Oil and Natural Gas Corporation (ONGC), the country’s largest oil and gas company, has sought up to Rs 16,000 crore worth of incentives from the Andhra Pradesh government for making the proposed 15 million tonne per annum (mtpa) refinery-cum-mega petrochemical complex at Kakinada viable.
The incentives sought are for over a period of eight years. This means the incentives in the form of tax holidays and free land work out to Rs 2,000 crore per month.
“Taking everything else into consideration, the state government has to give various incentives to make the project viable,” said ONGC’s director for business development AK Balyan.
It is the state government, in fact, that has been lobbying for the refinery, but ONGC is not keen to invest without the incentives which include almost 950 hectares of free land for the project. ONGC also wants exemption from sales tax on sale of petroleum and petrochemical products, free power and water supply during construction phase and road and rail connectivity.
“We will only go ahead if the state government offers us the incentives we have asked for,” said another senior ONGC official.
ONGC’s subsidiary Mangalore Refinery holds 26 per cent stake in Kakinada Refinery Petrochemicals Ltd (KRPL), the company set up to implement the refinery project. IL&FS holds 51 per cent stake and the balance is with the Andhra Pradesh government.
The UK-based Hinduja group is also expected to pick up a stake in the refinery. Former ONGC chairman Subir Raha, who had conceptualised the Kakinada refinery, is now the executive vice-chairman of the Hinduja group.
UPSIDE FROM PETROCHEM
Balyan said that with the incentives, and the petrochemical complex, the Kakinada refinery would be feasible. The petrochemical complex, planned to be of a capacity of 1 mtpa, would be the driving force behind the project. “The margins from petrochemicals are good and that should make the project financially feasible,” Balyan said.
The petrochemical industry, which is cyclical in nature, is expected to go through a downturn from 2009 to 2013. Balyan said that even during the downturn the margins from the proposed plant would be positive.
Investment in the proposed petrochemical plant would be in addition to the Rs 25,600 crore that is expected to be spent on building the refinery.
“Products from the refinery can be exported to the east Asian countries. There is a market there,” Balyan said.
Analysts tracking the sector, however, feel that a refinery in the country’s east coast is not very well suited to export petroleum products. “The countries there are already well fed by the Singapore refineries,” an analyst with a global advisory firm said.
Earlier this week, ONGC Chairman and Managing Director RS Sharma said that at a capacity of 15 mtpa, rate of return on investment would be 10.27 per cent, which would become negative in case of a 10 per cent rise in capital cost.
Understanding Short Term Trading
Before I begin, this blog is not for intraday traders. My definition of short term implies duration of around 2 to 3 months.
Short Term stock picking is no rocket science, but rather a visual interpretation of technical charts. A basic moving average on a time frame chart will show the direction of the securities movement.
Moving averages is a mathematical results calculated by averaging a number of past data points. Moving averages (MA) in it's basic form is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. Once the value of MA has been calculated, they are plotted onto a chart and then connected to create a moving average line. Typical moving averages used for short term trading are 50 MA and 100 MA.
Types of Moving Averages
1) Simple Moving Average (SMA)
SMA is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. The usefulness of the SMA is limited because each point in the data series is weighted the same, regardless of where it occurs in the sequence. Critics argue that the most recent data is more significant than the older data and should have a greater influence on the final result.
2) Exponential Moving Average (EMA)
EMA overcomes the limits of SMA, where more weight is given to the recent prices in an attempt to make it more responsive to new information. When calculating the first point of the EMA, we may notice that there is no value available to use as the previous EMA. This small problem can be solved by starting the calculation with a simple moving average and continuing on with calculating the EMA.
The primary functions of a moving average is to identify trends and reversals, measure the strength of an asset's momentum and determine potential areas where an asset will find support or resistance. Moving averages are lagging indicator, which means they do not predict new trend, but confirm trends once they have been established.
A stock is deemed to be in an uptrend when the price is above a moving average and the average is sloping upward. Conversely, a trader will use a price below a downward sloping average to confirm a downtrend. Many traders will only consider holding a long position in an asset when the price is trading above a moving average.
In general, short-term momentum can be gauged by looking at moving averages that focus on time periods of 50 days or less. Looking at moving averages that are created with a period of 50 to 100 days is generally regarded as a good measure of medium-term momentum. Finally, any moving average that uses 100 days or more in the calculation can be used as a measure of long-term momentum.
Support, resistence and stoploss can be infered by referring the closet MA below or above the market price. The other factor that is used in short term momentum is the trading volume. The moving averages along with the trading volume can provide a better insight to short term movement.
Markets are moved by their largest participants - I believe this is the single most important principle in short-term trading. Accordingly, I track the presence of large traders by determining how much volume is in the market and how that compares to average. Because volume correlates very highly with volatility, the market's relative volume helps you determine the amount of movement likely at any given time frame--and it helps you handicap the odds of trending vs. remaining slow and range bound.
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