Spicing up the market

BY SIDDHARTH KUMAR

PHOTO: GETTY IMAGES

BETTING ON turmeric is fetching even better returns than investment in stock markets. At a time when the government and the Reserve Bank of India (RBI) are struggling to cool down inflationary pressures, turmeric prices have soared over 40 percent. The common man suffers but the spot price was quoting at Rs. 15,176.30 per 100 kg on 16 November on the National Commodities and Derivative Exchange (NCDEX) — which is a jump of 40.62 percent from the beginning of the year.

Interestingly, the BSE Sensex became the world’s best performing index earlier this month after touching its lifetime best of 21,000. This was a jump of 20 percent, while turmeric gained more than 40 percent. Thus investors betting on turmeric made more money than stock investors. “This year is beneficial for investors who put in their money in agriproducts like turmeric,” says Nalini Rao, senior research analyst at Angel Commodities.

Some equity analysts say there is a relationship between high production of commodities and stock prices. Better performance of commodities is good for companies if they use these products as raw material. “Busi - ness in some fundamental commodity products can be termed more lucrative in comparison to equities,” says Kishore Ostwal, chairman and managing director at the Mumbai-based CNI Research.

India is the largest producer, consumer and exporter of turmeric. “Lower supply in the market and higher demand are the major reasons behind turmeric’s soaring prices. In the past two years, its production was lower. This season production is good, but delay in fresh arrivals is pushing prices northward,” Rao adds. The price rise in spice is important, especially in the backdrop of the high inflation rate, which has forced the RBI to hike key policy rates six times this year. India’s headline inflation stood at 8.58 percent in October, while the food articles inflation rate for the same month was 14.13 percent.

“Food price inflation is a structural problem,” observes Aditi Nayar, economist at ICRA Ltd, while Finance Minister Pranab Mukhejee feels the basic problem is not merely on the demand side. “Inflationary pressures are coming from the supply side. International food prices are going up,” he explains.

High prices of food articles are a major concern for the common man in a country where about 800 million people earn less than $2 a day, according to the World Bank.

Investors betting on turmeric made more money than stock investors at the BSE Sensex

Indian turmeric, considered to be of the best quality due to its high curcumin content, has been rapidly gaining acceptance in global markets, pushing up exports exponentially; and the trend is likely to continue. Dealers say turmeric may trade even higher in the near future on firm demand from stockists, and fresh export enquiries coupled with lower carryover stocks in spot markets. Other commodities like pepper and cardamom too are likely to remain firm in the coming week. According to Angel Commodities, “lower turmeric stocks till fresh arrivals expected in January next year will control the near month futures (derivative contracts on NCDEX) from falling sharply down.”

The sheer volume of India’s turmeric production makes it a major player of the miracle spice used in cosmetics and medicine. According to the Spices Board of India, turmeric exports from April to September 2010 stood at 26,750 tonnes, as compared to 30,275 tonnes in the same period previous year.

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siddharth.kumar@ fwtehelka.com

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National Spot Exchange plans to launch new metal e-products

Will allow smaller investors to participate in the demat trade

BY Siddharth Kumar
Delhi

The National Spot Exchange Ltd (NSEL) sees big opportunity for its e-series products, which allows retail investors to invest in physical commodities in dematerialised or demat form and is planning to launch 20 products under this umbrella by the next year.

E-series consists of a series of investment products in commodities, which are focused on retail investors. Bourse officials say these products are unique as they have turned commodities from mere hedging and raw material sourcing products to investment instruments.

The e-series functions exactly like the equities cash segment but offers commodities in demat form and in lower denominations, thus enabling even small-time traders to invest in these products, said Anjani Sinha, managing director and chief executive of NSEL.

The spot exchange would currently focus on e-series and sees its future growth coming from this segment, he said.

“We are working on a number of non-perishable commodities such as zinc and nickel that we want to launch next. We are planning to have more than 20 e-series products that would include several ferrous and non-ferrous metals by the end of next year.”

NSEL, promoted by Financial Technologies India Ltd (FTIL) and National Agricultural Cooperative Marketing Federation of India (NAFED), currently has three e-series products–e-gold, e-silver and e-copper.

Sinha claimed that since their launch early this year, e-gold and e-silver products have been a huge success with investors. The depository participants (DP) empanelled with NSEL have till date registered more than 22,000 demat accounts.

The e-series have also proved to be a better investment option over other popular investment products in commodities, such as physical gold and exchange-traded funds as these have given more than 25 per cent return in less than six months, said Sinha.

“There has been consistent growth in turnover as well. The current turnover in e–series products ranges between Rs 100 crore per day to Rs 200 crore per day. With more commodities coming under this series, turnover will soon be reaching to the level of Rs 500 crore per day,” he said.

E-copper has been a hit too, witnessing significant volumes and turnover since its launch last week. On the first day of its launch, investment in e-copper was more than Rs 70 crore while the closing price was Rs 452.10 per kg. Boosted by the success of its e-series products, NSEL’s total turnover at the end of its second year of operations soared by a whopping 235 per cent to Rs 7,320.47 crore.

http://www.tehelka.com/story_main48.asp?filename=Ws261110COMMODITIES.asp

Excess UP rains hit sugar production

Production may not meet its target this year but that is not leaving the sugar industry worried as even a slightly lower achievement would be much better than last year's

BY Siddharth Kumar
Delhi

Sugar production in India may not touch the target of 25.5 million tonnes this marketing year due to excess rain in Uttar Pradesh that has affected the cane yield in the state.

Production may not meet its target this year but that is not leaving the sugar industry worried as even a slightly lower achievement would be much better than last year’s, analysts observed.

“Rain impacted badly on cane crops in Uttar Pradesh and consequently production target for the state this year has been reduced to 6.66 million tonnes from the earlier estimate of 7.09 million tonnes,” said an Indian Sugar Mills Association (ISMA) official, who did not wish to be identified.

According to Vivek Saragoi, managing director of Balrampur Chini Mills Ltd, sugar production in Uttar Pradesh, India’s second largest sugar producing state, would suffer as rains have devastated the cane crop. On Wednesday the International Sugar Organisation (ISO) lowered its 2010-11 world production estimate and said the surplus sugar stocks would be 1.29 million tonnes, less than half its previous production.

The world body hopes for a record sugar production of 169 million tonnes this year, but inclement weather in key sugar producing countries has prompted the global body to slash its output estimate for August by 1.4 million tonnes.

The ISO has also lowered the initial production forecasts for China, the European Union (EU), Russia, Ukraine and Colombia, apart from the largest sugar producing nations. India is world’s second largest producer of sugar after Brazil.

Flash floods in Pakistan in July and August had wiped out large tracts of maturing crops, leading to a spurt in sugar prices in the international markets.

“Commodities prices have moved northward in the recent past on firm demand and lower supply,” said Ravindra V Rao, assistant vice president (commodities advisory) at Unicon Commodities. Sugar prices recently crossed a 30-year high in international market and are seen remaining high and extremely volatile. “Outside Asia, crop expectations for Egypt, the EU and the US were also curtailed,” said the Food and Agriculture Organisation.

However, according to ISMA forecasts India is likely to produce 25 million tonnes of the sweetener in 2010-11. The country’s sugar production in the last marketing year (October to September) was 18.8 million tonnes.

“Bad weather and other factors could lead to a shortfall in sugar production but it will not be worrisome,” said Mehul Agrawal, research analyst (commodities) at Sharekhan, an online trading portal. India is expected to decide on easing curbs on sugar exports after the actual production figures are available, Agriculture Minister Sharad Pawar had told Parliament recently.

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MOIL scouting for overseas mines ahead of IPO

Expecting higher demand for manganese

BY Siddharth Kumar
Nagpur

Government-run MOIL Ltd, formerly Manganese Ore (India) Ltd, which is expected to hit the capital market with a Rs 1,500 crore initial public offering (IPO) later this month, is scouting for mines overseas. The company expects higher demand for manganese in the coming years.

"We are looking to acquire mining properties in South Africa, Congo and Turkey, as the demand for manganese by Indian steel producers is expected to rise in the near future," said KJ Singh, chairman and managing director, MOIL Ltd.

"We are at the initial stage of acquisition. We have sufficient cash balance for such deals - about Rs 1,700 crore," added GP Kundargi, director (production and planning), MOIL. "MOIL is a debt free company and has healthy profit margins."

MOIL currently has 10 mines -- six located in the Nagpur and Bhandara districts of Maharashtra and four in the Balaghat district of Madhya Pradesh. All these mines are about a century old. Most of the mines are underground except three which are open-cast.

Tehelka visited MOIL’s Kandri mine, which is an underground mine in the Nagpur district and found that the company maintains high safety standards. Unlike coal blocks, where gases like methane and carbon mono-oxide pose a threat to human health, mining at Kandri was quite clean. The working conditions in the mine were quite conducive with proper ventilation and good lighting. “The output at Kandri is about 60,000 metric tonne per annum and 700 people working on the site”, said Kundargi.

According to rating agency CARE Research, with increasing domestic steel capacities the demand for manganese ore is expected to be strong.

For the production of steel, manganese is a key component. Industry experts say India's steel output is likely to increase to 120 metric tonne by 2012 from about 70 metric tonne at present.

MOIL Ltd's 20 percent stake sale is expected to fetch about Rs 1,500 crore. The company's public offering of 33.6 million shares, comprises 10 per cent stake sale by Centre and 5 percent each by Madhya Pradesh and Maharashta governments.

At present, the union government holds 81.57 per cent in the company, Maharashtra 9.62 per cent and Madhya Pradesh 8.81 per cent.

The government-run miner's officials say the company is getting full support from its employee union for this stake sale. “We see bigger participation under the staff quota of the IPO,” Kundargi added.

MOIL, which functions under the Ministry of Steel, had a profit after tax of Rs 466 crore for the financial year 2009-10.

(The visit to Kandri mines (Nagpur) was sponsored by MOIL)

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Trading on the move, NSE style

Trading on the move, NSE style

NSE kicks off trading via the mobile phone

BY Siddharth Kumar
Delhi

The National Stock Exchange (NSE) kicked off mobile trading to enable investors to execute buy or sell orders any time on the move, even while roaming outside the country.

So far, only a handful of member brokers provided this option to their clients, at their own cost. But now, for the first time an Indian exchange will provide this facility to all traders, the bourse said in a statement.

The facility will be available through brokers who have enrolled for NOW – the software used by NSE members – free of cost, the statement said. The brokers or the clients will not have to make any investments.

Investors will be able to trade through their GPRS-enabled mobile sets, while travelling anywhere in India or abroad. They will have access to trade in the cash market, derivatives or currency, just the way they do on their trading terminals, and at the same speed.

“This is another facility the exchange is providing to the large universe of investors, to make trading simpler and easily accessible to clients on the move,” said Ravi Narain, chief executive officer and managing director, NSE.

“Someone sitting in a remote corner like Darbhanga or Siliguri” execute trades, he added. “We expect that nearly 5 million investors would benefit from this move.”

http://www.tehelka.com/story_main47.asp?filename=Ws091110TECHNOLOGY.asp

PowerGrid FPO fully subscribed on Day 1

BY Siddharth Kumar
Delhi

Investors planning to bid for a bigger pie in the state-run Power Grid Corporation of India Ltd’s (PGCIL) follow-on public offer (FPO) after the changed investment limit for retail investors will be disappointed, as the market regulator is yet to officially notify the amendments.

Last month, the Securities and Exchange Board of India (SEBI) had approved an increase in the application limit in public issues for retail investors to Rs 2 lakh from the existing Rs 1 lakh.

The decision to hike the retail limit is yet to be notified by the SEBI and hence the new increased cap “will not be applicable to the Power Grid Corporation of India Ltd’s follow-on public offer,” Union Disinvestment Secretary Sumit Bose told reporters here on Tuesday, during a road show of the state-run power transmission major.

PGCIL has came out with a public offering worth about Rs 7,600 crore and the issue has received good response from investors as it was fully subscribed on the first day of launch on Tuesday. In the secondary market as well, shares of PowerGrid bounced back and gained 5.49 per cent to close at Rs 103.75 each on the Bombay Stock Exchange. In the previous session, the scrip had fallen 3.6 percent.

“Since the FPO is on, volatility in the stock cannot be ruled out,” SMC Global Securities strategist Jagannadham Thunuguntla said.

The issue, priced in a range of Rs 85 to Rs 90 per share, closes on November 12. However, for qualified institutional investors, the bidding will end on November 11. A discount of 5 per cent will be offered to retail investors and employees on the FPO issue price.

The state-run navratna firm is the country’s largest power transmission company and aims to double its capital spending to about $27 billion (about Rs 112,000 crore) in the five years following April 2012.

“We expect PGCIL to achieve the capex (capital expenditure) of Rs 550 billion (Rs 55,000 crore) targeted under the Eleventh Plan, despite meaningful delays in generation capacity additions, given the incremental capex towards high-speed transmission corridors,” domestic brokerage house Motilal Oswal said in a note.

Under the issue, the Centre is divesting its 10 per cent stake by offering to offload its 420 million shares. The FPO also comprises a fresh issue of 420 million shares, representing another 10 per cent stake. Post-issue, the government’s total stake will come down to 69.4 per cent.

According to PGCIL Chairman and Managing Director SK Chaturvedi, the company plans to expand its telecom infrastructure network, including further diversification into value-added services.

The firm aims to diversify into the business of leasing its tower infrastructure to independent tower firms and telecommunications service providers and has appointed a consultant for the same.

The company has also floated tenders for the selection of telecom tower infrastructure providers for utilising its transmission towers in Punjab, Haryana, Himachal Pradesh and Jammu and Kashmir, he said. According to the Motilal Oswal report, “The revenue potential of this business could possibly be Rs 4.5- 5 billion.”

When asked whether the PGCIL issue will be able the generate the kind of demand Coal India’s Rs 15,200 crore initial public offering (IPO) did, Chaturvedi said, “The two should not be compared as demand for an IPO is different from a FPO.”

PGCIL had been entrusted with the statutory role of Central Transmission Utility (CTU) by the government. As CTU, the company operates and is responsible for the planning and development of the country’s nationwide power transmission network, including interstate networks. It was ranked as the world’s third largest transmission utility by the World Bank in January 2009.

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The feud continues

MCX-SX challenges SEBI order with writ petition in the Bombay High Court

BY Siddharth Kumar
Delhi

MCX Stock Exchange (MCX-SX), which is at loggerheads with the capital market regulator, has filed a petition in the Bombay High Court challenging the order of the Securities and Exchange Board of India (SEBI) that rejects the bourse’s application against their starting business in equity and some other segments.

The writ petition was filed on October 29 and is expected to be taken up for admission after the court vacation.

"We have confidence in the judicial system and we are sure that justice will prevail," MCX-SX Managing Director and Chief Executive Joseph Massey said in a statement.

SEBI on September 23, 2010, had passed an order rejecting the application made by the bourse to get a regulatory nod for commencement of trading in equity, futures and options, wholesale debt market and other segments products. SEBI cited the failure to comply the mandatory shareholding norms by promoters, among several other issues, for the rejection of the application.

Earlier, in July, MCX-SX had dragged the market watchdog in the Bombay High Court for delaying the decision over its application to start new products.

MCX-SX, promoted by Multi Commodity Exchange (MCX) and Financial Technologies (India) Ltd (FTIL), presently offers trading in currency derivatives.

In a further setback to MCX-SX, last month SEBI granted the green signal to the National Stock Exchange and the Bombay Stock Exchange (BSE)-backed United Stock Exchange to begin trading in currency options. MCX-SX, however, failed to get the nod till now to start trading in currency options, a derivative instrument used to hedge against currency fluctuations.

"The recent decision of SEBI not granting currency options to us along with other exchanges was vindictive, biased and discriminatory, like its earlier decision of not granting IRF (interest rate futures) to us. Such a decision has already started impacting our business adversely," Massey said.

Despite a weaker broader market, shares of FTIL on Monday gained over 2 percent on the BSE to settle at Rs 1,063.40 each. The BSE bellwether Sensex shed was down 0.7 per cent.

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