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For private circulation

Vol 1 Issue 4 April 2012

A Monthly Financial News Letter from RBG Commodities

On March 16th 2012, the Finance Minister Mr. Pranab Mukherjee presented the Union Budget for the year 2012 13. Being a budget of one of the fastest g 2012-13. growing economies, the budget announcements caught global media attention. There were some reports in the beginning of the Year 2012 about improvement in the global economy, so the Indian budget proposals was carefully watched by many developed countries. The Budget for the financial year The 2012 - 13 seems to be better as it considers different factors for the Economic Improvement. Throughout the Budget the Government tried to introduce measures to control fiscal deficit. Indias fiscal deficit during April to February was Rs. 4.94 trillion ($96.8 billion), or 94.6% of the revised full fiscal year 2011/12 target. During the same period in the last fiscal year, the deficit period was 68.6% of the budget target. Net tax receipts were Rs. 4.94 trillion and total expenditure was Rs. 11.07 trillion during the April February period. Earlier this month, the government revised up April-February the fiscal deficit target for the 2011/12 fiscal year to 5.9% of GDP from 4.6% projected earlier. Steps taken to control fiscal deficit were increase in taxes and promised cuts in subsidies. For the first time the Government focused on subsidies to control the deficit. So we think this initiative we may lead to another revolution as the major portion of the tax collection by the government is being spent on subsidies and for other social commitments. There were also some announcements in the Budget for the Corporate sector. The Government did The not change in Corporate Taxes and Government projected to include Rs.50 lakh crore in 12th Plan for infrastructure, half of this from the private sector. In the case of ECB (External Commercial Borrowings), Government permitted $ 1 billion in Airline sector and to low- cost housing sector. low Withholding tax on external commercial borrowings reduced from 20 per cent to five per cent for power, airlines, roads, bridges, affordable houses and fertilizer sectors. On the other side there were some announcements, which are going to affect the Indian Corporate sector in the long run. Service tax rate rose from 10 per cent to 12 per cent; similarly Excise duty has been raised from 10 to 12 per cent. There are some recommendations for the individual citizens also; it includes rising of Income tax exemption limit to Rupees two lakhs, Deduction of up to Rs.10,000 from interest from savings bank accounts etc., Another major highlight of this Budget is that the Government is aiming to raise Rs. 30,000 crore from disinvestments. In Indian economy, concerns about Inflation are ore acting as a hurdle for the Economic growth. India's inflation is structural, driven largely by agricultural constraints; there were some recommendations for the agricultural sector f for improving productivity. Like in every Budget higher allocation was given to the defense sector, which is about Rs. 1.93 lakh crore during 2012 -13. Government has estimated GDP growth rate at 7.6 per cent in the 13. financial year 2012 2013 and expects inflation to be lower. If the budget proposals are inflation implemented in time, we can expect a good rate of growth in Indian economy for the year. Government may face challenges arising from political and social fronts too. In recent Assembly elections, Regional Parties have emerged stronger than National Parties. So the Government may arties face restrictions in implementing many Budget proposals or the Government has to consider opinion of these parties in implementing such proposals for the attainment of the economic g goals.
Sandeep Chandran, RBG research

General Financial News

SEBI spells out exit route for regional exchanges

BS Reporter / Mumbai Apr 03, 2012, 00:02 IST

The Securities and Exchange Board of India (SEBI on Monday Exchange (SEBI) paved the way for closure of several defunct regional stock exchanges (RSEs) by allowing voluntary exits. exits.An exchange without any trading at its own platform or where the annual trading is less than Rs 1,000 crore may apply for voluntary apply derecognition and exit, Sebi said in a statement after its board meeting.

FMC suspends launch of soybean contracts BS Reporter / Mumbai Apr 04, 2012, 00:04 IST
As a precautionary measure, the commodity markets regulator, the Forward Markets Commission (FMC), has suspended the Markets launch of lean season contracts in soybean. This means, all soybean contracts scheduled to be launched for delivery until September would not be made available for hedging on the exchange platform.

Futures trade in seven commodities under government scanner due to 100% price rise in 3 months ET Bureau Mar 30, 2012, 01.46AM IST
MUMBAI: Futures trading in seven food commodities, whose prices have more than doubled in the past three months, is under the government's scanner and action will be taken if scanner there is evidence of speculation, said a top official of the commodity futures regulator, Forward Markets Commission (FMC). "The commission will closely monitor a few agri agri-commodities to check if there is any cartelisation or illegal trading by speculators, and will act upon it," said FMC Chairman Ramesh Abhishek. Online traders will have to key in two passwords from next month

Prashant Mahesh, ET Bureau Mar 21, 2012, 02.14AM IST

MUMBAI: Internet trading could soon get cumber cumbersome for brokers and investors with the mandatory introduction of two twofactor authentication for online trading by the end of this month, said experts. In a bid to make internet trading more secure, market regulator Securities and Exchange Board of India ( Sebi) has made two-factor authentication, in which the user provides two factor means of identification, compulsory for online share transactions.

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The month of March 2012 was crucial for the Indian markets as the Government of India announced the Budget for the year 2012 2013. In Indian Indices the Budget has lost its significance as an event that impacts the stock markets in a major way. If we look at the movement of the Nifty on Budget day, it hardly saw a major swing. This year, however, it was expected that the Union Budget would bring in some strong reforms in the form of a definitive road map for the DTC, GST etc., which was supposed to help improve the market sentiment; but it failed to do so. In the month of March the uncertainty prevailing over GAAR issue, the coal FSA issue and CAG report on coal mining etc., spoilt the mood in the domestic bourses even though the global markets are in the hands of bulls. Uncertainty around the Participatory Notes (P-Notes) taxation issue resulted in sharp correction in the domestic bourses during the mid week of March. However it failed to break the 5150 support levels and later clarification by the Finance Minister that the Government does not intend to levy any tax on the holders of Participatory Notes (P-Notes) helped the index spike up sharply. In the month of March Nifty opened at the levels of 5366 and made a high of 5499 and closed at 5295 levels. Due to the financial year ending, many investors are stayed away during the last week of March. The lack of participation and expiry in the Futures and Options segment made Nifty highly volatile. Investors will closely watch clarification from the Government on General Anti-Avoidance Rules (GAAR). Finance Minister Pranab Mukherjee said on Friday, 30 March 2012, that the government does not intend to levy any tax on the holders of Participatory Notes (P-Notes). He also said that a clarification on the matter would be issued by the Government in due course and that the Centre has no intention of harassing genuine overseas investors. A lack of clarity on taxation of P-notes has contributed to the volatility in the markets. In April the markets are going to be guided by the announcement of the yearly financial results by the Indian Corporates. The announcement of results will start with the announcement of the results by the IT giant Infosys on 13th April 2012. For the month of April Nifty seems to be having support around 5070 and resistance seen around 5500 levels. The performance of the global indices also may act as a crucial factor for the Indian Indices. The sectors like banking, infrastructure, and capital goods may get investors attraction this month. By analyzing the present market conditions, the markets are creating good opportunities for the long term investors especially in those shares in Nifty 50. We are expecting positive results from most of the Indian Corporates due to the global economic recovery.
RBG Research

The Month of 2012 was not very happy for the Agricultural market players due to the extreme volatility in Futures market. The Commodity market regulator Forward Markets Commission (FMC) had barred with immediate effect the fresh positions in Guar Seed and Guar Gum Futures. The prices of the Guar complex rose more than 500 % during the period from November March. According to media reports Futures trading in seven food commodities, whose prices have more than doubled in the past three months, is under the Government's scanner and action will be taken if there is evidence of speculation. FMC plans to monitor trading patterns, volatility and individual trader positions in Black Pepper, Mustard oil, Chana, Potatoes, Soyabean, Cardamom and Mentha oil. Between January and March 2012, Mustard Seed prices have risen by 101%, Chana 108%, Potato 170%, Mentha oil 172%, Soyabean 118%, Cardamom 185% and Black Pepper 122% on the Exchanges. Mustard seed, Chana, Potato and Soyabean are important contributors to the monthly food inflation index and impact consumer budgets. Pepper: Pepper witnessed extreme volatility during the month of March. Pepper made a high of 43870 in April expiring series and made a low of 36920 in the month of March. Technically in April series 36900 seems to be a good support and resistance seen around 40800 levels. Fundamentally in Pepper, the arrivals are very low. Some of the dealers were liquidating because of the hike in KVAT from 4 per cent to 5 per cent. Sellers in Chikamagalur and Sakleshpur in Karnataka were selling at Rs 380-385 delivered anywhere in India, while those in Kodagu were reportedly offering at Rs 390-395 a kg delivered anywhere in the country. Some selling pressure was reported in Wayanad also. These factors aided the market to fall. Rubber: The Association of Natural Rubber Producing Countries (ANRPC) has lowered its natural rubber (NR) supply estimates for 2012. According to it, total supply would be 10.42 million tonnes (mt) from 10.52 mt expected a month ago. With the revised figures, supply is expected to rise only 1.1 per cent from the supply in 2011. Earlier, the increase expected was 2.6 per cent. The total production of NR in January from ANRPC members fell 12.8 per cent from a year earlier. Despite a sharp rise in prices since the middle of the month, the production fell to 291,000 tonnes in Thailand (from 385,000 tonnes in January 2011), 239,000 tonnes in Indonesia (from 247,000 tonnes) and 85,000 tonnes in Malaysia (from 108,700 tonnes) largely due to lacklustre demand from China. However, India and Vietnam managed a marginal increase during the month. Precious Metals: It was almost flat session for the precious metals in the month of March. Gold for April series hit a high of 28535 and hit of a low of 27312 and closed at 28030 in the end of month. Technically gold has support around 27100 levels and resistance around 29015 levels, similarly for the Silver support seen around 54800 levels and resistance around 62030 levels. The Movements in the US Dollar Index will also act as a crucial factor for the precious metals in the months to come. Base Metals: For the base metals also it was almost a flat session. In the first week April the US reported solid manufacturing data. Considering such data flows we can expect an uptrend in the base metals pack in the month of the April. Copper has support around 428 levels and resistance seen around 448 levels, similarly, Nickel has support around 895 levels and resistance around 975 levels and in the case of lead, support seen around 103 levels and resistance around 106.80 levels. RBG Research


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Disclaimer: This electronic news letter is only an information service. Informations are collected from different sources which are believed to be reliable, but are not guaranteed by RBG Commodities about the accuracy. RBG Commodities does not assume any responsibility or liability resulting from the use of the information given.

Editorial Board: Shijo Jose, Sandeep Chandran, Vishal Dand RBG Commodities Limited, VI/93, Jew Town, Cochin 682002. Tel: 0484-2588841/44/48/09