Readings: DR arbitrage, Fertilizer shortages, India Market cap
- Economic Times: Downslide hits depository receipts arbitrage opportunities
. . . even during days of very thin volumes (in DR segment) in 1998-2000, the average spread used to be about 15-20%. This percentile has come down to an average of 2-3% currently.
DRs of many companies trade at a significant premium or discount to their underlying in the domestic market due to factors such as high foreign demand, low DR float, restriction on foreign buyer to investment in the overseas markets and internal fund mandate to diversify in other markets.
“We have stopped doing DR arbitrage since January as it is not financially viable for the brokerage anymore. Currency instabilities are posing great risks; one wrong call in overseas market, and you lose heavily in home market. There is great risk (these days) in keeping a stock exposed overnight to take a call on it the next morning,”
The key to arbitrage is to accept that every good arbitrage opportunity is bound to go away, and hence you need to keep coming up with new ones all the time.
The domestic shortage coincides with a global scarcity of fertilizers. Last month, China agreed to pay triple what it did a year ago for potash. From Canada to the Philippines, fertilizer prices are up, in part because most are made by energy-intensive processes and, consequently, track the price of fuel.
India consumes 48 million tonnes, or mt, of fertilizers of which 14mt are imported.
. . . the increase in production costs of fertilizers on account of soaring crude prices had begun to squeeze margins of domestic fertilizer firms and this would see the government’s subsidy burden touch an estimated Rs 95,000 crore in 2008-09, 1.9% of India’s gross domestic product.
- Financial Express: Black Monday sends bourses’ fiscal score to red
. . . the cumulative market capitalisation of all the listed Companies in the country has fallen below the Rs 50-trillion mark.
The total value of all the listed shares, also known as investors’ wealth, has plummeted by close to Rs 20 trillion (about 500 billion dollars) from its highest level early in 2007.
Ouch!
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June 11th, 2008 at 6:38 pm
The callousness in not initiating the gas pipelines and unending negotiations are going to hit both the industry and the agri sector big time.
Crude hit has been like a electric shock, its a tough road ahead for everyone.