Domestic tyre manufacturers and dealers are at loggerheads over the hike in tyre prices. Dealers alleged that manufacturers were using the raw material cost increase as an excuse to book huge profits.
The All-India Tyre Dealers’ Federation (AITDF), the apex body of dealers, said the price hike did not match the prices of raw materials such as natural rubber and others.
Rubber constitutes 50 per cent of the cost of a tyre. Unlike in the West, Indian companies use more natural rubber than synthetics. Forty-three per cent of a tyre is made of natural rubber and 3 per cent synthetic rubber, according to the Automotive Tyre Manufacturers’ Association (ATMA).
“During February-June 2006, when natural rubber prices touched a five-year high of Rs 111 a kg, tyre prices were increased by 17-28 per cent by leading tyre makers,” said a AITDF release.
“However, rubber prices came down in the following months and reached Rs 92 a kg, which was the average of last year,” said a senior office-bearer of AITDF. He alleged that manufacturers did not pass this benefit to consumers.
On the other hand, tyre makers said while rubber prices stabilised, the prices of other raw materials such crude oil and carbon black went up. Hence, they were not in a position to reduce the price, said an executive of a leading tyre company.
On the same note, K J Rao, CFO, Ceat Tyres, said, “Although prices of natural rubber steadied, the prices crude oil and carbon black went up. So, the hike was justifiable.”
The dealers’ body further said Apollo, Ceat, MRF and JK Tyres were already in the process of announcing another price hike.
This will counter the possible excise duty cut on tyres expected in the Union Budget. The prices are expected to see a fall after the excise duty on them is brought down to 14 per cent from 16 per cent.
A AITDF letter said: “The domestic tyre majors effected several price hikes in 2006 in all categories. The increase was based on the price of natural rubber at Rs 111 a kg. Tyre makers benefited from the reduction in natural rubber prices for the entire year of 2007, but failed to reduce prices accordingly.”
According to the last quarter results of major tyre makers, the percentage cost of raw materials during the last quarter as that of total sales has shown a decline for the tyre-producing companies.
India’s fourth largest tyre-making company JK Tyres, for example, had a raw material consumption of 68.1 per cent of net sales as compared with 77.7 per cent in the corresponding quarter of the previous year.
“This helped all the leading tyre companies post robust third quarter results,” AITDF has alleged.
Apollo Tyres reported a net profit growth of 77 per cent at Rs 62 crore as against Rs 35 crore. MRF Tyres’ profit grew 76 per cent at Rs 51 crore from Rs 29 crore, JK Tyres posted 162 per cent growth at Rs 21 crore as compared with Rs 8 crore and Ceat reported 73 per cent growth at Rs 19 crore from Rs 11 crore, the dealers’ body further noted. (All quarterly net profits of the current year are compared with the comparable quarter of the previous year).
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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