The Focus by Club Ecobizz - March Issue

8/3/2019 The Focus by Club Ecobizz - March Issue

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March Vol.


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From The Editors Desk

NEHA SHARMA

IBS Hyderabad

1. Multi Brand Retail In India

- Tinu Dalal

2. Is This A Revolution Or An

Uprising?

- Priyanka Pathak3. Trust Me!

- Anushree Mohta

4. Crime + Women = DELHI?

- Cynthia Ann Robin

5. Creating the $20 Trillion

Market

- Antariksh V

6. Channeling the Channels- Adwita Pant

7. Infrastructure Deficit: The

Choking Factor of Indias

Growth StoryPart 2

- Neha Sharma

8. Induced Spending- Antariksh V & Neha Sharma

9.Demystifying Stock Analysis

- Vasu Goyal

Hey There,

As we close in on another Finan-cial Year, there is a lot to look backand learn from. Starting from the

Economic Survey with the Budget,to the Warren & Gates visit, GulfCivil Wars and the much talkedabout Japan Tragedy.

In this issue we have coverednearly every aspect of the econ-omy starting from Multi-BrandRetail, Infrastructure Deficit, Gov-ernment Induced Spending, StockAnalysis to the Great NYSE-DBmerger. Apart from this we havethe most relevant social issuessuch as Crime against Women, So-cial Uprising in the Gulf backedwith Marketing jargons analyzedsuch as WOMM and AdvertisingChannels!

Heres wishing you a warm andenriching read.

Best Regards,

Neha Sharma.

March Vol , 2011. Ecobizz Newsletter


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IBS Hyderabad

Multi Brand Retail In India

- Tinu Dalal

vantage of 100 per cent FDI in cash and carry

business and Carrefour (France) and Tesco (UK)

have announced their intention to do so, single

brand retailers like Marks & Spencer (UK) and

Vision Express (Netherlands) have been forced

to accept partnerships withlocal business houses for entry

into single brand retail.

Other multi brand retailers

like Walmart have taken the

franchise route to enter the

Indian market. However

brands like Ikea are lobbying

hard to get the FDI limits in

the retail sector revamped,

before making a foray in the

Indian market.

According to a 2010 A.T.

Kearney report, India ranks

third after China and the US

on the FDI Confidence Index

while it is the top location for

non-financial investment.

The study found that if the

Indian retail sector becomes

more open in future, it could

become a vital, high poten-tial market like China. In 2006, the Government

for the first time eased retail policy in the country

by allowing up to 51 per cent FDI through the

single-brand retail route. Since then, there has

been a steady increase in FDI in the retail sector;

the sector's share in total FDI flows into India

Retail is one of the fastest growing sectors in theIndian economy. The Indian retail industry is the

fifth largest in the world and is expected to rise

in at a great rate in the coming years, rising at

$430million by the end of year 2011 and reaching

$635 by the year 2015, andthis is the reason why sud-

denly the foreign retailers

have started seeing India as

the next hottest business

destination. Currently India

permits 51%FDI in single

brand retail and 100% in

cash and carry stores. A

cash and carry store is dif-

ferent from regular retail

chains which target profes-

sional customers rather than

end-consumers. This con-

cept is based around self-

service and bulk buying and

serves registered customers

only. The core customer

groups are hotels, caterers,

traders and other business

professionals. Such stores

aim to prevent any intervention by middlemen

and requires buyers to make their own arrange-

ments and assume all risk.

However no FDI is allowed in multi brand retail.

While, companies like Metro AG (Germany) and

Shoprite (South Africa) have already taken ad-

Allowing foreign investments

into multi-brand retail has

been a hotly debated topic

with those opposing it arguing

that global retail companieswould wipe out existing small

mom-and-pop stores, thus

taking away livelihood of

millions of people.

March Vol , 2011 Ecobizz Newsletter


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have increased from zero to 0.2 per cent in a two-

year period. The cumulative FDI in single-brand

retail stood at $190 million in February 2010. FDI

data since 2007 demonstrates a steadily rising

trend in the single-brand retail sector. Besides,

there has been less volatility in FDI flows even

during periods of world-wide r ecession.

Earlier this year the government hinted on the

signs of opening up the FDI in multi brand retail.

It is believed that the UPA government was con-

sidering a proposal of allowing 51% FDI in the

multi brand retail but after protests from signifi-

cant allies like Trinamool Congress and outside

supporters BSP and SP, the government finally

reached a consensus of 26%. The ministry of mi-

cro, small and medium enterprises (MSME) has

proposed allowing only up to 18 percent FDI in

multi-brand retail. However the government is

still considering all facets of allowing FDI in

multi brand retail before finally giving a green

signal to the international retailers.

Both industry and the stock market have wel-

comed the first step towards opening up the sec-

tor. The retail industry in India needs access to

more capital. It can definitely go into the invest-

ment (for) the supply chain. But we just cannot

build the back-end without an equal amount of

development in the front-end, said Rakesh Bi-

yani, CEO of Future Group.

Thomas Varghese, CEO of Aditya Birla Retail

Ltd, says he is in favour of allowing 49% FDI in

multi-brand retail. If you are allowing FDI, do

it in a calibrated fashion because it is politically

sensitive and link it (with) up some caveat from

creating some back-end infrastructure, he

added. The relaxation in FDI will accelerate the

growth of modern retail and the investments in

backend and supply chain will help entire indus-

try.

Pinakiranjan Mishra, partner, retail & consumer

IBS Hyderabad



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multi brand retail is allowed then farmers and

small scale retailers will be forced to sell their

produce at a cheaper price. They also believe thatthe entry of global retailers could harm interests

of kirana stores as well, which currently employ

33.1 million of Indias population.

But those in favour have been arguing that all

such fears are unfounded and that entry of estab-

lished global companies will strengthen India's

weak supply chain, reduce wastage, bring down

prices of various goods and assure farmers of

procurement of their produce at right prices.

The unfounded fear that large retailer will killsmall ones is wrong. There is room for both to

grow over the next foreseeable future, said

Harsh Bahadur, general manager (wholesale) at

Tesco Hindustan Wholesaling Pvt. Ltd. He

added that if the government went ahead and

allowed FDI, it would be good news for the

economy

practice at Ernst & Young says, We already

have lots of areas where foreign direct invest-

ment is helping the sector to grow. Retail sectorrequires lots of money for setting up infrastruc-

ture and back end and here too, FDI is best op-

tion to grow it faster.

However not everyone has given a thumbs up

for the proposal. Both the Bhartiya Janta Party

and the left parties have opposed the proposal of

allowing FDI in retail. Some of the state govern-

ments also have reservations about the issue of

FDI limit. Domestic trade associations have also

warned that big retail players would eventuallycontrol pricing and use their huge procurement

requirements to bully farmers into selling at

lower prices.

The proposal has also met stiff resistance from

organisations like Kisan Jagriti Manch and Bhar-

tiya Majdoor Sangh believe that if the FDI in the

IBS Hyderabad



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Chennai, Bangalore and H yderabad.

It also said that malls housing multi-brand retail

stores should be "at least two kilometers outside

the precincts of the town or city area" to mini-mize competition to small retailers. The discus-

sion paper also talks of reserving 50 per cent jobs

in FDI-funded retail outlets for rural youth. Also ,

to provide a fillip to the SME sector, the Centre

has recommended sourcing a percentage of

manufactured products from the domestic SMEs.

The DIPPs discussion paper also points out that

the farmers get just one third of the total price

paid by the consumers as against two third re-

ceived by the farmers of the countries with a

greater share of organized retail. FDI in multi

brand retail might be an efficient of addressing

the concerns of the farmers and other small scale

retailers. As for empowering the small scale re-

tailers, the government can play a vital role in

safeguarding there interests and helping them

withstanding the competition from the organized

retail by formulating policies and r egulations.

Will the Foreign Direct Investment (FDI) in multi

-brand stores be a reality or stay a myth, is a sen-

tence reverberating in the minds of every global

retailer who wants to grab a pie of the lucrative

Indian retail market. But for now, we will have to

wait and watch what the final outcome will be.

The Department of Industrial Policy and Promo-

tion (DIPP) has released a discussion paper on

permitting foreign direct investment (FDI) in

multi-brand retail chains. The discussion paper

also highlighted the following concerns of the

industry:

1. Rs 1 Trillion worth of fresh produce is

wasted owing to lack of supply chain

infrastructure.

2. Intermediaries flout mandi norms and

their pricing lacks transparency.

3. Agriculture Produce Market Committee

mandis in state have becomemonopolistic and non transparent

4. Consumers end up paying a premium

due to lack of farm to store retail supply

chain.

The discussion paper suggested that even if FDI

is allowed, conditions should be put that "50 per-

cent of the investment should be in fixed capital,

including facilities for supply chain infrastruc-

ture, processing and storage. Other issues up fordebate include identifying possible locations for

such stores. The current thinking is that these

stores could initially be allowed to come up in

cities with population of over 10 lakh, initially

only in six metros -- Delhi, Mumbai, Kolkata,

IBS Hyderabad


When a management team with a reputation for

brilliance tackles a business with a reputation for bad

economics, it is the Reputation of the Business that

remains intact.

- Warren Buffet


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MOVEMENTSIN S&P 500 V/S NIFTY

- Lakshay Mehta

mine is the national flower of Tunisia-from

where it first broke out.

All these revolutions are participants of ColorRevolutions- the name coined by media to de-

scribe related movements in different countries.

These revolutions have restricted themselves tonon-violent resistance with the use of demonstra-

tions and strikes to advocate democracy andoverthrow corrupted and/or

authoritarian governments.

The people of Tunisia re-mained in the shackles of

oppression for too long. Pre-cipitation by high unemploy-

ment, corruption, inflationand lack of freedom turnedthese protests into an upris-

ing. It all started with the self-immolation of Mohamed

Bouazizi, a fruit and vegeta-ble seller, who became sotired of the abusive officials

that he set himself on fireand died. This event sparked

a wave of unrest in the na-tion which resulted in the

ousting of President Zine El

Abidine Ben Ali.

Apart from this, the inability of the Tunisiangovernment to censor information from the Tuni-sian people about the rampant corruption in thegovernment further mushroomed the protests.

Since then reports of heavy-handed response bythe police to peaceful marchers and obstructing

the demonstrators by opening tear gas have be-come a part of daily chores. The pro-democratic

protests sweeping in th e Middle East has had its

Many autocrats have struck this world. Some-where they have triggered growth and some-where they have vandalized peace. The unrest in

nations like China, Tunisia, Libya, etc. takes its

credence from a revolution which is graduallygaining momentum. Though it sounds little

fancy its strength cannot be underestimated. It iscalled the Jasmine Revolution.

It signifies pro-democratic

protests for the change ingovernment made in coun-tries like Egypt, Tunisia,Libya, Algeria, Iran, China,

etc. It made its presence

felt in December 2010 inTunisia and since then pun-

dits in Tunisia are calling it

to be the Jasmine Revolu-tion.

Well to start with, the firstquestion that comes in mymind is- why is it called aJasmine Revolution? How

did the Jasmine Revolution

get its name? Is it a garden

party or an uprising?

In the last decade we have had Rose Revolution

(Georgia), Tulip Revolution (Kyrgyzstan), etc.The reasons why these uprisings are named afterflowers or colors can be traced back to the Czech

Velvet Revolution of 1989. It was a non-violent(velvety-gentle) uprising which led to the over-

throw of the Communist Government. TheseGreen, Rose, Orange, etc. Revolutions have

unleashed a rainbow of imitators and Jasmine

Revolution is one of them. Apart from this, jas-

Is This A Revolution Or An

Uprising? -Priyanka Pathak

Jasmine revolution has

become the voice for all

victims of autocracy which has

been muted for all these years.What started out as an

Uprising has now transformed

to a Civil War.


IBS Hyderabad


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been blocked in social networking sites.

Many activists are still not sure who was behind

the campaign and who first circulated the onsetof Jasmine Revolution on the U.S based Chinese

n e w s w e b s i t e - B o x u n . c o m .

But nonetheless a revolt is in the making with

small but stubborn protests continuing in China.

As we have discussed, the guiding force behind

this movement is the public demand for democ-racy which has swept across Tunisia, China, Iran,Libya, etc. But amidst this unrest, Libya is in themost vulnerable state. The protests mirroring the

turmoil have brokenout in many parts of

Libya. The crisis in

Libya has the poten-tial to spell disaster

for the rest of theworld. The virulent

autocracy of Muam-mar Gadhafi has re-

volted back. He is not

relenting before thedemand and has re-

sorted to rampantviolence to curb the

stir. Libya is in such a

precarious positionbecause of the dam-

age it threatens tounleash beyond the

shores of the country. It poses a very potentialfuel crisis by pushing the crude oil prices to re-

cord levels as Libya is the 15 th largest exporter ofcrude. But the most disturbing fact is its impact

on the rest of Africa has gone unnoticed.

In the wake of the Libyan crisis, the key U.S. in-dices like Dow Jones Industrial Average,

NASDAQ, and S&P 500 have taken a beating.

Though it may not be directly affected by sup-pressed fuel exports at this point of time, but the

rising prices in the international market may re-tard its recovery process. Jasmine Revolution is

in its nascent stage with its destiny not defined.

cascading effect on many nations like-China,Libya, Iran etc.

To start with, it might be tempting to draw com-parisons between the Middle East protests and

that of China, but doing that would underminelot of differences that exist between these twosocieties. One fact that remains is that at the end

of the day majority of China citizens are content

with their government.

Activists, possibly from outside China, have

called upon the China citizens to express theirdispleasure against the ruling government for

the lack of reformsand corruption by

conducting silent

meeting outside de-partment stores. The

idea is for the sym-pathizers of democ-

racy to gather in des-ignated public placesin major cities every

Sunday to marchpeacefully for a

Jasmine Revolu-tion- the name bor-

rowed from the Tu-

nisian revolt in theM i d d l e E a s t .

Chinese authorities,to detain the protes-

tors, have increased the number of police on thestreets, have barred mobile messaging and also

have censored Internet postings.

Does this mean that Jasmine Revolution in Chinawas nipped in the Bud? Considering Chinas

tight control over media and Internet, the cam-paign did not draw much traction among thecitizens. Many activists have gone missing after

the campaign. Many foreign correspondentshave been threatened by the authorities not to

report the campaign in the media or else theirvisas would be cancelled. Also since all the calls

are made by Twitter and other Internet servicesthat are widely blocked in China, only those whoknow how to bypass the internet censors get ac-

cess to the information. The word jasmine ahs

IBS Hyderabad



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- Lakshay Mehta

But what is remarkable here is the gestation pe-

riod involved at each stage of marketing. The

sponsored ad takes time to come to the viewers

notice, and then some more time to convince the

user for a trial. On the other hand, word of

mouth marketed the website in a geometric pro-gression and with a much

shorter turn around time

involved. The catalyst in

the second case was the

very important factor

called TRUST. A t

rust is about get-

ting a tried and tested

quality suggestion from a

well wisher, whom we

assume to have knowledge

about the subject matter in

consideration. Even if not

knowledgeable, we are

certain that the well wisher

definitely wants us to

benefit from his sugges-

tion. This trust always

helps in making a faster

decision with much more

surety. The lack of trust on

a new organization for lack of authentic details

about it had made the first trial a much more

risky endeavor. Several studies confirm that peer

recommendations influence business buyers de-

cisions more than any other form of advertis-

ing. Some 90% of buyers trust peer reviews and

The regular ad pop-ups on facebook tempting togive the best deals on branded accessories were

too irresistible to ignore. I was unaware about

the authenticity of the websites; yet giving a try

too became irresistible. The first page of the web-

page was devoid of any brands advertisements

and straight directed to-

wards registering up for

the website. To my sur

prise it was a fruitful en-

deavor providing dis-

counts on a host of catego-

ries of product brands and

services in every city. In

fact in the next few daysthe real benefits of the site

convinced me enough to

suggest it to a few friends

who too benefitted them-

selves and others out of it.

Yes we all know its called

word of mouth marketing.

It all started with a spon-

sored advertisement from

such websites like yebhi.com, futurebazaar.com

and the like, that were displayed on facebook,

followed by a trial made by a interested surfer,

an experiential marketing, and due to a good

underlying product-service it assumed the chain

of WOMM.

Opinion Leaders, Review Sites

& Colorful Advertisements rule

the palate. But what is it that

Truly determines the consumerbuying behavior. Its Word of

Mouth Marketing which is

emerging as a credible source in

recent times.

IBS Hyderabad

Trust Me!

IBS Hyderabad

- Anushree Mohta



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and marketing initiatives that only one-time

nudge the emotional strings of its audience is no

longer enough. Creating a bond on the otherhand requires a commitment. The core of this

commitment is majorly made of nothing more

than a good product itself. Other strategies and

services are only compensating the lack of hav-

ing a good product. The underlying concept is to

make the customer trust the product and its

manufacturer to deliver a quality good that

meets its expectations and serves its needs satis-

factorily.

Word of mouth marketing has been prevalent in

the society ever since the need of a separate mar-

keting activity was not even felt. In its most

primitive form its called, as we all know Gossip.

But when gossip began to be purposely initiated

and monitored by established organizations, it

became known as Word of Mouth Marketing.

70% trust online reviews, according to the

American Marketing Association. Meanwhile,

only 15% of buyers say they trust traditional ad-vertising.

Marketing is nothing but the building up of a

relation between the company and the consumer,

by effectively understanding the relation be-

tween the consumer and his need. In the evolu-

tion of selling into marketing, producers have

shifted their focus from initially making a rela-

tion with the product, then came relation with

the consumers wallet, and gradually focused onbuilding a relation with the consumer himself.

But in building this relation, what came in very

late was the realization of trust acting as the

most important foundations of any relation. It is

always easier to trust a family member rather

than a stranger. Marketers still remained strang-

ers to their customers. Creating advertisements

IBS Hyderabad



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son not to trust the stranger. While marketers so

far took advantage of the former, networking

sites provide the advantage to its members by

harping on the latter. Perfect knowledge about

the market was only an assumption, until recent

times, thus sharing of experiential content was

not made use of completely. The key decision

influencer was majorly the marketing communi-

cations of the company. Opinion leaders too ex-

isted, but there is a way to tamper their opinions

too. Thus consumers could be largely misled into

believing the false commitments made by organi-

zations. With growing connectivity and subse-

quent interactivity, the perfect knowledge about

the market, is finally taking shape. Review-sites

bring together the comments and experiences ofa host of people with similar subject of interest,

to share good content that subsequently helps

other people as guidance. Even though there is a

chance of companies initiating anonymous

praises about themselves, these sites are largely

trusted for authentic details and experiential con-

tent. It also keeps the companies on their toes

since word of mouth marketing is out of its con-

trol, yet it must be closely monitored than before

as it can cause severe irreparable damages. Withword of mouth marketing, now consumers have

a way to keep a check on the authenticity of the

leaders opinion as well.

Initially in the past word of mouth marketing

was always considered to be a process that mar-

keters could not affect. The aim was simply to

create happy customers, who in return would

hopefully tell their family and friends about their

positive experience. Marketing gurus refer to this

as organic word of mouth marketing, wherein

the important aspects are creating an improved

underlying product or service and o ffering good

customer service

The process of organic word of marketing is in-

herently slow and with the rise of the internet

over the last decade many companies have

turned to what is now termed as amplified word

of mouth marketing. This is when marketers

develop strategies that accelerate and enable

word of mouth activity to take place. These

strategies include: creating communities to share

content with the masses, creating a buzz through

marketing activities, provoking experiential mar-

keting, identifying and targeting influential opin-

ion leaders. The sky stands the limit for the scope

of this sort of marketing.

Familiarity always facilitates a decision. How-ever, sometimes we even have to trust strangers.

This can happen because either the responses

from familiar folks may not be available as an

option, or may be even because there is no rea-

IBS Hyderabad


Classic economic theory, based as it is on an inadequate

theory of human motivation, could be revolutionized by ac-

cepting the reality of Higher human needs, including the

impulse to Self Actualization and the Love for the Highest

Values.

- Abraham Maslow


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- Lakshay Mehta

are not at all helpful. Is it really true? Yes we are

a rich metropolitan city, even ranked among the

worlds best cities, we have the best schools and

colleges, and we recently hosted the Common-

wealth Games an honor not given to any other

city. We as a city have come off age but what

about our attitude? Our thinking & Our mental-ity? When will it come off age? We might be

quite warm people from inside but what about

the warmth that we display out

side?

In the debate on CNN IBN con-

ducted by Rajdeep Sardesai soon

after Radhikas death, Rajdeep

posed this same question to Kiran

Bedi asking her whether the inci-

dent that took place where soon

after Radhika was shot nobody

came forward to help her and

even after her death no eye wit-

nesses were coming forward, was

Delhis culture to be blamed? Was

the attitude of the people of Delhi

the reason? To this question Kiran

Bedi replied that it was not spe-

cifically Delhi culture but a North

Indian culture in general. She said the North In-

dian culture is such that outsiders do not feelwelcome here.

Delhis own chief minister Sheila Dixit had also

said after Radhikas murder that Delhiites need

to be more responsive and is it not a fact? Why is

it that the people around her did not come to her

help soon as she was shot? If the people around

8thMarch was celebrated all over the world asInternational womens day and what an irony

it was that on the day celebrating womanhood

the story which was making waves among the

media was that of 20 year old Radhika Tanwar.

Radhika, an undergraduate student of Delhi

University was shot dead by an unidentifiedperson on the busy over-bridge at Satya Ni-

ketan, near her college. Radhikas killer had

been stalking her for quite some

time is yet to be arrested and is

therefore still at large. A day

after her death with the ongoing

investigations, there was a de-

bate on CNN IBN conducted by

Rajdeep Sardesai between the

Delhi commissioner of police,

Kiran Bedi, Ex- President of

Delhi University and a member

of the council of social science.

The topic of the discussion was

how safe is the national capital

Delhi for women. While the dis-

cussion steered through how

women in Delhi dont trust the

police and are scared of them,

the question somehow shifted to is it just

Delhi? Is it the culture of Delhi? Why is Delhithe crime capital? Why dont women feel free

and safe in Delhi?

Ive always been told by friends and outsiders

visiting Delhi that they dont feel at home here.

They say people in Delhi dont care about any-

one, everyone minds their own business and

We are just so involved

in our own little

precious lives that we

fail to think of people

outside it. Its time to

sit up take Notice and

initiate the Change.

Crime + Women = DELHI?

-Cynthia Ann Robin

IBS Hyderabad



13/27

13

her were more vigilant and responsive, probably

there was a chance of her surviving.

But again is it just Delhi or is the inaction of our

society in general to be blamed? We are just so

involved in our own little precious lives that we

fail to think of people outside it.

Be it Radhika or Jessica Lals murder, a reason

why these women lost their lives was because the

society was too slow to react. Why? What are we

scared of? Why do we not stop men from stalk-

ing women? Just

coming onto the

streets, holding

candle light

marches and

protests doesnot help. People

think minding

ones own busi-

ness is the best

way to stay out

of trouble.

Minding ones

own business is

not a solution

and keeping our

eyes and ears

closed to the

happenings

around us is not

a way of keep-

ing out of trou-

ble. I dont

want to interfere, its none of my business is not

the answer. No, if you see something wrong hap-

pening then do interfere, make a scene and do

whatever it takes to make your displeasure felt.

There are lots of women who are being harassed

right now in India. Not all of them come out in

the open. Many are scared about the repercus-

sions, of the embarrassment to their family and

many of them simply dont trust the police. It

is our responsibility as family, friend or just

fellow citizens to be helping them out. How

long can we chuck away these incidents and

lock them up in the closet? Sooner or later they

will come back to haunt us.

Neither should we simply blame the police for

everything. How long will we go on blaming

the police? The police can only help to an ex-

tent. We as citizens have as much an equal role

to play in look-

ing after each

other as the

police. Today

it is Radhika,

tomorrow itwill be some

other person.

Delhi is offi-

cially the crime

capital of In-

dia. People

especially

women are

apprehensive

of settling

down here.Isnt it an em-

barrassment to

Delhi, to us as

Delhiites? Its a

pity that of all

the things that

Delhi could be known for, it is known for its

ever increasing crime rate especially against

women. We as citizens need to bring about a

change, to be more alert of our surroundings,

and to strive to make our city a better place to

live in.

Remember our one single responsible act can

prevent a tragedy from occurring.

IBS Hyderabad



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14

has all the eyes of the world markets. This

merger for exchanges means a convergence of

technologies and processes, improving the per-formance of the exchanges and reduction in coststo investors. It shall also increase the investmentchoices for an individual investor after the con-

solidation of the investment avenues. The acqui-sition will broaden the trading avenues by in-

creasing access to companies listed on foreignexchanges, access to foreign

markets to tap money.

Exchanges, the world over, earn

money by charging a smallmargin on trade volume andearn profits by charging mar-gins on huge volumes. In this

world of slim margins, even anew entrant with technologi-

cally advanced exchange can goahead a lot further with easeand turn on profits. They will

not be bogged down by out-dated technology. With more

competition sprucing up, thelegacy exchanges are losing

their market share, making itharder to get the necessarylarge volumes for the expected

profits. The NYSE trade volumes have comedown to 27% of U.S. equities, down from 90% 15

years ago. To compete with the upstarts and sur-vive, these exchanges felt the need to combine, to

diversify their geography, regain sizable marketshare in their trading businesses and create

economies of scale that will lower their costs.

From a viewpoint of an outsider to this M&A

activity, it seems to be merely the best thing that

NewYork Stock Exchange Euronext (NYSE-E)and Deutsch Brse (DB) are amongst the biggeststock exchange companies in the world. They

have recently gone into the decision to mergecreating the worlds biggest stock exchange firm

having presence in more than 7 countries. Indeed

a super power like situation.

What are these companies? And what is it about

companies running the stockexchanges? Well NYSE is the

most renowned stock market in

the world, tracked by millionsof traders for speculating the

world sentiments. Many ex-changes feel the effects of the

movements on this exchange.Its the biggest market for eq-

uity trading. Listing on this

bourse signifies an Indian com-pany as a blue chip for the In-

dian investors. This is the mightof the greatest stock exchange inthe world. It has its presence inpan Europe too along with

dominance in American mar-

kets. DB on the other hand

is the biggest player in the de-

rivatives market having its presence in many

countries in Europe. NYSE had in 2006 beaten

DB in a bid to purchase Euronext the pan Euro-pean stock exchange (covering many Europeancountries) creating a behemoth of stock exchange

company. Now with the news of NYSE-E mergerwith DBthis will create the worlds biggest, larg-est stock exchange entity.

The $10 Billion merger controlling a $20 Trillion

IBS Hyderabad

Creating the $20 Trillion

Market

-Antariksh V

The Merger of the NYSE

and DB stock exchanges is

the cynosure of the

Financial World. Whatwould be the impact of

this collusion and the

probable After Effects?



15/27

15

are also in the process of merger) and DB-NYSE

combines and had completed the integration of

their respective mergers, they will be looking atacquiring Asian exchanges to complete their

global reach. Many analysts now believe that 5-10 years from now, there will probably be 4-5

global exchanges, each of which spans Asia,Europe and the Americas. It will look like the

credit card industry. At that point, the Indianexchanges will have the choice between being in

isolation in a merged exchange world and be-

come a relatively smaller entity in a global ex-change or start consolidation on by itself. The

Indian exchangesneed to act now to

spearhead the forma-tion of pan-Asian

exchanges that

would have muchgreater bargaining

power during thefinal round of con-

solidation. The rea-son for India beingcapable of taking on

the lead for the con-solidation in Asian

markets is that Indiais large and fast

growing emerging

market. Also its ex-changes have world-class market design, range

of derivative products, large and varied investor

base, sound regulation and high liquidity.

The only concern would be an oligopoly too

much power in the hands of too few exchangefirms. In that situation, markets could raise trad-

ing fees with little alternative for the investorsand traders. The European monopoly commis-

sion is currently checking the merger activities ofNYSE-DB to be sure that the merged entity doesnot affect the benefits for the market. Also an-

other requirement for the positive outcome willbe the changes in the regulatory framework for

the nations containing these exchanges. With thiswe hope that a combined entity, originating from

India or any other nation, should bring in moretransparency, better investment and trading op-portunities.

can be done for the two grand dads of the ex-

change economy who are struggling to remain

relevant in a high-tech financial world. ThisM&A is a strategic bet by the two organizations

to stay ahead in an increasingly global, intercon-nected and uniform financial market. Exchange

consolidation the world over is not going to beonly on a regional scale. Increasingly, the goal

will be to create exchanges that span several con-tinents and provide a single platform for trading

stocks and derivatives from all over the world

round-the-clock.

Both NYSE and DBhave products and

services beyond trad-ing, some distinct

and some overlap-

ping. They mostlikely would wish to

consolidate commonservices, cut costs

and take advantageof the combined cus-

tomer base to giveeach of their busi-

nesses a bigger audi-ence. Listing on stock

exchange and settle-ment and clearanceof trades though not

high end but still provides a good amount ofcash flow. An NYSE listing is still a sign of a blue

-chip company that's stable and well managed.But as NYSE had outsourced its settlement andclearing operations years ago, it needs these op-

erations to be performed in house and DB bringsin this opportunity to NYSE. DB brings in the

settlement and clearing business that reaches intoseveral countries. Another complication is of eq-

uity trading and particularly in the US, is thatthis is a cut throat business and much of theprofit is in derivative trading. In the case of the

proposed DB NYSE , it is Deutsche Brse thathas the most valuable derivative contracts. The

most important derivative contract at NYSE Eu-ronext is the Euribor futures which trade on Eu-

ronext and not on NYSE.

In a year or two, after the LSE-TMX (LondonStock Exchange and Canadian Stock Exchange

IBS Hyderabad



16/27

16


- Lakshay Mehta

huge number of national as well as regionalnewspapers circulated across the country. Thisproves that there is still enormous scope for printmedia to be effective.

Creativity and content is important as far as printmedia is concerned. The most important aspectof print media is that the targeted consumer has

to read and scan the ad to actually get attractedto the product. And hence theplacement of this genre of

advertisements is highlyvital. Amul has been suc-cessful in developing the con-tent and the placement oftheir print ads.

The evolution of print adscan be seen in the way Coca-Colas various campaignshave been created. Theprinted ads of the initial

years used printed images.The message to be communi-cated was also painted. As incase of Coke, sometimes, theprice was also mentioned. Bythe 1950s, print ads startedincluding photographs,which made it more effective.The print ads could also berelated to a situation. TheCoca-Cola print ads had anenvironment conscious imagewhen they depicted a bottle

of Coke enjoyed by a polar bear, an endangeredspecies. Brands can also be involved in sponsor-ing events like how Coca Cola sponsored the1995 Summer Olympics. The association was alsodepicted in the print ad as shown. The print adsfor the present years are more colorful and vi-brant and focus on happiness.

The advent of advertisement via television beganin the early 1940s. The first television commercial

The last time a brands ad campaign caughtyour attention, which medium was it using? Aconventional one like Television, Newspaperor a new emerging one like website banners, in-store communication, digital, mobile, etc? Ormaybe it was a mixture of more than one?Somehow, in the past few years the number ofcommunication channels at an advertisers dis-

posal has increased. As of now, a plethora ofmediums are available to anagency. But the importantissue is how effective arethe new emerging channelsas compared to the ever-green old ones?

Print media is the oldest ofthe entire lot. The begin-ning of the usage of theprint media is stated to bein the early 15th century, a

time when the ad-makerwas devoid of the pleasuresof television, radio, internet,mobiles, etc. Print ads werethe trend of the era. Posters,newsletters, brochures weresome the methods of com-munication used. Comingback to the present day,print ads are still an inte-gral part of a products

promotional campaign.Newspaper circula-

tions around the world have been on a rise.Indias two leading newspapers, Times of Indiain English and Dainik Bhaskar in Hindi have astrong reader base. According to the IndianReadership Survey (IRS) and the NationalReadership Survey (NRS), Times of India, inthe third quarter of 2010, had a readership baseof 72.54 lakhs and Dainik Bhaskar for the sameperiod had a readership base of 134.88 lakhs.Apart from the two newspapers, there are a

Channeling the Channels

Advertising is more than

conjuring up a creative

solution. Its true impact lies

within the Channel used for

communicating. Each decade

has brought up different ideas

and varied implementation.

This is as Diverse as it gets.

-Adwita Pant

IBS Hyderabad



17/27

17

half of Indian households have a television. Thetelevision users have access to 515 channels, bothnational as well as regional. This gives an ad-maker a huge opportunity to communicate withthe consumer.

The tone in which the message is conveyed isvery important as far as a TVC is concerned. A1950s Coke TVC (clips shown in the figure), in-cludes a person giving details about the variousfeatures of Coke and also shows youngsters en-

joying the drink. This is very informative for theviewers seeing the TVC almost when it started.

TVCs can also include the situations occurringduring that time as a base. Such campaigns are

(TVC) was aired in United Stated on July 1, 1941by watchmaker Bulova and hence began thechanges in the way advertisers worked. In aTVC, there are various senses getting involved atthe same time. The visuals capture the attentionof the eyes, the music and the voice attracts theears and the overall content gets the mind think-ing.

Since the 1940s to the present, television is one ofthe most preferred modes of advertisements

throughout the world. In India, post-liberalization there have been many changes inthe content that is allowed to be viewed. Due tothis, the TVCs have seen a phenomenal change.According to a survey done, presently around

IBS Hyderabad



18/27

18

product is appreciated, the word can be easilyspread among the users visiting the page, i.e.viral marketing strategy. In case a product is notappreciated, suggestions can be collected fromthe same public forum. Using this channel cau-tiously is vital, as it can generate a negative pub-licity if the wrong word spreads. There can alsobe a brief about the events conducted by a prod-uct posted on the social networking sites so thatthe user feels more involved.

Theseto the introduction of technologically ad-

vanced websites are also available to mobile us-ers, due phones. The figure shows the facebookpage for Coca-Cola and the iPhone Facebookapp, which is a popular mobile application thesedays.

The mediums discussed here are just a few of anentire sea of mediums. Hence, using these medi-ums effectively and developing a meaningfulmessage will h elp ad-makers create an attractivead-campaign. Advertisers can utilize these medi-ums either singularly or by combining a few. Asthe competition in every field is on the rise, agen-cies should identify innovative channels to com-

municate with the consumers; however the im-portance of the conventional channels should notbe completely ignored. Therefore, choosing theright channel is not a process that should betaken for granted and an in-depth understanding

used by various brands especially during festi-vals like Diwali as seen in Cadbury, or duringtimes of economic slowdown, as seen in Airteland ICICI Bank. In a country like India, TVCscan be developed in regional languages as well tocommunicate the message to the consumer.

Post-television, innovations in technology havegiven communication channels a new dimension,altogether. The world was never this close andwell-informed before. Consumers are rationaland look for all options in all possible areas and

then decide on what they want to purchase. Us-age of internet and mobile phones has given ad-vertisers a new medium to stay connected withthe consumer. Instead of waiting for the consum-ers to look at a print-ad or TVC, the advertise-ments can be sent directly to their pockets.

This new medium can incorporate the usage ofboth the print ads as well as TVC. Newspapersand magazines are easily available online to thepeople who dont have the time to actually buy ahard copy. Times of India Online is the mostvisited newspaper website in the world. In May2009, the website had 159 million page views.

Therefore, print ads can be easily accommodatedwithout losing their sheen. Similarly, social net-working sites and websites showing streamingvideos give a chance to share TVCs and get pub-lic opinion. It has various advantages as well. If a

IBS Hyderabad


A Creative Economy is the fuel of Magnificence

- Ralph Waldo Emerson


19/27

19

level, it would be beneficiary to have PPPs in

infrastructure. PPP is an acronym for Public -

Private Partnerships that are established when aGovernment entity and a Private Sector Firm joinhands in the form of a contractual agreement.The PPP model ensures greater transparency and

credibility with the role that Private Firms haveto play. This could be in terms of Funding, Plan-

ning, Co-Ordination, Implementation, Operation& Maintenance. Infrastructure

is one domain where the Main

tenance costs can be real highwhen spread out over a long

period of time and takingnatural calamities in to consid-

eration. There are various PPPmodels that are indicate therole of the Private firm. These

are as follows:

Build Transfer: The Firm takesup the Designing and Imple-

mentation phase and once theProject is complete, the Gov-

ernment takes care of Opera-

tions and Maintenance.

Build Maintain: The Firm takes

care of Designing, Buildingand Maintenance while the

Government handles the Operations.

Build Transfer Operate: The Firm Designs &Builds, transfers the ownership to the govern-

ment however it Operates for a specified time

period and then passes it over to the govern-

ment.

Build Operate Transfer: Here the Firms takes care

In the last issue, we saw the various problemschoking the countrys growth prospects. The sti-fling Infrastructure deficit has the crippled us in

terms o f operations, logistics and the develop-

ment front. Rising demand and government ini-tiatives have done little to help the cause. As per

a survey conducted by the Investment ClimateAssessment around 1/3rd of Indian Firms de-

scribed infrastructure as their major problem for

business development.

To address the issue, the Plan-ning Commission came upwith a rudimentary figure of

$500 billion that may be

needed to close this infrastruc-ture gap. However with a lib-

eral fiscal policy in place, Iwonder how they plan to

source the funds. As per thesignals sent out by the budget

planned, the government

seems to be quietly phasingout the subsidies. At this time,

if the Center plans any morefiscal consolidation the tax

payer will have to bleed. So in

an effort to obtain the funds

required we need to have a

more conducive FDI policy and a greater role of

the Public and P rivate enterprises. Since we al-ready have a liberal investment policy when it

comes to infrastructure including the tax breaksannounced in the budget recently, we need to

ensure greater legal accountability by having a

rigid framework in place.

To evaluate and judge development at a micro

Infrastructure Deficit: The Choking

Factor of Indias Growth StoryPart 2

-Neha Sharma

The infrastructure deficit

has been crippling the India

Growth story. Its high time

for the Government towake up, get its act

together and pull in more

power packed reforms for a

Demand Hungry Nation.

IBS Hyderabad



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20

innovation and a technological push are the need

of the hour.

When it comes to investments and funds, what isit really that is holding us back? Al though 100%FDI is permitted, we are still limited by the Co-

ordination problem as detailed in the last issue.Apart from this th e Prime Minister has proposed

that infrastructure debt funds are an appropriatemeans to solve the problem. Weve had agencies

like IDFC and other Private firms float bonds inthe market in order to soak up funds. However,

the response to these has been lukewarm. Why,

you may ask?Well, its because

the yield on theInfrastructure

Debt is compara-

tively lowerwhen it comes to

the varied invest-ment instruments

available. Thegeneric rate on

the infrastructurebonds is nearly

8.25% whereas asimple Fixed De-

posit can helpyou earn nearly9.75% yield on

your money. Plusconsidering the

long Gestation periods and Development cost,the Infrastructure fund has a minimum lock inperiod of 5 years. So, this clearly indicates that

the opportunity cost is an important factor. Whywould the average investor get his money tied

up in a low yield instrument? This is preciselywhy the additional Rs. 20,000 as planned out in

the Budget for Infrastructure has a menial role to

play.

The way forward? It seems logical to build on thePPP model for now. Many road networks have

been setup successfully under the BOT (BuildOperate Transfer) model and it can be imple-

mented easily as well. The PPP model can be ashort term solution to the demand driven econ-

omy. In the long term, we need to fix those yield

patterns in place!

of Design, Build and Operations for a specific

time period and then Government takes over.

These are some of the generic models that arepopular in the PPP mode. Apart of this the limitand extent of control can be explicitly stated

through contracts having a fine line of demarca-tion between service and management. Through

the Private Firms, we can invite funding fromcapital markets as well. This holds true for firms

looking for Expansion or Diversification. Therewould be a greater need for understanding if the

Diversification is Related or Unrelated. In case of

Related, thestakes would be

too high while inUnrelated the

relevant risk is

low. The in-volvement of

Private Sectorwould help in

pushing upcompetition lev-

els and thiswould make the

developmentagenda more

aggressive.

One of the re-

markableachievements in

recent times was the Golden Quadrilateral Pro-ject. Interesting though is the very idea that

spawned this infrastructure ordeal. As per apopular review by the Economic Times, the then

Prime Minister Atal Bihari Bajpayee felt that the

speech he was offered to speak on was too mun-dane and he added zest by stating that he wishes

that India be connected by Road from Kashmir toKanyakumari. The NHAI sat up took notice and

came up with humble plans for the North East

and South West Corridors. Politics does have itsweird ways. In the recently announced Railway

Budget, Mamta Banerjee did propose expandingthe railway network by i mplementing the PPP

model. In fact, its noteworthy that most of therail network (nearly 50,000kms) in place was ac-

tually laid down by the British in Pre-Independence era. Since Independence we have

added just about 10,000kms in 6 decades. Thus

IBS Hyderabad



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21

for enterprise A is the output product of enter-

prise B, with this vicious circle there can be a

devastating crumble of the system. And if thiscrumbling is not stemmed then this will affectthe citizens and their purchase behavior further.With this crumble citizens tend to save more and

spend less as there is no future security. So thereis no money which is being circulated.

To counter this, We believe there were many cus-

toms and rituals in place from theancient times. All these rituals

were formulated for all the festi-

vals in our nation. There are innu-merable festivals, effectively mak-ing someone celebrate a festival oroccasion everyday. As being a

celebration, on all these occasionsthey are required to invite guests.

As a general custom, guests bringin gifts while the host gives outshagun- some token money as a

mark of respect, love and affection.This is raw money. We term it

as raw money because there is noexchange of value between the

giver and taker. There was alsopolished money, money used for

exchange of value, people buying

material goods. Rituals encouraged people tobuy new clothes, house renovation. New clothes

meant money for the weaver, who in turn gives itto the farmer. House renovation meant money

for the work smiths. In other words, there wasflow of money from top to bottom in the hierar-

chy of users of items. Also there were further

aspects of Indian rituals art. This was encour-aged so that even the artists get their share of

funds during these festivals and there is flow of

The buzz word doing the rounds from the ad-vent of recession is how to induce the con-sumer spending. Even the Indian government

has taken a lot many steps to induce the spend-

ing during those years of recession. America hasbeen a leading example of how to stimulate the

consumers to purchase more via the policychanges. They have brought in various fiscal and

monetary policies which inculcate the habit ofexpending more and saving less.

Policies are reducing the borrow-

ing rate, reducing the value of thecurrency so that more money is

spent.

But the main aim is just spending;does it cater to the need of mean-

ingful spending which will be use-ful for the whole economy? We

doubt about it.

As a parallel to the current statusof the USA, India in the ancienttimes was very rich. Most of thepopulation was wealthy and had

some occupation to perform. There

was no urgency in spending the

money to buy items of desire. Theyhad enough liquidity with them to spend as

and when required. Also the people believed in

savings and longevity of material goods.

This situation can be seen as a grave issue for the

countrys financial situation. If people do notspend money, then who will purchase the goods?

Who will produce the raw materials? When thereis no consistent demand, then how can enter-

prises define their stores? And as raw material

INDUCED SPENDING

-ANTARIKSH V & NEHA SHARMA

Government InducedSpending is the

buzzword. More thanjust another reform

there can be long termrepercussions of thispolicy. A short runFix or a Long Term

Solution?

IBS Hyderabad



22/27

22

savings rate. This is beneficial in the short run

and the repercussions can be tamed by altering

the monetary policy. But with increasing con-sumption and higher spending what are we lead-

ing on to? We believe that policies conducive tospending which build on lower interest rates for

ease of availability of credit would turn out to bedetrimental in the long run. Firstly, due to in-

duced spending the average consumer getscaught in to the cycle of availing credit for short

term purchases. In turn theyre really not saving

much and at thesame time are

falling in to adebt trap.

This cycle

would keep con-tinuing and

eventually there

would be a sce-nario where

people wouldhave faltering

credit scores asthe ability to

repay would belower. As the

savings rate is

already on adecline lately,induced spend-ing will only

add on to thepilling debt lev-

els. Nearly 10

years down theline, banks would face a liquidity crunch in giv-ing out newer loans as they would have troublein getting back the funds given out initially to

instill liquidity in the system. Contradictory is it?

Therefore, its a question that remains to be an-swered whether induced spending is really a

way to tackle liquidity and raise demand in theshort run, or is it just another means of taking the

bull by its horns in the long run?

money in each and every household in the na-

tion. With this money changing hands, there is

money in the system to be used as a medium ofexchange, possessing value and starts running

the economic mill.

People are accustomed to spend during the fes-tive seasons and saving during the odd seasons.

These festivals are a standard feature product ofus Indians. We cannot live without it. Its our

culture, our nature. Indeed this has resulted withus Indians doing creating the biggest gold pur-

chase fest in

world duringDiwali. There

are numerousfairs which start

off during thefestival seasons,

just look around

any ganeshot-sav, navratri,

roza, christmas,etc. all these

festivals create acarnival of fairs

where themoney changes

hands, oiling

the economicmachinery.

So without

blaming anycountry or its

beliefs and cus-toms, We can

say that if the festivities are made about in such a

manner so that people are compelled to spend,then you have your financial machinery running

smoothly. You dont need any special kind of

fiscal or monetary policies to Induce Spending.

However, then the question remains as to how

much consumption is actually feasible? The aver-age consumption rate is much higher than the

IBS Hyderabad



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23

IBS Hyderabad

Guest Contributions


IBS Hyderabad



24/27

24

sic Value (IV) which is a function of the stocks

expected returns and risks. IV is the stocks true

value and a stock is mispriced when the current

market price (CMP) is different from its IV.

Based on this mispricing buy / sell decisions are

taken. These two values are expected to become

same in the long run as the markets are assumed

to be efficient in long run. Hence an investor is

expected to buy a stock when it is

mispriced and hold it till its CMP

becomes equal to IV. Fundamen-

tal Analysis assumes that price

movements are 90% logical and 10

% psychological.

Using below three analyses the IV

is determined and then compared

with CMP.

(1) Economic Analysis includes

the overall condition of countrys

economy

a. A countrys GDP growth rate

i.e. rate growth of goods and ser-

vices produced in the country is directly propor-

tional with performance of companies and hence

their stocks. If the GDP is growing at say 9 %

then most companies and their stocks are ex-

pected to grow and give a return o f 9%.

b. Interest Rates set by the apex bank dictate the

borrowing cost for corporate entities. High inter-

est rate erode their margins and thereby reducing

Most of us arent new to investing. As equitiesgive the best returns in the long run we are al-

ways tempted to invest in them to get our share

of the pie. Even the current choppy markets

ruled by Foreign Inflows, high inflation and soar-

ing crude oil prices dont deter smart investorsfrom investing. Many investors make choices

using their own skill and past experience. At the

same time with the fast expand-

ing number of investors a breed

of professionals called stock

analysts have also cropped up.

For an ordinary investor who

doesnt have the time or exper-

tise to study and analyze stocks,

they are the best guide to cherry

picking stocks. However, mostinvestors arent aware that there

are two distinct models of stock

analysis Fundamental Analysis

and Technical Analysis. Both

these models have their own set

of assumptions and techniques.

They often c ontradict each other.

Consequently and quite naturally Fundamental

Analysts and Technical Analysts may also con-

tradict and create confusion for investors. Shed-

ding light on these two analysis models and their

usage is the premise of this article.

(1) Fundamental Analysis:

As per this model any traded stock has an Intrin-

IBS Hyderabad

Demystifying Stock Analysis

-Vasu Goyal

Investing is one of the

main drivers for any

Economy. But its all

Greek & Latin to

average investor. Here

we break down how

exactly stocks are

analyzed.



25/27

25

a. Present Value (PV) of a companys stock is as-

certained by calculating a companys expected

earnings in future by forecasting its projected

future cash flows and discounting them at an

appropriate rate (using risk associated).

b. Key Financial Ratios (like P/E Ratio, P/B Ra-

tio) etc. Price to Earnings ( P/E ) ratio is calcu-

lated by dividing the Market price of a stock by

its EPS ( Earnings per Share ). It give the multiple

at which a stock it priced to its Earnings level. A

P/E ratio of 10 means an investor has to 10 pays

times its EPS to buy the stock. Naturally higher

P/E ratio signifies more premium.

c. Management quality refers to integrity and

caliber of the management of a company. The

better and effective the management is, the better

a company is expected to perform in future. Thus

its stock might be trading at a premium to similar

companies.

d. Other factors considered are Dividend policy,

Upcoming projects, Promoters shareholding etc.

Analysis may be started from any direction as

seen below :

Top Down Approach : Economic Analysis In-

dustry Analysis - Company Analysis

Bottom Up Approach : Company Analysis

Industry Analysis - Economic Analysis

(2) Technical Analysis:

In this model a stocks past price movements are

used to forecast its expected future price move-

ment. It is calculated using various charts and

diagrams. All these calculations are done using

software and help in deciding entry/exit price

levels. Some popular charts and diagrams are

described as under :

profits.

c. Inflation Rates determine the cost of input ma-

terials and are vital especially for manufacturing

companies as expensive inputs put pressure onmargins.

d. Exchange Rate fluctuations affect margins of

companies which serve foreign clients especially

IT companies whose major revenue is from Inter-

national clients. A rising Rupee and say a falling

Dollar will erode the profits of a company whose

billings are in Dollar.

e. Government Policies like Tax Laws etc are also

considered.

(2) Industry Analysis is analyzing the particular

sector in which the company is situated

a. Different sectors like Metals, Infra, Power,

Pharma, IT, Automobile etc. are individually

analyzed for future growth prospects. For ex

Governments increasing allocation to Infrastruc-

ture sector in the budget will give a major boost

to Infrastructure companies. Government stimu-

lus packages, incentives for a particular sectoralso affect the performance of companies. For ex

Tax holidays etc.

b. General Price level of goods and services of a

particular sector affects margin of companies.

Recent price wars among Telecom Operators

have reduced their margins and affecting long

term profitability.

c. Entry n exit barriers like licensing require-

ments for new players in any particular sectorplay a key role in deciding the amount of compe-

tition.

(3) Company AnalysisHere specific companies

in a particular sector are analyzed and then com-

pared with si milar companies.

IBS Hyderabad



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26

sell it when it touches the moving average.

(c) Price patterns - Stock price movements often

create patters like Head and Shoulders, Necklace

etc. which help in predicting further price move-ments.

(d) Other charts and diagrams used are Price

Bands like Bollinger Bands, Support and Resis-

tance levels etc.

The technical Analysis model assumes that the

price of a stock reflects all relevant factors like

GDP growth rate, Interest rate, stimulus, price

level, competition, management of company,

cash flows etc. Here this model conflicts withFundamental Analysis. Prices always move in

accordance with trends which will continue until

an opposite trend sets in. These trends follow a

cycle in the long run which will repeat itself.

Price and traded Volume of a stock are two fac-

tors considered here. Technical Analysis assumes

that price movements are 10% logical and 90 %

psychological.

Conclusions for Investors:

Investors may follow any model. Its a matter of

personal choice and investment horizon. How-

ever, Technical Analysis is more suitable for

speculating i.e. investing for short term whereas

Fundamental Analysis is suitable in the long run.

Both these models are widely used and have

their pros and cons. They often contradict. Some-

times extremely skilled and seasoned investors

use a combination of both the models.

(a) Price Line chart - This is a very basic chart

which is created by connecting a series of past

prices with a line. It gives an idea of how the

price has changed over a period of time.

(b) Moving Average It is the average price of a

stock over a given time span, say 1 yr, 5 yrs etc.

Such charts represent the general price for the

time span and when compared with current

price line helps making buy / sell decision. In-

vestors typically buy a stock when its currentprice is above the moving average price line and

IBS Hyderabad


Economy is the method by which we prepare today to afford the improvements

of tomorrow

- Calvin Coolidge


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IBS Hyderabad

For Readers

Dear Readers,

I believe you appreciate the transformation of The Focus. Your praise and encouragement has

always been a source of motivation for us. Therefore, in case you have any comments or sugges-

tions for improvement please leave them in the COMMENTS section our website

www.ecobizz.weeblycom. We at Ecobizz will be more than happy to incorporate your sugges-

tions.

Further, those of us with a flair for writing and are seeking an opportunity to see their thoughts

in print. Here is your chance to let your dreams to turn into reality. We publish articles from

our readers; you could be from any walk of life within or outside of IBS, Hyderabad, a student, a

faculty, a professional, a homemaker or a self employed entrepreneur. We believe that every in-dividual must get an opportunity to express oneself. The article should be of around 1,000

words concerning economics, politics, social issues, management or business. You can e mail

your contribution to [email protected].

Regards,

Team Ecobizz
http://www.ecobizz.terapad.com/http://www.ecobizz.terapad.com/mailto:[email protected]:[email protected]:[email protected]://www.ecobizz.terapad.com/

Documents

The Focus by Club Ecobizz - March Issue