Seed Capital Newsletter Volume002

8/8/2019 Seed Capital Newsletter Volume002

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Seed Capital Newsletter Volume: 002 AUGUST 15-AUGUST 31 - 2010

Where Great Traders Begin

D for DEFLATION

Is deflation bad for Economy?

Continued on 4

Indias Stock exchangeSome important data about

major stock exchange and

major benchmark index

Page 3

Market NewsGet the latest news and views

from Industry

Page 6

Business QuizLets check your general

Knowledge!

Page 8


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As our newsletter goes into its second edition it is high time thatthe editors have a word with its coveted readers.

You all must be wondering why did the company name itselfSEED CAPITAL? What has a seed got to do with capital? Well,my friends a seed, when it germinates symbolizes growth, zeal tocompete with its other counterparts and be vibrant. It shows thewill to learn and explore its surroundings.

We, being a novice group of student vying to make it big into thecorporate world decided to open up a company not because we

want to earn big money. It is stealth, knowledge, and experiencethat we crave for. The moolah will follow later on. Butknowledge does not come that easy. One has to run behind it topossess it. And we sooner than later have realized. So wedecided that our prime motive is to learn. Not only about thetrading but the holistic tricks of the trade. That is why wedecided for this newsletter that would not only have thecompany news updates but will actually contain news from allthe sectors and from all over the world. By this we keep our

quest to crave for knowing more and more continuously ticking.But what is the point in learning if theres no element of fun. So

we have a section to keep our readers hooked and enjoy as well aslearn.

Coming to more serious issues, we are managers to be and it isvery important to realize that managing things is not a single-handed affair. It needs teamwork, team spirit and groupcohesiveness. The newsletter is not one mans effort. It is properteamwork, delegation, control and improved group dynamics.This was our yet another motive behind our creating a newcompany.

Wed like to conclude with a very hearty thanks to all our readers

for having accepted and appreciated us and congratulate myteammates for having done their jobs so far so good. A reason tocheer for ourselves is that we are well in our way towards what wewant to achieve.

Knowing is not enough; we must apply. Willing is not

enough we must do. Namit Kewat- Chief Editor

Letter From The Editors Desk

VISION

To be respected and

preferred businessorganization with a

motive of building

wealth and creating

prosperity for all the

customers and

members of our

company


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Continued

Is Deflation bad for Economy? [Seed Capital Academy]

Deflation is a contraction on the volume of money and credit relative to available goods

Dose fall in prices is bad news for economy? And what if it happens as the expansion in

production of goods & services; then why it is bad news? If this is true then consumer will have

large quantity of goods and services.

A general fall in prices is also a fall in fractional reserve lending. Fractional reserve lending

permits banks to generate credit that is not backed up by real savings credit created out of

thin air.

And when these unbacked credit comes into economy it creates activities that consume, and

do not produce, real wealth and undermines the pool of real savings. Also these activities

deteriorate the performance of the various activities. Which gives rise in the banks bad loans.

Banks deals it by not renewing matured loans; i.e. which triggers a decline in the money stock.

So the reason behind decline in money stock and an economic slump is loose monetary policy

not by liquidation of debt.

But without this loose monetary policy banks will have difficulty in practicing fractional

reserve lending.

So it is the unbacked credit which reshuffles real saving from wealth generators to non-

wealth generators, which weakens the ability to grow the pool of real savings, and there by

weakens economic growth.

So declining pool weakens borrowers ability to serve the debt. Even increase in real interest

rate will put things in proper way and remove the garbage of scarce real savings; thereby

helping the real economy.


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* An IMF study by Eduardo Borensztein and Ugo Panizza counts as many as 257

sovereign defaults between 1824 and 2004. Between 1981 and 1990 alone, there

were 74 defaults.

*MCX India is World No 1 In Silver, No 2 in Gold, Copper & Natural Gas and No 3

in Crude Oil in terms of number of futures contracts traded in 2009.

* Solwara 1 is going to be the worlds first Deep-Water mining Project. Location is

Bismarck sea, North of Papua New Guinea. And Is operated by Company Nautilus

Minerals(Canadian Company). Company hopes to start production(Ore containing

Copper and Gold) by next year.

Did You Know

In such situation, if central bank is thinking to pump in more money into the system; i.e.increasing the price levels(countering deflation; that is Inflation), it will worsen the situation

because pool of real savings is still declining.

So deflation is healing the economy.

Deflation is response of Inflation and in general Inflation is increase in money supply. Hencefall in money supply leads to fall in general prices- Deflation.

So it the disappearance of money that was previously generated out of thin air, underminingnon-productive activity. Which is great news for Wealth generating activities.

But what about the fall in economic activity which is associated with fall in prices?

As we have discussed, Deflation is arresting the impoverishment created by the Inflation, bystrengthening the producers of wealth, and revitalizing the economy.

Hence, deflation is shattering the illusion of prosperity created by Inflation. The fact behindthis is, there is less real wealth.

So from above, we can conclude that Deflation lays the foundation of economic revival.


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Market News:

Credit Default Swaps

The Reserve bank of India had published a draft on 5th august that allows Commercial banks,primary dealers and NBFCs to participate in Credit Default Swap(CDS).

CDS in an instrument which allows various business entities to manage risk associated with thebond market. CDS is a specific knife of counter-party agreement which allows the transfer ofthird party credit risk from one party to another.It is also proposed that participants have net NPAs of less than 3%.

"Keeping in view the need for development of the infrastructure sector, CDS shall be permittedto be written on corporate bonds issued by Special Purpose Vehicle(SPV) of rated infrastructurecompanies," the RBI said.

India's Coal shortage sparks import boomWith forecast that India's power consumption will double by 2020 and it could face a coalshortfall of anything up to 200 Mt a year by 2015-about half the power sector's expecteddemand-huge improvements in domestic levels and rapidly raising imports are now deemed to

be essential.

In July, Coal India announced that it would invest in its frost port terminal to handle imports.The terminal in southeast India will open in 2013 and will be capable of handling 6Mt of coal ayear.Coal India is forming joint venture with power utility NTPC to buy fuel from overseas.

This initiative comes against a background of forecast suggesting the country's coalconsumption may rise from around 500 Mt to more than 1bn tones by 2015. For this importsshould rise as much as 150 Mt a year, more than 2.5times the level recorded over last financialyear ended in March.

Current coal output is about 535 Mt. and our overseas search of coal has extended fromIndonesia to Mozambique, Botswana and Australia.

Insurance Cover + Infrastructure BondFirst time by any insurer in World, LIC is planning to offer free cover for all buyers of itsforthcoming infrastructure bonds worth at least 5,000 Crore.Still clarification from ministry and IRDA is yet to obtain.

The bonds will have minimum tenure of 10 years, while investors will be locked in for 5 years.After 5 years, customer can redeem investment either through a secondary market deal orthrough a buyback by the issuer.


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Banking Sector:

Strong loan growth of 22% Year over Year(yoy) partially led by lower base of last year andfunding opportunity towards 3G and BWA. However, deposits growth was muted at 15% YoYresulting into CD ratio improving to 73.4% vs 72.2% a quarter ago. PNB, HDFC Bank andBoB grew loans higher than sequential industry growth.-Core Operating Profit was up 61% YoY On a lower base. For PSU banks it grew 74% YoY.SBI, BoB and OBC lead the pack .Overall results were better than expected with PAT growthof 28% YoY for our coverage universe.-The expected margins to remain robust in FY11 as banks are offsetting the impact of risingdeposit rates by increasing their BPLR. The concerns over asset quality are abating with uptickin economic growth.-Top Picks: SBI, ICICI Bank, HDFC Bank, BoB and Union Bank large caps. Andhra, Indian,

Federal Bank in mid caps.

Pharma Sector:

Drug company, Sun Pharma on Thursday said it has received approval from the US Food andDrug Administration to market generic version of anti-depressant Venlafaxine hydrochlorideextended release tablets.The shares of the company were trading at Rs 1,795.20 at the Bombay Stock Exchange inmorning trade, up by 1.65 per cent over the previous close.

Infrastructure:

RBI RELAXES RULES FOR LENDING IN INFRASTRUTURE

The Reserve Bank of India has relaxed its norms relating to the lending in the infrastructure

sector, according to a notification released on Friday.

The central bank has created a new category of non-banking finance companies known asinfrastructure finance companies taking the type of finance companies to four others beingasset finance companies, loan companies and investment companies.


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1. In the Indian securities market, which local term is used to describe the non-convertibleportion of a party convertible debenture ?

Ans._____________________________________________________

2. At which African stock exchange is trading in the ALSI 40 index carried out?

Ans._____________________________________________________

3. If NYSE is located on wall Street, which north American stock exchange is situatedon Bay street?

Ans._____________________________________________________

4. At which European stock exchange would you find a fully automatic electronic cashmarket trading system named Extra?

Ans._____________________________________________________

5. At which European stock exchange is trading in the MIBTEL index carried out?

Ans._____________________________________________________

6. Which banks credit cards are marketed with the tag-line, FREE FOR LIFE?

Ans._____________________________________________________

7. In which year did India resort to rupee devaluation for first time?

Ans._____________________________________________________


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8. Customized banking Innovation is the punch line of?

Ans._____________________________________________________

9. How many bank where nationalized in 1980?

Ans._____________________________________________________

10. In 1997 , a Chicago based company named GURANTEE TRUST Life insurancebecome the first company in the united-states to offer life insurance to which kind ofpeople?

Ans._____________________________________________________

11. Who set up the new India insurance company in 1919?

Ans._____________________________________________________

12. Which Indian financial service company has launched a new branding exercise underwhich its asset financing business will be branded as equik?

Ans._____________________________________________________

13. which private sector insurance company in India has launched a personalaccident cover named shanti?

Ans._____________________________________________________


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14. In 1966, which company acquired standard and Poors ?

Ans._____________________________________________________

15. In 1936, the French car company Citroen was sold to which tyre company?

Ans._____________________________________________________

16. To which cement group did Raymond sell its cement business?

Ans._____________________________________________________

17. Which financial institution was established in 1948?

Ans._____________________________________________________

18. How many times has financial emergency been declared in India?

Ans._____________________________________________________

19. What was the nickname for the day(s) when the Stock Market crashed?

Ans._____________________________________________________

20. What does the bear and the bull stand for?

Ans._____________________________________________________

Results Will be declared in the Finance class of 27th August and in the Next issue of SeedCapital Newsletter.


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We , a part of the seed capital team, have tried our

best to create an effective and informative newsletter.

But its incomplete without readership and their

valuable suggestions to improve our efforts.

Hence, we look forward to your participation in

order enhance the quality of our newsletter.

For Your Suggestions and Comments Contact:Namit Kewat, Editorial Team

Seed Capital, EMPI B SCHOOL

[email protected]

Sheetal Arora, CEO

Seed Capital, EMPI B SCHOOL

[email protected]

Disclaimer: For internal circulation only with a purpose of class room studies and disseminating

information to the students

Documents

Seed Capital Newsletter Volume002