Basmati rice segment in India may grow 4%

India is seeing record foreign investment inflows due to the growth potential in the country's various sectos. One such area is the basmati rice industry.

India is the world's second largest rice producer behind China, with an annual production of 89 million tonnes.

India produces several varieties of rice and one of its most famous brands is basmati.

Basmati rice is grown in both India and Pakistan. Total global basmati rice output is 2.3 million tonnes of which India produces about 1.7 million tonnes and Pakistan 600,000 tonnes.

Indian basmati rice has a global market and about 40 per cent of its crop is exported.

Though 60 per cent of basmati produced is consumed domestically, it constitutes only about 1.5 per cent of the rice consumed in the country.

This share of basmati is rising as the income levels of the population continue to climb.

Basmati rice is produced in two ways before it is ready for consumption. The two types of basmati rice are raw and sella (parboiled).

The raw rice is mainly consumed by the domestic market where as the sella rice is mainly destined for export.

The decision about whether to make raw rice or sella rice starts from the initial point, which is of getting paddy for production.

The production process of making basmati rice includes steps such as cleaning and drying the paddy after which milling is done.

In milling, a lot of steps are taken such as removing the husk and bran from rice to convert it into white coloured rice. It is then ready for consumption.

In case of sella rice, the process remains the same but the only difference is that a special process of boiling and steaming is undertaken whereby the nutritive value of bran in rice is captured before the milling process is undertaken.

Indian companies have been able to procure the right technology with which they can grow the best quality rice with very little wastage and that is why they are able to command a major market share globally.

In India a major chunk of exports as well as the domestic market are controlled by the unbranded segment of basmati rice.

Indian companies are now trying to develop their own brands so that they can command a premium as well as make a major market presence for themselves.

The major players in this industry are REI Agro, Satnam and KRBL.

The rice industry in the country is expected to see a growth of about 5-6 per cent in the years to come and the basmati rice segment is expected to see growth of 3-4 per cent.

With strong domestic and export markets, this industry is very attractive and one to watch out for in the days to come.

The Indian markets continued to see gains with a lot of new foreign institutional investors (FIIs) coming in.

The markets ended last week at 7,768, gaining about 14 points or 0.17 per cent for the week.

Metals stocks made good gains as the prices of metals once again started to move up globally as well as in the domestic markets. Stocks in this sector saw gains in the region of 2-3 per cent .

Oil and gas stocks saw some correction as international crude prices continued to soar.

This sector's stocks were down by 2-3 per cent. Pharma stocks made a brief comeback last week and they are expected to perform better in the days ahead.

This sector's stocks saw gains in the region of 2-3 per cent during the week.

Other sectors such as banking, FMCG and information technology ended the week flat.

The Indian markets are seeing a deluge of foreign funds and that is the reason why they continue to grow stronger.

It appears that the money flow will continue to come in the days ahead and one can expect some more action.

The coming week is again going to see a lot of volatility similar to that we have been witnessing for the past few months and the market should be range bound. It will trade in the region of 7,500-7,900.

The writer heads the Dubai office of Karvy Stock Broking Ltd.