The bulk of the spurt in tea prices in 1998 came in the first quarter of the current year and the latter periods have been witnessing a declining rate of growth in selling prices as production increases especially from the northern tea gardens have kept pace. In fact for the first time in the current year average tea prices had actually fallen during the first few weeks of the third quarter before recovering a little in early December, despite the fact that the overall production has been good.

Consequently a major part of the interest in tea companies from the stock market has come about due to the rising export demand for Indian teas. Tea exports as of the first half were already higher by 19 per cent, and export growth has continued wellinto the third quarter. This improvement has come about despite the reticence shown by Pakistan in buying Indian tea. Last year that country purchased 5 million kgs of tea against which so far exports to Pakistan this year are just over one million kgs. Exports to other countries such as Iran and the CIS have been very good.

In the domestic market there has been a continuing shift to packaged tea from loose tea, which should increase value addition. Besides, companies like Tata Tea are acquiring tea gardens in Sri Lanka, where the cost of producing tea is much lower. Tata Tea itself has been busy with launches of new brands of packaged tea. In addition, by now it has become obvious that the companies have been able to pass on the 8 per cent excise duty imposed in the recent Union Budget for 1998-99. In fact the excise hike has already been negated for in the first half itself as tea prices were up between 33 per cent to 40 per cent on an average. Besides, TTL has also managed to make a breakthrough in theUS market for tea bags, therefore improving its export prospects. While the domestic season is progressing very smoothly the only threat could come from Sri Lankan teas, which being a Saarc country is allowed duty free exports to India.

Besides tea, TTL subsidiary companies have a very strong presence in coffee as well. Consolidated Coffee and Asian Coffee have both benefitted from the rise in coffee prices in the first half and once again in the third quarter. Coffee prices are higher in the third quarter by around 5 per cent as compared to last year.

Unseasonal rains have delayed the harvest of the coffee crop in Vietnam, which has adversely affected coffee prices in the European markets. In addition the coffee crop in Mexico and Colombia has also been affected. This has worked to the advantage of coffee growers in India as domestic prices have firmed up and export growth has been outstanding. According to the Coffee board, Indian coffee exporters achieved last years entire exports of $267 million inthe first seven months of the current financial year. Even though the second half is generally sluggish the current year is a record one for coffee exports.

The Tata Tea stock has risen by 15 per cent in recent weeks and so have the stocks of companies such as George Williamson which has increased by around 16.5 per cent. Minor increases in stock prices have also been seen in Harrison Malayalam, on the back of falling production and rising prices in the south. The stocks of other tea companies with production centres concentrated in the north and eastern region such as AFT Industries and Bishnauth Tea have not kept pace.

Pharma Stocks

It was widely reported last week that the Insurance Regulatory Authority (IRA) Bill will be tabled on Monday, in parliament. But the weekend agitation in parliament regarding the Womens Reservation Bill has effectively killed hopes of an early passing of most of the pending bills. It is understood that only once the Womens Reservation bill is discussed can anyothers be taken up for discussion. It is expected that the patents bill also may not be taken up for discussion soon.

As a result most pharma stocks such as Glaxo, Pfizer and German Remedies fell from the day's high. Further, stocks that had attracted backwardation in the last settlement such as Novartis now attracted still more sellers. But, if the IRA bill is tabled on December 15 as is being reported; it should serve to lift spirits.