Saturday, June 30, 2007

Answers to some shout-box queries – 8

26 Jun 07, 15:33

rishi: Sir can you tell me how the share prices for a company goes up and down ??

Let me try to list out some things that take a share’s price up or down:

  1. Technically speaking it is pure demand supply equation.
  2. Inherent strength of a company’s fundamentals leads to demand and hence the price goes up. If the demand comes down the price will come down.
  3. Company or market sensitive information making its appearance in the market. This can include the sector in which the company operates. It can include the company itself. As for instance when it is the subject of a takeover attempt.
  4. Manipulation by market operators. These include brokers, market makers and others.

25 Jun 07, 23:26

vinod: Why should continue with export of iron when it reserves are coming down(eventhough the reserve are estimated to be 23 bn tonnes)?

This is an issue over which the two opposing camps keep fighting vigorously. The mining companies say that what they are exporting are ‘fines’ for which there is no ready market in India. And hence they should be allowed to export the ore. The Indian steel industry says that the ore should not be exported and preserved for the fast growing domestic sector.

The country produced about 160 mn tonnes of iron ore during 2006-07. Over 95 mt of this was exported mostly to spot markets in China. More than 80% of these exports constitute iron ore fines.

I think we should look at the issue, keeping the future potential discoveries of ore also in mind. The figure of 23 bn tonnes need not and should not remain a static figure. It should ideally be growing with the passage of time. Secondly, when we are able to produce the ore, but are not able to consume it immediately in the immediate future, why should we be emotionally attached to it? It should be allowed to be exported so that the people who invest in the mining activity are able to recover their investments and also make a bit of profit. This would in turn lead to more investments in the mining sector and allow further development of the iron ore mines.