Readings: Sensitivity to Higher Oil Prices, Yen & ECBs, Sensex $ futures
- Morgan Stanley: Reassessing Macro Sensitivity to Higher Oil Prices
. . . increasing oil consumption has meant greater reliance on crude oil imports for India. India imports about 72% of its crude oil and petroleum products requirement, up from 44% in 1995. Crude oil accounted for about 25% of India’s total imports in F2007 (5.3% of GDP). India’s overall oil balance (crude oil and petroleum product imports less exports) is one of the worst in the region.
. . . the current weighted average realization of oil products in the domestic market implies an average crude oil price of US$54/bbl (WTI), versus the current international market price of US$96/bbl. The gap between the required fully marked-to-market price of petroleum products and the current domestic prices of these products is covered by (a) passing the burden onto (largely government-owned) oil companies, both upstream and downstream; (b) increasing the fiscal burden by way of reduction in indirect taxes on petroleum products; and (c) issuing bonds to oil companies to compensate for the lack of recovery (which the government treats as an off-budget liability, i.e., this part of the subsidy burden is not taken into account for presenting annual budget deficit estimates).
- Business Standard: Companies sweat it out as yen appreciates
A lot of ECBs (external commercial borrowings) has been in yen, based on the assumption that yen would not appreciate beyond 111-112. These companies would be adversely affected if not fully hedged. At least 30-40% of incremental ECBs over the last year or so have been in yen.
Indian companies and banks borrowed about $25 billion overseas in 2006-07 and $7 billion in the first three months of 2007-08.
- Economic Times: Sensex futures to debut on US exchange next year
Come February 22, 2008, futures contracts on the 30-share Sensex, India’s most widely tracked stock market index, will be available for trading on US Futures Exchange (USFE).
The USFE’s Sensex futures contract will have a notional value of 40,000 and a tick size of $5. It will trade 23 hours every trading day and the settlement will take place on monthly basis.
The US-based Commodity Futures Trading Commission had given its approval for the sale of Sensex-based futures contracts in June last year. Subsequent to this approval, BSE’s Exchange Traded Fund on Sensex was listed on Hong Kong Stock Exchange on November 2, 2006.
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