Upload
surya-sudhakar
View
215
Download
0
Embed Size (px)
Citation preview
8/6/2019 Chaanakya 4_15
1/27
8/6/2019 Chaanakya 4_15
2/27
Rates 01
Graphs 02
Student Cartoon 03
News 04
National & International events in the world of nance
Debate 05Is Indian economy the biggest bubble?
Contemporary ArticlesUniversal life insurance policy and IRDA 06IPO Study: Coal India Ltd. 08RBI looking into MFI s 10SBI Bonds 11
Scam 11Wipro Ltd.
Commodities Article 12Commodities trading
Did You Know? 14
8 Good things about the credit crunch
Investors Focus 17
Technical and fundamental analysis
Alumni Speak 18
A peek into the corporate world through our Alumnisexperience
Buzz Words 19
Fincopedia
Quiz 20
Check your Financial Quotient
8/6/2019 Chaanakya 4_15
3/27
Rep 6.00%
Reverse Repo 5.00%Call rate 4.80-8.00 %
Ination (as on 14 Oct.) +8.62%
Forex Reserve $ 295.399 billion
(as on 22nd Oct 2010)
91 day T-Bill 6.8536%
IIP (for August) +5.60%
6.90 GS 2019 8.0907-8.0907%
Rates
01
Money isnt what motivates entrepreneurs; it is ac-
knowledgementa craving for your ideas to be ac-
knowledged.
You know what the difference is between a dead
skunk and a dead banker on the road? Theres a
skid mark by the skunk.
You cant overestimate what happens when you en-
courage regulators to believe that the goal of regu-
lation is not to regulate.
8/6/2019 Chaanakya 4_15
4/27
43
43.5
44
44.5
45
14-Oct 17-Oct 20-Oct 23-Oct 26-Oct 29-Oct
Rs/$
GRaPHs
02
17800
18100
18400
18700
19000
14-Oct 17-Oct 20-Oct 23-Oct 26-Oct 29-Oct
1500000
6900000
12300000
17700000
23100000
28500000
5900
6000
6100
6200
6300
14-Oct 17-Oct 20-Oct 23-Oct 26-Oct 29-Oct
future rates open interest
5900
6000
6100
6200
6300
19400
19700
20000
20300
20600
14-Oct 17-Oct 20-Oct 23-Oct 26-Oct 29-Oct
sensex nifty
79
81
83
85
87
14-Oct 17-Oct 20-Oct 23-Oct 26-Oct 29-Oct
Oil(per bbl)
8/6/2019 Chaanakya 4_15
5/27
By- Md. Zafar Iqbal I MBA - M
students caRtoon
03
8/6/2019 Chaanakya 4_15
6/27
inteRnational news
Millions of protesters have gathered in cities across France to demonstrate their opposition to
proposed pension reforms. The government plans to raise the retirement age from 60 to 62 and
the full state pension age from 65 to 67.
The Group of 20 pledged to refrain from competitive devaluations and commit to market de-
termined exchange rates, a G-20 ofcial said, citing a statement to be released after talks end in
South Korea. The International Monetary Fund will be tasked with producing a broader report
on currency policies and studying economies with persistent trade imbalances.
The US economy expanded at a 2% annual rate in the July-September quarter. It marked an
improvement from the feeble 1.7% growth in the April-June quarter. Consumers helped boost
last quarters economic growth with 2.6% growth in spending.
national news
By- Vaibhav Nagar, I MBA L
04
The ow of foreign money into the stock markets continued unhindered in October with to-
tal inows crossing $6.425 billion, the highest in a single month. In fact, FIIs have been netbuyers on every trading day since Aug 30 till Oct 29 when they sold stocks worth $125.35
million.
Oil minister Murli Deora met Finance Minister Pranab Mukherjee to seek cash compensation
of at least ` 15000 crore for state-run oil companies which have lost over` 31,000 crore.
Unusual short term liquidity shortfall in the money market forced call money rate the over-
night interest rate that a bank pays to borrow from another bank to shoot up to a high of
about 13%, Usually repo auction, under which banks borrow money from the RBI at a pre-
xed rate (6% now), take place on all working days of the week
Indias overall public debt increased marginally by 2.8% to ` 27.77 lakh crore in the rst
half of the current nancial year, but better management saw average maturity of outstanding
long-term increase to 9.83 years at end-September 2010 from 9.71 years at end-June 2010.
The average coupon (or interest rate) of outstanding stock also dropped to 7.85% from 7.79%
over the same period. Internal debt constitutes 89.4% of the governments total public debt.
8/6/2019 Chaanakya 4_15
7/27
05
is indian econoMY tHe BiGGest BuBBle?
By- Sona Joseph I MBA M
Narration: During the time, when the whole world is talking about India being the next biggest
economy of the world, one cant but sit and argue the sustainability of such a claim, considering
the rapid growth and the lack of expertise at a domestic level. Is the growth of India rocketed by
a foreign push, bound to be stalled when the other economies dawn upon the realization of thethreat of being overpowered?
By- Richa Jain I MBA L
CONS
The so called Rural economy of India is still
vibrant despite the global turmoil. SEBI and
other regulating bodies should be given their
due credit for being precautious before every
major leap. The strong banking regulatory sys-
tem has also helped India to weather the stormsof global credit crunch. In fact, the fall of many
private banks in developed nations led people
to feel insecure about investing there, which
have increased the ow of NRI deposits to In-
dias strong and government owned public sec-
tor banks.
When compared with other emerging econo-
mies such as China, Indian economy is lessdependent on exports. Domestic consumption
makes up about 75% of Indias GDP, while it
accounts for less than 50% of Chinese econ-
omy. Manpower is the core strength of India
with our entrepreneurs doing exceedingly well
in the world market. India is a breeding ground
for skilled labour. China might have abundance
of technical expertise, but it is at the cost of
quality. Countries like the USA would not com-
pletely withdraw the outsourcing system sim-ply because they lack the knowledge to carry
out the job when compared to Indians. The Tata
Nano car is a witness to the country possessing
technical expertise and with the nuclear deal
bill being passed, we are making progress in the
defense eld too.
Moreover, two other major components of
Indian GDP, agricultural and service sectorshave not been affected by the global slowdown
much. Other countries like Germany and UK
too consider India a potential hub, which will
ensure FDI and FII to ow for few more years
PROS
The Indian economy has seen a substantially
rapid growth in the last ve years. As India is
a cost-effective and labour-intensive economy,
it has immensely benetted from the outsourc-
ing of work by developed countries and also by
having strong manufacturing and export-ori-ented industrial framework. Since a large part
of growth and employment can be attributed to
the BPO and KPO trends, and the rise in Sensex
to the investments from FDIs and FIIs, what are
the chances that our countrys economy will
ourish?
Can a country which does not have its own
technology for gun production for the safety ofits citizens, a country which imports all the de-
fense technology from other developed nations,
actually be termed as the next big thing? In-
dia has very stringent regulations controlling
the exchanges which curb and block greater
amounts of investments from FIIs and FDIs.
China has the technology to manufacture a gad-
get at half the price offered by the US. India
does not possess such technical expertise.
Will our country ever grow beyond the reli-
gious issues like the Ayodhya Verdict, the po-
litical dirt that is being bought to the surface
during the CWG hosting, the corruption that
often leads to disputes between different states
within the country? With the food prices rising,
increase in imports, fall in agricultural output,
corrupted political governance, will our country
be able to match the expectations of the world?
It is time to reconsider the chances knowing that
developed nations like US has its president ask-
ing his countrymen to stop outsourcing jobs to
8/6/2019 Chaanakya 4_15
8/27
06
After much of the conicts between IRDA and SEBI over the control of the Unit-Linked Insurance
Plan (ULIP) in India, the court has nally given its nod and authentication to IRDA to regulate the
ULIPs. IRDA has taken stringent decisions in regulating the ULIPs which has directly affected
the insurance agents. To help both the customers and insurers a new policy was in the ground
plan waiting for the approval from the regulatory body and that policy is Universal Life Policy
(ULP). ULP are basically hybrid product with features of both traditional and unit-linked plan. It
is basically not a separate category of products instead it has modied and redened to make it
unique over ULP. ULIP is presently in the evolving stage in India.
By-Naveen Kumar Kulkarni, I MBA N
uniVeRsal liFe insuRance PolicY and iRda
to come. The CWG will no doubt act as trade
multiplier, though the only concern remains is
to what extent. Our country has a strong foun-
dation, which means that though it has tight
regulations the LPG process has come about
gracefully.
Our basis for claiming India to be the next big
thing is slow growth backed by a strong foun-
dation and a huge manpower possessing capa-
bility which is growing at an average rate of
8.5%. The rest of the world has no way out
other than to participate in our growth because
it is the only survival route for the developednations. The rupee value is growing stronger
in comparison with the dollar value which is
depreciating and this is not a short-term trend.
Indian companies are acquiring foreign com-
panies all over the world. This shows that In-
dian companies are getting a stronger hold in
the global market. Savings is the key factor that
will propel Indias growth story and our people
are less leveraged individually when compared
to citizens of developed countries.
As we know slow and steady wins the race, it is
incorrect to say that India is the Biggest Bubble.
countries like India, and requesting them to rst
employ their own countrymen. Will our coun-
try be able to provide employment to every In-
dian even when the developed nations stop pro-viding us jobs? Wouldnt the so-called already
developed nations withdraw their investments
from our country when their own survival itself
will be in danger?
Will our country withstand another nancial
crisis in case the European countries are un-
able to repay the debt, given that the market
was at all-time low when the sub-prime crisis
took place? Our country is known more to bea saving economy than a spending economy.
The MPS is somewhere around 35%, whereas
that of the USA is much lesser. Now recollect-
ing the theory of spending, India will not grow
given that it does not spend enough to generate
enough. The government borrowing in India
has already reached 50% of its GDP. History
is testimony to the fact that when such borrow-
ing reaches its peak (i.e. say 90-95%), a coun-try is trapped in the vicious circle of debt and
then there is no way out. Considering the cur-
rent scenario it would not be wrong to say that
India Is the Biggest Bubble.
8/6/2019 Chaanakya 4_15
9/275 CHAANAKYA VOL4_13
The major hallmark of this policy is its exibility in terms of
Premium amount
Tenure and
Sum assured of the insurance
Some of the other salient features of this plan are
The freedom to mutate the payment of the premium over the policys life that means if a person
has started a monthly payment then he/she has the freedom to swap to quarterly or annually.
If the customer fails to pay the premium amount within the stipulated time then the policy is
not automatically cancelled.
But if we compare ULIP and ULP then ULP holders cannot choose the investment option as
in case of ULIP. They will not get to know the asset value of their investment.
Some companies that used to offer universal policies are
Max New York Life Insurance, Reliance Life Insurance,Aviva Life Insurance and Bharti Axa Life Insurance. If you
descry both sides of the coin then we can conrm that ULP
is advantageous to its customers in terms of exible payment
and guarantee that policy will not lapse.
Reasons for Cancellation
But now IRDA has banned the further sale of the universal
life policies because of the complaints it received on the sale
praxis of the insurers and its arbitrage to life companies.The other reason is its high commission structure. IRDA
thinks that it needs to build a better regulatory framework for
protecting policyholders interest.
The regulatory body drafted some guidelines to dene the Variable Insurance Product also known
as Universal Life Policy to make it understand it in a better way. It has asked for the insurers
thoughts on the same so as to make changes or implement the same in future.
Impact on Insurance Companies
Stopping a certain policy immediately will affect the business of the company. When we considera particular policy there will be many agents working with that policy and the policy applied by
policy holder will be at different levels of acceptance and both will be affected. Some companies
have been strongly hit due to this decision because Universal Life Plan (ULP) is a major part
of their business. They have much of their business from ULP and one of the companies in this
category is Reliance while other companies are waiting for new guidelines as they think that
new guidelines may bring transparency in the system. Many companies are even requesting for
different norms to different companies.
Impact on Policy HoldersThe policy holders in a way are happy as many are in a dilemma regarding the regulations of
this policy. They are looking for IRDA to come out with a structured regulations to help them
understand the policy in a more better and efcient manner. But IRDA is not able to convince the
07
8/6/2019 Chaanakya 4_15
10/277 CHAANAKYA VOL4_1308
policy holders in terms of distinction between ULIP and ULP.
Conclusion
We can conclude that Universal Life Insurance which is a modication of the traditional plan
which can be observed from the guidelines drafted, has not been fully accepted by the customers
because of its loop holes and incomplete guidelines from the regulatory body and in this regard theregulatory body has stopped insurance companies from selling this policy until nal guidelines
are released to help the customers understand the policy in preferable manner.
By- Saurabh Khator, I MBA L
iPo studY: coal india
INTRODUCTION
With large number of IPO hitting the market, one may wonder what IPO is all about and how it
affects the common investor when markets are at their peak level. Initial public offer(IPO) is the
way company raises money from the investors for its future projects and invariantly gets listed onthe stock exchange. The market from which company raises funds is called the primary market.
The Primary Market is, hence, the market that provides a channel for the sale of new securities to
issuers, which can be the Government or corporate, to raise resources to meet their fund raising
requirements, working capital, debt repayment, acquisitions, and a host of other uses. The market
in which shares are already listed and traded is called the secondary market. To explain the process
of IPO, let us take into consideration Coal India IPO. Coal India- a government owned company
which is going public for the rst time to raise funds. It is the largest coal producing company
in the world with coal mining capacity of 431 million tonnes and reserves of 53.1 billion tonnes.
Government is planning to divest around 10% of their holding in the company with this IPO. The
IPO is a part of government fund raising of` 40,000 crore through disinvestment for this scalyear. The issue size is ` 15000 crore, the largest in line till now after Reliance power IPO size of`
11800 crore. Some analyst believes this IPO is an answer to Chinas biggest IPO Agriculture bank
of China (ABC) with issue size of $22.4 billion.
CONTENT
First step:-When a company decides to come up with IPO it has to go through series of guidelines
instituted by SEBI. The rst step is to appoint the *book running lead manager (BRLM), syndicate
members and registrar of the issue to carry out the whole process. In case of Coal India IPO we see
the BRLM are Citigroup, Morgan Stanley, ENAM Securities, Kotak Investment Bank, Deutschebank and Merrill Lynch Limited. Kotak Securities Limited is the syndicate member to the IPO and
Link Intime India Private Limited is the registrar to the company.
Second Step:-The second step involves the preparation of *1"Draft Offer document" by Coal In-
dia Ltd and the Book Building Lead Manager of the public issue. This document is submitted to
SEBI for review. After reviewing this document either SEBI ask lead managers to make changes
to it or approve it to go ahead with IPO processing. Road shows are carried out by BRLM for
investors viewpoint.
Third Step: After SEBI reviews draft offer document and revert back to lead managers to makechanges. It approves draft offer document which is now called offer document after SEBI ap-
proval. Its now on the issuer to decide the date and the price band of the issue.
8/6/2019 Chaanakya 4_15
11/27
09
Fourth step: The Company now sends the offer document to the registrar of the issue and the
stock exchanges it is willing to list itself. After getting the necessary approval, the price band of
issue is decided in consultation with the issuer company and the date when the issue opens is also
decided. After putting in date and price band the offer document now becomes Red Herring
prospectus which is then printed and posted to the syndicate members for distribution to the in-
vestors. In case of Coal India if we see the Red Herring prospectus the price band for the issue was` 225-` 245 and the date of the issue as October 18, 2010 and will get closed on October 21, 2010.
Coal India is 100 % Book Building Process. In coal India we see 50% being reserved for *2QIBs
(Qualied Institution Buyers), 15% for *2HNI (High Net worth Individuals) or NII and 35% for
the*2 retail Investors and 1% reserved for employees of Coal India. The number of equity shares
for public offer are 631,636,440 of face value of ` 10 each which puts the company market capi-
talization to 1.56 lakh crore, placing it in the category of navratnas. The *3minimum order quan-
tity is 25 shares and in the multiples of 25 with maximum being 400 shares for retail investors. By
this IPO, Government would reduce its holding by 10% in the company. The retail investors and
employees would get 5% discount on the issue price. The issue would close for FIIs and QIBson October 20, 2010 while for retail investors it would close on October 21, 2010.
CONCLUSION
With issue being closed on October 21, 2010 , market witnessed record bid from FII worth 1.20
lakh crore and retail investor subscribing IPO 2.23 times which is quite a good response for IPO
of this size(15000 crore). Retail Investors subscribed for 44.6 crore shares as against 20 crore
shares on offer. The HNI portion was subscribed 25.4 times. Overall the coal India IPO was sub-
scribed 15.2 times which shows the phenomenal response from all categories of Investors. The
IPO witnessed maximum bidding on the last day as QIBs have to keep in 100% money upfront
according to recent SEBI guidelines unlike earlier where they have to pay only 10 % of the ap-plication money. So far FII have pumped in 1.08 lakh crore into market this year. The IPO is
scheduled to open on November 4, 2010. The Success of this IPO sets benchmark for the coming
IPO like power grid Corporation FPO and SAIL FPO worth ` 8000 crore each. We expect the IPO
to open with ` 100 premium and advise investors to book prot and recover their investments, as
we expect selling from FIIs side after Diwali and at the end of this scal year.
*Book running lead managers are responsible for initiating the IPO processing, helping company
in road shows, creating draft offer document and get it approved by SEBI and stock exchanges
and helping company to list shares at stock market. Syndicate members collect the application forshares and Registrar of the issue is mainly responsible for processing of IPO applications, allocat-
ing shares to applicants based on SEBI guidelines, processing refunds through ECS or cheque and
transferring allocated shares to investors Demat accounts.
*1Draft offer document is usually a PDF le containing information about company business,
management, risk involved with the issue, company nancials and the reason company is going
for the IPO.
*2QIB or Qualied Institutional buyers are Financial Institutions, Banks, FIIs and Mutual Funds
who are registered with SEBI. NII or HNI are the ones which are not registered with SEBI likeIndividual investors, NRIs, companies, trusts etc. Retail Investor are common investor and they
cannot apply for more than ` one lakh in an IPO while HNI or NII can apply for more than one
lakh shares.
8/6/2019 Chaanakya 4_15
12/27
10
*3Minimum order quantity or lot size is the minimum shares that the investor can bid for while
applying for the shares. The shares are allotted on the basis of bid received in each category.Since
July 2006, SEBI made PAN number mandatory for IPO applicants. Forms submitted without PAN
number or wrong PAN numbers are considered as faulty application and they are not consideredfor IPO allotment.
RBi looKinG into MFis
The surge in complaints against Micro Finance Institutions (MFIs) for charging abnormally high
rates of interest and using strong arm tactics to recover loans has now prompted the apex regula-
tory bank, Reserve Bank of India (RBI), to form a sub-committee to look into their functioning.
The RBI Governor announced that this sub-committee will look into the functioning of the MFIsector, and what bearing they have on the RBI policy. This sub-committee will decide on how
they can convince these MFIs to pass on the huge prots made by them to the borrowers by lower-
ing their interest rates charged from borrowers. It may be noted that since a large number of MFIs
fall outside the purview of RBI, the latter cannot regulate their interest rates.
The apex bank can only suggest to these institutions to lower their interest rates, for the better-
ment of the borrowers.
Why this move?
The move comes after the Andhra Pradesh Cabinet approved an ordinance to rein in these MFIs,
after the hard core measures used by these institutions allegedly forced some people to commit
suicide. This ordinance calls for three year sentence and ` 1 lakh penalty for MFIs, in case found
harassing borrowers for recovery of loans. In addition should register with state government.
It may be noted that a bill to regulate MFIs is also being prepared, which will be tabled in the
Parliament, though this too may not cap the interest rates being charged.
RBI regulation and MFIs
The RBI regulates only those MFIs that are registered with it as non-banking nance companies.Although the registered companies cover over 80 per cent of the micronance business, in terms
of number of companies they constitute a small percentage of the total number of MFIs in the
country. The central bank, however, does not prescribe lending rates for these institutions.
Relevance of MFIs in this context
In wake of the nancial inclusion campaign of the government, and these MFIs being institutional
sources of getting credit, they have become very important, especially for the urban poor and in
rural areas. Like all other states, Punjab and Haryana, too, have a large concentration of MFIs, and
since these prove to be an alternative to non institutional source of nance like money lenders,
they have a very important role.If the banks were to increase their penetration and reach all unbanked areas in the hinterland,
these MFIs will be forced to offer credit at cheaper rates.
By- Amala Gadde, I MBA V
8/6/2019 Chaanakya 4_15
13/27
11
wiPRo scaM
Software major Wipros internal investigation into embezzlement of funds by a company
employee, who allegedly committed suicide after the scam came to light in December, found
that the amounts involved "were not material". The Bangalore-based rm also announced
changes in certain key positions in the controllership team, but did not reveal the amount of
money involved in the fraud.
The fraud came to light in December last year after a banker to the rm alerted Wipro about
an overdraft. An employee working with Wipros controllership division, within the nance
department, had embezzled about $4 million by exploiting the exclusivity of access to thecompanys banking accounts. The employee siphoned off the companys money to his personal
savings accounts in multiple transactions, worth anywhere between ` 1 lakh and ` 1.2 crore,
and used the money to acquire jewellery apart from investing elsewhere, including buying land.
By- Chinmay Jethwa, I MBA L
sBi Bonds
By- Prateek Nangia, I MBA V
The State Bank of India's rst retail bond issue of` 1,000 crore was subscribed over 17 times on
Monday (the opening day). The issue has closed on October 25.
The bond will be allotted on rst-come rst-serve basis. As it was oversubscribed on the rst day,
those who will apply on the second or third day will have no chance to get the bond. The country's
largest bank oated a public issue of lower Tier II bonds on Monday worth `1000 crore. Bids by
high net worth individuals were at 18 times their allotted amount, while institutional buyers ap-
plied for more than 46 times their allotment, the sources said. Indian companies have raised $6
billion in international bond sales this year, more than three times the amount raised in 2009.
Allotment of bonds
Market sources said the portion reserved for high net worth individuals was subscribed by over 19
times, while that reserved for retail investors was oversubscribed 6.4 times. The bond will offeran interest of 9.25% for 10 years and 9.5% for 15 years. The sale began on Oct. 18. State Bank is
selling bonds for` 5 billion , with an option to retain oversubscription up to another` 5 billion ,
according to a bank statement.
However, it has a call option SBI can redeem the bond - after ve years. But if the bond is not
redeemed after ve years, the bank will give an additional half a percentage point interest.
Why preference to SBI bonds
As banks are offering an interest rate of 7% to 7.5% for ve year deposit, the rate offered by SBI
on the bond could be termed as attractive. Citigroup, Kotak Mahindra Capital and SBI Capital
Markets are the managers for the issue. The bonds are proposed to be listed on NSE. Application
size for retail investors is `5 lakh.
8/6/2019 Chaanakya 4_15
14/27
12
coMModitY tRadinG
By - Mayuri Jain, I MBA K
Before going into depth of what commodity trading is, let us rst get an insight of basics of com-
modity market, its history and need of commodity trading.
Commodity market: Commodity markets are markets where raw or primary products are ex-changed. These raw commodities are traded on regulated commodities exchanges, in which they
are bought and sold in standardized contracts.
History: The history of organized commodity derivatives in India goes back to the nineteenth
century when the Cotton Trade Association started futures trading in 1875, barely about a decade
after the commodity derivatives started in Chicago. Over time the derivatives market developed
in several other commodities in India. Following cotton, derivatives trading started in oilseeds in
Bombay (1900), raw jute and jute goods in Calcutta (1912), wheat in Hapur (1913) and in Bul-
lion in Bombay (1920). In order to restrict the unnecessary speculation in essential commoditiesand prevent farmers interest government prohibited forward and options trading of commodities.
As a result commodities market tumbled down. Later in 1993, economy becoming more liberal
and globalized government allowed future trading in 17 commodities group. But still, commodity
Wipro declined to offer any comments, as the company is in a silent period ahead of its second
quarter results later this month.
Early investigations into the embezzlement reported at Wipro, earlier this year, hinted the in-
volvement of multiple ofcials and units within the companys nancial department. Apart from
investigating how the processes were tweaked to carry out the embezzlement, E&Y, along with
the internal auditors, is also examining if there were more departments and people involved in
the incident. For instance, while the controllership unit, where the embezzlement happened, is re-
sponsible for authorizing payments, such requests are processed by Wipros payments-processing
department called Wividus. The embezzlement has been happening over three years. It cannot
be carried out in isolation. The objective of investigations is to identify the process improvements
and even x accountability, said an insider requesting anonymity. He added that it was still too
early to draw conclusions, since the investigation is expected to be completed by October-end
only.
Audit rm Ernst & Young, apart from an internal probe committee led by Narayanan Vaghul,
former chairman of ICICI and an independent director with the countrys third-biggest software
exporter submitted their reports to the companys board. Wipro led its annual report with the US
Securities and Exchange Commission for the year-ended March 2010 more than a month after the
scheduled September 30 deadline, as it was waiting for the on-going investigations to be com-
pleted.
Though the image of the software giant has been tarnished up to an extent, the case does not mean
that it has a permeable system. However this issue has once again raised the question of impor-
tance of IT security and evaluation of vendors security standards.
8/6/2019 Chaanakya 4_15
15/27
13
futures trading in India remained in a state of hibernation for nearly four decades, mainly due to
doubts about the benets of derivatives. Thus government further made policy changes favour-
ing commodity derivatives and it was a timely decision too, since internationally the commodity
cycle was on the upswing.
Why are commodities derivatives required?
It is common knowledge that prices of commodities, metals, shares and currencies uctuate over
time. This makes people feel that price changes in future can create risk for businesses. Deriva-
tives are used to reduce or eliminate price risk arising from unforeseen price changes.
Two important derivatives are futures and options.
(i) Commodity Futures Contracts: A futures contract is an agreement for buying or selling a com-
modity for a predetermined delivery price at a specic future time. The commodity futures have
existed since the Chicago Board of Trade (CBOT, www.cbot.com) was established in 1848 to
bring farmers and merchants together. The major function of futures markets is to transfer pricerisk from hedgers to speculators. For example, suppose a farmer is expecting his crop of wheat to
be ready in two months time, but is worried that the price of wheat may decline in this period. In
order to minimize his risk, he can enter into a futures contract to sell his crop in two months time
at a price determined now. This way he is able to hedge his risk arising from a possible adverse
change in the price of his commodity.
(ii) Commodity Options contracts: Like futures, options are also nancial instruments used for
hedging and speculation. The commodity option holder has the right, but not the obligation, to
buy (or sell) a specic quantity of a commodity at a specied price on or before a specied date.
Option contracts involve two parties the seller of the option writes the option in favour of the
buyer (holder) who pays a certain premium to the seller as a price for the option. There are two
types of commodity options: a call option gives the holder a right to buy a commodity at an
agreed price, while a put option gives the holder a right to sell a commodity at an agreed price
on or before a specied date (called expiry date).
The option holder will exercise the option only if it is benecial to him; otherwise he will let the
option lapse. For example, suppose a farmer buys a put option to sell 100 Quintals of wheat at a
price of`25 per quintal and pays a premium of`0.5 per quintal (or a total of`50). If the price
of wheat declines to say `20 before expiry, the farmer will exercise his option and sell his wheatat the agreed price of`25 per quintal. However, if the market price of wheat increases to say `30
per quintal, it would be advantageous for the farmer to sell it directly in the open market at the
spot price, rather than exercise his option to sell at `25 per quintal.
Present scenario:
Three multi-commodity exchanges have been set up in the country, viz,
The National Commodity and Derivative Exchange Ltd (NCDEX),
The Multi Commodity Exchange of India Ltd (MCX) and
The National Multi Commodity Exchange of India Ltd (NMCE).
With the help of these stock exchanges retail investors can now trade in commodity futures with-
out having physical stocks!
8/6/2019 Chaanakya 4_15
16/27
14
The most widely traded commodities are
Industrial metals: comes in many shapes and forms, with copper being the most liquid in
India, followed by nickel, lead and zinc.
Precious Metals: one of the most actively traded commodities, with gold and silver beingthe two most liquid ones.
Energies: Crude oil and natural gas.
Agriculture: more liquid commodities are soya bean, guar seed, and chana, while others
like wheat, maize, potatoes and sugar are also traded.
Commodities are easy to understand as far as fundamentals of demand and supply are concerned.
One should understand the risks and advantages of trading in commodities futures before taking a
leap. Historically, pricing in commodities futures has been less volatile compared with equity and
bonds, thus providing an efcient portfolio diversication option.
In fact, the size of the commodities markets in India is also quite signicant. Of the countrys
GDP of`13,20,730 crore (` 13,207.3 billion), commodities related (and dependent) industries
constitute about 58 per cent.
Currently, the various commodities across the country clock an annual turnover of `1,40,000
crore (` 1,400 billion). With the introduction of futures trading, the size of the commodities mar-
ket has grown many folds here on.
did You Know?
By- Abhijeet Singh I MBA G
8 Good things about the credit crunch
It is very hard these days to watch the news or read your daily newspaper without being constantly
bombarded by predictions of doom and gloom and worse days to come due to the current credit
crunch. Large banks are falling like ies after a lengthy fanatical high fuelled by a long greedy
lending binge. With an increasing number of large businesses collapsing and the promise of manymore to come, people nd themselves constantly battling with feelings of uncertainty about the
future were catastrophe seems to be looming just around the corner. However, we conveniently
forget about the many perks that might result out of all this misery and we seem to have a strong
tendency to push aside any optimistic ideas in keeping with the general doomsday mood that the
media keeps inicting upon us. The following points might help add a pinch of salt to our general
perception of life and project a icker of light towards the end of the tunnel.
1. High Ination
With ination edging just below 5 points, things are getting more expensive every day. Yes, we
are coughing up increasing amounts of money for the daily essentials and most of our salarieswill not keep up with the increase. But for those of us who have debts and mortgages -which is
probably a large majority as a result of the government's last ten years economic policy- things
are not as bad as it seems. With ination gures very close to the Bank of England interest rates,
8/6/2019 Chaanakya 4_15
17/2714 CHAANAKYA VOL4_131515
we are paying our mortgage lenders a smaller margin of prot in real money value. For a typi-
cal `100000 mortgage, ination alone is reducing just under`5000/year of the real value of the
money owed. In a few years when we eventually emerge from the other end, many people will
realize that this credit crunch has reduced the required time for paying their mortgages compared
to average years.
2. Lower Interest Rates
No bonus points for guessing that sooner or later, the Bank of England will have to reduce interest
rates to stimulate the economy. In our modern volatile economic environment, we are in a rare
situation where we can be that certain about the coming year's interest rate predictions. This is
obviously good news for those of us with debts and mortgages.
3. Lower Immigration
Remember how hard it was last year to go through a day without reading a story about the con-
siderable inux of immigrants into an already saturated island with infrastructure struggling to
cope with the numbers? There has been a long debate about the effects of immigration and about
weighting its benets against its social and economical impacts.
This has prompted the government to introduce major reforms to the immigration rules which
came just in time for the credit crunch to score a double whammy in the same direction. A weak
pound combined with an unsecure, over-saturated job market is making the UK less attractive
for new immigrants and even forcing some of those already here to think about leaving. The
correction of course does not happen overnight, but it seems that the system has its own way of
bringing back harmony and balance equalizing immigration volumes with the country's capacityto welcome new comers.
4. Positive Environmental Impacts
With greedy big oil inating prices and a weak US dollar, highly oil-dependent businesses in
general are becoming less competitive compared with less oil-dependent ones. There is a growing
incentive for both governments and businesses to switch to greener options in addition to making
research in order to nd alternative energy sources more economically viable.
5. Increased Exports
It is a no brainer that the current weak pound will increase the competitiveness of our business
abroad. This will play a signicant role in getting us out of the crunch and will help create new
jobs on the long run.
6. Collapse of Under Performing Businesses
They say in an up moving market, only fools manage to lose money, while in a crashing one only
the best are able to survive. The credit crunch is torching through nancial markets like a forest
re. It is weeding away old infrastructures with weaker less cost effective businesses leaving
behind only the solid foundations. Once the re is out, we will have a market with only the best
performing useful businesses and lots of space for expansion.
7. Improved Tourism Revenue
A weak sterling and high air fares have already forced many of us to consider exploring the great
8/6/2019 Chaanakya 4_15
18/27
16
destinations that good old GB has on offer for our next holiday. It is also cheaper now for foreign
tourists to visit the UK which promises a nice timely boost to the tourism industry that in turn will
generate extra real revenue contributing to end the crunch.
8. Lower House Prices
We all have been complaining about over-inated house prices during the last 5 years, but when
house prices come crashing down like a wall of bricks, we complain even more. The reality is, as
we all knew and conveniently ignored, we all had it coming, and a seemingly endless ination in
house prices is obviously unsustainable on the long run.
Although this crash might be bad news for those of us who need to sell and down-grade during
the crunch, the majority of home owners who borrowed sensibly will not be affected even if they
wanted to sell and buy a similarly priced or more expensive property.
As for rst time buyers, yes they will struggle during the crunch to get a mortgage, but once this isover, they will be able to buy the same houses with smaller mortgages, and with ination wiping
even more of their mortgage costs and interest rates expectedly coming down, this might compen-
sate them for the rent money they had to pay during the crunch years.
Source: www.articlebase.com
8/6/2019 Chaanakya 4_15
19/27
17
inVestoR Focus
By- Madhukar Das, I MBA G
Technically Speaking
The price chart forms morning star
candlestick pattern suggesting bulls
are stepping in. Also there is a 2week double bottom forming signal-
ing a short term upmove.
Stochastic chart further confirms
the short term upmove. Crosses inthe oversold region.
William %R crosses over 80 in
oversold region. And trend
divergence is reverse of price,
signaling short term buy oppor-tuni ty.
Commodity channel index line
crosses over 100 and 50 lev-els.
Volume chart shows healthy
activ ity and is trending up for
last few trading sessions.
Special points of
interest:
Since we are lookingat a trading horizonof 15-30 days, we
shall give moreweightage to technical
analysis and price
trend of the stock.
We shall also study
the fundamental as-pects of a company to
avoid getting into lossmaking trade positionsin case of movement
of market in direction
opposite to that of myprediction.
Recommendation : BUY
Price : ` 1025.05
Target :`
1100Stop loss : `980
BUY :Gemstone
Investments
CMP` 10.40
Target` 12.10
Stop Loss` 9.80
Short Sell :
Zenith InfotechCMP` 239.95
Target`208
Stop Loss`250
Indiabulls Securities
CMP27.80
Target` 25.10
Stop Loss` 29
Other PicksReliance InfrastuctureThe markets have witnessed seesaw movement in the past couple
of weeks owing to fund ow in and out of Indian markets my FIIs. Fi-
nance minister Pranab Mukherjee has denied any FII cap for now, it
remains to be seen where the market heads in coming weeks.
Fundamentally Speaking
Reliance Infrastructure Ltd is not only Indias largest private sector
enterprise in power utility but also the largest private sector player in
many other infrastructure sectors of India. It has various projects un-
der public-private partnership model. They will develop Mumbai met-
ro and operate it for 35 years. Also NHAI has given several orders to
build, operate and transfer scheme, ve major projects in Tamil Naduand one in Rajasthan. Mega plans in pipeline for specialty real estate.
Reliance Infrastructure also distributes more than 28 billion units of
electricity to cover 25 million consumers across different parts of the
country including Mumbai and Delhi.
The current P/E is at 24.1 as against industry average of 25.3. Also
the price is 21x FY2011 earnings. The September quarter sales are
expected to grow by 18-20%.
8/6/2019 Chaanakya 4_15
20/27
aluMni sPeaK
By- Geetika Gupta, I MBA N
In this edition, we have Mr. Bipin Kumar Singh to give us insights on entrepreneurship.
Name- Mr. Bipin Kumar Singh
Qualication- BBM, MBA- Finance
Organization: RBWI
Designation- Director
Batch- 2006
Previous organization worked in- RMPW/ PRIVATE BANKER
E-mail Id: [email protected]
Contact Number: +91 95388 67014
Chaanakya: What does your present job involve?
Mr. Bipin: It involves managing the team, hiring and conducting performance appraisals, settingup targets and continuous monitoring of the health of the company.
Chaanakya: What inspired you to venture into entrepreneurship? How has your journey been
so far?
Mr. Bipin: Most importantly, passion to start something new, something different was the driv-
ing force behind the birth of the idea and an equally passionate team to work with encouraged
me to venture into this new avenue. The road was never easy. But with the initial crunches and
inevitable hurdles, it was a bit critical to stay calm and we have managed to steer clear of that so
far. So, with every move, we learn some things work while others dont. And we keep improving
by the day.
Chaanakya: What, as an entrepreneur, do you expect from MBA students?
Mr. Bipin: A keen ear in current affairs, good communication skills, dedication, loyalty and a
spark to outperform peers are some of the essential attributes.
Chaanakya: The rst year students prepare themselves to hit the corporate arena as INTERNS.
What advice would you give them for getting the best out of their internship?
Mr. Bipin: Keep your eyes open towards the developments in the corporate arena and try to ab-
sorb as much knowledge as you can during this internship.
Chaanakya: The Students from the second year are all set to take up Placements. Your Advice
Mr. Bipin: The students must have a blend of right attitude and good presentation skills. They
should move in the direction of right areas and identify opportunities and posses a knack for
practical application of Business knowledge.
Chaanakya: Lastly, a few words for our Budding Managers
Mr. Bipin: Never feel that you have learnt enough to be in a job, the end result will follow pro-
vided you have adopted the right path.
Thank You!!!
18
8/6/2019 Chaanakya 4_15
21/27
19
Three nger booger
It refers to a situation that gets completely botched up
(typically unexpectedly) and is extremely difcult toget rid of or to get away from. It can also describe some-
thing you end up with that you didnt ask for and dont
want, but cant get rid of.
Use: Mike got a new client referral, but it turned out
that the client had all kinds of problems nobody expect-
ed to have to deal with, and was a general pain in the
ass. His friend that referred the client said, Man, Im
sorry, I didnt mean to send you a three nger booger.Soft paper report
It is a negative reference to a report, indicating disbelief
or a lack of condence in the reports facts, or just gen-
eral disrespect for the report or its author. Its called the soft paper report because it needs to be
written on soft paper, so that it will have another use.
Use: Craigs presentation had no substance; it was a soft paper report.
Feed the ducks when they are quacking, dont look for ducks to feed
This phrase is used in regards to looking for investors or partners. You would always rather havethem come to you hungry than chase them around with the bread. Be ready for investors when
they come to you showing interest; dont go after them trying to sell.
Use: Brian advised, rather than trying to go to every potential lender that we should whisper
down the lane, as it was a small community of prospects and we should let them come to us. Then
we could feed the ducks when they are quacking, rather than just looking for ducks to feed.
Poof offering
It refers to a type of public offering where individually owned businesses suddenly combine their
ownership into a new public company. Its called a proof offering because on one day you havefour private businesses and the next day, following the public offering, you have one new public
company.
Reference: Green Weenies and Due Diligence by Ron Sturgeon
BuZZ woRds
THE AMERICAN WAY
8/6/2019 Chaanakya 4_15
22/2716 CHAANAKYA VOL4_1320
QuiZ
1. Alfa, sky bags and Footloose are brands associated with which company?
2. Asias largest gold renery will come up in the Manesar, Haryana. It is jointly built byIndian owned MMTC and PAMP. PAMP belongs to which country?
3. Boeing, GE Aviation and Lockheed Martin were in news recently for
4. Which channel is going to launch a sub-brand for women, with the letter 'W' being added
to its original name?
5. From chief of SpiceJet to chief of Kingsher Airlines, who made this transition recently?
6. For the eleventh consecutive year, this brand topped Interbrand's list of 100 'Best GlobalBrands'. Can you name it?
7. The 'Simply Clever' ad message is associated with which automaker?
8. Recently this bank completed 150 years of its operation in India and it goes with the tag-
line Committed to a changing India. Which bank is it I am talking about?
9. Microsoft research has launched a multilingual content creation tool for Wikipedia called
as
10. In which country's coins you can nd the following lines imprinted, 'This is the root of all
evils'?
By- Deepak Jose I MBA K
8/6/2019 Chaanakya 4_15
23/27
cRosswoRds
Across
3. The banks that have no physical presence and conducts business over
phone
6. The rst woman to serve as Securities and Exchange Commissions
permanent chairman
8. The famous Hedge Fund owner who made $2 billion prot during recession
Down
1. Brazil stock exchange located at Sao Paulo
2. He is the poster-bad-boy of dot com bubble
4. The banks that are licensed by nations with low taxes and limited nancial regula-
tions
5. The measure to know how the price of a particular stock uctuates in relation to the
whole stock market
7. The only major automaker to avoid bankruptcy
21
8/6/2019 Chaanakya 4_15
24/27
Quiz Answers1. VIP
2. Switzerland
3. These 3 companies together bagged 42% of
the total defence deals.
4. ESPN (The sub-brand for women will be
ESPNW)
5. Sanjay Aggarwal
6. Coca-Cola
7. Skoda8. BNP Paribas
9. Wikibasha
10. Vatican City
Finance-de-HuMoR
JoKes aPaRt
22
QUESTION: When does a person decide to become a stockbroker?
ANSWER: When he realizes he doesn't have the charisma to succeed as an
undertaker.
8/6/2019 Chaanakya 4_15
25/27
JunioR teaM
Apoorv Jhudeley
& Rajat Sikri
Editor-in-chief
Md. Zafar Iqbal
Cartoon
Vaibhav Nagar
News
Naveen Kulkarni
Crosswords & Quotes
Sumit Kumar Gupta
Graph & Rates
Amit PrakashBook and Magazine Review
T. Deekshith Ravi Chandra
Student Article
Rohit Dhannawat &
Saurabh Khator
Investors check
Amit Prakash &
Chinmay Uchhrang Jethwa
Scam
Mandeep Kaur &
Mayuri Jain
Commodities Market
Richa Jain &
Sona Joseph
Debate
Akshat Malik,
Geetika Gupta &
Manan DattAlumni Speak
Abhijeet Singh &
Deepak Jose
Quiz & Did You Know
Gaurav Jain &Madhukar Das
Investor Focus
Apurva Gupta &
Pragathi P.
Buzz Words
Kumar Gaurav &
Meenakshi Ramnath
Review Committee
Apoorv Jhudeley &
T. Deekshith Ravi Chandra
Creative Head & Design
8/6/2019 Chaanakya 4_15
26/2718 CHAANAKYA VOL4_13 CHAANAKYA VOL4_13
senioR teaM
Manesh Paul Mani
Editor-in-chief
Sachin
Cartoon
Amutha Priya D
News
Nivedita Tiwary
Investors check
Sonal Sankhla
Student Article
Nithya Prakash
Scam
Mookambigai
Commodities Market
Niveditha S
Debate
Clifford Cardoza, Smitha
Joseph & Mohil Kapoor
Alumni Speak
Dorin Jane
Quiz & Did You Know
Mantri Ankit Atul
Quotes & Buzz Words
Pottim Sahiti Reddy
Crosswords
Vipul Jain
Graph, Rates
Dhanya Anna Kurianm &
Resmy Sebastian
Review Committee
Bhargav K.Creative Head & Design
Pradeep Thangavel
Compiling and Editing
8/6/2019 Chaanakya 4_15
27/27
Institute ofManagement
Hosur Road, Bangalore - 5600029, Karnataka, India
Tel: +91-80-4012 9350/9351/9355