Higher export prices have left no takers for Indian onions in the international market; wholesale prices are crashing due to excess supply
The prices of onion in the wholesale market are crashing because of the lower offtake by exporters and adequate supply with the arrival of the kharif crop.
RP Gupta, director, National Horticultural Research and Development Foundation (NHRDF) told Moneylife, "The prices in the wholesale market are coming down. In the Lasalgaon market, they crashed to Rs900 per quintal from the earlier rate of Rs1,100-Rs1,000 per quintal. This is mainly due to lower export because of the high prices. There is sufficient production for this year. The kharif crop has also started hitting the market."
After a ten-day ban on onion export, which saw indefinite strikes by farmers and traders, the government finally lifted the ban on 20th September. Despite a week after this, there are no takers for Indian onions in the international market as the buyers are finding it difficult to pay a minimum export price (MEP) of $475 per tonne. The ban was imposed in order to check the prices of the bulb in the domestic market.
Now traders are demanding the export prices to be decreased to earn better revenue as there is significant stock to meet domestic demand. "Government should immediately reduce the minimum export price to avoid further losses," said Mr Gupta.
In international markets, buyers are purchasing onions from China and Pakistan as they are relatively cheaper in price, compared to the Indian variety.
In Mumbai's wholesale market, the prices of onions have fallen by more than 40% since the export ban was lifted. Nitin Parakh, trader from APMC, Vashi (Navi Mumbai) told Moneylife, "In the wholesale market the prices have come down to Rs7-10 per kg from the earlier stable price of Rs12-Rs15. The new crop will soon arrive in the market and there would be adequate supply. Government should immediately bring down the export price."
Meanwhile, in the retail market, the prices are expected to be stable. Currently, the prices in the retail market range between Rs12-Rs20 per kg depending on the produce. "Retail prices will be stable due to good supply," said another Vashi-based trader.
Experts, too, feel that the decision to borrow more may not have much impact on the fiscal deficit as borrowings are aimed at making up for shortfall towards small savings
New Delhi: Finance minister Pranab Mukherjee on Friday said the decision to borrow an additional Rs 53,000 crore from the market during the current financial year may not have a bearing on the fiscal deficit, reports PTI.
"It is too pre-mature to say that there would be adverse impact on fiscal deficit... we have to borrow Rs53,000 crore to ensure that there is an un-interrupted cash flow," he said.
"As far as fiscal deficit is concerned we shall have to consider various other factors," Mr Mukherjee told reporters.
The government proposes to bring down the fiscal deficit to 4.6% of the gross domestic product (GDP) during 2011-12 from 5.1% in the previous fiscal.
In order to meet its expenditure in the second half of the fiscal, the government in consultation with the Reserve Bank of India (RBI) on Thursday decided to borrow Rs52,800 crore from the market, over and above Rs4.17 lakh crore estimated earlier.
Experts too feel that the decision to borrow more may not have much impact on the fiscal deficit as borrowings are aimed at making up for shortfall towards small savings.
"As far as fiscal deficit is concerned, present borrowing will not have any impact as it is mainly due to less of small savings," said Anubhuti Sahay, senior economist, Standard Chartered Bank.
Expressing a similar opinion, DK Joshi, chief economist of Crisil said, "Fiscal deficit numbers will depend on the small savings. We have not revised the fiscal deficit target for this fiscal yet."
According to government estimates, small savings during the first quarter (April-June) of the current fiscal declined by Rs26,542 crore. It had increased by Rs13,250 crore in the same period last year.
"The decline in small savings collection also impacted government cash management," the finance ministry said in its quarterly review tabled in Parliament in the monsoon session.
The government finances are also impacted due to lower-than-expected revenue realisation and slow pace of disinvestment.
Higher government borrowings, experts said, will further harden interest rates, which are already up following the decision of the RBI to raise its key rates 12 times since March 2010 in its bid to check rising inflation.
Bond yields, which are an indication of interest rates, have already started going up following the announcement of the government's decision.
"As far as bond yield is concerned, there will be an upward trend. We expect that 10 year bonds will inch up to 10.25% by December 2011," Ms Sahay said. Yield on 10 year G-Sec is now hovering around 8.25%-8.5%.
On crowding out of capital on account of higher government borrowings, Mr Joshi of Crisil said it will not happen in the current scenario as private investment is already subdued due to factors like high interest rate regime and global economic turmoil.
Watch 4,900 on the Nifty below which the market may make any move
Pressure on metal stocks after the Cabinet cleared the new Mines Bill, which seeks mining companies to share profit with project-impacted people, and signs of a slowdown dragged the market lower today. Although the Nifty opened below yesterday's close, it managed to make a higher low of 4,924. Yesterday we had mentioned that the Nifty may go up to the level of 5,100 if the lows hold, however, this may take some time to happen. From here, we may see the Nifty moving in the range of 4,900 to 5,000. The National Stock Exchange (NSE) saw a volume of 57.85 crore shares.
Concerns from various policymakers about the slowdown in the domestic economy pulled the index lower at the opening bell today. The Nifty slipped below the 5,000-mark at 4,990, down 25 points and the Sensex declined 98 points to resume trade at 16,600. Profit-booking in early trade saw all sectoral gauges, barring the consumer durables index, trading in the negative.
The US markets closed mixed in overnight trade with analysts asserting that volatility is expected to remain high till euro-zone members commit themselves to preventing a Greek default.
Select buying pushed the market into the green for a short while, helping the indices scale the day's high at around 11am. The market was range-bound till the noon session, but a lower opening of the European indices resulted in the domestic benchmarks falling sharply.
The market continued to drift lower in the post-noon trade and touched the intraday low in the last hour. The Nifty traded in the range of 4,924 to 5,026 and the Sensex swung between 16,405 and 16,745. The market closed marginally above those points in the day's high. The Nifty settled 72 points lower at 4,943 and the Sensex ended the session with a loss of 244 points at 16,464.
The advance-decline ratio on the NSE was 4721:923.
While the Sensex settled with a 1.46% loss, the BSE Mid-cap index fell by 0.58% and the BSE Small-cap index dropped 0.88%.
The decline in the sectoral space was led by BSE Metal (down 2.68%), BSE Realty (down 2.08%), BSE Bankex (down 1.84%), BSE Auto (down 1.76%) and BSE PSU (down 1.62%). BSE Consumer Durables (up 1.02%) was the lone gainer.
Bharti Airtel (up 0.44%) and Reliance Industries (up 0.02%) ended in the positive on the Sensex while Coal India (down 5.15%), Sterlite Industries (down 4.05%), Tata Steel (down 3.99%), Jindal Steel (down 3.78%) and Hero MotoCorp (down 3.01%) were the top losers on the index.
Among Nifty stocks, Sesa Goa (up 4.60%), Ranbaxy (up 2.73%), Power Grid Corporation of India (up 1.59%), Grasim Industries and Ambuja Cement (up 1.16% each) were the top performers. On the other hand, Reliance Capital (down 13.17%), Reliance Communications (down 7.99%), Reliance Infrastructure (down 7.27%), Sterlite Ind (down 4.72%) and Tata Steel (down 4.30%) were the major losers.
Markets in Asia were mostly down on disappointing manufacturing output data from China and factory output from Japan. The HSBC China PMI stood at 49.9 for September 2011, unchanged from the previous month, while Japanese factory output rose 0.8% in August from the previous month. Debt issues in Europe also weighed down the sentiments.
The Shanghai Composite lost 0.26%; the Hang Seng declined 2.32%, the KLSE Composite slipped 0.02%; the Nikkei 225 shed 0.01% and the Straits Times fell by 1.22%. On the other hand, the Jakarta Composite gained 0.34%, the Seoul Composite added 0.02% and the Taiwan Weighted rose 0.60%.
Back home, institutional investors, both foreign and domestic, were net sellers in the equities segment on Thursday. While foreign institutional investors pulled out Rs230.30 crore, domestic institutional investors sold stock worth Rs402.88 crore.
Pharma major Strides Arcolab today said its subsidiary Onco Therapies has received approval from the US health regulator USFDA to market generic Paclitaxel injection, used for treating cancers, in the American market. The product will be launched immediately through Pfizer, with which it has a tie-up, Strides added. The stock fell 0.55% to close at Rs353 on the NSE.
IT services major Mahindra Satyam (formerly Satyam Computer Services) today said it has deployed a new cloud-based managed services platform, 'Enlighta Deliver', to help its clients optimise service delivery performance and service levels. Enlighta Deliver will enable companies to solve client engagements faster without any customisation and offers strong performance management capabilities and faster services delivery. Satyam closed trade at Rs70.40, down 0.91% on the NSE.
Infrastructure Development Finance Company's (IDFC) committee of directors on 28th September approved the shelf prospectus of the proposed public issue of long-term infrastructure bonds of face value of Rs5,000 each. The issue will be in the nature of secured, redeemable, non-convertible debentures, having benefits under Section 80CCF of the Income-Tax Act, 1961, not exceeding in aggregate Rs5,000 crore for the financial year 2011-2012 in one or more tranches by IDFC. The stock declined 2.78% to Rs110.10 on the NSE.