Saturday, December 25, 2010
Rio Tinto Group Ltd. offered A$3.9bn (US$3.9bn) for rival coking coal developer Riversdale Mining Ltd. to gain excess to crucial reserves in Africa. But, there could be rival bids from other companies as miners seek to cash in on the growing demand for crucial steel-making ingredients. The Rio Tinto bid needs the backing of at least one of Riversdale's three large shareholders, including India's Tata Steel Ltd. and Brazilian steel group CSN. Rio Tinto raised its offer to A$16 per share cash on Thursday from an earlier indicative bid of A$15. Riversdale's shares rose as markets expected superior bids. Riversdale shares had been suspended from trade for the past couple of sessions.
Oil prices climbed for a fifth straight day in London trading on Friday, spurred by continuous spell of bitter cold weather in the northern hemisphere and persistent signs of a gradual pick-up in the crucial US economy. Brent crude climbed to its highest since October 2008. Oil was all set to post its longest winning streak in six weeks with prices trading near the highest level in two years.
Indian Railways will increase the rates charged for transporting iron ore, steel and other products by about 4% from Dec. 27 as it seeks to counter the spike in higher wages and rising fuel costs. According to Anil Kumar Saxena, a spokesman for the Union Railway Ministry, employee wages, fuel costs and input prices have risen. Still, about 50% of the increase has been absorbed by the Railways, he said. Freight rates for coal, coke, cement, caustic potash and some petroleum products will also be increased by a similar amount, according to a Dec. 20 circular posted on the Ministry of Railways’ website. Charges for foodgrains and fertilizers will remain unchanged, while rates for salt and sugar will appreciate marginally, it said. The freight rates for transporting cement, coal and coke for a distance of between 501 kilometers and 510 kilometers will increase to Rs 489.90 from Rs 471, according to the Railways. The rates for alloys, metals, iron and steel will go up to Rs 587.90 from Rs 565.20, the Railway ministry said.
Reserve Bank of India (RBI) released the gist of the comments on the Discussion Paper on "Entry of New Banks in the Private Sector". The range of comments received has been very wide and does not indicate consensus on any of the issues, the central bank said. The comments received are reflective of sectoral positions, i.e. of banks, NBFCs and industrial houses. Comments from others also spanned a wide range, the RBI said. Incumbent banks are opposed to the idea of allowing industrial/business houses to promote new banks, as the large capital buffer that would be available to them would create an uneven playing field. Moreover, having financial licence and having industrial activity implies there could be connected lending. Allowing industrial houses to own banks will also exacerbate the concentration of economic power and political influence, argued some stakeholders. However, as an experiment, a couple of industrial houses could be allowed to own restricted small banks.
Though the key indices gained 1% during the week, one should not read too much into it as the tepid rise came amid thin volumes. Most investors have virtually taken a backseat for December and are looking forward to 2011. The same is the case with most global markets, although they still have managed to post decent gains in the year-end rally. The Indian market has underperformed its global counterparts of late, as a spate of controversies and the political stalemate in parliament have kept investors at bay. Part of the recent fall could also be attributed to the year-end fatigue on the part of the FIIs.
Annual rate of inflation in the Food Articles space rose sharply in the second week of this month, putting further pressure on policymakers to check the spiraling prices of essential food commodities. Inflation in the Food Articles group climbed to 12.13% in the week ended December 11 from 9.46% in the previous week, the Union Commerce & Industry said. This was the third instance of an increase in food inflation on a weekly basis after easing for seven consecutive weeks. Inflation in the food articles space was at 21.13% in the year-ago period.
Onion prices started declining in wholesale markets after the Government took a string of measures to check the steep jump in domestic prices. The Union Government slashed the Customs Duty on the imports of onions to zero from 5% as it tried to reign in spiraling prices of the essential food item. The Government imposed a ban on onion exports till January 15, in a bid to increase the availability in the domestic market.
Expiry of the near-month December 2010 futures & options (F&O) contracts may cause volatility next week, the last trading week of calendar 2010. The near-month December 2010 derivatives contracts expire on Thursday, 30 December 2010.
Volumes may continue to remain low as foreign fund managers will be on year-end vacation. Public sector oil marketing companies could be in focus as the Empowered Group of ministers (EGoM) headed by Finance Minister Pranab Mukherjee is likely to propose a marginal hike in diesel prices at a meeting likely to be held on Thursday, 30 December 2010.
The barometer index BSE Sensex and the 50-unit S&P CNX Nifty regained their psychological 20,000 and 6,000 mark respectively as higher advance tax payment by top Indian firms and a major acquisition in the steel sector, boosted sentiment. The Sensex advanced in three out of five trading sessions during the week.