Business Standard

Positive hints

Few fresh positions are being taken in the derivatives market

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Emcee Mumbai
The markets have moved up smartly in the past two trading sessions, and interestingly, before the Nifty June contract expired on Thursday, it was trading at a premium.
 
Otherwise, for most of the month, it was trading at a discount. This is generally a positive signal.
 
But few other indicators support this positive view on the markets. In fact, total open interest on the National Stock Exchange has been hovering around the 2.3-2.5 lakh contracts mark for some time now, meaning that few fresh positions are being built.
 
On expiry day, the total open interest stood at 2.36 lakh contracts, over 30 per cent lower compared to the high outstandings earlier in the year. With few fresh positions being taken currently, it's evident that punters in the derivatives market, too, are waiting for the budget before they make their moves.
 
Reliance spreads wings
 
The key takeaway from the announcements made at Thursday's Reliance annual general meeting is that India's biggest conglomerate is building synergies with existing businesses and entering / expanding market share in new markets.
 
RIL's acquisition of Germany-based Trevira Gmbh for approximately Rs 440 crore is strategically logical "" the Indian petrochemical major is aggressively working on expanding its global market share in the polyester market given the upcoming phase-out of the multi-fibre agreement from January 2005.
 
Large capacities and a diversified customer base will be crucial for success, and the German acquisition is well positioned to meet that object - Trevira has carved its niche in the high-value European polyester market and exports form a key proportion of its turnover of 316 million euros in CY 2003.
 
Also important is the German company 's strong marketing network in the booming Eastern European markets where demand for polyester derivatives, especially for automotives and home textiles, is growing at around 12 - 14 per cent annually, compared with around 6-8 per cent globally.
 
True, the turnover of the German acquisition accounts only for approximately 3 per cent of the parent's net turnover, but it indicates that RIL is keen to ramp up its footprint overseas over the next few years.
 
The acquisition is part of RIL's strategy to hike its total petrochemical capacity to 15 million tonne over the next three years ""- logical given the strong demand conditions from user industries.
 
The Reliance group is currently implementing a gas-fired 3, 500 mw power project in Uttar Pradesh and the cost of gas comprises approximately 60 per cent of the overall power generation cost.
 
It makes sense, therefore, to keep operational costs in check through in-house supplies "" apart from the gas finds at Krishna-Godavari basin, supplies from the new finds at Orissa could also be suitably utilised at the UP power plant, in future.
 
Also the expected oil supplies from Yemen, and other proposed acquisitions, will help to ensure uninterrupted supplies for the company's Jamnagar refinery. Offtake from the refinery should not be a problem, as Reliance is currently building its petrol retail networks across the country.
 
In addition, it has been aggressive in bagging new customers and recently it emerged as the lowest bidder for supplies to NTPC Ltd. Analysts point out that investors are concerned about a possible rise in the company's tax liability due to measures in the Union budget, which is why the stock hasn't fully reflected the fundamentals.
 
IT industry & visa renewal
 
The US has announced that it has ceased domestic visa re-issuance for the E, H, I, L, O and P categories of visas. These visa holders would now have to travel to their countries to renew their visas at the American consulate.
 
Indian software companies use the H and L categories to send their employees to the US for onsite (work done at the client's centre) and onshore (work done in the same state/country but not at the client's site) projects.
 
But most employees who travel abroad on onsite and onshore projects do so only for a short period. Once the project has completed, or when the work is ready to be moved offshore to its own centre, these employees travel back to India.
 
Since most employees shuttle between India and the US, getting a renewal in India wouldn't be a bother. No wonder, the Bombay Stock Exchange IT index rose 0.9 per cent on Friday, in line with the market.
 
The only people who will be impacted by this move are those permanently stationed in the US. For instance, Indian employees working for companies in the Silicon Valley.
 
With contributions from Amriteshwar Mathur and Mobis Philipose

 
 

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First Published: Jun 26 2004 | 12:00 AM IST

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