Chart of the day: Why you should consult 'Dr Copper' before investment?

Riken Mehta
Moneycontrol Bureau

The biggest dilemma for medium to long term investors is when to make an entry or exit in equity markets. Just like other asset classes, one should look at a few leading indicators before making any investment decisions. Analysts believe domestic sales of heavy commercial vehicles and prices of copper are two leading indicators which have a strong correlation with economic growth outlook. A strong performance from copper is typically seen during periods of economic expansion and vice-versa. As seen from the chart, Copper prices have been correlated with the Nifty since 2000. Recently, copper prices hit six-month low on weak demand.

See the chart below. Comex Copper Vs Nifty since 2000

Chart of the day: Is RIL's buyback programme a hit so far?

Riken Mehta
Moneycontrol Bureau

Reliance shares continue to flounder even as the company is buying back shares from the market. When the company had announced the share buyback, investors were hopeful that it would act as a good support at lower levels. However, with uncertainty over gas output persisting, investors appear to be using every rise in stock price to book profits. RIL has so far bought back 3.18 crore shares since 14th February, 2012. It touched a 52-week low of Rs 671 on 8th May.

Chart of the day: It's not just RIL that is suffering from low gas output

Riken Mehta
Moneycontrol.com


Falling output at Reliance 's KGD6 is causing grief to power companies as well, as it comes at a time when there is a shortage of coal as well. Over the last three years, the movement in the benchmark BSE Power index has shadowed that of the RIL stock. And there could be more bad news in store. Niko Resources, RIL's partner in the KG basin on Thursday slashed proven and probable gas reserve estimate by 78.5% to 1.93 trillion cubic feet from around 9 tcf earlier.


See the chart below. RIL's average KGD6 Gas output in each quarter from Q1FY10 to Q4FY12. Chart: BSE Power Index, RIL share price vis-a-vis KGD6 Gas output

Chart of the day: Brokerages shut shop despite rise in F&O turnover

Riken Mehta
Moneycontrol.com

The number of equity brokers is on the decline, going by Sebi data till December 2011. This despite traded turnover on the bourses having nearly trebled over the last three-and-a-half years. Industry sources say more brokers would have shut shop during the first half of this calendar.

The reason for declining profitability of broking firms has to do with the shift of volumes from cash market to the futures and options (F&O) market where the broking fee is much lower. For instance, on a cash market turnover of Rs 10 lakh, the broker earns Rs 5000 as commission, whereas on the same turnover in the F&O market, the commission is just Rs 250. A sharp rise in the cost of funds too has hurt the bottomlines of brokerages, as they have to fund their clients’ positions till the cheques are encashed.