The Market Mirror

The rising cost of under-recoveries ....................

The price of Indian crude basket has shot up 52 per cent since February this year when oil companies had cut petrol and diesel prices. On Wednesday, the Indian crude basket was at $84.31 a barrel. The basket in October averaged at $79.33 a barrel.

Oil industry experts say that if international crude oil prices were to remain above $90 a barrel for the rest of the year, the under-recoveries would be rise to over Rs 60,000 crore for the full year.

However, there is a flip side to this. The spurt in crude prices is boosting the gross refining margins of the integrated refining-cum-retailing companies like IOC, HPCL and BPCL. The impact is mostly on the retailing business. Mr S.V. Narasimhan, Director Finance, IOC, said that the existing mechanism of burden sharing has to be reviewed. The 24 per cent to be shouldered by retailers is a huge amount as far as profitability is concerned. Besides, liquidity is also a concern. Every dollar increase in the four petroleum products will lead to under realisation going up by about Rs 1,800 crore on an annualised basis, he said.

Zinc futures hit a historical low on MCX .......................

Near-month zinc futures on Friday went below its previous low of Rs 106.30 to touch a fresh low of Rs 106.20 on the Multi Commodity Exchange of India.

Prices have fallen tracking losses in the London futures and on rising inventories, traders said.

Stocks of zinc in London Metal Exchange warehouses have jumped nearly 30 per cent since last week to more than 77,000 tonnes - more than two days of global consumption

Retail investors stayed net sellers in July-Sept ..........?????

The market value of shares held by FIIs in S&P CNX 500 companies went up by 25 per cent between July and September, from about Rs 8,00,000 crore to Rs 10,00,000 crore.

The gain for retail investors was less than half this figure, mainly because unlike FIIs they were net sellers. Retail investors purchased shares worth about Rs 12,000 crore (valued at the average of ‘opening’ and ‘closing’ prices) during the same period, while selling shares worth Rs 20,000 crore.

It is partly because large holders were more bearish than small holders that the total value of their holdings went up only 5 per cent, while small holders were able to clock up a respectable 18 per cent. The seeming bearishness of retail investors cannot be explained away by their taking the mutual fund route. These are people who have opted for direct stock market investments.

The more ‘affluent’ among the retail investors have also been much less venturesome than small holders. This is because 75 per cent of purchases by small holders were in just three companies: Bajaj Auto (Rs 2,233 crore), ABB (Rs 2,184 crore) and ICICI Bank (Rs 2,083 crore).

Despite the interest of small holders, total retail holdings in Bajaj Auto went down, not up. Small holders picked up 9 million shares; large holders sold 11 million. However, part of the apparent difference in attitudes towards the stock may be simply because sale of a relatively small number of shares caused migration of a few big investors from the latter to the former category. Eighty per cent of sales by small and large holders alike are related to shares that were, and are, on their way up.

(‘Small holders’ refers to persons holding shares with a face value of less than Rs 1 lakh in any single company.)

Bunge plans selling edible oil in sachets

sachet CATCH IT.......
Popular vanaspati-brand Dalda is set to drive the sachet revolution in the edible oils category. After the success of shampoos in sachets from other FMCG companies, Bunge India is taking this route to make its Dalda edible oils more affordable, offering sachet packs priced at Rs 5 (70 ml) and Rs 10 (145 ml) to consumers in smaller towns.

In spite of volatility in edible oil prices, the decision to launch smaller packs with lower pricing is a pioneering effort made by the MNC to ride down the population strata to address the daily edible oil consumption needs of consumers across the country.

HIT BY SUGAR GLUT .............CHINI KUM

The country is suffering from sugar glut, having produced a record of over than 300 lt for the season ended September 2007. The annual domestic demand is at 200 lt. In 2006-07 season, Maharashtra produced 90.8 lt while Uttar Pradesh's sugar output stood at 85.3 lt. Production in Karnataka and Tamil Nadu stood at 26.5 lt and 24.5 lt, respectively.

According to the Indian Sugar Mills Association (ISMA) forecast, the country's sugar output in the sugar crop year ending in September 2008 will be about 300 lt. The International Sugar Organisation had estimated production at 33 million tonnes............


May shift to wheat as sugar prices decline to Rs 1,000

Less is more
UP farmers are selling to the mills at less than the current State-recommended price of Rs 1,250-Rs 1,300 per tonne Some farmers are selling cane to gur manufacturers since they get cash immediately ...........

A successful rule-based money manager suffers from acute diabetes. He attributes his success in money management to the self-control that he developed in his food habits due to his health condition! He TELLS that he constructs his portfolio with high dividend-yield stocks. How is this strategy related to self-control?

You may have heard of Oscal Wilde’s quote, “I can resist anything but temptation”. It is true. If we tell you not to eat chocolates because you are gathering weight around your waist, you may be tempted to have more.

Overcoming temptation............


Our mind is geared to craving more of that we are prevented from having. The money manager learnt about this from his health condition. He overcame the temptation and stuck to a healthy diet. And he transported that self-discipline to the asset markets. How?

You and I like to see our investment account generate some cash at regular intervals. If the account does not, we may be tempted to sell some shares to realise cash. The problem is that we often use the cash from the shares sold for current consumption.

But what if our investments gave us some income at regular intervals? Perhaps, that may give us some self-control — prevent us from selling shares for current consumption. It is not that this income has to be sizable. It is just that we need some cash flow to mollify our desire for investment income.

Money management rule


Now, you will be able to appreciate the money manager’s strategy. The dividend income allowed him to distribute some cash to his clients at regular intervals. This allowed him to manage the portfolio without his clients pestering him to sell shares to generate cash for current consumption.

Experts in behavioural finance have observed this behaviour among investors. They call it “consume dividends and leave the capital intact” effect.

It is, perhaps, the reason why companies continue to pay dividends though the tax rate is higher than that on capital gains. To think a successful money management rule can start with an acute diabetes condition!

Oil Rises Above $98 to a Record on Dollar, North Sea Evacuation ........

-- Crude oil rose above $98 a barrel for the first time in New York as the dollar tumbled to a record low against the euro and producers evacuated platforms in the North Sea, evading a storm forecast to bring waves as high as 36 feet.

Dollar Slumps to Record on China's Plans to Diversify Reserves

-- The dollar slumped to a record low against the euro after Chinese officials signaled plans to diversify the nation's $1.43 trillion of foreign-exchange reserves in response to a falling U.S. currency