Fuel prices hike within three days

Despite Prime Minister’s indication of early fuel prices hike, source related to government said the decision may not take before Thursday as the government has not reached in a consensus.

The UPS government was evading from taking decision on fuels hike even as losses of state-run oil companies widened to Rs 650 crore a day, they said.

Prime Minister’s call for unanimity in thinking comes in the backdrop of opposition from Left parties, which props up the UPA from the outside, to any move to raise petrol, diesel and other domestic fuel prices.

Indian Oil, Bharat Petroleum and Hindustan Petroleum, who till last week were losing about Rs 580 crore per day on sale of petrol, diesel, domestic LPG and PDS kerosene, are incurring a revenue loss of close to Rs 650 crore from June 1, industry sources said.

Government spent most of its time last fortnight in consultations including at the highest level to combat the projected Rs 2, 25,040 crore revenue loss on fuel sales.

Official said the three firms, who till last week were losing Rs 16.34 a litre on petrol, are incurring a loss of Rs 21.43 on sale of every litre since June 1.

Similarly, the losses on diesel have widened to Rs 31.58 per litre from Rs 23.49 while on kerosene they have jumped to Rs 35.98 from Rs 28.72 per litre.

Losses on LPG have swelled to Rs 353 per 14.2-kg cylinder from Rs 305.90.

How behaviour impacts your returns in market?

When it comes to investing, we are often our own worst enemies. The greed and fear factor easily cloud our judgement; being too afraid to lose leads us to take prejudiced action; biases in how we interpret and process the information can lead to sub-optimal decisions.

Stock market is often perceived as a person: It has moods, it can be bad-tempered or exuberant, it can overreact one day and make amends the next day and so on. So the question is can psychology really help us understand the financial markets better? Can we improve our investment decisions and profits using the psychology of investing? The answer is yes. How? The idea is simple: Investors are not as rational as the standard economic theory assumes; they are not rational being, they are human beings. Frequently emotions prompt us to make decisions that may not be in our rational financial interest.

The psychology of investing is better understood through the emergence of a fascinating new field called behavioural finance. Behavioural finance pairs emotions with investments and shows how emotions and cognitive errors can cause disasters in our investment decisions.

In stock markets, behavioural finance can help explain situations such as why we hold on to stocks that are crashing or are ridiculously overvalued, jump in late and buy stocks that have peaked in a rally just before the price declines, take desperate risks and gamble wildly when our stocks descend.

Common mistakes

Overconfidence: Investors tend to be overconfident in their ability to make decisions in an uncertain world. We often set unrealistic investment goals. Most of us often find it difficult to distinguish between luck and skill. We often forget failures and, even if we don’t, we tend to focus primarily on the future, not the past. We generally remember failures very differently from successes. Successes are due to one’s own wisdom and ability, while failures were due to forces beyond one’s control. Thus, we believe that with a little better luck or fine-tuning, the outcome will be much better next time.

The tendency to remember our good decisions and forget the bad ones is commonplace. We also tend to believe that if our last decision or two was correct, then we possess special market-beating capabilities. This was particularly seen in the bull run we witnessed in 2007 and mid-January 2008. Almost everyone in the stock market had become an expert. Everyone’s stock recommendation was generating exorbitant returns.

Irrespective of the overvaluations, people thought that the Sensex will still zoom over 30,000 levels and their stocks will keep generating higher returns. But then, we all know what happened. Markets bombed in late January and tumbled further in the following months, correcting 25-30% from its all-time highs. Over confidence and greed navigated the investment decisions and rationality was lost in the process.
The comfort of crowd – herd mentality: To humans, a group offers safety. Let’s take an example from the internet bubble of 2000. “My stocks were simply not going anywhere. My friends were investing in the information technology stocks and making a lot of money. There was so much excitement about these stocks. I did not understand much about IT companies but I bought stocks of IT companies. But soon regretted it, as I lost 70% of portfolio value.”

This is where behavioural finance helps in as it says that when everyone is excited about the market, you should be extremely cautious. Share prices are not just based on economic values but also on psychological factors that influence the market sentiments. Share prices are often far too volatile to be explained by fluctuations in economic factors such as dividends or earnings. Much of the volatility can be explained by fads and fashions that have a great impact on investor decisions.

I often advice investors to use their own analysis and judgement rather than following the crowd. Don’t invest in companies you don’t understand. From the earlier example, many investors may say of the internet bubble, “I had my doubts about the IT stocks, but everyone else seemed so sure they were winners.” This is what is usually seen in the stock markets ‘herding behaviour’. Most of the times, others influence our own investment decisions, against our better judgement. And this happens with the so-called experts of stock markets too.
In fact, studying Warren Buffett’s investing career, it has been said that his greatest advantage is not one of analysis, but rather his willingness to be anti-social.

Considerations

Behavioural finance is important and can help us in making smart investment decisions. But it would be a misconception to say that behavioural finance means people can beat the market. Behavioural finance doesn’t say, “There’s easy money, go after it”. It says that psychology causes market prices and fundamental values to part company for a long time. And although there’s a potential profit opportunity there, it comes packaged together with additional risk.

Finance offers no investment miracles, it can help investors train themselves how to be watchful of their behaviour and, in turn, avoid mistakes that will decrease their personal wealth. It provides a platform to learn from people’s mistakes, to modify and improve their overall investment strategies and actually profit from identifying these mistakes.

Even experienced investors are susceptible to making the judgement errors identified by behavioural finance research. The only solution to avoiding this error is discipline. Set realistic goals for portfolio’s long-term return.

How big is the global Gold investment market?

Gold is attracting growing interest from a small number of pension funds, some of whom may already be building their exposure to gold, usually as part of a basket of commodities. Why is gold attracting people? And why is it that people love to invest in gold?

Find out here why gold lures people:

Why do people invest in gold?
People around the world invest in gold for many different reasons. Many people view gold as a reliable source of value in times of trouble. Gold offers insurance against stock market failure and has proved to be a liquid, transportable asset for refugees needing to flee their countries. More and more people understand that by investing in gold, they are protecting themselves against a range of risks, such as weakness of the US dollar; unexpected inflation; and low returns on other assets. Some people simply want to own as asset they can trust, because it is real and holds its value over the long term.

Is gold really a good hedge against inflation?
There is substantial evidence to support the view that gold is a good long run hedge against inflation. In the short-run, the gold price may deviate from its long run inflation hedge value, and may take a number of years to revert to this constant. Gold is not a perfect hedge against inflation, but it is the only hedge that has been tried and tested over centuries that have seen currencies rise and fall.

Is gold a global currency?
Gold has retained its role as a monetary asset. Central banks around the world still hold around 12 per cent of their reserves in gold, and even private individuals can and do use gold to settle payments. However, gold is not “issued” by any particular government and is not beholden to any political regime. In this sense, it is a truly global, international currency, free of political or national association and liability.

Is gold a commodity?
Gold is used for different purposes, and these certainly include commodity uses. Industrial applications of gold account for about 10% of demand each year. Demand for gold as jewellery absorbs around 75% of the gold supplied to the market each year, with the balance made up by investment. Gold is certainly included in the leading tradable commodity indices. So for many practical purposes, gold is viewed as a commodity.

How can gold be both a currency and a commodity? Isn’t this a contradiction?
For most of history, currencies have been backed by commodities, or metals were used as money directly. Even today, when national currencies are no longer backed by real assets, gold maintains its value as an independent, international currency but at the same time is used as a commodity, and certainly viewed as a commodity, by many investors around the world. Gold’s ability to play this dual role successfully underpins its usefulness to investors.

Is gold a high risk or low risk investment?
In general, gold is considered a low risk investment because its price is typically not very volatile. The gold price tends not to fluctuate more than the world’s largest blue-chip stock market indices like the S&P 500. That is why many investors with low-risk profiles are attracted to gold. However, investors in high risk assets also find gold useful because they can use it to manage their risk.

What types of returns does gold offer investors?
Although very large investors can lend their gold out and receive a “gold” interest rate, in practice this yield is very low. So the main return on gold is capital gain or loss which is realised by selling some gold. This is no different from many other assets, including, for example, zero coupon bonds.

How big is the gold investment market?
In 2005, the overall gold market saw inflows of US$ 56 billion, of which nearly US$ 9 billion represented investment flows. Ultimately, the size of the gold investment market is some proportion of all the gold that has ever been mined. On this basis, gold represents around 4% of the market capitalisation of global bonds and equities.

How can I invest in gold?
There are many ways to invest in gold and these are explained fully on www.gold.org/value. How an individual chooses to invest in gold depends on the size of the investment, his/her reason for investing, and the purpose of the investment. People invest directly in bars and coins; through gold futures, options, warrants and certificates. They may also hold gold in metal accounts with their bank in just the same way they could have a foreign currency account. The most popular, fastest-growing form of gold investment is also the newest: gold traded in the form of a security on stock exchanges around the world, generally referred to as “gold ETFs”.

It is appropriate for pension funds to invest in gold?
Gold certainly merits the attention of pension funds who are seeking good portfolio diversifiers and wish to reduce the volatility of their returns, particularly in response to changes in International Accounting Standards and as part of a liability-matching strategy. Gold is attracting growing interest from a small number of pension funds, some of whom may already be building their exposure to gold, usually as part of a basket of commodities.

Courtesy: World Gold Council web site www.gold.org

5 Indians among seven outsourcing billionaires: Forbes

In a clear indication that India dominates the outsourcing business in the world, a Forbes magazine survey says that five of the seven billionaires whose primary source of wealth is outsourcing are Indians.

Three of the five N R Narayana Murthy, Nandan Nilekani and Senapathy Gopalakrishnan, are from Infosys Technologies. The others are Azim Premji of Wipro and Shiv Nadar of HCL Technologies.

Forbes notes that all of these five made their billions through providing global software and IT services. In contrast, the other two outsourcing billionaires, Terry Gou and Barry Lam, both of Taiwan, run companies specialising in contract manufacturing in the electronics sector.

Premji tops the list of outsourcing billionaires with a net worth of $12.7 billion. He is the chairman of Wipro, provider of integrated business, technology and process solutions. The software services outsourcing company acquired a business process outsourcing arm in 2002, the business magazine said.
Nadar’s net worth is $3.9 billion and HCL Technologies, co-founded by him, is an outsourcing electronics, computing and IT software company.

"With clients like Cisco, Boeing and IBM, HCL is one of India’s leading global IT services companies that emphasises ’transformational outsourcing’, or working with clients to re-define the cores of their businesses," Forbes wrote.

Narayana Murthy, with a net worth of $1.4 billion, is now chief mentor and non-executive chairman of Infosys, a software services company he co-founded with only seven people and $250. Infosys is now a global leader in IT and consulting.

"Infosys pioneered the global delivery model of outsourcing. The premise is to take work to the location where the best talent is available; this philosophy helped stimulate the rise of offshore outsourcing and, of course, added to the company’s wealth," the magazine reported.

Nilekani, with a net worth of $1.1 billion, is a co-founder of Infosys who ran the company as chief executive and managing director until June 2007, when he became co-chairman.

Gopalakrishnan, with a net worth of $1 billion and another Infosys co-founder, was president and chief operating officer of the company until last June when he took over from Nilekani as chief executive and managing director.

Terry Gou (net worth: $6.1 billion) is chairman of Hon Hai, that has capitalised on the popularity of iPods, cellphones, game systems and other devices the company assembles.

Barry Lam (net worth: $1.3 billion) runs Quanta Computer, the largest notebook original design manufacturer that boasts clients like Apple, Hewlett-Packard and Dell.

These seven billionaires, Forbes clarified, made their fortunes through a phenomenon called offshore outsourcing. It is a combination of outsourcing and offshoring, two similar concepts that are often lumped together.

By definition, outsourcing is to purchase or subcontract from an outside source; while offshoring can be done both within and outside a company.

"The economics behind offshoring are really compelling, and customers usually do it for three reasons - they want specialized firms, want to cut costs and gain access to talent or specialised skills," the magazine quoted Robert Kennedy, a professor at the University of Michigan Business School, as saying

Dollar in cardiac arrest, may end up in a coffin

Following its worst weekly drop in over 60 days, gold found some old friends in Asia over the weekend - buying of the metal by jewelry fabricators became noticeable, finally.

Although gold prices reached for $895 in overnight trade, the going proved a bit more difficult as the calendar pages were turned to Monday in Dubai, Zurich, and London. Gold fixed at $891.25 for the AM price-setting session in London while the US dollar found verbal support from the Treasury’s Mr. Paulson, and while the principal product of the countries he is visiting took a further loss of $1.30 to trade at just above $126 per barrel.

New York trading opened the first session of June with a small gain of $0.50 quoted at $886.60 per ounce as the greenback climbed above 73 on the index and as oil broke under the $126 mark. While the economic calendar is not exactly lacking data flows for the first half of the week, the more significant and potentially dollar-moving figures will come Thursday and Friday. In the interim, participants will be looking at numbers and central bank strategy trends coming from the EC in order to gauge what direction the dollar may be heading for in the near-term.

Silver was off 23 cents at the open, trading at $16.64 while platinum rose $1 at $2007.00 and palladium fell $7 to $431.00 per ounce. The trend for the day may well be to the upside however, as British lender Bradford & Bingely raised apprehension levels about the state of the housing markets on more than just a US and UK level. Adding to the buoyant tone were reports that the head of Wachovia was handed his own head on a platter by the bank’s board.

While various gold discussion groups were prematurely ’celebrating’ the possible end of the US dollar’s peg to the currencies of the Gulf’s oil producing nations (they see such a move as the last nail in the greenback’s coffin) Mr. Paulson was on a PR tour for the greenback in the region, and appeared to walk away with a tacit agreement for the peg to remain in place, at the very least, for the next two years. Moreover, he also welcomed any portion of the $4 trillion that the oil producers have amassed in revenues by now, for possible investment in the US. Bloomberg reports on Mr. Paulson’s findings:

"The comments may spur traders to further trim their bets on a revaluation in currencies such as the Saudi Arabian riyal and United Arab Emirates dirham. While the fixed exchange rates mean that costs of imported goods have increased as the dollar has weakened, Paulson said that the region’s inflation is being driven mainly by costs of building materials and food.

"It is an endorsement of maintaining the GCC pegs to the dollar,’’ said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Connecticut. In addition, ``ending the dollar peg, from the U.S. point of view, would diminish U.S. influence."

Paulson meet today with Sheikh Ahmed bin Zayed al-Nahyan, managing director of the Abu Dhabi Investment Authority, the world’s richest sovereign wealth fund, before giving a speech on open investment. In the speech he urged Persian Gulf countries to reduce barriers to international investment and pledged that the U.S. would remain open to capital from the region.

"As we seek to open new markets abroad, America will keep our markets open at home to investment from private firms and from sovereign wealth funds,’’ Paulson said."

Although nothing is ever certain, it might be prudent to go out an buy another few bags of nails for that dollar coffin -assuming one can find any more such fate-sealing devices. The greenback’s chances of complete cardiac arrest are now about as promising as Mrs. Clinton’s odds for the nomination. But, odds are still odds, many will retort.Meanwhile, a major flight of rodents was seen from the oil ship "S.S. Crude" as values went parabolic and as regulators prepared to dissect that market with a very sharp scalpel. Bloomberg fills us in:

"Hedge-fund managers and speculators reduced bets on higher oil prices by 80 percent since July as crude futures rose to records and U.S. regulators started investigating trading, government data show.

So-called speculative net long positions fell to 25,867 contracts on the New York Mercantile Exchange in the week ended May 27 from a record 127,491 on July 31, according to a U.S. Commodity Futures Trading Commission report on May 30.

The decline may complicate the CFTC’s probe as regulators try to determine how much of the rise in oil to more than $135 a barrel last month was caused by speculators who may have manipulated the market instead of consumer demand. The CFTC, under pressure from Congress, said May 29 it was investigating the doubling of oil prices the past year and said it will consider giving more detail on the types of oil investors and their holdings."

With the above background items in mind, let’s see how the oil/dollar saga unfolds this week and how the ECB and US statistics impact the markets. A respite from the declines would be welcome even if the potential gains could meet some profit-taking headwinds near $910.

India's auspicious days for buying gold

The following are some of the days considered auspicious according to the Hindu calendar for gold purchases in India:

Jun 7 Sat Pushya Nakshatra Day for new ventures

Jul 5 Sat Pushya Nakshatra Day for new ventures

Aug 1 Fri Pushya Nakshatra Day for new ventures

Aug 28 Thu Gurupushyamrit Day for new ventures

Sep 25 Thu Gurupushyamrit Day for new ventures

Oct 1 Wed Dussera Festival

Oct 22 Wed Pushya Nakshatra Day for new ventures

Oct 26 Sun Dhanteras Gold for prosperity

Oct 28 Tue Dipawali Festival of lights

Nov 18 Tue Pushya Nakshatra Day for new ventures

Dec 15 Mon Pushya Nakshatra Day for new ventures

The biggest auspicious day for buying gold is the Dhanteras festival, followed by Akshaya Tritiya that fell in May.

An inauspicious phase -- Shradh -- a period for paying homage to ancestors, is from Sept. 15 to Sept. 29.

The Hindu calendar has regional variations, but the above dates are broadly followed across the country in the gold trade for planning inventories.

Indian Rupee Rises; RBI to Provide Foreign Exchange to Refiners

India’s rupee rose to the highest in more than two weeks after the central bank said it will provide foreign currency to refiners in exchange for bonds to help them meet the increasing cost of crude oil.

The rupee advanced for a second day after the Reserve Bank of India said it will buy the so-called oil bonds from refiners and provide equivalent amount of foreign exchange. The announcement, meant to ensure stability to markets due to a rally in crude oil prices, was made by the central bank on May 30 after trading closed. Indian refiners meet three-quarters of their annual energy needs from abroad.

``Dollar demand from the biggest section of buyers will be met to a large extent and will reduce volatility,’’ said Jayant Chiney, treasurer at state-owned Bank of India in Mumbai. ``I expect the rupee to move with a positive bias now.’’

The rupee climbed 0.5 percent to 42.235 versus the dollar as of 10:10 a.m. in Mumbai, according to data compiled by Bloomberg. It rose to as much as 42.1725, the highest intraday level since May 14.

Crude oil on the New York Mercantile Exchange has risen almost 33 percent this year and reached a record $135.09 per barrel on May 22.

The Reserve Bank said on May 30 its move will ``improve the access of oil companies to domestic liquidity and alleviate the lumpy demand in the foreign-exchange market.’’

The central bank will buy each day as much as 10 billion rupees ($237 million) of the oil bonds, issued to refiners by the government to compensate for selling fuel below cost, the bank said without elaborating.

India’s oil imports rose to a record $8.6 billion in March, government data show.

Are your investments beating inflation?

Inflation means a rise in prices of goods and services over time. It is calculated by taking into consideration a set of goods and services, and then the prices of the items in that set are compared to prices one year ago. In India, inflation is measured based on the wholesale price index (WPI) which measures the change in prices of a selection of goods at wholesale rates.

Inflation gradually reduces the purchasing power of money, and therefore it becomes very important for investors to understand the impact of inflation on their investments.

Inflation means a rise in prices of goods and services over time. It is calculated by taking into consideration a set of goods and services, and then the prices of the items in that set are compared to prices one year ago.

In India, inflation is measured based on the wholesale price index (WPI) which measures the change in prices of a selection of goods at wholesale rates.

Inflation gradually reduces the purchasing power of money, and therefore it becomes very important for investors to understand the impact of inflation on their investments.

For example, if an investor deposits his money in a savings bank account which generates a return of 3.5 percent per annum, and inflation in the market is around seven percent, he is making a bad choice as his purchasing power is increasing by only 3.5 percent whereas prices of goods and services are increasing by seven percent.

The Reserve Bank of India (RBI), in consultation with the government, sets the target for the rate of inflation in the country. This target inflation number is between four and five percent on a year to year basis.

Currently, the inflation rate is hovering around the eight percent mark. The core inflation rate and the consumer price index are ruling even higher than this level. This shows that the common man is feeling the heat of the price rise much more than what is indicated by the inflation rate.
These are some factors that are pushing inflation here:

High commodity prices

One of the prime reasons for this rise in inflation is high commodity prices. Crude oil, precious as well as industrial metals, food stuff like tea coffee etc are ruling at high prices.

Global factors

Inflation is rising at the global level too. The recent growth in developing economies is another reason for this higher inflation rate. With the sharp growth seen in developing nations, the demand for many essential commodities like energy , metals and food grains has gone up significantly, whereas the corresponding rise in the supply side has not been happening.
Domestic factors

The domestic economy is growing at around 7-8 percent per annum from the last few years. The per capita income levels have gone up and as a result the demand for many commodities has increased significantly . The growth in the stock markets and the property market in the recent past have had a positive impact on the consumer sentiments, leading to more spending.

Hedge against inflation :

Real estate:

Historically, investments in real estate have worked as a good hedge against inflation. Carefullyselected real estate properties provide high returns. However, huge funds are needed and it is not an option that offers liquidity.

Real estate investment trusts (REIT) addresses these two issues. A REIT is like mutual funds and investors can buy units of REITs. Therefore, REITs enable investors to buy shares in a company that invests in large-scale real estate projects and many buildings. REITs are not available here but the recent SEBI’s draft proposal is paving the way for them to come here.
Equity:

Another way to hedge against inflation is to invest a certain portion of your funds in equities. Senior citizens and riskaverse investors should also invest a small percentage of their investment portfolio in equities. Investments in equity may not necessarily be just stocks - investors can do it through equity or balanced mutual funds too.

Commodities:

Investments in precious metals (gold, silver and platinum) is another popular way of hedging against inflation. However, investors should bear in mind the prices of precious metals can be quite volatile. Therefore, investments in precious metals would be a good addition to your investment portfolio as a hedge against inflation if they are purchased at the right time.

Technically speaking: Share Market's climbing a wall of worry

When stock prices are rising regardless of market uncertainties, the stock market is said to be climbing a wall of worry and we expect the same to play out in the coming weeks based on the current technical signals. The markets ended May on a volatile note in line with the historical trend for that particular month. The 30-share Sensex began the month on a euphoric note at 17,600 levels only to correct from then on and end close to the lowest point at 16,400. The damage this time around has not been as severe as in the past few years and can be described as a healthy time-wise consolidation phase.

By rebounding repeatedly from the level of 16,200 last week the Sensex followed the “Fibonnaci” study as the support happens to be the crucial 50% retracement of the entire rise from 14700 to 17700. On most technical indicators the indices are deeply oversold thereby limiting the downside. We believe the fall in the recent past is a part of the bigger uptrend that should be used as an opportunity to create medium-term long positions.

Pattern Set-Up: On the current index chart two important patterns can be spotted, an outcome to which is likely in the month of June ’08. Firstly, on the bullish side the Nifty has been moving within a downward sloping “channel” for the last six weeks and is currently at the lower trendline of the same as presented in the chart below. This pattern provides strong support at the level of 4,800, which corresponds to 16000 on the Sensex.

A gradual move back to the upper trendline could be in the offing. Secondly, on the bearish front, pessimists would argue the development of a “double top” pattern with the neckline at the level of 16600. The same provides us a target of around 15,300. However, we would give little importance to this pattern as the volume characteristics and other indicators do not support the same.

Index Outlook: In the short-term, a volatile trading range has been established between 16,000-16,600 a breakout from which is likely in the coming week. We believe that the breakout is likely to be on the upside that would help resume the broader uptrend and take the index gradually back to 17,200-plus levels.

For the medium-term, the bulls would continue to have the upper hand till the Sensex stays above the crucial support of 16,000, which is now a make-or-break point. We believe the recent decline is a buying opportunity and therefore maintain our medium-term target of 18,000/5,300.

BSE IT: The Technology index has been an outperformer in the last few weeks and we expect the same to continue going forward. The index looks on course to test a level of 4800 from where a minor pullback is not ruled out. A bigger target for the index would be 5100 that should be achieved over the next couple of months.

BSE Healthcare: The sector has one of the rare charts that has got close to its Jan 08 high. A consolidation pattern breakout has been spotted last week that calls for another 7-10% upside in the near term.

BSE Metals: The index has been locked within the consolidation range of 16300-17200 for the last one month. An upward breakout from the same is likely this week that should help it reach 18500 and potentially even 19300

Gautam Shah
(The author is VP & technical analyst, JM Financial)

No option but to hike fuel price: PM

Prime Minister Manmohan Singh on Monday said the government was left with no option but to hike the price of fuel due to soaring price of crude oil in the global market and asked for "wider political consensus to adopt more rational economic policies".

“We cannot allow the subsidy bill to rise any further. Nor do we have the margin to fully insulate the consumer from the impact of world commodity price and oil price inflation,” Manmohan Singh said at the annual summit of the Associated Chambers of Commerce and Industry (Assocham).

“Up to a point we can insulate poor sections of our society and we have done that. Our government has not raised the price of kerosene in the past four years. We have only marginally raised LPG and diesel prices. Even petrol prices do not fully reflect world trends.

"In the case of other national resources, especially water, we have been altogether imprudent. This situation cannot continue forever. We need wider political consensus to adopt more rational economic policies,” the prime minister said.

In view of the above, the petroleum ministry had even proposed to raise petrol prices by Rs 10 a litre, diesel by Rs 5 per litre and that of cooking fuel Rs 50 per cylinder to cut losses being incurred by the state-run firms. But the Left parties had categorically said they would oppose any move to hike prices of transport and cooking fuels since the average citizen was already burdened by high inflation.

However, all said and done, petroleum minister Murli Deora had indicated that they were concerned at the financial health of the PSUs, and "there are some measures that are under discussions," he had told the media.

We should also bear in mind that oil prices have doubled since last year, buoyed by mounting fears of supply bottlenecks due to robust economic expansion in Asia and continued supply disruptions in key oil producers such as Nigeria. A move which has already forced smaller Asian oil consumers such as Taiwan, Indonesia and Sri Lanka to raise domestic fuel prices. And now it was the turn of India to do so!

Biofuels not just bad but involves risk : UN

Biofuels, which is at the centre of controversies ever since the concept gained momentum, on Monday received a mixed cautious opinion from the UN Food and Agriculture Organization.

A joint report published by the FAO and International Institute for Environment and Development (IIED) said, biofuels boom risks harming the world’s poorest people by forcing them off the land they depend on.

However, the report adds that biofuels are not all bad, and shows that their production can also allow poor groups to increase their access to land and improve their livelihoods if the right policies are in place.

The report comes as world leaders meeting in Rome this week hear calls for new guidelines on biofuels, which some have blamed for diverting resources from food production.

It points out that all biofuels are not equal and recommends policies that would increase the social benefits biofuels production can bring to the rural poor in developing countries.

Biofuel production is set to expand in the coming years despite growing concerns about the role of biofuels promoting deforestation and taking land formerly used to produce food.

The report shows that large-scale biofuel production is affecting poor people’s access to land in India, Indonesia, Papua New Guinea, Mozambique, Tanzania and Colombia.

Elsewhere, however, small-scale farmers have been able to increase their access to land to seize opportunities that the biofuels boom brings.

Insurance employees urge LIC, GIC to hike wages

The All-India Insurance Employees’ Association has urged Life Insurance Corporation and General Insurance Corporation to commence negotiations on wage hike, due since August 2007, and effect a 40 per cent hike.

At a press meet here on Sunday, Mr K. Vengugopal, General Secretary, said the demand was quite justified, as both LIC and GIC had the capacity to pay and “the operating expenses of LIC are the lowest in the industry at 5.54 per cent, against 23.11 per cent for private companies”.

He said salaries of LIC staff were much lower in comparison with wages of the private insurance companies’ staff. “However, there is not much attrition and only 4-5 per cent of the LIC staff is leaving jobs to join private companies. The demand for wage hike is therefore quite reasonable. Even internationally, the accepted norm is that 6 per cent of the premium income be allocated to salaries of the staff and LIC was only paying 4.6 per cent or so,” he explained.

He said LIC was outperforming the private companies and it had 23 crore policy-holders, with a market share of 64 per cent. LIC ended the 2007-08 fiscal with 3.73 crore new policies and a new business premium of Rs 44,000 crore. He urged the Union Government to merge the four public sector general insurance companies in the country to enable them to face competition from the private sector. “When mergers and acquisitions are the order of the day in the financial sector, there is no reason why it should not be applied to the general insurance sector,” he said.

He said the union would continue to fight the proposal to hike the FDI limit in the insurance sector from 26 per cent to 49 per cent. “The Left parties are supporting us and we are sure of fighting off the proposal at least as long as the UPA Government lasts,” he said.

Will CME takeover Nymex?

The Chicago Mercantile Exchange (CME), the world’s largest and diverse derivatives exchange is planning to further cement its position by taking over Nymex.

If the deal happens, CME will become a monopolistic exchange that controls over 98 percent of the US listed futures. It would offer a wide range of contracts on both commodities and fainancials—interest rates, oil, foreign exchange, metals, agricultural products among others.

t may be recalled that in 2007, CME had merged with Chicago Board of Trade (CBOT), the oldest futres exchange in the world.

The deal is entering share holder opposition and approval of three-quarters is required for the acquisition to take place.

While many members at the New York energy exchange feel the Chicago group’s offer to buy them out for $612,000 per seat is too low, the target company’s shareholders are unhappy about the level of the overall cash-and-shares bid, which has dropped from $11.3bn or more than $119 per share when it was first proposed in January to $8.8bn or about $93 per share due to falls in the CME’s share price, The Financial Times reported.

Meanwhile, despite the bid made by Nymex no competing bid has emerged as expected by the exchanges.

India to sustain growth despite challenges - PM

India will be able to sustain high economic growth despite several challenges, Prime Minister Manmohan Singh said on Monday, and the government’s aim was to contain inflationary expectations without hurting expansion.

Singh was speaking at an annual meeting of a leading industry lobby group.

The Indian economy, Asia’s third-largest, grew 9.0 percent in 2007/08 and the central bank estimates it will expand 8-8.5 percent in the fiscal year ending March 2009.

India’s economic growth is threatened by high crude oil prices, Prime Minister Manmohan Singh said.

Singh was speaking today at the Associated Chambers of Commerce and Industry in New Delhi.

Big players to set up commodity exchanges in India

Futures trading in commodities in India is all set to witness the entry of big financial players as groups like Reliance, Kotak and Indiabulls are chalking out plans to set up commodity exchanges in the country.

The Indian government recently had banned futures trading in a few commodities. But this has not dampened major companies to eye futures trading in commodities.

Last week, government permitted companies with an initial capital of Rs 100 crore to set up commodity exchanges. Top officials in the Anil Dhirubhai Ambani Group and Kotak Mahindra said that they are planning to set up commodity exchanges.

”Yes, we are chalking out a plan to set up a national commodity exchange. Details of the project will be announced soon,” a senior Reliance official associated with the project told Commodity Online.

Similarly, Kotaka Mahindra has already taken a majority stake in the regional Ahmedabad Commodity Exchange as part of its plans to set up a national commodity exchange. Indiabulls, a major financial services player, has also inked agreements with MMTC to set up a national commodity bourse.

Last week, Forward Markets Commission (FMC) last week released detailed guidelines for grant of recognition to new commodity exchange under the Forward Contracts Act as the futures market has grown significantly in the past few years.

The guidelines provide the much awaited framework as a number of companies had previously showed interest to launch new commodity exchanges. As per the guidelines, companies or a consortium of such firms can file applications to the commodity futures market regulator for setting up an exchange with a minimum capital base of Rs 100 crore.

However, they outline that it should be a public limited company and at least 26 per cent equity stake of any proposed national-level exchange should be held by a government company.

The guidelines stipulate that institutional investors including stock or commodity exchanges, banks, co-operative societies and federations manufacturing agri inputs should own at least 20 per cent.

These corporate houses are getting lured to huge growth potential in the Indian commodity market, which is already of the size of close to one trillion dollars and could gain further given a continuing bull run across the world in this segment for over five years now.

Currently, India has three national commodity exchanges—the Multi Commodity Exchange (MCX), the National Commodities and Derivatives Exchanges (NCDEX), and the National Multi Commodity Exchange (NMCE). Recently, the Bombay Stock Exchange picked up a strategic stake in NMCE.

Pakistan's Inflation May Climb to 12% on the Rising Cost of Energy, Food

Pakistan’s inflation may climb as high as 12 percent this year, almost double the government’s target, because of record-high oil and food prices, threatening to cool demand and slow growth, the nation’s central bank said.

``Inflation is already a serious policy concern,’’ the bank said in a report released in Karachi today.

State Bank of Pakistan this month unexpectedly increased the benchmark interest rate for the second time this year, to slow inflation from the fastest in at least 25 years.

The surprise decision comes amid rising oil and food costs that pushed consumer prices 17.21 percent higher in April from a year earlier, following a 14.1 percent gain the previous month.

The $146 billion economy grew at an average annual pace of 7.5 percent in the past four years, according to the government. Growth may slow to 6 percent in the fiscal year ending June 30, from 7 percent in the previous 12 months, the government forecast.

How Gujarat markets potato

Potato is one of the important cash crops grown by the farmers of Gujarat. The potato growers have to face lot of marketing problems like price instability, less producer’s share in consumer’s price, storage problems etc.

Therefore, to get clear picture of marketing of potato, a study on marketing of potato in middle Gujarat was carried out by the department of Agricultural Economics, B.A.C.A, Anand Agricultural University with the specific objectives viz; to study the pattern of disposal of potato, to examine the price behavior and period of disposal and to estimate the market cost, margin and price spread in marketing of potato.

The data were collected from 150 potato growers spread over ten villages of two talukas of middle Gujarat during 2001-02 to 2004-05.

Thus, the average result of four years was worked out. Per hectare average yield of potato was about 163.83q and the marketable surplus was 92.81 per cent of the total production on the sample as a whole. Generally, potato growers sell their produce at distant places in out of district when they get higher prices as compared to near market within district sale. It was found that, about 50 per cent produce was sold out of district.

A clear seasonality in prices was observed in potato marketing. Thus, prices of potato were low in immediate post harvest month and increased there after. Though potato growers know such type of seasonal price trend, 59 per cent of the produce was sold by potato growers without storing the produce in cold storage as they could not get pledge finance on their produce kept in the cold storage.

It was also found from the overall result of four years that keeping potato in cold storage and sale in different seasons was about 35 per cent more profitable. But only 41 per cent of total quantity was sold in off season after keeping in cold storage.

When the potato was sold without storage, the cost incurred by the potato growers was Rs.38/q and it was Rs.185.16/q when produce sold after storage. On an average, potato growers realized about 53 per cent share in consumer’s rupee. Out of 47 per cent price spread, 23 per cent shared by retailer, 2 per cent by wholesaler and 22 per cent by marketing cost. To increase the marketing efficiency, it is necessary to reduce the marketing cost.

From the study a very noteworthy result was found that spoilage cost (Rs. 33.43 per quintal/ 18 per cent of total marketing cost) was remarkably high when potato was kept in cold storage. Therefore, efforts should be made by cold storage owners to minimize the spoilage of potato; the produce kept in cold storage and the temperature and other parameters relating to cold storage need to be examined by the concerned scientists and cold storage owners.

Free MSEs from money lenders: FM asks Banks

Making a strong case for freeing micro and small enterprises from the clutches of private money lenders, Finance Minister P Chidambaram reminded the banks that they are duty-bound to lend to the sector.

"It is the duty of banks to help and nurse these micro and small enterprises...MSEs are entirely dependent on unscrupulous money lenders who charge huge interest rates," he said releasing the Code of Banks’ Committment to MSEs.

"We have made significant progress as far as agriculture sector is concerned, in education, loans to industry and in the last few years to SMEs through SHGs (self-help groups).

But I do not feel that we have yet been able to reach credit to micro and small entreprises," he said.

He said MSEs were more vulnerable than low paid employees who hold regular jobs.

"In business you can’t be certain that every day will be the same as previous or every day will bring the same kind of rewards or returns," Chidambaram said.

"Undoubtedly, credit is the most important part of the lifeline of the Economy. Absence of credit means there is hardly any room of opportunity for growth, not to speak of sustainable growth," the Finance Minister said, adding that it was in times of uncertainties MSEs needed resilience to tide over the difficult phase.

In a developing country, micro and small enterprises will continue play to an important part for many many years to come, he said.

Mkts seen rangebound, fuel prices eyed

Indian shares may start higher on Monday on improved sentiment in other Asian Markets, but an increase in retail fuel prices expected this week would limit the upside.

Shares in export-driven software services firms will be in focus after US computer maker Dell posted strong results on Friday that signalled business and consumer spending were holding up.

"I think the Markets will hold on for some time, but you may not see a major rally," said Ambareesh Baliga, vice president at Karvy Stock Broking.

The 30-share BSE index ended 0.6 percent up on Friday at 16,415.57. But it had fallen 1.4 percent on the week and is more than 19 percent down this year.

"IT should see some more upside. Many people are still low on IT weightage wise," Baliga said.

India’s annual inflation came in at 8.1 percent in mid-May, its highest in more than 3-½ years, and any increase in state-set retail fuel prices would accelerate inflation.

Asian shares rose on Monday with Japan’s Nikkei share average and the MSCI index of shares in the Asia-Pacific region outside Japan was trading 0.05 percent higher, while a pan-Asian index was up 0.5 percent.

Petro price hike will push inflation to double-digit: CPI

The CPI said any hike in petroleum product prices would be a disastrous step which would push inflation to double-digit level.

The party would organise a countrywide agitation on June six to protest the proposed hike in fuel prices, CPI General Secretary A B Bardhan told reporters.

"Any hike in petro product prices will be a disastrous step which will push the rate of inflation to 10-11 per cent," said the CPI leader, who is here to participate in party’s UP Council meet.

He said financial and monetary policies being pursued by the UPA government at the Centre had failed in taming inflation and ensuring food security for the nation.

"We have given a number of suggestions, including banning forward trading in commodities, to rein in inflation.

But, the Centre has not paid heed to any of the proposals," Bardhan said.

On the Gujjar stir in Rajasthan, the CPI General Secretary demanded resignation of the Vasundhara Raje Government saying it had failed to tackle the situation.

"Raje promised reservation to Gujjars but did nothing for them during her four-year rule," he said and termed her dispensation as a "government of killers".

On the Samajwadi Party mending fences with the Congress, he said SP leaders Mulayam Singh Yadav and Amar Singh met him last week.

"They are part of the UNPA" and would abide by any decision taken by the alliance, he said.

Rupee at 2-week high after RBI move

The Indian rupee rose to a two-week high on Monday after the Reserve Bank of India said it would provide foreign exchange to oil refiners, a move analysts said would reduce dollar demand in the currency market.

At 9:28 a.m., the partially convertible rupee was at 42.22/23 per dollar, half a percent stronger than Friday’s close of 42.45/46, after rising as high as 42.15, a level it last tested in mid-May.

After the market closed on Friday, the central bank said it would conduct open market operations in the secondary market in oil bonds held by state-run oil companies to provide liquidity to crude refiners.

"This is definitely having an impact on the market as the oil guys are the biggest dollar buyers and any move to check their demand is rupee positive, at least in the short term," said a trader at a foreign bank.

India imports a majority of its oil and refiners have been very active in the past few weeks, pushing the rupee down to a 13-month low of 43.21 on May 22.

JPMorgan advised all its clients to liquidate any positions that would have benefited from continued rupee weakness and estimated the central bank may end up providing as much as $12 billion in support to oil refiners via this facility.

Sentiment for the rupee has also been buoyed after the government raised foreign investor limits in local debt markets and allowed firms to borrow more funds overseas last week.

One-month offshore non-deliverable forward contracts were quoting at 42.21/31.