Readings: Commodity futures, Mutual fund loads, Oil subsidies
- Socialist Worker: Gambling with the futures
. . . speculators are driving up the prices of all commodities, including wheat, corn, soy, etc., because of intense trading on what are known as futures markets.
. . . if futures prices are going up and a gap develops with current spot market prices, this could lead buyers of commodities to hoard in the present–to take advantage of the lower current prices and avoid paying higher prices in the future. If, say, the price of oil futures is $125, but the price of oil on the spot market is only $115, more firms will buy oil today, thus putting upward pressure on the current price of oil. On the flip side, rising oil prices in the present can help push futures prices upwards. Thus, rising prices in either the spot market or the futures market could end up reinforcing each other and further exacerbate inflation.
. . . grain futures contracts for some have become investment securities–not hedging instruments that offset either cash inventories or future usage.”
- Business Standard: Zero entry load, but few takers
. . . direct investment has increased from 2 per cent to 6-7 per cent, which is a marginal rise of 5 percentage points. Many investors still prefer to invest through distributors in spite of a 2.25 per cent entry load. Inconveniences in the online process and asset management companies’ (AMC) offices have kept investors from taking the direct option.
Direct applications are mainly coming from institutional clients (Rs 10 lakh and above) as they have the manpower to do the legwork.
Typically, in a branch, 85-90 per cent visitors are distributors and direct clients’ are 10-15 per cent.
With international crude oil prices hovering around $129 a barrel, the country’s three oil marketing companies – IndianOil, Bharat Petroleum, and Hindustan Petroleum – are collectively looking at losses of Rs200,000 crore this year.
. . . the Oil & Natural Gas Corporation (ONGC), the country’s main oil producer, along with gas pipeline company Gail is supposed to share one-third of the oil marketing companies’ losses. But ONGC’s turnover for 2007-08 will be around Rs65,000 crore – one-third of the projected losses. Loss-sharing can thus wipe out ONGC as well.
. . . some oil companies will be plain and simple broke as they exhaust their borrowing limits of Rs90,000 crore. They have already notched up borrowings of around Rs70,000 crore when their combined net worth is just over Rs54,000 crore. The only reason they are still able to borrow is because they are owned by the government, and governments are not expected to default.
Get ready for long lines at petrol pumps!
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