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The finance club at IMT Ghaziabad is engaged in a constant endeavor to provide you with a practical exposure to the world of finance and the latest emerging trends in the related fields of Risk Management, Banking, Investments and non-finance topics.
Do write to us at: [email protected]
Term of Week In Focus
Opinion
Personality Tech World
Capital
Budgeting | 6
Phaz Music : P2
Headphones |12 Pranav Mistry |11
Crude oil decline to
$50 a barrel: Will it
stay? | 4
JANUARY 11, 2015 | A FINNICHE INITIATIVE
The Demise Of
Mahinda Rajapaksa | 2
Disclaimer: FinXpress takes no responsibility for the opinions expressed in the magazine.
2015 has brought in sports fever at IMT. With IPL in mind, Cricket, Football and
Badminton tournaments are planned for the subsequent weeks. The owners have bought
their teams and the auctions for cricket and football players has been completed. The
tournament is set to kick start in the upcoming week and all teams are busy planning
strategies and practicing hard to emerge as winners.
Club FinNiche releases its weekly magazine FinXpress, with the In Focus talking about
the ‘The Demise of Mahindra Rajapaksha’. The Opinion gives an overview of ‘Crude oil
decline to $50 a barrel: Will it stay?’.
The term of the week describes ‘Capital Budgeting’, a process to decide which long term
investment to make. Do have a look at the market section, Tech world which brings to
you about P2 Headphones and Personality of the week, Pranav Mistry.
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
January, 11 | 2015 | Volume 29
The Demise of Mahinda
Rajapaksa
Crude oil decline to $50 a
barrel: Will it stay?
Capital Budgeting
Pranav Mistry
P2 headphones
- By J. Sindhuja
Mahinda Rajapaksa, the longest serving
president of South Asia has been
outmanoeuvred and outwitted by his
opposition team headed by Maithripala
Sirisena by winning a whopping 52.1% vote
share in the recently concluded Sri Lankan
general elections. This comes in as a surprise
particularly when the country has been
recording the highest GDP growth rate (>7%)
as compared to its South Asian peers for the
past five years and also boasts an comfortable
public finances.
Let us throw some light over all those factors
which have led to his ouster from the
presidential office.
The first factor and an important one is the
nepotism and favouritism which has been
extended by Rajapaksa to his family members.
For the record, the ministries of economic
development and defence along with other
key posts like speaker of parliament and
presidential advisor were all allotted to the
relatives of the then president. It is startling to
know that 70% of the state’s budget is being
allocated amongst those ministries which are
held by the brothers of Rajapaksa. This clearly
signifies the concentration of power with only
one family which was bound to meet with
acute resentment from the public, particularly
when it is a democracy.
Rajapaksa’s government has also been
accused of supporting fringe extremism by
using Sinhala Buddhist groups who were
primarily targeting the Muslim minority
population. The ruling party has actually
adopted a reverse polarization strategy by
fuelling deadly riots in the country, which
was expected to make the majority Sinhala
community to rally behind the government
and thereby overpowering the increasing
dissent amongst the minorities. However, as it
was clearly evident that this step has
backfired as a significant percentage of
Sinhalese votes have been polled against the
incumbent government owing to multitude of
various other factors.
The word ‘Development’ is the major plank of
the Rajapaksa's government, which included
massive overhaul of the country’s
infrastructural facilities and an urbanization
drive to provide basic amenities to the needy.
However there has been a case of serious
misgivings under this agenda, which includes
the likes of depriving its citizens the right to
criticise and to express their dissent. Things
went nearly out of control when Chief Justice
of Sri Lanka has been sacked only for
questioning the government over the
constitutional discrepancies on a financial bill.
To sum up free society and an independent
judiciary has gone for a toss under his regime
which hadn’t bode well with voters as they
weren’t really ready to pay such a heavy price
for sake of development. Another important
factor was the government’s miscalculation in
setting up its priorities like patriotism
prevailing over the quality of life. An average
Sri Lankan citizen has been facing
unprecedented increase in the food and
essential prices, while his salaries had more or
less remained the same which made it very
difficult to make his both ends meet. However
the government instead of tackling these
issues have chose to patriotism chest
thumping which didn’t go down well with
the common man for whom his own well
being comes above all the other factors.
The incumbent government has also been
criticized for its flip flop foreign policy
measures with its neighbours and the west.
During the war time, Rajapaksa has
maintained close relations with India which
has long been the country’s best ally over the
years. However there has been a complete U-
turn in this policy as he countervailed India
by engaging with its adversaries China and
Pakistan for various fronts. Its relationship
with China has particularly irked India as
country is important for its geological
maritime security, after a Chinese nuclear
submarine has been allowed to station in one
of the Sri Lankan ports. The other grave
policy blunder committed by the ruling party
was its absolute denial to carry out an
independent investigation over the war time
crimes by an outside entity as demanded by
the western powers, which has isolated the
island nation on various developmental
factors.
Lastly the opposition has been successful by
uniting the whole of minority population viz;
Muslims, Christians and Tamils for voting
against the incumbent government. This was
possible with a ‘Maithri’ approach which
implied that coming together and staying
together and moving ahead to achieve a better
society. The country’s stock market has also
cheered the result by galloping to a four year
highs. However the road ahead for the new
government isn’t expected to easy as there a
far too many challenges and very little hope in
the offering.
- By Gayatri Pandit
Last time the crude prices collapsed was in
2008-09, that was because of the financial
collapse. However, this time the reason for
the slump in crude oil prices is different. The
reason being the over supply, economic and
political changes in various parts of the
world. However, there are four reasons which
can say that the price will not be sustainable
at $50 per barrel.
The main reason behind the drastic decline in
oil prices is the increased production not only
in United States, but also in Canada, Iraq and
a handful of other countries. The decrease in
price is because oversupply from the United
States. As per OPEC, to maintain the market
share, none among the UAE, Saudi Arabia
and the United States are willing to cut down
their production because there is a fear that
other competitor may gobble up their market
share if the demand increases. Thus, it can be
seen that the decline in oil prices is because of
increase in US shale production and decrease
in the demand by China, which is the largest
imported of crude oil. According to
International Energy Agency, the demand
and supply imbalance in third and fourth
quarter i.e. roughly 500,000 barrels a day is
same as that of last year. The fluctuation is
observed in the first two quarters because of
the economic and political changes taking
place in various economies. 500,000 barrels of
overproduction(0.5% of the total) is equal to
OPEC overproduction versus its own quota,
and yet there is plunge in last two quarters
with no parallel when the world was similarly
oversupplied in past (2012). So, the question
arises here: Saudi Arabia is also contributing
to this supply, so even if they withdrew will
the prices stabilize or will it lead to inflation.
Another reason to the weakening demand of
oil and petroleum products in Europe and
developing countries as these economies are
trying to reduce their dependence on oil
products by using efficient vehicles and
enhanced technologies.
Also, the current prices are expected to be
below the costs. At $60 a barrel, many of US
shale projects do not even meet the threshold
of production cost which causes US
companies to cut down their drill contracts.
Many US oil drillers have cut down drilling
rigs for the 4th week. For example, Helmerich
& Payne Inc. (HP), the biggest rig operator in
the U.S., received a termination notice for four
contracts. Terminating rig drilling contracts is
cheaper than drilling $10million wells over
and over again.
In addition, the cash-strapped oil-producing
countries will become more unstable to
declining oil prices. The reason being fear of
supply disruption. For example, Russia is
largely dependent on oil and gas production
as the revenue from oil contributes to 45% of
government budget and if oil prices stay at
$60 a barrel, Russian economy may shrink 4.5
% next year.
Demand Supply mismatch
Economies relying more on
non crude products
US oil drillers cut rigs
Default by cash-strapped oil-
producing countries because of
large dependence on crude oil
export
Also, one of the major producers to oil
Venezuela is also badly affected by declining
oil prices. Because of rampant inflation and
declining oil prices, the Venezuelan economy
may shrink to 3% this year, resulting the
economy may default.
Implications on Stock market
The S&P 500-stock index declined 1.83%,
Tokyo’s Nikkei decreased by 2.5%. The Vix, a
measure of market volatility that is known as
Wall Street’s fear gauge, leaped about 12
percent. Because of these the investors are
turning their investments into mare reliable
return giving instruments such as government
bonds, treasury bills.
It can be seen from the graph as the market
price of crude is declining, investors are losing
their confidence in this sector thus switching
towards more reliable investments.
Other reasons for stock market decline:
With the election in Greece in due in the
coming year, it is difficult to predict whether
Greece will stay in Euro zone or not. Because
of this uncertainty, the dollar is continuously
up surging against the euro.
Consumer benefit
Consumers can benefit by decline in oil prices.
As the decline in oil prices does not lower the
household and vehicle spending on crude
products, hence the disposable income
increases. They also get additional benefit
because of the drop in heating oil and diesel
prices.
However, it is difficult to say that the decline
will stop in the coming months. It will take at
least 2015 winters to come to expect stability
in oil prices. This is because of the competition
for capturing the market share along with
that increase in the no. of refineries in Saudi
Arabia and the United Arab Emirates which
will increase the export of oil and gasoline
products to 500,000 barrels a day in coming
months. In addition, various countries are
planning to function their pipelines which
may add 350,000 barrels a day onto it.
Greece ability to stay in Euro
zone
Market competition for greater
market share
Oversupply is persistent till end
of 2015
Source: Reuters
Source: The Bond Buyer
Availability of funds
Structure of capital
Taxation Policy
Government Policy
Lending Policies of
Financial Institutions
Immediate need of the
Project
Earnings
Capital Return
Economic Value of the
Project
Working Capital
Accounting Practice
Trend of Earning
Size of Business
Risk of the business
Forecast of the market
Political unrest
Capital Budgeting is the process by which the
firm decides which long-term investments to
make. Capital budgeting, or investment
appraisal, is the planning procedure used to
figure out if an association's long term
investment, for example, new hardware,
substitution machinery, new plants, new
items, and exploration advancement ventures
are justified regardless of the financing of
money through the company's promotion
structure (obligation, value or held profit). It
is the procedure of distributing assets for
significant capital, or venture, expenditures.
One of the essential objectives of capital
planning speculations is to build the
estimation of the firm to the shareholders.
Numerous formal systems are utilized as a
part of capital planning, including the
strategies, for example,
Accounting rate of return
Payback period
Net present value
Profitability index
Internal rate of return
Modified internal rate of return
Equivalent annuity
Real options valuation
Ideally, organizations ought to seek after all
undertakings and opportunities that improve
shareholder esteem. Be that as it may, in light
of the fact that the measure of capital
accessible at any given time for new tasks is
restricted, administration needs to utilize
capital planning systems to figure out which
activities will yield the most return over an
appropriate time of time.
Management must apportion the
association's constrained assets between
contending open doors (ventures), which is
one of the principle centers of capital
planning. Capital budgeting is likewise
concerned with the setting of criteria about
which ventures ought to get speculation
financing to build the estimation of the firm,
and whether to fund that venture with value
or obligation capital. Investment ought to be
made on the premise of value-added to the
future of the corporation.
Capital budgeting activities may incorporate
a wide assortment of diverse sorts of
investments, including however not
constrained to, expansion policies, or mergers
and acquisitions. At the point when no such
esteem can be included through the capital
budgeting methodology and overabundance
money surplus exists and is not required, then
administration is relied upon to pay out some
or those surplus income as cash dividends or
to repurchase the organization's stock
through an share buyback program.
- By Shikha Sharma
Healthcare stocks and
Defensive Consumer stocks
gain this week
Vibrant India – Modi’s
superlative act likely to
influence investors
INDIAN MARKETS
Gold prices rose as dollar and other equities failed to reach the forecast. Gold also re-
bounds because of good seasonal demand. The volumes traded in the week were not
high. The Benchmark BSE index ended lower at 1.54 percent and NSE index ended at
1.32 percent lower, hitting the expectations of the investors. Indian shares are expected
to trade range bound in the week ahead.
BSE SENSEX
CNX NIFTY
Open High Low Close
SENSEX 27404.19 27507.67 27119.63 27458.38
NIFTY 8285.45 8303.30 8190.80 8284.50
COMMODITIES
EXCHANGE RATES
INTERNATIONAL MARKETS
Commodity Unit Rs / Unit % Change
Gold 10 grams 26800.00 0.26
Silver 1 kg 36833.00 1.65
Crude Oil 1 bbl 2983.00 -12.00
INR/ 1 USD 62.3953
INR /1 EURO 73.6140
INR/ 100 JAPAN YEN 52.23
INR / 1 POUND STERLING 94.1670
Open High Low Close
NYSE Comp 10811.82 10811.82 10680.53 10711.41
NASDAQ 4744.47 4744.71 4681.24 4704.07
S&P 500 2063.45 2064.43 2038.33 2044.81
FTSE 100 6569.96 6570.24 6471.38 6501.14
CAC 4249.26 4272.83 4149.14 4179.07
DAX 9813.99 9860.18 9601.75 9648.50
NIKKEI 225 17318.74 17342.65 17129.53 17197.73
SSE 50 2554.29 2692.61 2540.34 2569.02
Hang Seng 24049.70 24169.06 23859.49 23919.95
Diageo India merger with USL gets shareholder nod
Minority shareholders of United Spirits Ltd (USL) have voted in favour of a special
company resolution that will see the transfer of business of Diageo India to USL, a strategic
move which only 45 days ago was rejected by the same set of shareholders. The special
resolution encompasses three key business contracts between USL and its present owner
Diageo Plc, which controls 54.78% stake in the Indian spirits company. These contracts
include: import of finished goods for distribution in India; import of bulk scotch to be
bottled and distributed in India; and the licensing of global brands that would be
manufactured and distributed in India.
The latest move will add Rs 700 crore to USL's revenue and Rs 70 crore to the EBITDA. In
the last fiscal, USL's revenue stood at Rs 8,665 crore. Since the resolution was a related-party
transaction, Diageo by law had to abstain from voting. A little over 76% of minority
shareholders cast their vote in favour of the resolution as against 70.20% shareholders who
voted in favour last time, which saw the resolution getting defeated. To be passed, the
resolution required at least 75% to vote for it.
Directorate of Revenue Intelligence issues notice to Vodafone
The Directorate of Revenue Intelligence (DRI) has issued a show-cause cum demand notice
to telecom major Vodafone and its two subsidiaries for allegedly evading anti-dumping
duty of Rs.330 crore. “We have issued the notice to Vodafone,” confirmed a senior DRI
official. Vodafone imported Synchronisation Digital Hierarchy based transmission
equipment from China by declaring it as non-SDH equipment, for allegedly evading the
duty, according the DRI.
The Directorate General of Anti-Dumping has initiated the action after a local Indian
manufacturer Tejas Networks filed a complaint against cheap imports from China and other
countries. Officials said that Vodafone, during the proceedings, opposed the levy of anti-
dumping duty, saying that SDH was critical for the telecom sector. “We have investigated
and found out the modus operandi of the duty evasion,” said the official. Vodafone
spokesperson could not be contacted for a comment.
Vistara to run cost-effective model to stay afloat in market
The newest full service carrier Vistara, which took to the Indian skies on Friday, will run a
very cost-effective model to remain competitive in the aviation market where it faces
challenges from competition like Air India and Jet Airways. The key factor for us will be to
keep our costs low, Vistara’s chief executive officer Phee Teik Yeoh told FE on Friday.
Vistara, which currently has 400 staff in its rolls, including about 140 cabin crew staff, plans
to follow a lean hiring model.
Prime Minister Narendra Modi
will inaugurate the 7th edition
of Vibrant Gujarat Summit, a
flagship programme of Gujarat
government, in Gandhinagar
on Sunday, which will see
participation of UN Secretary
General Ban Ki-Moon and US
Secretary of State John Kerry
The present was amid the
announcement on Friday that
that Infosys will provide 100
percent variable bonus pay-out
to its employees for the
December quarter
Govt approves 12 FDI proposals worth Rs 1827.24 crore
The Government has approved 12 foreign direct investment (FDI) proposals worth Rs
1827.24 crore, including one by Ratnakar Bank Limited, Mumbai for an initial public offer
(IPO) of its equity shares to residents and non-residents including Foreign Portfolio
Investors (FPIs), Foreign Institutional Investors (FII), Foreign Venture capital Investors
(FVCIs).
The approvals were given on the basis of the recommendations of the Foreign Investment
Promotion Board (FIPB) at its meeting held on December 19.
Oil strikes new low, gold gains
Oil prices tumbled this week, hampered by oversupplies and weak global demand despite a
pick-up for the US economy, traders said. Brent North Sea crude dropped to $48.90 a barrel
Friday and the New York price hit $46.85 on Wednesday — the lowest levels since late April
2009. A decision last month by the Organisation of Petroleum Exporting Countries, which
supplies about a third of the world’s oil, to leave output unchanged despite the price plunge
has rattled the market in recent weeks. By Friday on London’s Intercontinental Exchange,
Brent North Sea crude for delivery in February tumbled to $49.67 a barrel from $57.02 the
previous week. On the New York Mercantile Exchange, West Texas Intermediate or light
sweet crude for February slumped to $47.96 a barrel from $53.49.
Gold won support from its status as an economic haven amid concerns for the eurozone.
Falling industrial output and exports suggest Germany’s current economic weakness is not
over yet, while concerns persist regarding Greece’s future role in the single currency bloc.
By Friday on the London Bullion Market, the price of gold rose to $1,217.75 an ounce from
$1,172 a week earlier. Silver climbed to $16.24 an ounce from $15.71. On the London
Platinum and Palladium Market, platinum grew to $1,225 an ounce from $1,193. Palladium
edged up to $795 an ounce from $791.
Government to invest Rs 3 lakh crore for building power infrastructure, says Piyush
Goyal
An amount of Rs 3 lakh crore would be invested in building infrastructure for transmission
and distribution of power in the country, Union Power Minister Piyush Goyal today said.
This would facilitate a 24x7 power supply, the minister said, adding the revenue to be
generated from the auction of coal blocks would be spent on the development of coal-
bearing areas. Focusing on the NDA government's commitment to provide 24x7 power
supply to people, Minister of State for Power (Independent Charge) Goyal said the eastern
states would get lakhs of crores of rupees through auction of coal blocks.
He is from Palanpur, North Gujarat. He has
completed his Bachelor's Degree in Computer
Science and Engineering from the Nirma
Institute of Technology in Ahmedabad,
Gujarat. Pranav holds a Master's degree in
Media Arts and Sciences from MIT and
Master of Design from Industrial Design
Center, IIT Bombay. Prior to that, he also
dropped out of Architectural college prior to
his Bachelor's degree. Later he was a research
assistant and a PhD candidate at MIT Media
Lab. A man who loves designing and wants
to see technology from design perspective,
He is proud 'Designeer'.
Career
He joined Samsung as the Director of
Research in 2012, and now serves as the Vice
President of Global Operations of the Korean
Company. He introduced Samsung Galaxy
Gear smart watch in September 2013. In the
past, he has worked with Microsoft, Google,
CMU, NASA, UNESCO, Japan Science &
Technology to name a few. Before joining
MIT, Pranav worked as a UX Researcher with
Microsoft.
Mistry is best known for his work on
SixthSense. Among some of his other work,
Pranav has invented Mouseless – an invisible
computer mouse; SPARSH – a novel way to
copy-paste data between digital devices;
Quickies – intelligent sticky notes that can be
searched, located and can send reminders
and messages; Blinkbot - a gaze and blink
controlled robot; a pen that can draw in 3D;
and a public map that can act as Google of
physical world. Mistry is one of the top
Inventor Under-35 and people know for His
Sixsense and Samsung galaxy Gear Smart
watch.
In News
As part of restructuring process and to arrest
the slide of profits margins of company's cash
cow Mobile division, Samsung Electronics
has crowned 33-year-old Pranav Mistry, as
vice president (Global operation) in
December 2014. Prior to this promotion,
Mistry was Vice President of Research &
Development and the head of Think Tank
Team based in Silicon Valley, USA.
He also came in news last year when he said
that he wants to work with Mr. Narendra
Modi and is willing to leave his present job to
do so. He said “I am waiting for him to pop
the question... and ready to say bye to my
lab”.
14th May, 1981
B. Tech. - Nirma Institute of
Technology
M. Des. - IIT, Bombay
PhD - MIT Media Lab
Young Global Leader 2013 by
World Economic Forum
50 Most Creative People of
2010 by Creativity 50
TR35 by Technology Review in
2009
Phāz Music, an audio company that launched
Tuesday, has introduced its first product: The
Model P2 headphones.
The P2s are coolly designed, with carbon fiber
frame and bright-orange ear cups, but the
appearance doesn’t make it unique. The P2s
are the first headphones that double as a
portable battery pack for your smartphone
with a battery power of 1200mAh.
While this may sound as an complex gadget,
the tech used is actually pretty simple: it just
has a pair of headphones and a portable
battery pack strapped inside the headphone.
That’s basically what the P2s are, just sleeker.
The P2s have a USB port under one of the ear
cups which is used for charging. If you want
to listen to music and charge your phone at
the same time, you’ll need two cables (an
audio cable and a USB cable).
The P2s also have a built-in amplifier that can
power the phone’s 40mm drivers for better
sound quality and also a 15dB bass booster.
The amp and bass booster could use up
approximately 10 percent of the headphone’s
built-in battery, which would mean you can
get about 10 hours of amplified, bass-boosted
playback along with charging your
phone. The phone would work passively even
without the amplifier or the bass booster
(unlike some noise-cancelling headphones),
so when the battery runs out there is still
plenty of playtime left.
Another neat feature on the P2s is the sharing
port. The audio-out port under one of the ear
cups lets you plug in a second pair of
headphones and “share” your music with a
friend.
The P2s are fashionable, with the battery
pack, amp, bass booster, and sharing port, but
they’re also pretty lightweight (comfortable to
wear for long duration). The headphones
though is not on par with gadgets of the same
price range.
- By Mohammed Zakir Ahmed
Phaz P2 headphones were
launched at the CES 2015 held
in Las Vegas from Jan 6th to
9th 2015.
The P2’s are available for pre-
order now at $249.99 and will
start shipping in April 2015.