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Term of Week

In Focus

Opinion

Personality

Brand World

Seigniorage | 6

Cicret Bracelet|12

Kailash Satyarthi |11

Fight of OPEC and U.S. for

market share and its impact

on other economic factors| 4

DECEMBER 14, 2014 | A FINNICHE INITIATIVE

India Russia Summit

Highlights| 2

Disclaimer: FinXpress takes no responsibility for the opinions expressed in the magazine.

Another week of hectic schedule has gone by with IMT continuing to live by its motto of

IMT never sleeps. Report submissions, presentations to be submitted in the coming week

and the winter chillness setting in and the year coming to an end, IMT is on a high to the

end the year on a positive note.

Club FinNiche releases its weekly magazine FinXpress with the In Focus talking about

the ‘India—Russia Summit Highlights’. The Opinion gives an overview of ‘Fight of

OPEC and US for market share and its impact on other economic factors’.

The term of the week describes “Seigniorage", difference between the value of money

and cost of producing it physically. Do have a look at the market section, Tech world

which brings to you about Cicret Bracelet and Personality of the week, Kailash

Sathyarthi.

Hope everyone likes the revamped version of magazine. Club FinNiche welcomes any

comments, suggestions or criticism regarding the magazine. Please do write to us and

share your ideas.

Happy Reading!

Regards

The Editorial Team

Club FinNiche

December, 14 | 2014 | Volume 25

India—Russia Summit

Highlights

Fight of OPEC and US for

market share and its impact

on other economic factors

Seigniorage

Kailash Sathyarthi

Cicret Bracelet

The bilateral summit between

India and Russia takes place

every year alternatively in

Moscow and in New Delhi. The

forthcoming summit will be the

15th annual bilateral summit

between the two countries.

- By J.Sindhuja

Russian president Putin yet again delivered a

master stroke by signing 20 deals which are of

worth over $100bn ranging across sectors like

energy, oil & gas and defence. This comes at a

when time when his country’s economy is

facing severe headwinds owing to various

reasons like falling crude oil prices and severe

western sanctions imposed post Crimean

crisis. The two countries have signed total 7

inter-governmental and 13 commercial

agreements which also include the strategic

vision for cooperation for peaceful uses of

atomic energy.

Firstly amongst this plethora of deals, $40bn

worth was allocated in the nuclear energy

space and is spaced out across a span of 2

decades. Under this agreement, Russia will

help India in building a total of 12 new

nuclear reactors which would be a shot in the

arm to the government’s ambitions of

achieving energy security. However each of

these reactors are expected to cost thrice the

value of cost incurred for the Kudankulam

plants, mainly owing to the tough nuclear

liability laws adopted by the Indian

government.

Both the premiers have also signed on a pact

which involves Russia producing state of the

art helicopters in the Indian factories to

reduce cost overruns and production delays.

This is also the first major defence deal signed

under the ‘Make in India’ campaign as it

allows India to export these helicopters to

other countries.

The other key deals which were signed in

principle are mentioned as below

Agreement on training of Indian military

personnel in the Russian military

establishments. This move was aimed to

help in facilitating better understanding

among the two defence forces.

Enhancement of cooperation in Oil & Gas

sector. This envisages on the possibility

of constructing a hydrocarbons pipeline

between Russia and India, which has

long been neglected due to various

factors.

Tata group company- Tata Power has

entered into a Memorandum of

Understanding with the Russian Direct

Investment Fund (RDIF) to aggressively

pursue investment opportunities in the

energy sector within Russia.

Oil India Limited (OIL) and

Zarubezhneft have also entered into an

MOU on joint exploration of

hydrocarbons and also providing

technical assistance for the hydrocarbon

projects in India.

New protocol agreement signed between

the Ministry of External Affairs (MEA) of

both the countries which would

promulgate much closer consultations

between the two countries in 17 different

international issues.

To conclude these agreements not only

further strengthened the Indo Russian

relations but also placed them in a much

higher trajectory. Also these agreements

come in as a rude shock to the western

world just when they were beginning to

strengthen their relations with India.

- By Priti Sureka

Oil prices have been dropping sharply over

the past 6 months. In June, 2014 oil price was

$115 a barrel which now has fallen by more

than 45%. Now the oil price is below $60. In

response to this, OPEC which controls nearly

40% of the world market, had a meeting in

Vienna where it failed to come to an

agreement regarding production and supply

and ended up keeping production

unchanged.

Oil price is determined by demand and

supply and also by expectation. Presently,

demand is very low in Europe and Asia

because of weak economic activity and shift

from oil usage to other fuels. Geopolitical

risks also loom large. Situation of civil war in

Iraq and Libya is not allowing them to

produce much oil. On the other side, Saudi

Arabia has billions of reserves so it is not in

favor of sacrificing its market share so as to

restore the price. Such a drastic fall affected

the American and other Western oil

companies who undertook high-cost projects

borrowing heavily expecting high oil price.

But the situation is worst for Russia and Iran

as these countries are dependent on high oil

prices to balance their budgets. The Russian

economy was already facing weak growth

and now such jump in global oil prices is

putting an adverse pressure on the economy.

Oil revenue accounts for about 45% of the

country’s budget. And the spending of the

Russian Government has assumed oil price to

be in the range of $100 a barrel in 2015. So if

oil prices continue to fall in such a way, then

the nation has to either use its reserves or cut

back its planned spending.

After facing some years of recession, Iran’s

economy started to rebuild. The economy is

also facing trouble because of decline in oil

prices as it also expected oil price to be in the

range of $100.

Given the situation, OPEC seems to adopt a

price war strategy against oil producers in the

U.S. OPEC mainly Saudi Arabia is in favor of

reduction in oil prices so that it becomes

unprofitable for U.S. oil producers and they

leave the market. Meanwhile, in the U.S., fall

in crude oil prices may tender an economic

boost as gasoline prices will be reduced and

households will have more money to spend

elsewhere. Investment will rise and so as

capital formation in the economy,

simultaneously stimulating growth

momentum.

Saudi Arabia has billions of

reserves and it cannot sacrifice

its market share to restore the

oil price in global market.

These nations are dependent

on high oil prices to meet its

budget requirements and thus

they are adversely affected by

drastic fall in global oil price.

The drop in oil prices is having an impact on

shale extraction operations and offshore

drilling of U.S. Shale operations also

generate employment and it is doing much

better in U.S.

However, it is becoming difficult for shale

drillers to generate enough cash flows to

pay back the loan due to low oil prices.

According to a recent report by Bank of

America, 15% of U.S. shale producers are

already losing money at current oil prices.

However, Bank of America expects a

rebound in oil prices in the second half of

2015 .

Oil contributes around $1.2 trillion to U.S.

GDP and gives over 9.3 million jobs. So it is

an alarming situation for the U.S. economy.

If oil price rises, food prices will rise and it

will lead to inflation. The reverse case also

holds good. Falling oil prices results in fall

in price of food. The ultimate result is

deflation. Therefore, countries already

facing deflation issues will be extremely

troubled by inability to pay debt. On the

other side, dollar value is rising relative to

many other foreign currencies. Hence, debt

repayment is likely to be very difficult.

LNG prices decrease as oil prices. Hence,

fluctuating LNG prices affect investment in

infrastructure required to export LNG. As a

result, export of LNG has become less.

The world is reaching to the limits of debt

expansion. Lower oil prices also help

interest rate to go up. However, there is

always a limit on the borrowing amount by

individual, business or government. In such

a case, the most obvious solution is

Quantitative Easing or other strategies.

However, QE cannot be adopted just like

that. There are many pros and cons attached

to it. Firstly, it creates an asset bubble and it

also encourages investment with lowest

probability of success.

Therefore, the consistent fluctuation rather

decline in oil prices and the pricing and

production strategy of OPEC countries and

U.S. are affecting not only the concerned oil

producing countries but also other nations

who are dependent on oil and who are

heavily burdened by debt.

Seigniorage also spelled as

seignorage is the difference

between value of money and

cost of its production

Seigniorage means right of lord to mint

money. Seigniorage is the revenue made by a

government from the printing of currency. In

other words, it is the difference in the face

value of money and cost of making it

physically.

Seigniorage is the revenue derived by the

government when the cost of minting coins or

printing money is less than the market value of

the currency, while if the cost of producing

money used in circulation is more than the

intrinsic value of the money the government

loses money on seigniorage. It is the value the

government generates by adding its stamp to

an ordinary piece of paper, piece of metal or

electronic bank entry. Paper/electronic fiat

money has a higher seigniorage as the source

is not a physical metal to create it, whereas

coins have lower seigniorage because the it

costs to create coins and source metal.

In the year 1290, King Philip IV lacked

resources to fund his wars, so he began to

debase the currency by increasing seigniorage

he extracted from melting new coins. This

caused devaluation of French currency,

inflation and disappearance of gold and silver

in the kingdom. This is exactly same as

printing of money, an increased monetary base

with less intrinsic value creates inflation. This

is due to the fact that level of goods available

for sale are exactly same but more money is

available for circulation resulting in higher

inflation as these goods will be sold at higher

prices to compensate. The term also applies to

monetary seigniorage, where sovereign-issued

securities are exchanged for newly minted

bank notes by central bank, thus allowing the

sovereign to borrow without the need to

repay. However it refers to sovereign revenue

obtained through debt monetization including

expansion of money supply during GDP

growth and meeting yearly targets of inflation.

A person trades one ounce of gold for a

government issued gold certificate, and holds

the certificate for a year and then redeems it in

gold. If the person ends up with exactly one

ounce of gold, no seigniorage occurs.

If instead of issuing gold certificates, a

government converts gold into currency at the

market rate by printing currency notes and a

person exchanges one ounce of gold for its

value of currency. This person keeps the

currency for an year and then exchanges it all

for an amount of gold at the new market value.

If value of currency relative to the value of

gold has changed in the duration, the second

exchange may yield more or less than one

ounce of gold.

If the value of currency relative to gold has

decreased, then the person receives less than

one ounce of gold and seigniorage has

occurred. If the value of currency relative to

gold has increased, then the person receives

more than one ounce of gold and seigniorage

has not occurred. Assuming that the value of

one ounce of gold remains constant through

the year.

- By Mohammed Zakir Ahmed

Department of Commerce said

on Thursday retail sales rose

0.7% during November, which

was the best performance in

eight months.

With the S&P 500 hitting so

many records this year, while

many economies outside the

U.S. are growing at a sluggish

pace and China showing signs

of a slowdown, there’s been an

endless stream of warnings

that the market is overvalued.

INDIAN MARKETS

BSE benchmark Sensex extended its falling trend for the second consecutive week by

plunging 1,107.42 points due to all-round selling pressure in view of declining crude

prices and caution ahead of key macroeconomic data. The Sensex resumed almost

stable and touched a high of 28,454.85 before falling back to 27,320.05. The 50-issue

CNX Nifty of the NSE also plunged by 62.75 point, about 0.75 per cent, to end below

8,300-mark for the first time after one and half months at 8,292.90.

BSE SENSEX

CNX NIFTY

Open High Low Close

SENSEX 27,598.96 28822.37 28217.50 27,602.01

NIFTY 8,302.00 8626.95 8504.65 8,292.90

Crude oil for January

delivery CLF5, -4.10% was

trading on the New York

Mercantile Exchange for

$59.18 a barrel.

Major worry for economists,

the U.S. recovery might be

stalled by very slow growth in

Europe, and a slowing of

China’s rapid growth.

COMMODITIES

EXCHANGE RATES INTERNATIONAL MARKETS

Commodity Unit Rs / Unit % Change

Gold 10 grams 27199.00 -0.20

Silver 1 kg 38649.00 -0.04

Crude Oil 1 bbl 3636.00 -4.66

INR/ 1 USD 62.44

INR /1 EURO 77.38

INR/ 100 JAPAN YEN 52.49

INR / 1 POUND STERLING 98.15

Open High Low Close

NYSE Comp 10,690.14 10,690.14 10,500.50 10,690.14

NASDAQ 4,665.35 4,810.86 3,946.03 4,708.16

S&P 500 2,028.50 2,031.75 2,017.00 2,035.33

FTSE 100 6,461.70 6,461.70 6,297.44 6,461.70

CAC 4,197.48 4,202.52 4,103.49 4,225.86

DAX 9,794.20 9,799.65 9,586.22 9,862.53

NIKKEI 225 17,317.69 17,526.19 17,298.19 17,257.40

SSE 50 2,186.74 2,849.41 1,402.05 2,193.54

Hang Seng 23,328.99 23,445.96 23,230.03 23,312.54

Infosys Founders Including Murthy Sell Stakes for $1.1 Billion

Some of the founders like N R Narayana Murthy, Nandan Nilekani, S D Shibulal and K

Dinesh of Infosys Ltd sold shares worth $1.1 billion (Rs. 6,807 crore at 1 dollar = 61.88 rupees)

in India's second-largest IT services exporter on Monday, cashing in on a more than 20 per

cent gain in the stock since the company picked its first outsider as chief executive. Infosys

shares have so far risen 23 per cent since the company in June named Vishal Sikka, a former

executive at global software firm SAP, as its CEO in a bid to revive growth.

The four founders and members of their families sold 3.26 crore shares in Infosys at a fixed

price of Rs. 1,988.87 each, a 4 per cent discount to Friday's close, said Deutsche Bank, the sole

book runner of the sale. The four were all company executives who left before Sikka took

office. The sale reduces the combined stake of all the founders and their families to 5.1 per

cent from nearly 8 per cent, Thomson Reuters data shows. Infosys shares ended down 4.8 per

cent, while the Nifty fell 1.2 per cent.

Nifty ends below 8400, Sensex sheds 322 pts on China woes

Equity benchmarks as well as broader markets shed more than a percent on Tuesday,

tracking sharp fall in Chinese markets and further decline in crude oil prices. More profit

booking by investors also triggered sell-off in the market. The 30-share BSE Sensex closed

below the psychological 28000-level, down 322.39 points to 27797.01, continuing for the third

consecutive session today and hitting a one month low.

Globally, Asian markets closed lower with the China's Shanghai down 5.4 percent on profit

taking amid expectations of weak GDP in 2015 and liquidity fears. Hang Seng lost 2.3 percent

following slump on Wall Street last night while European markets like France's CAC,

Germany's DAX and Britain's FTSE dropped nearly one percent post Asian rout and further

fall in crude oil prices. Brent crude declined to fresh five-year low of 65.35 a barrel, before

showing a recovery to 66.46 a barrel.

Back home, all sectoral indices closed in the red. BSE Auto, Bank, Capital Goods, FMCG,

Metal and Oil & Gas indices were down 1-3 percent while the fall in Healthcare and IT

(down 0.2 percent) was less compared to other indices. Sesa Sterlite was the biggest loser on

the Sensex, down more than 5 percent on China woes. Other metals stocks like Tata Steel and

Hindalco Industries were down 3 percent each. State-run oil explorer ONGC shed over 4

percent to hit a 7-month low Rs. 351 as Macquarie lowered target price for the stock to Rs.

470 (from Rs. 500). Declining shares outnumbered advancing ones by a ratio of 2044 to 907 on

the Bombay Stock Exchange while four shares slipped for every share gaining on the

National Stock Exchange.

IDBI, which holds 16.6 percent

in the company, is leading the

stake sale talks.

Falling crude is a bigger theme

than even the change of

government at the center earli-

er this year.

Telecom Commission approves spectrum base price with riders

Inter-ministerial panel Telecom Commission has finalized the base price for spectrum to be

auctioned in February with some riders. TC held a meeting yesterday to discuss the next

round of spectrum auction including finalization of the base price. The committee of the

Department of Telecom had suggested a base price of Rs. 3,646 crore per MHz for the auction

of 800 MHz spectrum, used for offering CDMA services, which is 17 per cent higher than

what the regulator TRAI has recommended.

The price of 900 MHz and 1800 MHz as recommended by DoT committee could not be

ascertained. The TC's decision will now be placed before Telecom Minister Ravi Shankar

Prasad for final approval and after that Cabinet might be approached for certain issues. The

TC discussed the revised recommendations submitted by sectoral regulator TRAI on the

pricing of 800, 900 and 1800 MHz bands. The Telecom Regulatory Authority of India has

reiterated its recommendations for 900 and 1800 MHz bands, while it has increased the base

price by 15 per cent for 800 MHz band.

The next round of spectrum auction is proposed to be held in February and the government

is estimated to garner at least Rs. 9,355 crore from sale of radiowaves. Most of the spectrum

which is proposed to be put up for sale is being used by Airtel, Vodafone, Idea Cellular and

Reliance Communications across various parts of the country. These companies will need to

buy back radiowaves to continue their operations in areas where their licenses are expiring

in 2015-16.

CCI clears Sun Pharma-Ranbaxy deal

The Competition Commission of India (CCI) approved generic drug-maker Sun

Pharmaceutical Industries' $3.2 billion bid to buy Ranbaxy Laboratories, but ordered the

firms to divest seven products to ensure the deal doesn't harm competition. Sun Pharma

agreed to buy Ranbaxy from Japan's Daiichi Sankyo Co in April in a deal that would create

India's largest, and the world's fifth-largest maker of generic drugs.

The CCI said that it had decided that the "adverse effect of the proposed combination on

competition can be eliminated by suitable modifications", putting the companies a step closer

to completing the deal. The deal is now awaiting approvals from the U.S. Federal Trade

Commission and Indian courts.

The DoT imposed Rs.50 crore in

each telecom circle for alleged

violation of rule on both the

companies.

The S&P energy sector was

down 2.2 percent on the day. It

is down 16.5 percent this year,

the worst performing of 10 S&P

sectors.

Kailash Satyarthi (born Kailash Sharma) is a

human rights activist from India who has

been at the forefront of the global movement

to end child slavery and exploitative child

labor since 1980 when he gave up a lucrative

career as an Electrical Engineer for initiating

crusade against Child Servitude. As a

grassroots activist, he has led the rescue of

over 80000 child slaves and developed a

successful model for their education and

rehabilitation. As a worldwide campaigner,

he has been the architect of the single largest

civil society network for the most exploited

children, the Global March Against Child

Labor,which is a worldwide coalition of

NGOs, Teachers' Union and Trade Unions.

Academic Profile

He attended Government Boys Higher

Secondary School, and completed his degree

in electrical engineering at Samrat Ashok

Technological Institute, Vidisha and a post

graduate degree in high-voltage engineering.

He then joined a college in Bhopal as a

lecturer for a few years.

Work

While teaching as a professor in a college in

Bhopal, Mr. Satyarthi decided to work more

actively for social change. Along with a set of

friends, he founded Bachpan Bachao

Andolan (BBA) in 1980. BBA symbolizes the

struggle against child labour and child

servitude. The organization is also the

initiator of the first regional South Asian

people’s movement, the South Asian

Coalition on Child Servitude (SACCS), a

conglomeration of more than 750 civil society

organizations. Till date, BBA team has led to

the rescue and withdrawal of over 77,328

child bonded labourers and developed a

successful model for their education and

rehabilitation.

Satyarthi, along with Pakistani activist Malala

Yousafzai, was awarded the Nobel Peace

Prize in 2014 "for their struggle against the

suppression of children and young people

and for the right of all children to education".

Satyarthi is the fifth Nobel Prize winner for

India and only the second Indian winner of

the Nobel Peace Prize after Mother Teresa in

1979

Personal Life

He lives in New Delhi, India. His family

includes his wife, a son, daughter-in-law, and

a daughter.. He is very fond of cooking.

11th January, 1954

Samrat Ashok Technological

Institute, Vidisha

-Nobel Peace Prize 2014

-Defenders of Democracy

Award (2009-USA)

-Alfonso Comin International

Award (2008-Spain)

--Medal of the Italian

Senate (2007-Italy)

-Heroes Acting to End Modern

Day Slavey by US State

Department (2007-USA)

-Freedom Award (2006-USA)

-Friedrich Ebert Stiftung

Award (1999-Germany)

-La Hospitalet Award (1999-

Spain)

-De Gouden Wimpel

Award (1998-Netherlands)

-Robert F. Kennedy Human

Rights Award (1995-USA)

-The Aachener International

Peace Award (1994-Germany)

Paris based design company

Cicret

A bracelet that projects the

screen of your smartphone

directly onto your wrist

Currently, it is in the prototype

phase

A promotional video shared on

the company’s site has

gathered over 4 million views

on youtube

With wearables gaining edge, smartphones

and tablets are not the only mobile devices in

the present age. With the new bracelet, Cicret

is taking things up a notch by turning your

arm into a smartphone.

Cicret is in the process of raising funds for the

further development and production of the

Bracelet, but Cicret’s co-founder Guillaume

Pommier tells Gizmag that the first prototype

will be completed by the end of this year.

Features

The Cicret Bracelet consists of an

accelerometer and a vibration module, along

with an LED for notifications. WiFi and

Bluetooth are used for connectivity and there

is also a Micro USB port. As far as memory is

concerned, it is expected to be made available

in 16 GB and 32 GB models.

The device will allow users to send and

receive emails, browse the web and play

games. There will also be a provision to pair

up with an existing smartphone, answer

incoming phone calls and activate the

speakerphone functionality on the their

smartphone.

How it works

The Bracelet uses a pico projector and eight

proximity sensors that point towards the

user's forearm. It is activated with a twist of

the wrist, and when activated, it projects an

Android interface onto the users arm. The

proximity sensors detect the user's finger

movement are and allow them to interact

with the interface. It promises to provide the

same experience as with any other Android

device.

Challenges

Currently, projected touch screens lack the

responsiveness and visual clarity of glass

screens as available with the smartphones.

The bracelet would be more useful if Cicret

can improve on the technology, to make it

more competitive with the smartphones.