Home / Knowledge / News / Textiles / Don't indulge in fancy derivatives – Financial Consultant
Don't indulge in fancy derivatives – Financial Consultant
18
Nov '09
One of the highlights of the two day 'Texcellence 09' textile conference held in Ahmedabad was a presentation made by Mr SK Modi, a reputed financial consultant and also Director of Sukumo Consultancy Pvt Ltd on “Managing Volatility in Commodities and Currencies in the Textile and Clothing sector”.

Mr Modi began his presentation by outlining the three types of volatilities; demand and supply volatility; commodities volatility and currency volatility, which he said are all now interlinked. On the issue of demand and supply volatility he further bifurcated them into global, national, regional and firm specific.

On the matter of commodity volatility, he said the main issues facing the textile sector are related to cotton, oil, which in turn is related to energy, freight and raw materials derived from oil and the indirect impact on textiles. According to him when prices decline below cost, there occurs an inventory stockpile.

Giving examples of the volatility of the Indian currency versus the US dollar he said in November 2006 the dollar plunged to below Rs 45 and then remained low for 21 months, the lowest being Rs 39 and then in September 2008, it once again started rising and touched nearly Rs 49 and has now once again started its downward climb.

He said that the US dollar is a world currency and there is no such thing as a Euro-Rupee rate and it is only a derivative of Dollar-Rupee and Dollar-Euro. He added by saying that “Speculation is indeed a zero-sum game and if you win, somebody has to loose and vice-a-versa and you cannot outsmart those big boys who manage the global trade in currencies”.

He advised exporters to watch the markets more carefully and anticipate demand and supply correctly and stop dreaming of China exiting textiles, since it will not and try to join large global supply chains which are willing to measure and underwrite risk, i.e. deals in rupees. Going further he said it is okay to deal occasionally in forward vanilla covers, if they improve profitability but should be indulged in, only after considering transaction costs.

He counselled the policy makers to give direct subsidies, like US/EU do, instead of tinkering with the Rupee when they wished to check prices of specific products. In manufactured exports, there is no product where India doesn't have to compete with China and suggested that they could peg the Rupee to Chinese Renminbi.

He concluded his presentation by putting forth an idiom. “If nothing works and you do burn your hands, remember, no matter how bad your position, two and two still make four.”

Fibre2fashion News Desk - India

Must ReadView All

Textiles | On 17th Jan 2017

GST rollout from July 1; states to control small taxpayers

The Centre and states have reached a consensus on the issue of dual...

Textiles | On 17th Jan 2017

Reliance Industries net increases 3.6% in Q3FY17

In the three months ended December 31, 2016, India’s biggest private...

Courtesy: Carnegie Fabrics

Textiles | On 17th Jan 2017

Calera Capital acquires majority stake in Carnegie Fabrics

Private equity firm Calera Capital has bought a majority stake in...

Interviews View All

Evelyne Cholet
UCMTF

‘France had a reputation of being big in new ideas, but poor in marketing...

Sunil Kumar Sharma
Loknayak JPNSSSG Ltd

'The blend of cotton–linen yarn has high demand in the domestic and...

Krishnanand Tripathi
Textrade International Ltd

We believe in vocational education for entry-level employees, offering...

Marten Alkhagen
Swerea IVF AB

Marten Alkhagen, Senior Scientist - Nonwoven and Technical Textiles of...

Eric Scholler
Groz-Beckert

The Indian market has huge potential in technical textiles, and by far,...

Kerem Durdag
Biovation II LLC

Kerem Durdag, CEO, Biovation II LLC, provides an insight into future...

Yash P. Kotak
Bombay Hemp Company

One of the directors of Bombay Hemp Company, Yash P. Kotak, speaks to...

Robert Brunner
Devereux

Golfwear and menswear brand Devereux is set for greener pastures. Robert...

Wendell Rodricks
Wendell Rodricks

"We should not compare India and the West. There are things we do that...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


editorial@fibre2fashion.com

Letter To Editor






(Max. 8000 char.)

Search Companies





SEARCH
January 2017

January 2017

Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.

SUBSCRIBE


Browse Our Archives

GO


eNEWS
Insights
Subscribe today and get the latest News update in your mail box.
Advanced Search