Macro

Interactive Inflation Map for June 2011

Check out MarketVision's Interactive Inflation Map for June 2011, according to data released today.

Quick Note: What is this "Inflation" thing?

Skip if you know about the WPI and the concept of inflation.

Inflation data is released monthly. Today's release was a provisional estimate for Jun 2011. They will revise it two months later, in September (along with the release of August provisional data).

Inflation is calculated based on the wholesale price of certain elements, which comprise our usage (supposedly). The Wholesale Price Index (WPI) is a basket of these elements, weighted appropriately. So the price of onions (1 kg worth) gets a weight of 0.17% while crude petroleum price will be 0.90%.

The basket is hierarchical - so Onions is grouped under "Vegetables", which comes under "Fruits and Vegatables" which is further under "Food articles"->Primary Articles->Overall WPI Basket.

Interactive Indian Inflation Map for April 2011

The monthly release of Inflation is in for April 2011, and we have an inflation of 8.66% (provisional). We at MarketVision have built a full visualization (clicks and zooms and unzooms) at Visualizing Inflation In India, and this post will have visual excerpts with commentary.

This month we've included the change from the earlier month for each sub-category as well. The change looks like this with the legend:

March Inflation at 8.98%: MarketVision's Interactive Map

After our February article which got us a lot of email feedback (thanks!) we have a new interactive map for the March Inflation - the headline number came in at 8.98%.

You will see a lot of square boxes with different colours. The size of each box is its weight in the parent, and the colour is based on the inflation of that item as given below.

At Pragati: Open Up The Rupee

Last month, I wrote for Pragati on issues with Paypal recently and why the real solution is to Open Up The Rupee:

PayPal, the company that pioneered payments and money transfers on the internet, recently announced a change in the payment system for Indian residents, by setting a limit of $500 per transaction. Furthermore, users cannot use money credited to them to directly buy goods or services—they will have to get the money paid into their bank account first. PayPal said this change was made in order to comply with Reserve Bank of India (RBI) regulations and, regrettably, did not give any further details.

Many Indians use PayPal—shoppers who buy books or software online, electronic retail entrepreneurs, and freelancers who are paid online for ad hoc or small projects. Typically, they would receive and store money at Paypal, and use it to pay for goods or services, or to make small donations. With these new changes, they must withdraw any received money immediately so the intermediation costs go up—users can still pay others through PayPal with a credit card, but that means paying fees at both ends of the transaction.

The limit of $500 per transaction hurts the bigger players who heavily relied on PayPal as it is trusted by their US customers. Now they have to tell customers to split transactions into chunks of $500—a process that is tedious and appears unprofessional.

The new regulation was announced in a circular by RBI, which stated that the Foreign Exchange Maintenance Act (FEMA) laws do not allow for storing of export proceeds abroad. PayPal is therefore required to put all such money into a pooled account at a “Category 1 I-Bank”, and then transfer it to the exporter’s bank within seven days. The seven-day limit is the RBI restriction, wherein interest needs to be paid above that time (in addition, you have to be a bank); PayPal is required to report in detail all transactions over the $500 limit.

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(Read the full article)

Rupay: India's Own Payment Processor

Econonic times says that soon India will have it's own payment processing firm (to rival Visa and Mastercard) called Rupay.

After almost two years of planning, the National Payments Corporation has at last finalised the proposed unique India Card which once commercially launched would be an domestic alternative to the global real-time payment processing firms like Visa and MasterCard .

RBI Ups Repo to 6.75%

RBI today increased the Repo rate by 0.25% to 6.75%. Repo is what banks pay the RBI for overnight (1 to 3 days) borrowing. Reverse repo, or what the RBI pays for excess cash parked with them, is up to 5.75%.

Please don't consider this a big deal just yet. here's the long term history of rates:

India Repo Rate Chart

Weak Oily Chains and Weak Probability Implications

Fundoo Professor writes: How Weak is this Oily Chain?

Today’s Finanical Express carries an interesting column by Vikram Mehta, Chairman of the Shell Group in India.

The following passage caught my eye:

“Success in the exploration and production of oil & gas requires a company to overcome three interlocking sets of probabilities. The probability that a given geologic structure contains hydrocarbons [let's call this Event A]; the probability that hydrocarbons will be located [lets call this Event B], and the probability that once located, the find can be commercially exploited [let's call this Event C].”

Vikram’s statement has vast practical implications for security analysts.

The market value of an asset is the present value of its expected future cash flows. Cash flows from an oil exploration company can be derived only out of hydrocarbons which can be commercially exploited. And for that to happen ALL of the above three events must happen.

Suppose that the probability of Event A happening is 40%, that of Event B happening is 20%, and that of Event C happening is 25%.

Then the probability of seeing cash flow which is valuable is 0.40 x 0.20 x 0.25 or 0.02. That comes to just 2%!

I wonder if the market participants think in those terms before valuing oil exploration stocks.

My comment to it was:

Sir, what matter is returns. If they can make 100x their investment on an oil find that meets all three parameters, and they have enough blocks to explore, then the 2% probability is ultimately a reasonably large return. For every $100 they invest they will eventually make $200.

Feb 2011 Inflation at 8.3%: Visualized!

February 2011 Inflation came in at 8.3%, with a pick-up in manufacturing goods. I had written earlier that the danger remains of inflation moving from primary items to secondary items and now that seems to be happening.

Primary Articles Inflation Down To 13.96% for Feb 26, 2011

Primary Articles Inflation for Feb 26, 2011 has mellowed down to 13.96%. This is the lowest figure since November 2009, which is a good sign.
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New Companies Bill: One Woman In Every Five Directors

The new companies bill which is supposed to be passed in Parliament this session will mandate women directors on many boards.

Companies having five or more independent directors would have to necessarily have at least one female independent director, Corporate Affairs Minister Murli Deora said.