A Comprehensive Technical Analysis Programmes aimed to make you a Profitable Trader and achieve 100% return per annum on your Investment IN MCX & STOCK MARKET SPECIALLY IN GOLD MARKETSterlite Industries, India’s top non-ferrous metals company, and Tata Power Co Ltd will enter the country’s benchmark BSE Index after a rejig, the stock exchange said.
The two stocks replace Ambuja Cements Ltd and Cipla Ltd, the statement, released on Friday, said. The revisions will be effective from July 28, it added
India’s Reliance Communications said Reliance Industries had claimed first right of refusal to buy a controlling stake in it, but the mobile operator said this would not delay its tie-up talks with South Africa’s MTN Group.
Reliance Communications is controlled by Anil Ambani and Reliance Industries by his estranged elder brother Mukesh.
Here are five facts about the brothers and the division of the Reliance business empire after a bitter feud between them.
* Dhirubhai Ambani, a schoolteacher’s son and founder of the Reliance business empire, dies in July 2002. Mukesh becomes chairman and managing director of Reliance Industries, and Anil is vice-chairman and managing director.
* Feud between Mukesh and Anil becomes public in November 2004.
* In June 2005, the family reaches a settlement to split the Reliance business in a deal announced by their homemaker mother Kokilaben. The formal split happens in 2006.
* Mukesh gets the flagship Reliance Industries, with interests in petrochemicals, oil and gas exploration, refining and textiles. He has since launched a retail venture.
* Anil gets telecoms, power, entertainment and financial services businesses. The Anil Dhirubhai Ambani Group (ADAG) now includes Reliance Communications Ltd, Reliance Infrastructure Ltd, Reliance Capital Ltd, Reliance Natural Resources Ltd and Reliance Power Ltd
India is fast emerging as a major steel producer and the signature of Tata Steel, and its founder and visionary Jamsetji Nusserwanji Tata is solidly etched in the history of India’s industrialization. However, not many still know of a person who braved the tigers, elephants and wild animals of the Central Provinces in the late 1800s and really found the ore. That is why Tata group themselves holds him in high esteem and held a commemorative meeting on his 150 anniversary in 2005 in Jamshedpur. His statue is prominently displayed before the Tata Steel Factory in Jamshedpur.
He was Pramatha Natha Bose, the first Indian graded officer of the Geological Survey of India. The Romance of Tata Steel (Penguin, 2007) by R M Lala captures the mood of the times: “A thin line of travelers move its way through the jungles. In front, on the horseback, was a sharp-featured bearded young man, behind him on another horse sat a remarkably beautiful woman in a sari, riding side-saddle. Another pony followed with two babies on it in the charge of a competent care taker. Following at a respectable distance behind was a camel loaded with tents and chattels. Atop the camel were perched the servants of the party. Every ten or fifteen miles the travelers would stop for the man at the head to spend four or five days on a field survey, searching for iron ore, mica, coal and other minerals.”
The protagonist in the above narrative searching for the ore is Pramatha Natha Bose and the beautiful lady, his wife accompanied by their children. For six months of the year from October to March, the family was on a continuous safari during which time they would mix freely with the local tribals, the Kolis, the Bhils and Bose would invite them to speak about their manners and customs.
They enjoyed the trip immensely. At the same time as Bose was braving the jungles, a successful textile entrepreneur was reading Ritter Von Schwartz’s work ’The Financial Aspects of Iron-making in the Chanda District’. When many thought Jamsetji would continue expanding his textile business, but he had other plans after listening to many steel experts talk in England and elsewhere. Although he did not live to see the establishment of Tata Steel in Jamshedpur, the visionary in him had directed his next generations how to run a steel company.
“Be sure to lay wide streets planted with shady trees, every other of a quick growing variety. Be sure that there is plenty of space for lawns and gardens. Reserve large areas for football, hockey and parks. Earmark areas for Hindu temples, Mohammedan mosques and Christian churches,” Jamsetji wrote to son Dorab in 1902. It was PN Bose who discovered the iron ore in the Chanda and Durg districts in central provinces. On retirement from service in 1903, he was requested by the far sighted Maharaja of Maybhanj to explore mineral deposits in the state in Northern Orissa, where he did it successfully.
HOW TATAS FOUND DURG
Dorabji Tata had gone to Nagpur to meet Sir Benjamin Robertson, chief secretary of state to inform him that the Chanda project cannot be carried out as various iron deposits situated at some distance from each other were not continuous but mere pockets and that there was not enough ore in the Lohara Hills. The chief secretary happened to be out so Mr Tata drifted aimlessly into the museum opposite the secretariat. T
here he chanced upon a geographical map of the Central Provinces, printed in colour. He noticed that the Durg area was coloured very darkly, in a hue which was meant to indicate large deposits of iron ore. Later Sir Benjamin produced the records of Geological Survey, and it was found that 15 years earlier Mr P N Bose had gone through the district looking for iron. In a report of 1887 he had mentioned that the neighbourhood was rich in iron ore, but his investigation seemed to be cursory, and his report had long been forgotten.
Had Bose pushed his inquiries a little farther, he would have stumbled upon one of the richest deposits of iron ore in the world. Even though the investigating reports for the Dhalli and Rajhara Hills were highly satisfactory, Bose wrote a letter to the Tata firm and explained that he had retired from his post in the Geological Survey, and was now in the employment of the Maharaja of Mourbhanj. Bose, with the concurrence of the Maharaja, informed Tata Sons & Co that he had found very rich deposits of iron, and invited them to send representatives to inspect the ore fields. His inquiries were the prelude to the discoveries of C M Weld in Durg area. Afterwards, the iron and steel plant was indeed established at Sakchi in Mourbhanj state.
THE MAN
Pramatha Nath Bose (1855-1934) was educated at Krishnagar College and later at St Xavier’s in Calcutta he obtained a Gilchrist scholarship to study in London in 1874. During his study in Cambridge he became a friend of Rabindranath Tagore. May be because of this association, Tagore has written a beautiful poem on steel:
“Hard (Strong) Iron was lying unconscious in the realm of deep slumber.
O, We (I) awakened it.
It was hidden within the darkness of millions of years.
So we have awakened it.
It has been tamed and is under control
It speaks the way we want it to
To we have broken its silence.
It was static but now that it has gained motion
It is running on to conquer the world
Fearlessly now, we take hold of its reins with both hands.”
As a graded officer in Geological Survey his initial work was on the Siwalik fossils. Bose has several firsts to his credit. Bose was the first Indian graduate in science from a British University, first to discover petroleum in Assam, first to set up a soap factory in India and also the first to introduce micro sections as an aid to petrological work.
Bose was the first Indian to hold a graded position in the Geological Survey of India where he served with distinction. Bose was very much involved in the Swadeshi movement. He also authored several books on the freedom movement and history of India, including The Centenary Review of the searches of Asiatic Society of Bengal in National Scene, a History of Hindu Civilisation during British Rule (3 volumes) which is an objective assessment of British rule in India.
Tata Group held a commemorative meeting in 2005 in connection with the 150th birth anniversary of P N Bose. Dr T Mukherjee, deputy managing director of Tata Steel recalled that Bose paved the way for the Indian iron and steel industry. He had constantly taken up the cause of technical education in the country. His resolute pursuit of the issue resulted in the first All-India Industrial Conference in 1905, which was followed up in 1906 by the second conference. This also resulted in formation of the Indian Industrial Association.
His efforts also catalysed the foundation of the Bengal Technical Institute which is better known as the Jadavpur University today. Bose was the first honourary principal of this institute. A staunch supporter of industrialisation in India, Bose wrote extensively about the steady depletion of our raw materials to fuel industrial growth in the West. He specially referred to the output of mineral resources and industrial ventures of the country for ten years 1894-1903 and showed that the production of manganese ore increased 15 times, petroleum more than seven fold, mica nearly quadrupled, gold trebled coal more than doubled.
Bose estimated that not even a fiftieth part of the capital of the joint stock companies engaged in mining was contributed by the countrymen. No wonder all the material was being shipped abroad, said Dr Mukherjee. He further added that Tata Steel would always owe to this luminary for the historic letter he wrote to J N Tata on February 24, 1904, which changed the course of industrialisation in the country and wished that we had many more P N Boses in India in all fields, be it science, be it culture, politics or education.
Whats known on Wall Street as a "non-correlated asset" is just fancy talk, says Chris Mayer for the Rude Awakening, for something that doesn’t move in lock-step with the overall market. When the market falls, a non-correlated asset might actually rise, or at least hold its own. The correlation between changes in this asset’s price and changes in the broader market is either zero or near enough to smooth out your overall portfolio’s moves.
Gold is a classic example. Its price actually tends to rise during times of stock market distress, suggesting a negative correlation. (Gold up, stock market down and vice versa.)
Very few asset classes, however, can rival Gold’s long history of genuine non-correlation. Imposters abound. The imposters might move independently of the overall market for months or years at a time, thereby creating the impression that they are non-correlated. But when the markets really turn nasty, investors often learn that their "non-correlated" asset – unless it’s Gold Bullion – tumbles just as sharply as an S&P 500 Index fund.
However, some investors think they’ve found a reliable new non-correlated asset: so-called "frontier markets".
Merrill Lynch recently created an index not only to track them, but for investors to buy and sell, too. These frontier markets include Pakistan, Kuwait, the United Arab Emirates (UAE) and other markets throughout Africa and the Middle East. They also include Vietnam, Kazakhstan, Cyprus and others...individually too small for institutions to invest in, but worth buying – apparently – if you cobble them together into a new index that allows you to buy and sell the whole basket.
Merrill Lynch’s new Frontier Index tracks the 50 largest companies in 17 frontier markets. All told, the market value of all these companies combined is only about $330 billion – or about that of General Electric in the United States.
Right now, the index heavily tilts toward the Middle East, with 50% of the index in the region. Asia is the second largest component, with 23%, followed by Europe at 14% and Africa at 13%.
As for industry groups, banks usually features among the biggest companies in any emerging market. So banks and financial service companies represent about 65% of the index. Oil and gas is the next largest sector, weighing in at 13%. As far as countries go, the top three are the UAE (23%), Kuwait (18%) and Pakistan (14%).
So far, these frontier markets have lived up to their advance billing of not following the broader markets. Since Sept. 30, for example, the frontier markets actually gained 31% while the broader global market lost ground. Merrill Lynch back-tested the index several years and found that between Feb. 2000 and Dec. 2007, the index return’s correlation with the S&P 500 was only 32%.
So basically, that means that about two-thirds of the time, the frontier markets zigged while the S&P 500 zagged.
Sure, I love the idea of frontier investing – because I’m an optimist when it comes to global trade and booming overseas markets. Maybe it’s my globe-trotting that’s skewed my view. But when I travel overseas, I see great opportunity. I see people building businesses. I see the impact of global market forces on local energy, food and resource markets. I see the world getting smaller.
I’m long-term bullish on markets such as the UAE, Kuwait, Vietnam and others. But I also realize that the ride in some of these markets will be absolutely gut-wrenching. Just look at Vietnam.
The Vietnamese economy is growing somewhere between 7-9% per year. It is a cheaper place to do business than many other parts of Asia. Hence, Vietnam continues to attract a strong flow of investment.
While I liked what I saw going on there, I found no direct investment ideas. The market is just too small and illiquid. Heck, before March 2002, the market traded only on alternate days! Moreover, as with most of these frontier markets, Vietnam suffers from poor disclosures and low transparency. When you invest here, you’re really not sure what you’re getting.
I remember listening to Carlo Cannell, a very good investor at Cannell Capital, talk about his trip to Vietnam and his investments there. This was back in May 2007. The theme was investing in the dark. In Vietnam, he basically made many blind bets on lots of companies, figuring enough of them would work out.
Since then? The Vietnam market has tanked.
Perspective, though, is everything in markets. A chart of Vietnam looks nasty, with a near 50% drop from the high in less than a year. But as recently as July 2005, the index was only 250. You’d still have more than doubled your money in less than three years. In 2000, it was only 100. Investors are up six-fold from 2000, which is a lot better than an investment in the S&P 500 Index of any other major Western bourse.
And that’s really the key to the whole frontier market idea. As an investor, what’s most important is what happens over the years.
I’m skeptical of the idea of frontier markets as a "non-correlated asset", however, and for all seasons. They certainly can’t match Gold. Links between these small markets and their bigger brothers are probably stronger now than in the past. Vietnam, for example, depends heavily on foreign investment. Vietnam’s currency, the Dong, is still pegged with the Dollar.
So we have to be careful in taking the past and saying the future will work the same way. Even though, on their own merits, as growing economies, I like frontier markets for the long haul.
For now only institutions can buy Merrill’s index. But individual investors can still invest in frontier markets through mutual funds. The recently launched T. Rowe Africa & Middle East Fund is one. Just be sure you can stomach the major gyrations that come with working the frontier of investing.
Worst case? You’ll lose money in many different languages, not just English.
Surely the greatest marketing coup of the twentieth century – besides making cigarettes taste of freedom and youth rather than the Sandakan death-march – was kidding the world that "inflation" meant rising prices. Long mistaking symptom for cause, what hope do we have of defending our money today?
"The word ’inflation’ originally applied solely to the quantity of money," as Henry Hazlitt, sometime Newsweek and New York Times editor, put it in 1965. "It meant that the volume of money was inflated, blown up, overextended.
"To use the word ’inflation’ to mean ’a rise in prices’ is to deflect attention away from the real cause of inflation and the real cure for it."
In short, words matter – and not least when people try to save and plan for the future. Because our drive to label the world dictates our response to it. Use the wrong label, and you’re sure to screw up both your understanding and your reactions from there.
"Over the past 100 years the retail market has changed tremendously," notes Alan Kackmeister in a recent paper for the Journal of Money, Credit & Banking. "Transportation is easier. Stores are larger and less personal. Product brands have become more important. Food and other necessities make up a smaller share of consumption expenditures."
To this list of cost-cutting advances, Kackmeister could have added no end of technological and cut-price progress – mechanized and robot production, chemical fertilizers, those two billion people pulling down wage-costs after the Iron Curtain and Great Wall of China both fell to the globalized market...
Yet despite all these advances in making everyday stuff, what’s now called "the cost of living" has barely ever failed to stop rising. The official Consumer Price Index in the United States has risen 11 times over in the last 90 years. Here in Britain, one pound now buys less than 3% what it did in terms of "making ends meet".
Good job we’ve got so many more Dollars and Pounds to help pay for things, right?
Rain, rain go away, come again another day, Little Johny wants to play….
It is not just little Johny who dislikes a bad rain, farmers, traders, power producers, miners, plantations just about everyone from all walks of life. Even when rain comes soothing after a hot day, everyone still wants protection.
Now following the successful launch of exchange-traded weather Futures in United States under Chicago Mercantile Exchange (CME), one Hyderabad-based company, Weather Risk Management Services (WRMS) is planning to launch a weather trading platform in the country for the first time. According to CME, weather affects economies around the world and according to estimates, directly affects at least one third of businesses.
“The weather trading platform in India will be launched as soon as we get approval from Forward Markets Commission,” according to Sonu Agarwal, managing director of WRMS. The trading platform would allow one to buy or sell the value of a temperature and precipitation (rain) index at a specific future date.
While power companies such as Reliance Power or NTPC can trade in high-degree days (HDD) and low-degree days (LDD) contracts in Mumbai and estimate how much electricity could be consumed during those days, farmers can use weather derivatives to hedge against poor harvests caused by drought.
In USA, CME Group allows people to trade in weather conditions in 36 cities around the world 18 in the US, 6 in Canada, 9 in Europe, 2 in Japan average weekly, monthly and seasonal temperatures in select locations, frost and snowfall in select locations as also hurricanes in select locations. WRMS was incubated out of Indian Institute of Technology-Kanpur and Small Industries Development Bank of India Innovation Centre.
WRMS claims to have played a pioneering role in developing the Indian weather market which in a short span of 2 years has grown to a size of approx $20 mn (Total contract value). WRMS says it has a diverse clientele, including premiere agricultural companies such as ITC, Dupont Mayhco, JK Seeds, Excel Crop care etc, Microfinance institutions such as Basix, Care, Sadhan and prominent Airlines & Energy utilities.
The company reaches over 200,000 Indian farmers, according to its website. To facilitate future growth, the company is building a state-of-the-art weather & disaster research and analytics centre at the country’s most reputed Engineering Research Institute The Indian Institute of Technology-Kanpur (IIT-K). Eminent experts in the area of mathematics, statistics, design and finance are associated with it in this endeavour.
Sonu Agarwal, managing director of WRMS, said the existing national agriculture insurance scheme didn’t address farmers’ concerns. The claim settlement process was long and the scheme was proving costly to the government exchequer. The risks in Indian agriculture were largely attributable to weather.
“Therefore, it was felt that insuring crop losses through weather indices could be a good idea. The weather indices could be used to settle claims due to agricultural loss on almost a real time basis. Further these indices could be traded enabling reduction in cost of risk transfer,” he told Commodity Market.
The exchange will be launched by June this year. The total transaction at the trading platform in the first 6-12 months is expected to touch Rs 10,000 crore. Even when such estimates are released WRMS does not reveal how the system will work. Whether a separate exchange will be set or whether the derivatives will be traded on existing commodity exchanges and other issues?
To Commodity Market’s queries regarding trading margins and whether a separate exchange will be set up, Sonu Agarwal said such information cannot be shared because of legal obligations binding the company. What is the logic behind putting 18 degree centigrade as the benchmark temperature value? For example in some fruit growing regions, it could be lesser most of the time but still work out fine for that kind of crops?
Sonu Agarwal said the temperature indices are being primarily created for energy utilities, 18 degree is an established cut off point for turning on or off cooling and heating appliances. He said there will be separate derivatives for rainfall, drought, temperature and other weather parameters. Sonu Agarwal said the response to weather insurance based on weather-based indices has been overwhelming.
Over 10 lakh farmers have voluntarily opted for weather index linked insurance. Couple of state governments have replaced their earlier agriculture insurance schemes with weather-index based schemes. Regarding other services provided by WRMS, Sonu Agarwal said they provide agro-advisory services to farmers and agricultural entities.
These services are offered realtime on PC and mobile platform. Farmers can know the impact of weather condition on their crops real time and can take suitable measures. There are modules which help farmers formulate optimal irrigation and harvest plans. WRMS is also launching weather insurance for the renewable energy sector.
Hydropower companies can insure themselves against loss of generation due to insufficient water flow in their base reservoirs. Wind mills can protect themselves against loss inadequate wind speed. WRMS has also announced that an online-trading game will be set up to create awareness about weather derivatives. There are some like the reader of a leading business daily who fears that weather trading could become another speculative activity on a platform with legal sanctity.
“Our insurance products should be based on risk avoidance, risk reduction or risk transfer and not based on pure speculation,” he wrote in response to a news item that WRMS is launching weather derivates. As of now it is not yet clear what form the new weather trading platform will have as the company is itself not revealing much. However, the success of this platform will depend on bringing as many real stake holders to hedge against weather risks and avoid controversies regarding pure speculation. •
This article published in COMMODITY MARKTE, India’s No 1 news magazine on commodities.
