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Indian indices continued to remain under pressure in the post-noon trading session after following a negative trend since the opening of the trading day. Sectoral indices are trading on a negative note with stocks from the telecom and banking sectors witnessing major selling pressure.
The BSE Sensex is trading lower by 283 points (down 1.1%) and the NSE Nifty is trading lower by 90 points (down 1.1%). The BSE Mid Cap index is trading down by 0.6%, while the BSE Small Cap index is down by 0.7%. Gold prices, per 10 grams, are trading at Rs 31,037 levels. Silver price, per kilogram, is trading at Rs 42,232 levels. Crude oil is trading at Rs 3,182 per barrel. The rupee is trading at 67.23 to the US$.
As per a leading financial daily, gold imports by India, which is the second largest after China, contracted for a fourth straight month in May.
Gold imports stood at US$ 1.47 billion in May. This was as against US$2.42 billion recorded a year earlier and recorded a shrinkage of 39% YoY.
Meanwhile, total exports from India declined for the 18th consecutive month in May, a reflection of persisting weakness in the global economy. Price of the yellow-metal in Mumbai increased through May as global prices gained on worries over the health of the world economy.
One shall note that India imports around 800 to 900 tonnes of gold annually.
The data has provided some relief for government's rising concern regarding trade deficit. The country's current account deficit is likely to widen modestly to US$25 billion in the current fiscal from US$20 billion last year on rising demand for gold and sluggishness in exports. And this has helped to keep India trade deficit at manageable levels. In fact, in FY16 the trade deficit fell by 14% YoY.
Having said so, is this a good thing? Can we tolerate falling exports just because the trade deficit is in check due to falling imports? One of our editions from The 5 Minute WrapUp answers these questions.
Speaking of gold, Rahul Shah, Equitymaster co-head of research, in one of the editions of The 5 Minute WrapUp explains how the long-term Sensex-to-gold ratio can be a good way to measure the genuine wealth creation of an economy.
To keep a regular tab on the movements in gold prices and other commodities, you can read weekly market commentary from the Daily Profit Hunter team. Their weekly commentary tracks the developments in the global economy as well as equity, currency and commodity markets.
As per an article in Economic Times, Coal India Ltd (CIL) and National Thermal Power Corporation (NTPC) Ltd have signed a 50-50 joint venture (JV) agreement named Hindustan Urvarak & Rasayn Ltd. The JV will take over the Fertilizer Corporation of India's assets to run its Sindhri and Gorakhpur units. It will set up two urea factories on the premises of ailing Fertilizer Corp. of India Ltd (FCIL) to help in its resurgence.
In India, urea is a controlled fertiliser and is marketed at a fixed price of Rs 5,360 a tonne. The annual demand of urea in India is estimated to be 30 million tonnes (MT).
Further, both the companies together are expected to produce 1.27 million tonnes of urea per annum. The gas would be made available through the proposed Jagdishpur-Haldia pipeline to be constructed by GAIL.
This comes in the backdrop of the National Democratic Alliance (NDA) government's efforts in putting rural economy as its prime focus. Reportedly, this will help offset the demand supply gap of 8 million tonnes of urea currently. The government has made a provision of Rs 700 billion on account of fertiliser subsidies in the Union budget of 2016-17. Nearly 73% of this amount was allocated to urea.
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