Metal and oil hold promise in 2008 - 3

Global movements: Commodities are impacted more by the developments in overseas markets than in equity. Traders are required to keep a constant eye on the movement of commodity prices in global markets.

Broader market sentiments: As usual, traders should keep an eye on the broader market sentiments. They can initiate short or long positions accordingly.

Liquidity: Liquidity is a very broad term used in the market. It broadly indicates the total amount of trade that happened at a counter, number of contracts traded in a particular counter, the spread between the 'buy orders' and 'sell orders', and many more parameters.

Since all the commodities contracts are not very liquid, traders should keep the liquidity aspect in mind before initiating positions. As usual for day traders, brokerage eats into a lot of their profit pie. Since the commodities trading is still in an early stage here, traders should keep a watch on the brokerage applicable to them.

Delivery of contracts: In commodities futures contracts, taking delivery of an underlying commodity is not as simple as taking delivery of stocks.

Metal and oil hold promise in 2008 - 2

Edible oil

According to data released by the Government, there is a possibility of a lower Rabi oilseed crop for 2008 in India. That would mean bullish sentiments for edible oil and related commodities.

Metals (aluminum and steel)

The consumption of metals will continue to be high due to heavy infrastructure development activities in India and China. Therefore, the rates in metals are expected to trade firm in the medium term.

Here are some key points traders should keep in mind while trading in commodities futures:

Discipline: Traders should maintain proper discipline while trading in commodities.

Due to lower margin deposit in the carrying positions in commodities futures, the leverage becomes higher and as a result the potential of profit and loss goes up. Traders are recommended to maintain strict stop-loss and profit targets on their trading positions.

Track market movements: Commodities market is much wider and requires a wide variety of information.

Commodities trading is open for more than 12 hours per day. These factors pose a huge challenge for the traders in the commodities futures market.

Metal and oil hold promise in 2008 - 1

Trading in commodity futures increases the options for market traders. Commodity trades are highly leveraged. The margin requirement for trading in commodity futures is quite low in comparison to the total holding.

As a result, trading in commodities is becoming one of the preferred options for day traders (especially futures of precious metals - gold and silver). Contracts of precious metals and crude are highly liquid and trades in them are quite volatile in nature.

Trading in commodities is on the rise since it was introduced in India in 2003. Today, traders can trade in future contracts of more than 50 commodities.

Precious metals (gold and silver)

Precious metals are used by traders the world over for hedging. There is plenty of scope for further gains in gold and silver prices due to weakness in the dollar, worries over the US and global economy, the ongoing credit crunch and the shaky geopolitical environment. Also, the demand for jewelry has gone up.

Crude oil

Crude oil prices are expected to remain firm in the medium term. The world's oil demand is expected to grow faster than the supply in 2008 as per the forecast from OPEC.

Biotech a sleeping giant

Biotech still a sleeping giant for farmers in North East

The northeastern region considered to be a treasure house of plants, animals and microbial resources, however, continues to remain backward, its potential yet untapped said experts.
The sufferings of the farmers of the northeastern region can be substantially reduced if biotechnology is used in the agricultural sector, they said.

"Biotechnology, if properly applied, can work as the engine of growth for the hitherto underdeveloped North East region." The North East Chamber of Commerce and Industry (NECCI), a premier trade and commerce body of the region, is taking a leading role in bringing about awareness among the farmers about use of biotechnology.

NECCI secretary D K Sharma said his body had organised an interaction of experts from the University of Pune, Regional Research Laboratory, Jorhat, Indian Council of Agricultural Research, Borapani IIT, Guwahati besides several other institutions where the speakers were unanimous in their view that biotechnology has still remained a "sleeping giant" for the North East.

The focus, Pranab Kumar Goswami, head of the department of biotechnology, IIT, Guwahati, said should be on development of entrepreneurs in the biotechnology sector for which the NECCI had selected 25 young entrepreneurs. "Neither the policy makers nor the poor farmers know anything about biotechnology nor has this affected growth" Mr. Sharma said. Mr. Goswami said his department has developed a sound infrastructure for carrying out cutting edge research in biotechnology with active involvement with NECCI.

India is one of the five emerging biotech leaders in the Asia Pacific region and the northeastern region has tremendous potential for development of this sector due to its rich bio diversity, Mr. Goswami said.

"This is an ideal place for biotechnology based cultivation of aromatic and medicinal plants, sericulture, biological control of pests and diseases," he said. "The public sentiment on genetically modified organism, however, may be a barrier for growth, but this has to be changed: he said.

Domestic chronic drugs eye higher market share

(Khomba Singh)

Increase in health awareness, affluent lifestyles and a disposable income is expected to propel the Indian chronic drug segment to double its market share in the next 10 years. The growth will also bring the Indian pharma industry in alignment with global pharma industry, where chronic drugs constitute 70% of the total global drug industry.

At present, the share of the chronic drug segment in the Indian pharma industry vary between 25-35%, depending on whether certain ailments are included in the chronic segment or not. In contrast, for the global pharma industry, chronic drug segment is 70% of the total industry.

"The market share of chronic drugs in Indian pharma industry will double in 10 years. Soon, every Indian company will focus on this particular segment. Pharma companies will have to create new niche marketing initiatives and spend more to create awareness about lifestyle management, according to Chrys Capital MD Sanjiv Kaul.

Currently, the Indian pharma industry is about Rs 27,000 crore and is growing 15-16% annually. The chronic drug segment is already growing at a faster rate, about 18% as compared to 12% for the acute drug segment. Less than a decade ago, the share of chronic drug segment was between 10-20%.

Glen mark MD and CEO Glenn Saldanha said: “Most leading Indian pharma companies have already aligned their strategy or are in the process of alignment to take advantage of the growth in chronic medications.”

Mankind Pharma’s general manager of the product division Sanjay Kaul added: "The chronic drug segment will fuel the growth of the pharma industry. Many of the new product launches in the recent past have been in the chronic drug segment. “The company is venturing into anti-psychotic drugs, which is one of the chronic drugs.

Experts attribute the growth of chronic diseases (also referred as lifestyle diseases) to lifestyle changes which are backed by increase in disposable income.

The major chronic drugs in the country are cardiovascular drugs, anti diabetes drugs, anti-psychotic drugs and hypertension drugs. Chronic drugs also generate more revenue to pharma companies as they are costlier than acute drugs and consumed for a longer period as they are usually meant for life long medication.

Slowdown in US economy(part-2)

To what extent is India likely to be impacted by the slowing of the US economy?

The slowdown in the US will have a ripple effect across the world, though the impact will vary across different regions. All those economies that are export-oriented in nature, which means that a large part of the output in the country is exported, will face a more severe impact than others. Most South East Asian economies fall under this category. India, for example, is not a very highly export-driven economy. What this means is that there is a lot of internal demand in the country that will keep the economy running and while some exports might be affected, there is enough local demand for the time being to keep things going. In the equity market, the impact of the slowdown will vary according to the exposure of a particular company to the US market.

What will be the impact on sectors by a US slowdown?

There are some areas where the goods are being directly imported by the US and this could range from a range of textile products to individual item like jewellery where there would be an impact. But there can also be an indirect threat to several other areas like the information technology area where one might see that companies have reduced the additional contracts that they are going to give to Indian companies. However, there is no clear demarcation of the indirect impact because there might be some companies in the US who undertake additional outsourcing in order to control costs in a tight situation.

Slowdown in US economy(part-1)

Slowdown in US economy and market

(Arnav Pandya)

A key issue worrying equity investors in India is the possibility of a slowdown in the US economy. The fortunes of quite a few sectors in India are linked to the performance of the US economy. Hence if the engines of the world's largest economy begin to slow, the bottom lines of many Indian companies are likely to be impacted.

Technically, how is the slowdown in any economy measured?

A slow down in the economy means a situation where the growth rate of the economy as measured by the gross domestic product (GDP) numbers shows a smaller rise than witnessed previously. For instance, the economy which was growing at 5 % every quarter may ease to 4.5%. The GDP numbers are announced each quarter, but a slowdown should not be confused with a fall in GDP. For instance, a fall in GDP means that an economy that may have been growing by 5 % has now shown a negative growth of 2 %.

How does a slowdown in the US economy affect other countries?

The global economy is now much more interlinked than it was a few years ago with a lot of trade taking place between nations. The US is a major trade partner for many countries and especially a big importer of goods from across the world. If there is a slowdown in demand in the US, then there will be a lesser demand for these goods and this, in turn, will affect the suppliers who are providing the goods to the US. Thus the direct impact of the slowdown is that the number of orders and demand for several products might see a fall leading to an impact on the performance of several companies across the world.