MCX launches futures trading in guar seed and guar gum

The trading unit of the guar seed and guar gum is 1 metric tonne each and price quote for the contracts is ex-warehouse Jodhpur, inclusive of sales tax/VAT. The basic delivery centre for both the contracts is Jodhpur and additional delivery centres include Bikaner, Nokha, Sri Ganganagar, Hanumangarh and Barmer in Rajasthan, Deesa in Gujarat, and Adampur and Sirsa in Haryana

 
Multi Commodity Exchange of India (MCX) will commence futures trading in guar seed and guar gum contracts from today (14 May 2013). The commodity markets regulator, Forward Markets Commission (FMC), has given approval for trading in guar seed and guar gum June 2013, July 2013, October 2013 and November 2013 contracts in order to facilitate price discovery and price risk management in the guar complex.
 
The trading unit of the guar seed and guar gum is 1 MT (metric tonne) each and price quote for the contracts is ex-warehouse Jodhpur, inclusive of sales tax/VAT. These are compulsory delivery contracts with Staggered Delivery Tender Period for the last 15 days. The physical delivery would be available in multiples of 1 MT for both guar seed and guar gum. The basic delivery centre for both the contracts is Jodhpur and additional delivery centres include Bikaner, Nokha, Sri Ganganagar, Hanumangarh and Barmer in Rajasthan, Deesa in Gujarat, and Adampur and Sirsa in Haryana.
 
Tick size for both guar seed and guar gum contracts is Re1 per 100 kg. The initial margin required to trade is 10% or based on SPAN, whichever is higher. As an additional risk management measure, pre-defined special margins are included in the contract. The special margin of 10%, which is over and above the initial margin, will be imposed if prices rise by more than 20%. Further, for every 10% rise in prices, the special margin charged will also increase by 10%. Additionally, if prices increase by more than 50% in the June and July expiry contracts, a special margin of 70% will be imposed. 
 
The guar seed and guar gum open position limits for a member collectively for all clients is 12,000 MT or 15% of the market wide open position, whichever is higher, and for individual clients it is 2,400 MT. The near month limits shall be applicable for 20 days prior to expiry of the contract. The near month limit for a member collectively for all clients is 4,000 MT or 15% of the market wide open position, whichever is higher and for individual clients it is 800 MT. The position limits shall be applicable for all contracts traded on all exchanges.
 
The guar gum open position limits for a member collectively for all clients is 3,000 MT or 15% of the market wide open position, whichever is higher, and for individual clients it is 1,000 MT. The near month limits shall be applicable for 20 days prior to expiry of the contract. The near month limit for a member collectively for all clients is 600 MT or 15% of the market wide open position, whichever is higher, and for individual clients it is 200 MT. The position limits shall be applicable for all contracts traded on all exchanges.
  • User

    Should you hold on or sell your HUL shares?

    Shareholders holding on to the shares from now on will be living in hope that Unilever wants to delist HUL and will revise its buyback or open offer price from time to time

    On 30 April 2013, Hindustan Unilever’s parent company, Unilever Plc, announced an open offer to buy roughly 487 million shares, or 22.52% of the share capital, of  HUL, at 20% above the previous day’s closing market price (i.e. 29 April 2013). The open offer stipulates that Unilever Plc intends to buy back HUL shares, voluntarily, at a price of Rs600 per share. At the moment, Unilever Plc holds roughly 794 million shares in HUL, which forms 36.75% of the latter’s share capital. This means, if Unilever Plc intends acquire the 22.52% of the shares outstanding, it will take its total shareholding to 59.27%.
     

    If you are a shareholder what should you do? Tender your shares? Or hold on for more gains?
     

    Long-term shareholders will find it hard to make this decision. While HUL is a well-managed company with exceptional return on capital, Rs600 is way above the fair value currently. On the other hand, there is the possibility of Unilever Plc taking complete control (i.e. 100% ownership) in which case the price will head higher.
     

    On the negative side, Unilever finds great value in HUL and mines it regularly. Recently, HUL and Unilever Plc signed a ‘New Agreement’ under which HUL will pay higher royalty costs at an increasing rate till 31 March 2018. It will be 0.5% of turnover till March 2014, and thereafter in a range of 0.3% to 0.7% of turnover in each financial year, leading up to a total estimated royalty cost increase of 1.75% of turnover compared to existing arrangement, till 31 March 2018. This means, HUL will have less to distribute to shareholders or reinvest from the pie.
     

    Recently, Hindustan Unilever had announced good March quarter results. We had covered it over here (Hindustan Unilever reports robust results; net profit up 14.65%). Both its return on networth and return on capital employed are stupendous at 108% and 123% respectively. The valuations are at a premium though, with market capitalisation at 26.30 times operating profit.
     

    In our view, investors are taking a gamble if they hold on to the shares. Three factors will decide the movement of shares: rising earnings, more and more extraction of value by Unilever and possibility of a higher buyback price. Of these three, a shareholder, as an outsider, has a sense of only the first factor. It is impossible to get a sense of the other two. And based on that first factor of earnings, HUL is currently overvalued. The price of Rs600 will act as a magnet and HUL shares will not fall but the upside looks limited. Shareholders holding on to the shares from now on will be living in hope that Unilever wants to delist HUL and will be interested in revising its buyback or open offer price from time to time. Meanwhile, if performance slows down even a little bit, the stock will stay flat or even fall.

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    COMMENTS

    Nilesh KAMERKAR

    6 years ago

    Think again . . . can anyone build another HUL if he had Rs.150000 crores?

    Suiketu Shah

    6 years ago

    Excellent opinion from moneylife.The opinion in the printed press yesterday is all anti-investor asking people to hold on to HUL.

    How to protect yourself from becoming a victim of mis-selling

    Mis-selling is rampant in the financial services industry. While legislation may act as a shield in protecting the interests of investors, an investor can take care of the following aspects to minimize instances of mis-selling

    I have come across many cases of mis-selling in the financial services industry but the Mangelal Sharma case came a shocker for me (Will this 79-year old’s protest move the government and the RBI to stop mis-selling by banks?, Mangelal Sharma gets his Rs7 lakh back—another Moneylife victory). This was a case in which even an old man was not spared. Banks and financial institutions claim that customers are king for them but in practice they rarely follow this. Why do we have so many cases of mis-selling of financial products?  Is mis-selling happening because there is dearth of legislations?  The answer to this question is both yes and no. Though there are legislations in place to prevent mis-selling, these legislations hardly help investors. Also investors in many cases are not aware about how to take benefit of existing laws when they have become victim of wrong financial products sold to them.
     

    Whatever is the reason, there are instances of mis-selling in which people lose their hard-earned money and repent thereafter. While legislation may act as a shield in protecting interest of investors, is there any alternate way in which an investor can prevent himself/herself from becoming victim of mis-selling? Though there is no magic wand to help an investor, s/he can take care of following aspects to minimize instances of mis-selling:
     

    Never buy a product aggressively pitched by agents: It is very obvious that an agent or a representative of financial service provider pitches a product based on the commission or fee that he earns. So it is better not to get carried away by what he suggests. You need to understand your investment requirements and select product based on that. One more important point, even if the agent happens to be a family friend, ask him questions. You cannot leave your investments in other’s hand. Products like life insurance are often mis-sold by agents as investment products. Please remember insurance is a product having potential to cover risks.
     

    Never buy a product you do not understand: The golden rule to prevent mis-selling is not to buy a product unless you have understood the product fully. New products keep on hitting the market from time to time. The most recent example was the Rajiv Gandhi Equity Savings Scheme (RGESS). Many investors bought this product because of the fact that this is a good tax saving option, without realizing the risk factors. In past, there have been many instances when Unit Linked Insurance Plans (ULIPs) were sold to investors. The main reason of this mis-selling was lack of understanding of products by investors.
     

    If you are financially illiterate, there are two options. Acquire necessary skills to understand a product or approach a financial advisor. To me the first option looks better. In India, most of the financial products are plain vanilla products which an ordinary investor can understand. The problem with financial advisors is that most of them offer generic suggestions.
     

    Have a check list ready: In order to understand the product, you need to look at facts such as the risk and return aspects of the product. In order to understand product, you can check out some of the details which are as follows:
     

    • Is the return fixed or subject to market risks? Most of time variable return products are mis-sold as a fixed return product. Variable return products suit people who are ready to take risk. Also, remember higher the risk, higher the return is an erroneous statement, higher the risk, higher the expected return is practical.
    • If a particular return is promised, ask for it in writing. It can also be in the draft document. You can also ask for reference of assured return in the draft document. The seller will admit if the financial institution is not offering the same.
    • Is there a lock-in period in the product and what are the exit options? Some exit options are simply impractical like mutual funds available for trading on the stock exchange.
    • Carry out special check for hybrid products which has carry high prospects for mis-selling.
    • Is the product approved by a regulator?
    • Is the capital protected in the investment made by you?
    • What are the charges? Ask for all details.
    • If there is any fancy return in the product, ask for its working. Get it verified.
    • Do not trust projections. If somebody tells you that a mutual fund will provide 20% return in future, you need to investigate. Projection is not a child’s play and experts are proven wrong on this front every other day.
       

    Keep greed aside:  Mis-selling is easy if greed overshadows rational thinking. Many people invest their money in unknown financial products without understanding the product at all, as the greed of handsome return simply overwhelms them. So it is important that you never invest in products which give unbelievable returns.
     

    Never buy financial products when the deadline approaches:  If you are in hurry, you will have many worries later on. Never buy a financial product when the deadline approaches, especially the tax saving deadline. Think and plan in advance. Even if you have to buy any such product, buy conventional time-tested product such as PPF, NSC, etc.
     

    Please note that you can mitigate the instances of mis-selling by becoming more vigilant and careful. Take care to ensure that you never buy what you don’t need. Preventive measures against mis-selling need to be inculcated over a period of time.
     

    (Vivek Sharma has worked for 17 years in the stock market, debt market and banking. He is a post graduate in Economics and MBA in Finance. He writes on personal finance and economics and is invited as an expert on personal finance shows.)

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    COMMENTS

    Suiketu Shah

    6 years ago

    In "hot to protect yrself from being a victim of mis-selling",I would add 2 suggestions to all readers of ml:-

    1)Desist from ever contacting HDFC Bank for any investment related activities(and drive them off if tehy contact you unsolicited).Their head of equities-western region Parimal Shah(based in head office lower parel)is one of the most corrupt,cheat and frauds you wl find.He makes his staff sell shares to clients totally against what his company recommends(he wl not even give you monthyl recommendation of his bank) at very high prices where he earns illegal commission in cash.His cronies include people from HDFC securities like Naresh Rever and Chetan G Patel in their Kanjur marg office who donot even know how to draft 2 lines of english properly and who are only fit to be courier delivery boys,nothing more.

    2)Only read moneylife for sound knowledge on equities and how to grow yr money stres-fre.Ask me I have been doign so for 16 months and am such a happy investor now.

    Suiketu Shah

    6 years ago

    Main job of "wealth management companies" is to convert black into white.If you are one of those who has all white,best is to rely only on moneylife for sound advise,noone else.

    Fact of the matetr is the RM's of wealth management companies are also totally black with fake designations liek directors etc where they are not even manager level.Stay far far away from wealth management companies.

    Sachin

    6 years ago

    When agents can sell insurance as Fixed Deposit, anything can happen in India? Moneylife is doing a good job in educating public.

    REPLY

    Suiketu Shah

    In Reply to Sachin 6 years ago

    Agree totally.For instance Diwali 2012,I was heavily pressurised by Chetan G Patel of HDFC Sec(who doesnot even know how to talk proper english) to buying Gold mutual funds.I read moneylife's entire report on gold and declined.He kept pressurising me under his boss Parimal Shah's instructions saying it wl give a return of 30% in 1 yr.We are 7 months port-Diwali,gold has dropped more than 15% since then.

    Goes to prove that when HDFC Bank can indulge in such heavy duty pressure tactics to attempt to fool clients,one cannot trust anyone except moneylife for correct sound advise.Moneylife's latest article on gold 1 week ago is a masterpiece for any investor/reader/potential investor.

    Nilesh KAMERKAR

    In Reply to Suiketu Shah 6 years ago

    Dear Mr. Suiketu Shah,

    Please check this link out. Specially request you also to read the only comment below the article.

    http://www.moneylife.in/article/rbi-fina...

    Not all advice is bad . . .

    Suiketu Shah

    In Reply to Nilesh KAMERKAR 6 years ago

    Dear Mr Kamerkar

    Thanks yr article.Kindly note what I am highlighting is how fraudulent wealth management companies of the reupte of HDFC are almost forcing peoiple to buy at sky high prices.No wonder HDFC Insurance leads the pack (far far ahead) for insurance misselling at 330000 odd complaints last financial yr.The next company was at 21,000-hdfc bank is so so far ahead in fooling clients.

    I stick by my statement that paid advise (like hdfc bank parimal shah) doesnot mean its good,its worst that free advice.

    Moneylife is the only authentic source for reliable info.

    Suiketu Shah

    6 years ago

    Another tactic of fraud wealth management companies(WMC) is to make customers buy 1 out fo 5 "broker driven shares" which retail investors donot buy and for which they get hugh illegal cashcommission.These fraud WMC wl then say 1/5 mistake is allowed as noone is perfect and such nonsense.

    As has been said on moneylife,there are out of 5000 shares on bse,barely 200 which are worth investing in when the prices fall.Rest are not worth studying or examining at all for retail investors.

    REPLY

    Suiketu Shah

    In Reply to Suiketu Shah 6 years ago

    another tactic used by wealth management companies for fooling investors into Z grade shares is by mixing "market" calls with their own recommendations esp when investor is short of time.And when the recommended stock falls and one finds its not in the banks buying list,the fraud Rm of wealth management division of bank wl say "its a market call".Every wealth management company does this so they can earn illegal cash commission and their bank makes super commission from the Z grade rapidly falling stock.

    rajivahuja

    6 years ago

    I fully agree with the points mentioned above,

    REPLY

    Suiketu Shah

    In Reply to rajivahuja 6 years ago

    Another tactic of fraud wealth management companies is to give a target price of selling of a share with the intent to buy now.They wl not give the time frame for the target to be achieved.For example,what is the point of buying Bharti with a target of Rs 410(Rs 320/- app now) if it takes 2.5 yrs ie app 12% /yr returns.

    There are several more promising companies(with much much higher returns) in equities as one casn see from kensource list of medium and long term returns.

    sivasankaran

    6 years ago

    sir,
    the article is an eye opener who rush to invest motivated by greed.a good one it will guide people from the clutches of mis selling advisors/agents

    Sudheer M

    6 years ago

    As usual, a very good stuff from you, Vivek.

    A few more points based on the experiences from my friends/relatives:

    1. Check the sentences properly. An assured return of 18% promised may not be 18% per annum, but 18% one time.
    2. Read the form carefully and fill it yourself and don't get the "guidance" from the advisor like "just sign sir".
    3. Even if the agent gives you in writing, check whether is issued by agent himself or by the company. (I have seen many cases where fly by night agents come up with their own pamphlets which promise the moon)

    And the basic motto, "If you feel that something is unrealistic, it actually is".

    Suiketu Shah

    6 years ago

    Wonderful article.What frauds do these days is make you buy a well-known and reputed company's share but at a very high price.Be very cautious about this ploy as it applies to mutual funds also.

    You wl remain locked in thsi share/mutual funds for several yrs and hopefully get yr money back at the end of several yrs.Wealth management companies specialise in this ploy and the excuse they offer is nonsense like "noone can time the market".

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