Panic selling saps spot rubber

 

Spot rubber declined on Monday following an almost panic selling from dealers as the reports from the domestic and international futures were extremely disappointing.

Absence of genuine buyers and lack of confidence on the immediate future of the commodity kept the sentiments under pressure during the day.

Sheet rubber surrendered to Rs 170 (174) a kg, according to the traders. The grade dropped to Rs 172.50 (174) a kg at Kottayam and Kochi as quoted by the Rubber Board.

The August series slid to Rs 170 (175.02), September to Rs 163.90 (167.07), October to Rs 162 (166.25), November to Rs 161 (165.56) and December to Rs 162.25 (166.37) a kg for RSS 4 on the National Multi Commodity Exchange.

The Tokyo rubber futures fell to the lowest in nearly three years on worries over the decreasing demand and the debt crisis in Europe. RSS 3 weakened with August futures slipping to ¥ 206 (Rs 145.82) from ¥ 209.8 a kg during the day session and then to ¥ 203 (Rs 143.62) in the night session on Tokyo Commodity Exchange.

Maize surges on drought factors

 

Maize (corn) prices have gained in the last few weeks by about 15 per cent.

Corn plants in the US have been affected by the worst drought in the last five decades. This has led to a rise in corn futures in the global market.

Corn for delivery in December was quoted at $8.042 a bushel on the Chicago Board of Trade on Friday. A research firm has cut the US crop to 9.86 billion bushels, 30 per cent lower than initial estimates.

The rise in global prices has, in turn, led to demand for Indian corn from nearby destinations such as South-East Asia, Far-Eastern nations and the Gulf.

Even if enquiries have not fully realised into contracts, the commodity has gained just on trade sentiments.

Back home, with the India Meteorological Department forecasting a 15-per-cent-deficient monsoon, the market sentiment has received further boost. Though maize is less water-intensive crop compared to rice, the lower water storage level and poor soil moisture are causes for concern.

Thus, prices have been gaining on fears of a lower crop and short supply. Fears of delay in arrival of kharif maize is also playing on the minds of market players.

In the spot market at Davengare in Karnataka, maize was quoted at Rs 1,387.50 a quintal on Friday.

On the National Commodities and Derivatives Exchange, maize for August delivery ended up at Rs 1,491, while September contracts closed at Rs 1,539.

October finished at Rs 1,549 and November at Rs 1,516.

Rupee falls by 4 paise

 

The rupee fell to 55.65 against the dollar at close after the Reserve Bank of India left key policy rates unchanged.

The domestic unit opened higher at 55.44 against the dollar from previous close of 55.61.

The central bank kept repo rate and CRR unchanged due to “persistently high inflation.”

The rupee has fallen by over 20 per cent in the last one year reflecting the slowing growth and visibility on reforms in Asia’s third largest economy.

Experts have indicated that the Government must push big ticket reforms like FDI in retail, insurance, aviation and pension to get the rupee back to 50-level mark.

Assembly elections in key states next year leaves the Government with a very narrow window to act.

Rupee falls 27 paise to 55.61

The rupee today pared early gains to close at 55.61 against the dollar due to month-end demand for dollars from banks and oil importers.

The domestic unit that had opened higher at 55.29 from Friday’s close of 55.34 on a stronger euro and Asian markets. The euro was buoyed by comments from the European Central Bank President on Friday to do whatever necessary to save the Euro zone.

Further, the rupee was helped by robust domestic equity markets with benchmark Sensex closing higher by 1.81 per cent at 17,143.68. Intra-day, the rupee had strengthened to 55.20 before falling to a low of 55.61 against the dollar.

The rupee is likely to react with the Reserve Bank of India’s monetary policy review decision tomorrow. Largely, market expectations show the central bank is likely to maintain a status quo due to rising inflation. However, according to senior bankers and market participants a rate cut will lift the market mood.

Pepper rules hot on tight arrivals

Pepper futures continued to rule hot in early morning trade on the NCDEX. Arrivals of farm grade pepper in the market were tight.

Deficient rain in the growing regions of Kerala and Karnataka remained a cause of concern. Growing exports added to the pressure on supply.

During January to June 2012, 10,000 tonnes of pepper were exported as against 9,059 tonnes during the same period a year ago.

August futures were up Rs 290 for a quintal in early morning trade and were quoting at Rs 44,275. The September contract quoted at Rs 44,370 for a quintal and the October contract at Rs 44,800.

The spot rate in the Kochi market was at Rs 44,526.30 for a quintal.

Potato turns hot on monsoon woes

Potato futures continued to move up on the National Commodities and Derivatives Exchange on Monday as speculators enlarged their positions. Besides, a firm trend in the spot market helped the bulls' cause. Emerging demand at lower levels amid the upcoming festive season, and deficient rainfall in growing belts further fuelled the uptrend.

Around 200-220 lakh tonnes of potato had been stored in the country in different cold storages during the current season. Although 27-30 per cent of the cold storage stocks are released so far from overall producing belts, they are much lower compared to normal 35-38 per cent every year.

On the NCDEX, the tuber for August delivery rose by Rs 5.2 to Rs 1,270 a quintal while the September series traded higher by Rs18 to Rs 1,381.

According to NHRDF, the rise in prices is due to lower crop in growing regions.

Karnataka has completed kharif sowing but the area sown is affected due to lower delayed rainfall.

Sowing in Maharashtra has been affected due to delayed arrival of monsoon, which is still scanty. The area for kharif is expected to be less or may be same with delayed planting compared with last year, but it depends on further rains.

With reports of crop damages in Karnataka, the supplies from this region to other States may be hit as the overall output is expected to decline by 70-75 per cent, NHRDF says.

In the spot market at Agra, potato was quoted at Rs 1174.7 while arrivals zoomed to 1,200 tonnes compared with 900 tonnes a fortnight ago.

At Sultanpur (Uttar Pradesh), arrivals that were 30 tonnes during the start of the month have now doubled while prices have gone up from Rs 1,175 to Rs 

Cotton unchanged on limited buying by mills

 

On the back of limited demand from millers, cotton prices ruled steady in Gujarat and other regions.

According to brokers, cotton price may drop marginally this week.

Sankar-6 ruled at Rs 37,200-37,500 a candy (of 356 kg) in Gujarat. Prices of New V-797 were at Rs 30,500-31,000. About 5,000-6,000 bales (of 170 kg) arrived in Gujarat and around 10,000-11,000 bales arrived in India. Kapas was traded atRs 970-1,005 for 20 kg.

In Maharashtra, A grade (low micronaire) was at Rs 36,800-37,300 a candy and A grade (high micronaire 29+ MM) was at 37,300-37,800.

A cotton broker said: “At present cotton trade is very limited. South Indian mills are focusing more on imports than domestic supply.” Northern mills are importing from Pakistan.

S. Korea wins rights to undersea mine in Indian Ocean

South Korea today announced that it has secured exclusive rights to explore and develop a deep sea mine in the resource-rich Indian Ocean that can produce over $300 million worth of minerals such as gold, silver and coppers per year.

The International Seabed Authority (ISA) last week unanimously agreed to recognise South Korea’s rights to the offshore mine that lies across an area of 10,000 square km in the Indian Ocean, the Government said.

The site contains hydrothermal vents that could yield metals including gold, silver, copper, zinc and lead, South Korea’s Maritime Ministry said in a statement.

The estimated production would reach about 46,000 tonnes, worth $320 million, per annum, it said.

“This is the result of aggressive efforts by the Government and related agencies on investment, research and international diplomacy... amid fierce global competition to secure resources,” it said.

South Korea is Asia’s fourth largest economy. Its economy is export-driven, with production focusing on electronics, automobiles, ships, machinery, petrochemicals and robotics.

Energy-hungry China last year was given exclusive rights to explore 10,000 sq-km of seabed in the South-West Indian Ocean in an area off the coast of Africa.

By Mrs. Bandana Chadha Mam - Indian passion for gold gets American glitte

India's lust for gold is legendary. Indian households hold over $950 billion of the yellow metal, revealed a recent research by Macquarie research. India imports most of its requirements: a quarter of all the gold sold globally is imported by us.

But in recent times, another country has matched India's hunger for gold. China, the largest producer of the precious metal, became a net importer in 2011, as domestic demand soared.

Sometime this year, China is expected to overtake India as the largest gold consumer. China, which is among the top producers of gold globally, has high entry barriers for private miners and also uses its production for building up national reserves.

Entry barriers for entrepreneurs are high in Russia as well. South Africa and Australia, both big producers of the yellow metal, are becoming unpopular due to, respectively, high taxation and high production costs.

Some European gold reserves, for example the Rosia Montana in Romania, the largest untapped reserves in Europe, are facing problems due to environmental regulations.

That begets the question: where will India get its gold from? The US, and other countries in the Americas. North America has always been significant in the global gold stakes.

Globally, there have been 99 significant gold discoveries (defined as a deposit containing at least 2 million oz of the metal) during 1997-2011.

The Americas hold the greatest share in these discoveries—not surprising given that the Americas have accounted for more than half the industry's discovery-oriented gold exploration spending during the period.

In 2010, the gold exploration budget rose to $5.4 billion, which was 59% more than in 2009. In 2011, mines in the US produced gold worth about $12 billion.

Gold mining companies are again flocking to the Americas. In Canada, miners are making huge new discoveries as well re-starting old mines that were deserted due to lack of funds. In 2011, production rose 21% year-on-year to Canada's highest output in five years. Mexico's large mineral belts have been equally attractive for gold miners.

North America Accounts for Lion's Share

With 2011 production coming in at an estimated 85 mt, Mexico has seen a 254% increase in output. In all, North America was responsible for 16% of mine production in 2011.

And with a year-on-year production growth of 9%, well above the global average, along with a bevy of ongoing junior exploration, North America will be pumping out gold from a lot of new mines.

Mining companies without proven reserves—the so-called juniors— are equally enraptured by North America.

More than 70% of them own a project in North America, with over half owning a project in Canada, 17% in the US and 11% in Mexico, according to research by Zeal Llc, a consultancy.

BY MRS.BANDANA CHADHA MAM-Gold funds no match for ETF peers in returns race; DSP Blackrock Gold Fund & AIG World Gold log negative returns

The performance of gold equity funds —or funds that invest in shares of gold mining companies — has failed to live up to the expectations of investors, who desired higher returns and effective portfolio diversification.

Despite firm gold prices and sterling performance by gold exchange traded funds (ETFs), actively managed gold equity funds have underperformed most fund categories by a wide margin.

The Rs 818-crore DSP Blackrock World Gold Fund and Rs 177-crore AIG World Gold Fund — the only two gold equity funds launched in 2007 and 2008 — have generated negative 11.5% (-11.5%) and negative 16.5% (-16.5%), repectively, in the past one year.

The underperformance of these funds comes at a time when gold prices have appreciated 27% and gold ETFs have returned an average 26% over the past one year. The two gold equity funds have also underperformed popular equity diversified funds and sectoral funds by a good measure.

"There's serious risk aversion to equities at this point of time... This is creating a weigh-down effect on gold mining stocks as well," said Pankaj Sharma, head of business development and risk management at DSP BlackRock Investment Managers.

According to senior officials at both DSP Blackrock and AIG Global Investment, gold equity funds had their best gains in 2009, when both funds gained nearly two times the net asset value of gold ETFs. It was risk aversion to equities market that led to the fall of gold equity funds, they said.

"Gold mining companies are doing extremely well. Most gold miners are posting decent growth in profit margins, thanks to buoyant gold prices. These companies are not getting good valuation support due to poor equities market," Sharma said.

Both DSP Blackrock World Gold Fund and AIG World Gold Fund act as feeder funds to Blackrock Global Gold Fund and Falcon Gold Equity Fund, respectively. Blackrock Global and Falcon Gold — the master or target funds —have gold mining companies like Randgold Resources, El Dorado Gold Corp,Yamaha Gold Inc, Silver Wheaton Corp, Newcrest Mining and Franco-Nevada Corp among others in their core portfolios.
"These companies are doing very well and there is great demand for these stocks in market. But because there is demand, investors sell these liquid stocks when portfolios are bleeding or when the risk aversion to equities is high," said a large distributor empanelled with AIG Global.

Shares of gold mining companies have also remained subdued due to frequent down-rating by market analysts. A 15% increase in mining costs and concerns over equities market globally, have prompted several institutional brokers to downgrade gold mining companies over the past few months.
"Also, gold mining stocks are high-beta stocks. It will over-react to overall market momentum at both sides," the above-quoted distributor said. The fundamental question that comes to mind is should investors park their money in gold ETFs or wait for a turnaround in gold equity funds.

According to money managers, ETFs are for investors who want returns similar to physical gold prices. Gold equity funds are normal equity schemes with negligible reference to physical gold prices. "Gold equity funds are for investors with a long-term view.

BY BANDANA CHADHA MAM- Hard work pays off for Wockhardt: Habil Khorakiwala, Chairman, Wockhardt -

Habil Khorakiwala, 70, chairman of generic drugmaker Wockhardt, says that the company's near-death experience has taught him lessons that he hopes will last generations. 

"We have decided not to touch derivative instruments. Some bankers still come to us with such products. I tell them, I don't want to risk my organisation in my lifetime or in my children's lifetime," says the septuagenarian chairman, much chastened after foreign exchange losses three years ago that almost drove his company into bankruptcy. 

As a result pharma multinationals were hovering around for easy pickings, hoping to scoop up a firm that happens to be one of the fastest growing generic drug makers in India. 

In April 2008, Khorakiwala, who founded Wockhardt in the early sixties, the company was then known as Worli Chemical Works, announced its first ever loss, due to a mark to market loss of Rs 581 crore on account of the huge devaluation of the rupee even as in the same year sales grew 35% to Rs 3,593 crore. 

On Friday, when ET met him, a day after he completed a Rs 1,280-crore deal with Danone for Wockhardt's nutrition business, a confident Khorakiwala spoke candidly of his past troubles which are now behind him. Over the last two years, Wockhardt's debt-equity ratio has come down significantly from a high of 5.5:1 to 1.9:1, which will be below 1 after the money comes in from Danone. 

The stock has seen an exponential rise, jumping almost 200% in the last one year a sign, analysts say, investors have started re-rating the company. 

Acknowledging the role of his immediate family and his top management team for standing by him as he struggled to steer the company back into profitability, Khorakhiwala is certain that the turnaround is complete as a series of sales of non-core assets that included hospitals and the nutrition business helped pare debt even as core operations improved. 

Generics, the core business, has consistently delivered, even during its troubled years post 2008. 

Its Ebitda margins over last three years have thus showed a consistent rise. In 2011-12, it was about 31%, while in the previous year it was 24%. In 2009-10, it was 18%. 

Wockhardt has about 70% of its sales accruing from overseas, mostly the US. Hedging is par for the course for companies with forex exposure. TCS, Infosys hedge as a matter of routine. 

"We deliberated. We have a large portion of our business coming from overseas. It is neutral for us and we are not managing currencies. You burn your hands once then it takes time to recover," he says. A business runs on its inner core and inner strength, he says and for Wockhardt the only challenge was the "financial challenge", and therefore could be resolved. 

"We never had a business challenge. We remained very focused," Khorakiwala said. 

Spot rubber rules firm

Spot rubber ruled steady on Saturday.

The market remained firm on late trades following a better closing in domestic futures, but failed to record further gains on buyer resistance.

Sheet rubber finished unchanged at Rs 181 a kg at Kottayam and Kochi, according to traders and the Rubber Board.

FUTURES GAIN

In the futures market, August contracts improved to Rs 180.98 (Rs 178.80), September to Rs 178.15 (Rs 176.85), October to Rs 177.05 (Rs 176.01) and November to Rs 177.50 (Rs 177.14) a kg on the National Multi Commodity Exchange.

Shareholders get less from Indian companies

The return on equity, or the profit generated on every rupee of capital invested in Indian companies, has steadily declined over four years.

The return on equity (ROE) of the companies in the CNX 500 has fallen from 23 per cent in March 2008 to just 15.5 per cent by March 2012.

Lower shareholder returns, which is what a falling ROE implies, suggest that investors should pay less in terms of valuation multiples for these companies. But that is not all; profit growth for Indian companies has slowed in the last four years.

Yet, current stock valuations imply a high earnings growth — similar to what they were indicating during the market peaks. This indicates that there is a possibility of more downside to the broader market.

If one is keen to make long-term investments, one has to scout for stocks with attractive valuations that have bucked the trend of falling ROEs.

BEHIND FALLING ROES

To analyse trends in ROE, we started out with 2007-08 numbers, a year of strong growth and high valuations for India Inc.

With that as the starting point, ROEs for CNX 500 companies (excluding banks and finance companies) have tumbled from 24.2 to 15 per cent.

A break-down of numbers shows that much of the decline in ROEs of companies (excluding finance companies and banks) was due to the fall in net profit margin. Moderation in leverage, that is, higher use of equity funding than debt, also diluted ROEs.

The net profit margin of CNX 500 companies declined from 11 per cent to 6.6 per cent over four years. While operating profit margins also suffered some dent due to higher raw material costs, higher fixed costs substantially reduced net profit margins.

Rise in depreciation is indicative of companies adding to fixed assets. But, earnings haven’t kept pace with growth in assets.

Interest costs alone have risen at a 30 per cent CAGR during the last four years though companies managed to reduce their dependence on debt for funding needs.

Consequently, the annual growth of 18 per cent in net sales couldn’t translate into a robust growth in profits. Net profit growth during the four-year period was at a modest 4 per cent.

The decline in ROE, however, wasn’t uniform. Over two-thirds of the companies have witnessed decline in ROEs over the four-year period. Some sectors fared worse than others. Construction, realty, capital goods and telecom sector witnessed higher rate of decline in ROE.

But banking and finance companies, a few of the mid-tier IT companies and auto companies actually witnessed improvement in ROEs.

DLF, JSW Energy, Tata Steel, Idea Cellular and Unitech were some large-cap companies that saw their ROE decline sharply.

Of this, companies in sectors such as hotel, shipping, steel, capital goods and realty were amongst the ones that witnessed significant fall in their profitability due to fall in net margins.

For instance, the ROE of DLF declined from 67 per cent in 2007-08 to 4.4 per cent in 2011-12 after the net margin of the company declined to 12.4 per cent from 54 per cent.

Similarly, Unitech, HDIL and other realty stocks have also witnessed sharp decline in net margins.

LEVERAGE

The debt-equity ratio of CNX500 companies declined from 0.72 to 0.57 times in the four-year period. This should have ideally helped ROE.

The equity capital for Indian companies has expanded at twice the rate of debt funds over four years. Retained profits and fresh equity capital helped expansion in equity.

Companies such as Adani Enterprises, Aurobindo Pharma, Bajaj Electrical and Tata Steel are a few companies that have reduced their leverage ratio significantly and have seen moderation in return on equity.

SUFFERERS, SURVIVORS

Within the universe, non-finance companies witnessed a decline of ten percentage points in their return on equity. There was only a percentage point decline in ROEs of banking and finance companies.

The ROEs of non-finance companies and finance companies were 14.5 per cent and 15.8 per cent, respectively, for the recently concluded fiscal.

Larger companies as represented by CNX 100 continue to enjoy better ROE than mid-cap companies.

The ROE of large companies (excluding financials) was 16.7 per cent compared with 10 per cent in the case of mid-sized companies.

Higher interest costs were the key reason for mid-sized companies faring worse.

Interestingly, with their ROE at 10 per cent and high borrowing costs, it doesn’t make sense for mid-cap companies to add leverage at this juncture as it may not benefit ROEs.

FIIs pump Rs 8,400 cr into markets in July

Foreign investors have poured a little over Rs 8,400 crore into the Indian equity market this month so far sidelining concerns over weak monsoon, slowing economic growth and a high interest rate regime.

After three consecutive months (April-June) of selling, overseas investors infused Rs 8,424 crore into the equity market till July 27, according to the data available with the Securities and Exchange Board of India.

Market experts said foreign investors have sidelined concerns over weak monsoon, slowing economic growth and a high interest rate regime, mainly on hopes that government would initiate fresh reforms initiatives as Prime Minister Manmohan Singh had taken the additional charge of the finance portfolio.

Besides, investors are expecting that the government would initiate a few key reforms before the start of the Monsoon Session of Parliament on August 8.

During July 3-27, Foreign Institutional Investors (FIIs) were gross buyers of shares worth Rs 44,192 crore, while they sold equities amounting to Rs 35,768 crore, translating into a net inflow of Rs 8,424 crore

In addition, FIIs have also invested Rs 3,187 crore in the debt market so far this month. Buoyed by strong inflows, BSE’s benchmark Sensex surged 591 points or 3.3 per cent so far this month to settle at 16,839.19 points on July 27.

After taking the latest inflows into account, FIIs investment in the equity market stood at Rs 50,417 crore so far in 2012 and Rs 24,048 crore into the debt market during the same period.

As on July 27, the number of registered FIIs in the country stood at 1,756 and total number of sub-accounts were 6,341 during the same period.

Steel prices likely to rise 7.2% this year: CMIE

Steel prices are expected to rise by 7.2 per cent this year and the rates will start firming up from October due to rise in demand in spite of weakness in international markets, economic think-tank CMIE has said.

“Price hike of the alloy is likely to begin from October. Steel demand normally picks up when monsoon season ends and the construction activity gathers pace. We expect prices to rise by 7.2 per cent in 2012,” the Centre for Monitoring Indian Economy (CMIE) said in its monthly report.

The hike will be despite a fall in international steel prices and corrections in global raw material prices, it said.

“Healthy demand from the user industries, firmness in domestic iron ore prices and a weaker rupee are likely to aid the rise in domestic prices,” it said.

However, prices are likely to remain under pressure during the July-September season as demand for steel usually weakens in monsoons, especially from the construction sector.

Besides, the steel prices in international markets will remain weak in the coming months due to unfavourable macroeconomic environment, it added.

Steel production is likely to rise at a modest pace in the first half due to constrained availability of iron ore and subdued demand, it said.

However, production is likely to pick up in the second half when the construction activity gathers pace after the end of the monsoons, it said, adding that supply of iron ore may improve once the mining activity starts in Karnataka.

Meanwhile, the finished steel production is expected to grow by 8.5 per cent, it said. However, finished steel prices are likely to decline further, marginally, in the coming months, it said.

Most steel companies reduced prices of finished steel products by 0.5-1 percent in June, in view of a steep fall in international prices.

Global prices corrected sharply during the last two months due to uncertainty regarding demand prospects of the alloy from Europe and China, it explained. However, weaker rupee restricted the downside in domestic prices.

Index outlook - Bulls in retreat

The spectre of sovereign debt default in euro zone reappeared last week, spooking both the Sensex and the Nifty. Both the indices opened with downward gaps on Monday morning and continued tumbling downhill till Friday. Traders who were betting on stock prices rising further in the weeks ahead had to unwind their positions ahead of the expiry of July derivative contracts stoking the volatility further.

Deficient monsoon and its consequence also began affecting the market morale and corporate earnings could not do much to rectify the mood. There was intense drama on Thursday as several mid-cap stocks such as Tulip Telecom and Everonn Education took a sharp drive on rumours of brokers unwinding pledged shares.

Volumes spiked higher on Thursday, the day of the expiry. Derivative volume on NSE crossed Rs 2,00,000 crore on that day. Put call ratio in index options declined below 1 and open interest fell below Rs 1,00,000 crore implying that many traders were forced to unwind their position. Foreign institutional investors were net sellers in equity in most sessions last week. But their tally for net purchases in July stays at $1.5 billion.

The week ahead would be news-heavy with the RBI and the Federal Reserve holding their monetary policy meetings next week. Progress of monsoon, PMI numbers and earnings announcements will be other drivers in the short-term.

Oscillators in the daily chart moved deep into oversold zones. The Sensex declined below its long-term 200-day moving average on Thursday though it is just hanging onto that support now. The long lower shadow in the weekly candlestick chart implies that the index is trying to halt its current slide.

Sensex (16,839.2)

The Sensex recorded the intra-week low of 16,598.5 before regaining some ground on Friday to close 320 points lower. Key short-term support that investors need to watch now is at 16,467. The short-term guideposts for investors are as under:

Upward reversal above 16,467 will take it higher to 17,631 or 17,762 in the upcoming sessions.

Short-term view will, however, turn negative if the index closes below 16,467. It will mean that the index is moving lower to 15,916 or 15,748.

Movement between 17,000 and 17,500 will retain the positive short-term view.

Medium-term trend in the index is sideways. The movement since the 15,135 low appears to be the correction of the down-move from 21,108 peak. If the Sensex reverses above 16,467, it will imply that the C wave of this correction is sub-dividing further and can take the index up to 18,481 or 18,523 again.

Investors need to bear in mind that there is long-term resistance at 18,826 that could prove to be the ceiling for this year.

The Nifty (5,100) too hit the intra-week low of 5,032.4 before reversing higher on Friday. Key short-term support for the index is at 4,991. Short-term traders should not initiate fresh long positions if the index moves below this level. That will imply that the Nifty is heading towards 4,816 or 4,770 in the near-term.

Conversely, reversal above the 5,000 mark will mean that the index can move on to 5,227 or 5,348 again.

The Nifty is also poised at a very significant junction from a medium-term stand-point.

Sharp up-move from current levels can take the index higher to 5,389 or 5,610 over the medium-term.

But the breach of the support at 5,000 will mean that the index can head lower to 4,488.

Global Cues

Global markets remained in a sideways range but ended the week on a slightly positive note. European indices strengthened on statement from the French President and German Chancellor that they are committed to support the euro zone.

The CBOE Volatility Index spiked in the beginning of the week hitting the high of 21 on Tuesday.

But it declined from there to close at 16.7 implying that investors were feeling more sanguine towards the end of the week.

The Dow moved beyond the 13,000 level despite the US economy growing at just 1.5 per cent in the second quarter. This is slower than the 2 per cent growth in the previous quarter.

The index has now overcome the resistance at 12,850.

Short-term target for the index remains at 13,338.

Medium-term targets on close above 13,338 are 13,848 and the index’s all-time high at 14,198. Short-term view will stay positive as long as the index trades above 12,450.

One of the worst performing markets in recent times is the Chinese stock market. The Shanghai Composite Index is down 13 per cent since the beginning of May.

The index is also testing the medium-term low at 2,132. Breach of this level will be negative from a medium-term perspective.

Adopt e-documents to help exporters, banks urged

Banks must adopt the electronic Bank Realisation Certificate as this will reduce transaction costs for exporters and make them competitive, said Mr S.R. Rao, Commerce Secretary, Ministry of Commerce.

This involves electronic transmission of documents and details on foreign exchange realisation on exports from banks to the Directorate General of Foreign Trade (DGFT).

“The Government has a firm endeavour and commitment to make our exports competitive vis-à-vis competition from other markets. Policy attempts are being made to reduce transaction costs substantially,” said Mr Rao.

Currently, exporters get a manual certificate from banks. “eBRC will not only bring down transaction costs but it will also reduce paper work. It will be particularly useful for small exporters,” said Mr Rao.

This sentiment was also echoed by Dr Anup K. Pujari, Director-General, DGFT. He said eBRC will help trade improve productivity.

Commenting on apparel exports, Mr Rao said exporters are headed for “good” times. Exporters must go up the value chain and also look at new markets, he said.

“The autumn season is opening up and business should be doing well in traditional markets. We are also exploring new markets of West Asia, CIS and Iran.”

The Government is keen to explore trade opportunities and sort out visa-related problems with Pakistan, said Mr Rao. During August-September, the commerce secretaries of both countries are expected to hold talks in Pakistan.

Free trade agreements with Russia and European Union will be taken up soon, he said.

Brent crude dips to $103 per barrel

Lack of details on US actions to counter a gloomy economic outlook in a Congressional testimony by the Federal Reserve chief, Mr Ben Bernanke, sent crude prices down in Asia today, analysts said.

New York’s main contract, light sweet crude for delivery in August, shed 26 cents to $88.96 a barrel and Brent North Sea crude for September delivery shed 60 cents to $103.40.

Crude markets were discouraged by Mr Bernanke’s address to Congress yesterday, which contained no clear indication of a new round of quantitative easing or any additional Fed action to jumpstart the US economy, analysts said.

“While a QE3 announcement was never really on the cards, markets were hoping to get a clearer insight into what sort of conditions would prompt more Fed intervention,” IG Markets said in a report.

“Sadly all Bernanke did was to repeat what he’s said previously and reiterate his frustrations about the US economy’s slow recovery. Not comments really worth getting out of bed for.”

Mr Bernanke said the US economy might be heading for even slower growth than the two percent it recorded in the first quarter, but reiterated that the Fed was prepared to react should it deteriorate.