CV Raman, chief GM in Maruti Suzuki’s engineering division, has the answers. “In most cases, the same model usually has different engine capacities when it comes to diesel and petrol versions,” he says. “And the diesel is generally bigger.” Case in point: The Hindustan Ambassador with a 1.8L MPFI petrol engine and 2.0L diesel power plant.
But big doesn’t always guarantee a higher price as new car prices suggest. The secret lies somewhere else. Raman also points out that a contemporary diesel engine e.g. common rail direct injection (CRDI), uses more expensive components than a similar petrol engine. “A diesel generates more heat. Unlike a petrol engine, a diesel doesn’t have spark plugs to ignite the fuel-air mixture. The ignition happens when it intakes air and compresses it. The heat of the compressed air lights the fuel,” explains Raman. So, the high operating temperature ensures that the diesel enjoys premium treatment when it comes to component quality.
Along with expensive components, most oilburners also come fitted with turbochargers and this increases the overall price as well. A turbocharger is a forced induction system that increases an engine’s horsepower without adding too much weight. It compresses the air that flows into the engine. This means that more air can be squeezed into the cylinder, and more air means more fuel can be subsequently added to create greater power during combustion.
Well, so far so good. But then Gupta’s retailer also mentioned to him that the diesel Swift would ensure better fuel efficiency. And again the would-be car buyer wanted to know why. Well, this time the answer lies in the inherent quality of diesel.
It takes less refining to create diesel which explains its slightly lower cost. Also it is more oily and heavy than petrol for which it evaporates slowly (in fact diesel’s boiling point is higher than water). Diesel also posseses more carbon atoms in longer chains than gasoline which explains its higher energy density than petrol. This coupled with efficient engines gives diesel cars the tag of being more fuel efficient.
Also, in environmental terms diesel emits very low quantities of hydrocarbons, carbon dioxide and carbon monoxide — the ones responsible for global warming. The disadvantage lies in the fact that burning diesel emits high amounts of nitrogen compounds and particulate matter, also known as soot. But continuous advancements in technology coupled with ultra-low-sulphur diesel have managed to cut this down by over 90%. And if automobile experts are to be believed, this is just the beginning.
28 February, 2009
Chevron to exit RPL, sell 5% to RIL
Moving closer to merging its refinery subsidiary Reliance Petroleum with itself, Reliance Industries Ltd has said it will buyout US
energy major Chevron Corp's stake in RPL.
RIL will buy 22.50 crore equity shares or five per cent of RPL's equity from Chevron. This will raise its stake in the company to 75.38 per cent, besides its board is meeting on Monday to consider buying the rest.
It was not immediately clear at what price RIL is acquiring Chevron's five per cent stake. Sources, however, said the deal would be at Rs 60 a share, the same price at which the US firm had bought five per cent stake in RPL in April 2006.
When contacted, a RIL spokesperson confirmed the buyout but did not indicate the buyout price. Chevron had acquired 22.5 crore shares in RPL as part of an Equity Investment Agreement with RIL.
As per this agreement, RPL and Chevron were to enter into crude supply and product off-take agreements.
"Chevron, RIL and RPL have jointly decided not to proceed with the conclusion of these agreements. Consequently, RIL shall purchase 22.50 crore shares of RPL from Chevron," a RIL statement said.
The Equity Investment Agreement also provided that, in case these agreements are not executed, Chevron shall sell and RIL shall buy the five per cent shares of RPL.
On execution of these crude supply and product off-take agreements and certain other agreements, Chevron was to purchase additional 24 per cent stake in RPL from RIL.
However, RIL's holding in RPL will increase from 70.38 per cent to 75.38 per cent after the purchase. RPL in December commissioned its only-for-exports 5,80,000 bpd refinery.
"RIL, with its experience in sourcing of crude and placement of refined products in international markets for the existing refinery at Jamnagar, has chalked out strategy for sourcing of crude, product optimization and placement of products for both the refineries of RIL and RPL," the statement added.
Besides, in two separate filings yesterday, RIL and RPL said that a meeting of the board of directors will be held on March 2, to consider and recommend the amalgamation of Reliance Petroleum and Reliance Industries, the country's most valued firm in terms of market capitalisation.
The merger will make RIL one of the world's largest refiners.
energy major Chevron Corp's stake in RPL.
RIL will buy 22.50 crore equity shares or five per cent of RPL's equity from Chevron. This will raise its stake in the company to 75.38 per cent, besides its board is meeting on Monday to consider buying the rest.
It was not immediately clear at what price RIL is acquiring Chevron's five per cent stake. Sources, however, said the deal would be at Rs 60 a share, the same price at which the US firm had bought five per cent stake in RPL in April 2006.
When contacted, a RIL spokesperson confirmed the buyout but did not indicate the buyout price. Chevron had acquired 22.5 crore shares in RPL as part of an Equity Investment Agreement with RIL.
As per this agreement, RPL and Chevron were to enter into crude supply and product off-take agreements.
"Chevron, RIL and RPL have jointly decided not to proceed with the conclusion of these agreements. Consequently, RIL shall purchase 22.50 crore shares of RPL from Chevron," a RIL statement said.
The Equity Investment Agreement also provided that, in case these agreements are not executed, Chevron shall sell and RIL shall buy the five per cent shares of RPL.
On execution of these crude supply and product off-take agreements and certain other agreements, Chevron was to purchase additional 24 per cent stake in RPL from RIL.
However, RIL's holding in RPL will increase from 70.38 per cent to 75.38 per cent after the purchase. RPL in December commissioned its only-for-exports 5,80,000 bpd refinery.
"RIL, with its experience in sourcing of crude and placement of refined products in international markets for the existing refinery at Jamnagar, has chalked out strategy for sourcing of crude, product optimization and placement of products for both the refineries of RIL and RPL," the statement added.
Besides, in two separate filings yesterday, RIL and RPL said that a meeting of the board of directors will be held on March 2, to consider and recommend the amalgamation of Reliance Petroleum and Reliance Industries, the country's most valued firm in terms of market capitalisation.
The merger will make RIL one of the world's largest refiners.
Get ready for the BULL
Is this the right time to invest? Will the downturn continue? A few simple rules that help you spot the beginning of a bull market
The question, though very simple, raises a naive yet tricky subject — how to read the first signs of a turnaround. Here’s a ready reckoner to help you find out where the seeds of a new bull market are getting sown.
NATURE OF RALLY
First things first. As an investor, your first priority should be to figure out the nature of the rally in process. You must assess whether the market rally is a broad-based one or sector centric. Says Anup Bagchi of ICICIDirect; “You must remember that sector specific rallies cannot get converted into structural bull runs as was the case in 1992 and 2001, where the rally was concentrated towards the old economy and tech sectors, respectively.”
It is advisable to look at the broader pattern of the rally to identify if it is indeed a case of bulls getting back to business. According to Bagchi, though there will be sectors that will outperform every other sector, this outperformance cannot be recognised as a bull run and will not continue for long. The sector centric rallies are generally characterised by the good amount of sector rotation.
VOLATILITY INDEX
Then there is Volatility Index (VIX), or Fear Index, as it is better known. For starters, the index is a measure of the market volatility. It gauges the amount by which an underlying index is expected to fluctuate over the next 30 days. Right now, the VIX is trading in the low 40s on the National Stock Exchange (NSE), which indicates that the equity market can witness a uptrend or downtrend to the extent of 40% over the next month. Typically, a high VIX indicates that investor fear has increased. In a stable market, VIX is generally trading below 10. You can keep a tab on this wonderful tool to get the first clue on revival of a bull run. Once the volatility dips below 20, you will be much more safer investing.
M-CAP TO GDP RATIO
This estimate is a popular method of looking at whether the markets have bottomed out or not. As a rule of thumb, it is believed that when market-capitalisation to gross domestic product (GDP) ratio goes above one, the equity market starts getting attractively valued. “For instance, the average m-cap to GDP ratio for Sensex has averaged between 45-48% and in December 2007, this ratio was 1.78 and the rest is history,” says Bagchi of ICICIdirect.
DAILY MOVING AVERAGE
To judge the first call on a bull market, another parameter you can look at is Daily Moving Average (DMA). In a bull market, the index will be above its 200 simple moving average and stock value (at least major Nifty stocks) will be above its 200 DMA. “As long as Sensex/Nifty/stocks stay below its 50, 100, 200 SDMA, the market is said to be bearish. Once the index is below its 50 SDMA due to bearishness, it will start to bounce back, which in turn takes Nifty/Sensex/stock towards its respective 50 DMA, 100 or 200 DMA,” says Alex Mathew, head of research at Geojit Financial Services.
To explain this phenomenon, Matthew cites an example where spot Nifty is at 2934, Nifty 50 DMA is at 2864, 100 DMA at 3100 and its 200 DMA is at 3822. “In a bear market, as the Nifty is above its 50 DMA will have an inclination to test its 100 DMA of 3100 or sometimes even 200 DMA of 3822. These upward movements are said to be bear market rallies,” he says. According to him, higher trading volumes and low impact cost are main characteristics of a bull run.
OTHER FOOTPRINTS
Apart from the above mentioned yardsticks, there are some other clues that you can look at. Analysts say a take-off in the equity markets is typically marked by low inflation, low interest rates, earning yield to bond yield more than 1.5, historical valuation multiples like price to book value (P/BV) ratio, easy monetary policy, high liquidity, buybacks, dearth of new IPOs and weak hands vs strong hands (retail investors in extremely pessimistic mood selling out to strong institutional
hands). In case of P/BV ratio, it is advisable to look at past data as to how the multiples have expanded or contracted vis-à-vis the inherent value in the balance sheet.
There are, however, a few things that you need to keep in mind. “One, markets would bottom out much before the economy does — typically two quarters in advance to when actual revival in economy takes place — measured by quarterly profits of companies. Two, bull markets are born out of excesses of bear markets and vice versa. It is a cycle since times immemorial and nothing is a perpetuity. Three, bear markets typically last between 18-24 months — we are already into the 14th month of this current bear market and time is just ripe for the next bull run to begin,” says Manish Sonthalia, fund manager at Motilal Oswal Securities.
HOW TO GAIN
All in all, your ideal strategy to gain the most out of an emerging bull run should be to focus on buying fundamentally sound large-cap stocks, against mid-cap or small-cap scrips. Historical patterns show that it is large-caps which lead from the front in any bull market rally. The small-cap and the penny stocks are typically the last to move in any bull market. “Ironically the retail investor play it the other way around,” says Sonthalia.
According to him, sector wise, banking and auto sectors — being direct plays on the economy — are the first to move up. If stock prices of companies in these sectors move up and sustain at higher levels, it is almost a sure sign that the economy is moving up again and the bull market has begun. “These would also have to be substantiated by volume numbers and profits reported by companies in these sectors. If you can move quickly and buy stocks in these sectors early in the cycle, it can give you humungous profits,” says Sonthalia. He refers to the case of Tata Motors (then Telco) which moved from Rs 60 in 2002 to over Rs 900 in the next five years.
Analysts reckon that there are apparent signs that the current bear market may soon end. There is abundant capital waiting on the sidelines to be invested and at the first signs of some stability in the US, Indian markets would take-off. As the old saying goes on Wall Street — No one rings the bell at the peak of the bull market and at the bottom of the bear market. You have to take your own call while committing your capital by sticking to your own style of investing.
BEAR MARKET SYMPTOMS
• NSE volatility index (VIX) remains above 40%
• Volume traded is low
• Many stocks hitting 52-week lows or trading below it
• Continuous uptrend is not expected in the market
• Selective stocks move up
The question, though very simple, raises a naive yet tricky subject — how to read the first signs of a turnaround. Here’s a ready reckoner to help you find out where the seeds of a new bull market are getting sown.
NATURE OF RALLY
First things first. As an investor, your first priority should be to figure out the nature of the rally in process. You must assess whether the market rally is a broad-based one or sector centric. Says Anup Bagchi of ICICIDirect; “You must remember that sector specific rallies cannot get converted into structural bull runs as was the case in 1992 and 2001, where the rally was concentrated towards the old economy and tech sectors, respectively.”
It is advisable to look at the broader pattern of the rally to identify if it is indeed a case of bulls getting back to business. According to Bagchi, though there will be sectors that will outperform every other sector, this outperformance cannot be recognised as a bull run and will not continue for long. The sector centric rallies are generally characterised by the good amount of sector rotation.
VOLATILITY INDEX
Then there is Volatility Index (VIX), or Fear Index, as it is better known. For starters, the index is a measure of the market volatility. It gauges the amount by which an underlying index is expected to fluctuate over the next 30 days. Right now, the VIX is trading in the low 40s on the National Stock Exchange (NSE), which indicates that the equity market can witness a uptrend or downtrend to the extent of 40% over the next month. Typically, a high VIX indicates that investor fear has increased. In a stable market, VIX is generally trading below 10. You can keep a tab on this wonderful tool to get the first clue on revival of a bull run. Once the volatility dips below 20, you will be much more safer investing.
M-CAP TO GDP RATIO
This estimate is a popular method of looking at whether the markets have bottomed out or not. As a rule of thumb, it is believed that when market-capitalisation to gross domestic product (GDP) ratio goes above one, the equity market starts getting attractively valued. “For instance, the average m-cap to GDP ratio for Sensex has averaged between 45-48% and in December 2007, this ratio was 1.78 and the rest is history,” says Bagchi of ICICIdirect.
DAILY MOVING AVERAGE
To judge the first call on a bull market, another parameter you can look at is Daily Moving Average (DMA). In a bull market, the index will be above its 200 simple moving average and stock value (at least major Nifty stocks) will be above its 200 DMA. “As long as Sensex/Nifty/stocks stay below its 50, 100, 200 SDMA, the market is said to be bearish. Once the index is below its 50 SDMA due to bearishness, it will start to bounce back, which in turn takes Nifty/Sensex/stock towards its respective 50 DMA, 100 or 200 DMA,” says Alex Mathew, head of research at Geojit Financial Services.
To explain this phenomenon, Matthew cites an example where spot Nifty is at 2934, Nifty 50 DMA is at 2864, 100 DMA at 3100 and its 200 DMA is at 3822. “In a bear market, as the Nifty is above its 50 DMA will have an inclination to test its 100 DMA of 3100 or sometimes even 200 DMA of 3822. These upward movements are said to be bear market rallies,” he says. According to him, higher trading volumes and low impact cost are main characteristics of a bull run.
OTHER FOOTPRINTS
Apart from the above mentioned yardsticks, there are some other clues that you can look at. Analysts say a take-off in the equity markets is typically marked by low inflation, low interest rates, earning yield to bond yield more than 1.5, historical valuation multiples like price to book value (P/BV) ratio, easy monetary policy, high liquidity, buybacks, dearth of new IPOs and weak hands vs strong hands (retail investors in extremely pessimistic mood selling out to strong institutional
hands). In case of P/BV ratio, it is advisable to look at past data as to how the multiples have expanded or contracted vis-à-vis the inherent value in the balance sheet.
There are, however, a few things that you need to keep in mind. “One, markets would bottom out much before the economy does — typically two quarters in advance to when actual revival in economy takes place — measured by quarterly profits of companies. Two, bull markets are born out of excesses of bear markets and vice versa. It is a cycle since times immemorial and nothing is a perpetuity. Three, bear markets typically last between 18-24 months — we are already into the 14th month of this current bear market and time is just ripe for the next bull run to begin,” says Manish Sonthalia, fund manager at Motilal Oswal Securities.
HOW TO GAIN
All in all, your ideal strategy to gain the most out of an emerging bull run should be to focus on buying fundamentally sound large-cap stocks, against mid-cap or small-cap scrips. Historical patterns show that it is large-caps which lead from the front in any bull market rally. The small-cap and the penny stocks are typically the last to move in any bull market. “Ironically the retail investor play it the other way around,” says Sonthalia.
According to him, sector wise, banking and auto sectors — being direct plays on the economy — are the first to move up. If stock prices of companies in these sectors move up and sustain at higher levels, it is almost a sure sign that the economy is moving up again and the bull market has begun. “These would also have to be substantiated by volume numbers and profits reported by companies in these sectors. If you can move quickly and buy stocks in these sectors early in the cycle, it can give you humungous profits,” says Sonthalia. He refers to the case of Tata Motors (then Telco) which moved from Rs 60 in 2002 to over Rs 900 in the next five years.
Analysts reckon that there are apparent signs that the current bear market may soon end. There is abundant capital waiting on the sidelines to be invested and at the first signs of some stability in the US, Indian markets would take-off. As the old saying goes on Wall Street — No one rings the bell at the peak of the bull market and at the bottom of the bear market. You have to take your own call while committing your capital by sticking to your own style of investing.
BEAR MARKET SYMPTOMS
• NSE volatility index (VIX) remains above 40%
• Volume traded is low
• Many stocks hitting 52-week lows or trading below it
• Continuous uptrend is not expected in the market
• Selective stocks move up
Public sector oil firms slash jet fuel price by 7%
State-run fuel retailers on Saturday slashed jet fuel or ATF rates by a further seven per cent, making it the 11th reduction since September last year.
Aviation Turbine Fuel (ATF) prices in Delhi were slashed by Rs 2,052 per kilolitre to Rs 27,106 per kl, effective midnight tonight, an official of Indian Oil Corp, the nation's largest fuel retailer, said.But for the one-off 3.3 per cent increase in rates on January 16, jet fuel prices are declining in tandem with the fall in international oil rates.
In Mumbai, home to the nation's busiest airport, ATF rates were down to Rs 27,861 per kl from Rs 29,985.19 per kl.The reduction in jet fuel prices announced today varied from airport to airport depending on local taxes and levies and an on average worked out to Rs 2,125 per kl.ATF prices had peaked to Rs 71,028.26 per kl (in Delhi) in August on international crude prices touching historic high of $147 a barrel. But they have since been slashed every month till October and twice in November.After the 11th reduction, jet fuel are hovering at early 2005 levels.State-run Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum revise ATF rates on the 1st and 16th of every month based on the average international jet fuel rates in the preceding fortnight.
25 February, 2009
NASA's mission failed
The Orbiting Carbon Observatory (OCO), NASA’s satellite to track CO2 emissions on Earth, failed to reach orbit after blasting off early this morning, crashing in the waters off of Antarctica and dashing hopes for the $278-million mission.The payload fairing—a shroud that covered the OCO to protect it during its trip through the atmosphere—failed to separate from the Taurus XL booster rocket carrying the satellite after it took off from Vandenberg Air Force Base in California at 1:55 A.M. Pacific time (4:55 A.M. Eastern time), NASA said. “The satellite reentered the atmosphere and fell into the ocean just short of Antarctica,” Alan Buis, a spokesperson for NASA’s Jet Propulsion Laboratory, tells us. “The mission is lost.
24 February, 2009
NASA to launch CO2 tracking satellite
WASHINGTON: Scientists hope to get a clearer picture of how the Earth reacts to carbon dioxide with the launch on Tuesday of a new spacecraft
designed to collect data on the climate-changing gas. The Orbiting Carbon Observatory is set for launch early on Tuesday from California and will take about eight million measurements every 16 days for the next two years. Researchers said the information will give them a picture of how the carbon cycle affects climate and how net emissions vary by region. The goal is to measure carbon dioxide (CO2) sources and so-called "sinks" that pull the gas from the atmosphere. Scientists know that only about 40 percent of the CO2 released since the Industrial Revolution remains in the atmosphere. They can only account for the absorption of another 30 percent, leaving questions about what happened to the 30 percent. More complete measurements from the observatory should give them a better picture of where the carbon dioxide is being stored and how it changes over time. It should also help account for the uneven absorption of the gas from year-to-year, which does not correspond consistently with how much is released each year. "It's critical that we understand the processes controlling carbon dioxide in our atmosphere today so we can predict how fast it will build up in the future and how quickly we'll have to adapt to climate change caused by carbon dioxide buildup," scientist David Crisp said. Previous measurements of carbon dioxide have relied heavily on Earth-based observations and occasional images from aircraft.
designed to collect data on the climate-changing gas. The Orbiting Carbon Observatory is set for launch early on Tuesday from California and will take about eight million measurements every 16 days for the next two years. Researchers said the information will give them a picture of how the carbon cycle affects climate and how net emissions vary by region. The goal is to measure carbon dioxide (CO2) sources and so-called "sinks" that pull the gas from the atmosphere. Scientists know that only about 40 percent of the CO2 released since the Industrial Revolution remains in the atmosphere. They can only account for the absorption of another 30 percent, leaving questions about what happened to the 30 percent. More complete measurements from the observatory should give them a better picture of where the carbon dioxide is being stored and how it changes over time. It should also help account for the uneven absorption of the gas from year-to-year, which does not correspond consistently with how much is released each year. "It's critical that we understand the processes controlling carbon dioxide in our atmosphere today so we can predict how fast it will build up in the future and how quickly we'll have to adapt to climate change caused by carbon dioxide buildup," scientist David Crisp said. Previous measurements of carbon dioxide have relied heavily on Earth-based observations and occasional images from aircraft.
22 February, 2009
Become your own financial planner
Human life value
If you're a young person and think that financial planning must be undertaken only when you are older, with a family and have greater liabilities in life, you're sadly mistaken. On the contrary, the earlier you start planning, the better.While it may be great to have a financial planner to help you out, there is no stopping you from trying to do this yourself. To help you become your own financial planner, SundayET begins with the basic premise of how to calculate your Human Life Value (HLV), based on which you can plan your further investments.
The Defining number
According to Kunj Bansal, senior vice-president (portfolio management services) at Kotak Securities, "Human Life Value (HLV) is nothing but the money that you are going to make over the rest of your life. It is the present value of all that you are likely to earn in the future." Over a period of time, however, the process of calculating this has been modified to include the element of expenditure. So, in addition to your salary, it also takes into account the amount you are likely to spend in the remaining years of your life.Further elements have also been factored in such as already existing savings and bank deposits while other aspects like the house you are living in and the gold that you possess will be discounted.
Finding your HLV
Arriving at this figure can be as complicated or simple as you would like it to be, depending on all the elements that you include in the process of drawing your conclusions. However, for practical purposes, here’s a very simple way of arriving at this figure. Keep addingStart off with a basic figure such as your annual income. Use this to calculate your remaining earning capacity. For instance if you are 30 and are most likely to work till the age of 60, then you would need to work out how much you are likely to earn over the next 30 years of your life.Add your current savings to this. Savings in this case, would mean what is available to you in the form of liquid cash and fixed-deposits. "Once you have done this, formulate the present value of all the future earnings and you will then arrive at what is called the Gross HLV," says Mohit Thadani, head advisory, wealth management, Motilal Oswal Financial Services.
Begin subtracting
From the gross HLV, you need to deduct the expenses that you are likely to face on a daily basis such as those required to meet household expenses. You also need to factor in the taxes you are meant to pay if you haven’t already deducted it while calculating your income.Also deduct current financial assets from the gross figure. Keep a calculator near you because more subtraction follows. "Next, you will need to deduct all the one-time planned expenditures that you are likely to come across in your lifetime," explains Bansal. For this, you will need to know the approximate amount that you are likely to spend on buying your dream house.If you have kids, you should have an idea of whether you want to set your kid to study abroad or within the country and determine the kinds of costs that will be involved. And then comes the large, but often, unavoidable expenditure that is involved in your child’s marriage. And then, the expenses that could suddenly arise in the case of an emergency.
Net HLV
After all these deductions, the figure that you finally arrive at will be your net HLV or your expected HLV. Based on this figure, you need to plan your investment pattern.According to Thadani "It is imperative for an individual to work out his/her own economic value, so as to create replacement for his/her earnings in case of his/her demise – either through insurance coverage or through utilising his/her current wealth or combination of both."While things may vary according to your risk appetite, the key remains in investing in instruments- be it debt, equity, gold or real estate- which match the time frame that you have in mind and provide you with the adequate returns.
Other adjustments
While the method mentioned above is the most basic, there are a few more points that could come in handy. You would need to make adjustments to the basic calculations to include the possibility of salary rises or even job cuts in the present situation. Some people also include the life expectancy of the spouse while arriving at HLV. Bansal adds "Individuals also need to prepare themselves for a low-interest regime. As the economy develops, individuals should not expect the high rates of interest that they were used to getting in the past."
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