles and tyres. Global natural-rubber supply fell back in the second quarter of 2010, with production growth slowing from 4.9% to 3.5%. Global natural rubber demand is expected to be around 114,000 tonnes higher in 2010, at 10.3 million tonnes, compared to the previous forecast. According to Goldman Sachs Group Inc. consumption will outpace supply by 127,000 tonne, the most since 2007.

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China is the biggest importer of natural rubber followed by USA and Japan. General Administration of Customs reported that China’s natural rubber imports in August rose 4.9% from a year earlier to 158,589 metric tons.

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Production and consumption in India

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India is the fourth largest natural-rubber producer and second largest consumer. According to Rubber Board estimates, India is likely to produce 8.93 lakh tonnes of rubber in the current fiscal. During the April—August period of the current fiscal, the production of rubber increased to 2.97 lakh tonnes from 2.74 lakh tonnes in the same period last year. Rubber cultivation in India has been traditionally confined to
hinterlands of southwest coast. Kerala and Tamil Nadu together constitute the traditional rubber growing regions in the country. Kerala alone contributes 91% of the total rubber produced in India . Tyre makers constitute about 60-70% of the total rubber consumption in India.

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Correlation of Rubber and Crude Oil Prices

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There is a 91% correlation between rubber and oil prices from April 1998 to the recent period. Petroleum is used to produce the bulk of the synthetic rubber. Rubber prices have surged from around `2000 per quintal in April 1998 to `14,000 per quintal in October 2009, while crude prices have shot up from around USD 20 per barrel to USD 80 per barrel by October 2009. This shows astounding relativity between the global
economic indicator and rubber prices.

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Current scenario

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The global economic recovery and growth in China are powering demand for rubber products. World auto sales, propelled by Chinese demand, will increase 8 percent this year. In domestic market, since January 2010, tyre makers have already raised prices by 10-14 percent in four stages. A hike in March was due to the increase in excise duties, while the others were due to the rise in natural rubber costs.

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According to Rubber Board, the monthly average natural rubber (RSS-4) prices have gone up 75 percent year-on-year in August to `17952/quintal. Around the same time in 2009, the costs were at `10250 /quintal. From `13772 /quintal. in January 2010, rubber prices reached a high of `18900/quintal in July 2010.

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UNDERSTANDING BUSINESSES…….

While analyzing different companies, investors do easily get trapped in the details like figures, various stock valuation ratios tools to measure their performance while forgetting a more basic question that is “How does the company actually make money?”

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“BUSINESS MODEL” is the buzzword that gives the answer to the above question. In simple words, one can understand Business Model as “The strategic business plan that generates revenue and makes profit from the operations.” It defines the sequence how the business delivers value to customers, entices customers to pay for value, and converts those payments to profit. It reflects the management’s hypothesis about what customers needs, how they want it, and how an enterprise can meet those needs, get paid for doing so in terms of profit. It draws on the multitude of business subjects including entrepreneurship, strategy, economics, finance, operations, and marketing.

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When a business is set to establish, it entails a particular business model that shows the design or blueprint of the value creation, delivery, and mechanisms employed by the enterprise. An enterprise business formally can be described in four building blocks with nine basic elements as:

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1) Infrastructure

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Core Capabilities: A group or area of business competency where the business must excel in order for this business model to be successful. These are the key activities necessary for value proposition of the business. It includes the resources those are necessary to create value for the customer and drives revenue streams. This part in fact forces the need for specific business capabilities to perform at higher than average levels of effectiveness and efficiency. It describes how a company attempts to develop a sustainable competitive advantage and use it to improve its competitive position in the market.

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Value Configuration: Outlining the basic concept of a business model, this element describes how the business, through its activities, adds value to the consumer or marketplace. It binds together the conception of customer want, requisite core competencies, flow of revenue and various business alliances.

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It also identifies the resources that are necessary to create value for the customer.

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Partner Network: Partnership element describes the connection that the business has with other business entities, including suppliers, vendors, sales partners, service providers, and value-added resellers. These connections can define success for a business by allowing for specific efficiencies of capital, resources, and shared risk.

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2) Offering

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Value Proposition: What is being offered to the customer to drive revenue is being answered by this element i.e the products or services a business offers. It gives an overall view of products that represent value for a specific customer segment. It describes the customer problem, how the enterprise differentiates its offerings from its competitors and is the reason why customers prefer buying from certain enterprise over other. It is a solution that addresses the customer problem and describes the value of this solution from the customer perspective.

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3) Customers

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Customer Segments: The target market segment for a business’ products and services. It aims to recognize and focus the different needs and strategies to design the product, services for them and the way to reach them. Distribution Channels: This element presents the mechanisms of how the company’s product or service reaches the customer. In case of product manufacturing, the distribution channels element describes the flow of goods from manufacturing to market, including inventory and retailing however for service enterprise, this explains the location, management, and provisioning of service resources to the customers on an as and when required basis. Customer Relationship: It is the link a company establishes between itself and its different customer segments. It describes the motivations that lead customers to buy products and services from the business, and how the business nurtures those motivations through marketing and support activities. Various after sales services and the customer care support form part of it that helps management to get the responses of the users. It also helps in knowing the preferences of the consumer so as to keep the company aligned with changing environment.

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4) Finances

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Cost Structure: It accounts to the aggregate estimation of each resource being deployed that results to output in the form of product/services in the monetary terms. There are different strategies to determine the price of the product like Cost plus pricing, Competition based pricing, Target pricing, Dynamic Pricing etc. Revenue Streams: It’s not enough only to have an idea of what a business create value. A business operation has to be cognizant of where, and when, money flows into and out of the business. How money flows to the company through various products and segments of the business determines the revenue stream of the company.

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After analyzing the above nine elements one can simply get to know that how a business positions itself within the value chain of its industry and how it aims to sustain itself to generate revenue. So it’s not enough to say that a company sells mobiles or burgers. One needs to go deeper and understand the logic sequence of how the rupees are expected to earn and grow in future.

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We can take an example of shaving industry. Gillette sells the handle of its razor at cost, or even lower, because with this the company can sell razor refills, over and again. The company’s business model rests on giving away the razor’s handle along with blade as it actually generates profits not from the handle but from the sales stream driven by high-margin razor blade.

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Conclusion: Business model is considered to be the concrete foundation for a successful enterprise. In order to differentiate the companies from the losers, investors should know how to evaluate companies’ business models for perspective investment. Business model converts innovation to economic value for the business. When evaluating a company as a possible investment, one should be able to get how the company makes its money.Think on the lines as how attractive and profitable that business model is. Although, the business model doesn’t explains everything regarding the prospects of a company, but investor keeping a business model frame in mind can make better sense of the financial and business information. It eases the job of recognizing the companies that could be proved as the best investments.

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Physical Rubber Shows Mixed Trend on Friday

Physical rubber showed a mixed trend on Friday, the market was a bit apprehensive with the import news and took cautious approach. Meanwhile, the Rubber Board has reported that the natural rubber production in the country was picking up and the production during April-July 2010 was 223250 tonnes compared with 209575 tonnes in the previous year.

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Spot price for RSS-4 variety remained unchanged at Rs 189 while RSS-5 closed at Rs 179.50 compared to its previous closing of Rs 180.

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In the futures market for August delivery for RSS 4 improved to Rs 190.50 compared to its previous closing of Rs 189.99 while the September delivery closed at Rs 176.95 compared to its previous closing of Rs 175.56 on the National Multi Commodity Exchange.

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Whereas Copper prices decline for the second straight day on Friday

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Copper prices pared their early gains to close lower for the second-straight day on Friday, on getting disappointing employment data from the United States, the investors got concerned about a slowing economic recovery. Though, some pullback was seen with decline in energy markets putting the near-term demand prospects for the red metal bright.

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Copper for September delivery closed lower by 1.05 cents to finish at $3.3430 per lb, after trading in a range of $3.3250 and $3.38 on the Comex metals division of the New York Mercantile Exchange. On the London Metal Exchange, benchmark copper shed $30 to close at $7,370 a tonne.

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INVEST IN DIVIDEND PAYING COMPANY Final Part :)

Lots of market participants, who wish for regular income by way of dividends, look for stocks which maintain a steady or an upward trend of dividend declaration.

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Here is a list of few companies.

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Ideally, a low market price when combined with high dividend payout gives high dividend yields. Dividend yield is an uncomplicated tool for investor to evaluate his investments in stocks and to choose the right portfolio depending on his priority.

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Here are two things which will be very helpful for investor:

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Dividend-capture strategy – Investors using a dividend-capture strategy will simply buy the stock prior to the ex-dividend date, and would ensure that they would receive the payment by holding the security until the ex dividend date, and then sell the security. In theory, they should be able to quickly buy and sell a number of securities near their ex dividend dates and capture numerous dividends. However, in practice the truth is that this is not always the case.

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Dividend Arbitrage – It is an options trading strategy that involves purchasing put options and an equivalent amount of underlying stock before the ex-dividend date and then exercising the put after collecting the dividend. When used on a security with low volatility (causing lower options premiums) and a high dividend, dividend arbitrage can create profits, assuming very low to no risk.

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Concluding I would like to say that all investors have mainly two objectives. First is earning from capital appreciation and the second is profits from dividends. And, it is the skill of any stock to offer both these incomes that determine its market price. Investors can increase their returns by investing in dividend-yielding stocks, especially following a continuous stream of dividends. Considering the fact that dividends are tax free, it makes all the more sense to target these stocks.

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Additional Directional Movement (ADX) Final Part

Hello Friends here we come up with an extension of our previous blog “Additional Directional Movement (ADX)” Part 1.

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Additional Directional Movement (ADX) Final Part

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In this blog we would read about the features of ADX and the current scenario of the ADX in the market.

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ADX On PRACTICE

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The great feature of ADX is the ability to see buying and selling pressure at the same time.

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Values above 40 indicate very strong trending while values below 20 indicate non-trending or ranging market conditions.

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The indicator does not grade the trend as bullish or bearish, but merely assesses the strength of the current trend.

When ADX begins to strengthen from below 20 and moves above 20, it is a sign that the trading range is ending and a trend is developing.

The current scenario of ADX falling from the levels of 32 & now continuing at 25, tells that the momentum of price is toward a weaker section with a sideways movement.

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It shows that the sellers are stronger than the buyers,this is seen in a downtrend.

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The lesser volumes of trade & the bearish fundamentals also confirm that the overall sentiments are not supportive to the prices.

The factors are as follows:

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· Fresh arrivals are coming to the spot market with harvesting in Idukki.

· Commencement of fresh arrivals with higher moisture content is likely to keep check on the price.

· Indian production is also expected to be higher by 10% to 55,000 tonnes.

· Indian parity in the international market quoting at $3,200-3,225 a tonne (c&f).

· Spot prices have plunged by 9% within a span of 4 weeks, quoting near the levels of 14K.

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The investors are being cautious to enter the trade, which is hence keeping the price in a range between Rs. 13800-14800.

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However, the current tight stock levels in pipeline, & demand from the overseas and domestic market is adding support to prices.

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The DMI lines are good reference for price volatility.

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In a nutshell, values of the ADX can be used to confirm the strength of an upward/down trend & also give the investor the confidence to enter into the trade.

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🙂

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Pepper Futures Remain Unchanged :|

The pepper futures market witnessed high volatility on different “buy and sell calls“. Finally it closed just about steady on weak demand amid thin arrivals.

“There was no pressure on spot as all were seen prepared to switch over and going for additional buying as spot was not available,” market sources said.

“Good badla was taking place,” they said. Investors were offering spot at reduced discount of Rs 200 per quintal below the January price but there were no takers.

Processors in the primary markets and inter-State operators were buying from the primary markets and moving the material out to Tamil Nadu where no tax is levied on the commodity. From there the material is shifted to Bihar, Jharkhand, UP, West Bengal etc., where the local taxes are said to be at 12 per cent and therefore the dealers there do not buy on account, according to the sources.

In other major commodity update Coonoor auctions remains unsatisfactory

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Coonoor auctions remains unsatisfactory

The auctions of Coonoor Tea Trade Association for the year 2009 ended in discontent for the producers. Auctions remains unsatisfactory, as around 30 per cent of the six-week high 14.29 lakh kg offered at Sale No: 52 remained unsold despite shedding Rs 3 a kg. Market remains closed for a fortnight for the yearend and the first sale of 2010 will be held on January 7.

35 per cent of leaf and 27 per cent of dust offered remained unsold with continuing the trend of the past more than a month.

Among CTC teas from bought-leaf factories, Homedale Estate, auctioned by Global Tea Brokers, continued to fetch the highest price in both leaf and dust markets. “Our Broken Pekoe (BP) got the highest price of Rs 135 a kg in the leaf market. Our Pekoe Dust (PD) got the highest price of Rs 134 in the dust market. In all, three of our grades got Rs 127 and more,” Mr Prashant Menon, Homedale Managing Partner, said. “Our Darmona grades got the second highest bid of Rs 130 in both leaf and dust markets and five of our grades got Rs 123 and more,” Mr Dinesh Raju, Darmona Managing Partner, said.

Among orthodox teas from the corporate sector, Curzon got Rs 160, Chamraj Rs 143, Corsley Rs 142, Tiger Hill Rs 139, Kairbetta Rs 132, Havukal Rs 128, Coonoor Tea Rs 127, Glendale, Colacumby, Singara and Mailoor Rs 122 each, Quinshola Rs 121 and Sutton Rs 120. In all, 28 grades got Rs 100 and more.

Coffee Board Cuts Output Estimates

The Coffee Board of India slashed India’s 2009-10 (October-September) output projection by approximately 5.5% to 289,600 tonnes. Reduced estimation is mainly due to crop damage by heavy rains in major growing states.

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“The reduction in crop output is seen largely in Karnataka, while regions in Andhra Pradesh, Kerala and Tamil Nadu showed a nominal drop,” Coffee Board Chairman GV Krishna Rau said.

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He said heavy rains in Karnataka during October-November led to adverse crop conditions like berry dropping and wet feet in certain growing areas. Karnataka alone accounts for a fall of 15,775 tonnes of the estimated 16,700 tonnes decline in coffee output.

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In Other major Commodities Update, there is news of pepper futures fell sharply on bearish sentiments that pulled down the prices of all contracts.

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Pepper Future Report Fall

On Monday, pepper futures fell sharply on bearish sentiments that pulled down the prices of all contracts.

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Bearish sentiment that new crop would arrive any time in the market and there is no domestic demand to absorb it was being spread widely.

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Besides, 1,200 tonnes of pepper’s validity will expire on Feb 5 and hence it will be liquidated in January and that will come for delivery next month, thus goes the misinformation, market sources said.

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December contract on NCDEX dropped by Rs 367 to close at Rs 14,055 a quintal. January and February fell by Rs 376 and Rs 382, respectively to close at Rs 14,332 and Rs 14,560 a quintal.

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Total turnover increased by 3,064 tonnes to 6,925 tonnes. Total open interest moved up by 391 tonnes to 13,113. December open interest fell by 499 tonnes while that of January increased by 755 tonnes and February up by 92 tonnes.