Domestic tyres prices are set to go up across all categories in April. “We will be increasing our prices by 5 per cent from mid-April across all categories,” said Arnab Banerjee, V-P (sales & marketing), Ceat Tyres. This price hike will be the second one this year.
The first price hike of around 1.7 per cent by some tyre manufacturers was effected in February. Following a cut in excise duty spelt out in the Union Budget, tyre majors cut prices between 1.7 and 2 per cent in March.
While J K Tyres and Ceat have confirmed their latest price hikes, Apollo Tyres and MRF may do so soon. “The process of taking a final decision on prices is currently on,” said Sunam Sarkar, chief, corporate strategy & marketing, Apollo Tyres.
Tyres made in India have a ratio of natural rubber (40 per cent) and petroleum derivatives (60 per cent). Between the last quarter of 2007 and the first quarter of 2008, average prices of natural rubber rose by 4 per cent, while synthetic rubber moved up by 18 per cent.
Prices of chemicals and carbon black hardened by 16 per cent and 11 per cent, respectively. The highest price increase was witnessed in butyl rubber at 33 per cent.
On an average, prices of raw materials have appreciated between 12-15 per cent during the first quarter of 2008.
And tyre majors have initiated a price increase of about 5 per cent.
Tyre dealers in the country have termed the impending price hikes as opportunistic and arbitrary. They say the frequent price hikes could hurt the trucking industry the most as the cargo industry is a price senstive business.
“30 per cent of the operating costs for a trucker are spent on tyres and the rest on diesel. Any increase in the inputs for running a truck would directly push up transportation costs. Whether this cost will be passed on only time will tell,” said S P Singh, convenor, All India Tyre Dealers Federation (AITDF).
Tyre dealers say there’s little correlation between the increase in raw materials and the prices demanded by domestic tyre manufacturers. They allege price cartelisation by the manufacturers.
But tyre manufacturers beg to differ. A case in point is 2006, when prices of raw materials fluctuated steeply.
“Despite the frequent changes in the prices of raw material such as natural rubber, which rose as much as 24 per cent to Rs 111/ kg in July 2006. We had initiated small and steady price hikes ranging between 4-6 per cent across all tyre categories in the following months,” said AS Mehta, director (marketing), JK Tyre.
“And when prices of natural rubber dipped in September, we were prompt to roll back our prices by 5 per cent. While the overall price hike was 12 per cent for 2006, the effective hike was only 7 per cent for that year,” he added.
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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