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Term of Week
In Focus
Opinion
Personality
Tech World Arbitrage| 6
The Future of Cloud
Computing|12
Vinod
Khosla |11
December factory
growth at two year high
as orders surge| 4
JANUARY 04, 2015 | A FINNICHE INITIATIVE
An Alarming
Week for Oil| 2
Disclaimer: FinXpress takes no responsibility for the opinions expressed in the magazine.
2015 has arrived, a fresh start for IMTians to make this year eventful and attain greater
heights. First years are busy bidding farewell to their peers leaving campus on exchange
program where as second years have entered their final term and may be the last term of
education and freedom before entering the corporate world.
Club FinNiche releases its weekly magazine FinXpress, the first of 2015 with the In Focus
talking about the ‘An alarming week for oil’. The Opinion gives an overview of
‘December factory growth at two year high as orders surge’. The term of the week describes ‘Arbitrage’. Do have a look at the market section, Tech world which brings to you about ‘The future of Cloud Computing’ and Personality of the week, Vinod Khosla.
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, 04 | 2015 | Volume 28
An alarming week for oil
December factory growth at
two year high as orders
surge
Arbitrage
Vinod Khosla
The Future of Cloud
Computing
Retail prices of petrol and
diesel are not declining at the
same pace as the plummeting
price of crude. Consumers are
paying 8.32 per cent less for
diesel and 11.31 per cent less
for petrol than on June 1.
But, on macro level, the fall of
more than USD 50 can
potentially boost growth by up
to 0.5 percentage points in the
current financial year
- By Arihant Jain
Global Oil prices have fallen sharply over the
last couple of months and it has lead to
significant revenue shortfall for many oil
exporting nations. While it was trading to
above USD 110 per barrel 6 months ago, it has
halved since to around USD 55 per barrel.
Reasons for Fall
In the last few years, oil prices have been
bouncing over USD 100 per barrel because of
soaring oil consumption in countries such as
China and due to conflicts in key oil
producing nations such as Libya, production
was not able to meet the demand. Thus the oil
prices spiked. It prompted many US and
Canadian companies to drill oil at new places
to make sure they take advantage of this
surge. It paved way for the fall in oil prices:
1. Increase in output from US shale
producers.
2. Weak demand in many countries in
Europe and Asia due to insipid economic
growth.
Thus, fear of global oversupply and reduction
in demand sent Brent, the international oil
market, down almost 50 per cent last year, the
second-biggest annual loss since trading in
futures contracts started in the 1980s.
Petrol prices are set to fall to
below £1 a litre by the end of
this month for the first time in
six years, analysts have
suggested.
Analysts have predicted that
the world price of oil will
continuing falling, with experts
at bank Morgan Stanley
suggesting that prices could
even drop below $35 a barrel,
but others have warned that
prices are expected to rise
again at the end of the year.
In such a situation. OPEC, world’s largest oil
cartel generally reacts by raising prices or
limiting the production of oil but in the
meeting held in November, they decided not
to do so. Many OPEC countries such as Iran,
Saudi Arabia needs oil prices to be high so as
to balance their budgets but they didn’t
wanted to let go of their market share and
they hoped that lower prices would help
throttle the US oil bloom. This though was
unexpected, led to the free fall of oil prices.
It is evident from the graph above, that
eventually oil supply exceeded the oil
demand leading the sharp fall in oil prices.
Impact on manufacturers
On one hand, a steep decline in the cost of oil
leads to lower expenses. But on the other,
business may suffer because of lower
spending by oil and chemical companies on
big-ticket items like computers and new
machinery.
Though lower raw materials prices is a
blessing as it opens up margins for
manufacturers but for the specific industries
like the chemical industry or petroleum and
coal products, they’re getting hit directly.
Impact on Countries
Countries such as China, India and Japan,
who are the highest net importers of crude oil
have now access to cheap energy source. A
large portion of population in these countries
spend a significant portion of their income on
gas, as much as 30% in case of India. China,
being the world’s largest net importer of oil,
saves about USD 2 billion annually for every
dollar drop in the oil prices. Though most of
the Asian countries benefit from this drop,
one exception is Singapore. According to
Bloomberg, Singapore ranks second in the
world for reliance on crude and thus depends
heavily on export of oil.
With oil revenues making 45 percent of
government budget, Russia one of the worst
affected countries in the world. Economists
now estimate that Russia's GDP will shrink at
least 4.5 percent in 2015 if oil stayed at $60 per
barrel. The plunging price of oil has also
caused the ruble's value to collapse — which
is leading to panic inside Russia and a rise in
inflation, as imports become drastically more
expensive. So far, Russia's central bank has
been struggling to deal with this crisis. On
December 15, the country suddenly hiked
interest rates from 10.5 percent to 17
percent in an attempt to stop people from
selling off rubles.
Other countries struggling with this price
drop include Iran, Venezuela, Saudi Arabia
and to some extent, the United States.
Source: http://www.iea.org/
December factory growth at two
year high as orders surge
- By Shikha Sharma
Indian merchandise makers finished 2014 in a
higher apparatus, with business conditions
enhancing at the fastest pace in two years in
December. Quickened development of the
assembling segment was reflected by quicker
extensions in yield, new business and foreign
orders, said HSBC.
The headline HSBC India manufacturing
Purchasing Managers' Index (PMI) moved to
a two-year high of 54.5 in December, up from
53.3 in the earlier month. Business conditions
enhanced at a speedier pace in every one of
the three business sector gatherings amid the
month, with the most keen extension seen in
customer products.
Yield in the Indian manufacturing sector
climbed in accordance with the headline
index in December, with development getting
to the speediest in two years. As per various
study members, the most recent climb
underway was underpinned by stronger
request books.
Shopper merchandise were the best
performing of the expansive areas checked.
Most recent information reflected reports of
enhancing request in December, as new
requests expanded for the fourteenth
sequential month. Additionally, the rate of
development was checked general and the
speediest since the end of 2012. Also, Indian
manufacturing companies enrolled a further
climb in new fare business in December. New
work from abroad stretched at the speediest
pace since April 2011.
The rate of extension quickened to the most
checked in the current 14-month grouping of
development. Accordingly, the pace of
preproduction stock developing picked to the
most honed in more than two years. Besides,
supplies of completed products held by
Indian producers rose at the speediest rate
since the overview started in April 2005.
Then, diverged from proceeded with
development of generation and approaching
new work, staffing levels in India's
assembling economy declined in December.
That emulated two progressive months of
slight employment creation, in spite of the
fact that the pace of withdrawal was
fragmentary generally speaking. Work
misfortunes were clear in two of the three
reviewed sub-segments, with the special case
being moderate products.
Indian markets surged the
most , led by banking stocks,
which gained on expectations
of reforms in the sector
HSBC Purchasing Managers’
Index (PMI) showed
manufacturing activity in India
had picked up in December
2014
The index rose to a two-year
high of 54.5 points in
December, compared with a 21
-month high of 53.3 the
previous month
At last, higher costs paid for metals,
chemicals and gadgets set upward weight on
info costs in December. That said, the rate of
expense expansion facilitated to the slowest
in more than five-and-a-half years and was
well underneath the long-run arrangement
normal. Weaker expense weights were
reflected by a generally stifled climb in
offering costs amid the month.
Remarking on the India Manufacturing PMI
overview, Pranjul Bhandari, boss India
economist at HSBC said, 'Manufacturing
activity force quickened to a two-year high in
December, drove by a sound increment in
new requests from both at home and from
abroad. A precarious climb in new requests
from the customer area more than balance a
lull in new request development from
venture merchandise. In our perspective, an
ascent in the recent is basic for a genuine pick
-up in monetary development. In accordance
with falling item costs throughout the last
few months, info value expansion was
unassuming, and this pattern was
additionally reflected in yield costs. With the
disinflationary pattern making progress, the
RBI is required to discover space for some
rate cuts in 2015.'
The central bank has stayed immovably
hesitant notwithstanding proceeded with
interest from industry for a cut in the policy
rate. At the same time while keeping up the
norm on the rate in its past bi-month to
month monetary policy audit a month ago, it
had said it may cut rates — even in the
middle of surveys — if the circumstances
warranted so. Reflective of further
development of yield and new requests,
information purchasing among Indian
products makers expanded in December. The
rate of extension quickened to the most
checked in the current 14 month succession of
development.
Along these lines, the pace of preproduction
inventory building picked to the most honed
in more than two years. Besides, loads of
completed merchandise held by Indian
manufacturers rose at the quickest rate since
the overview started in April 2.
Arbitrage means simultaneous
purchase and sell of any
security, currency, stock or
asset in the respective market
with an objective of earning
profit from the price difference.
Arbitrage can only occur when
there is a price difference.
Arbitrage basically means simultaneous
purchase and sale of any security, any stock,
any asset or any currency in order to earn a
profit from a price difference without any
risk.
A stock is traded in multiple stock exchanges
and the quoted price may be different on each
stock exchange. Here arbitrage takes place to
take the advantage of this price disparity.
Initially, arbitrage used to occur only in
currency market, but today it applies to
commodity, futures and stock market as well.
For Example, Share of SAIL is trading at BSE
at Rs. 80 and the same is trading at NSE at Rs.
82. Then one can sell the stock on the NSE and
simultaneously buy from the BSE. This
transaction will lead to profit without any
risk.
Arbitrage also takes place in case of mergers.
In some cases, arbitrageurs purchase shares of
companies that are the targets of purchase
offers in an expectation of price difference
between the trading price and actual price
after merger.
Only large institutional investors and hedge
funds can indulge into the activities of
arbitrage. Because they are able trade large
block of shares and invest millions. On the
other hand, individual investors typically
don’t have large sums of money to take the
advantages of arbitrage opportunities and
they end up taking the advantage of smaller
arbitrage opportunities.
Arbitrage helps in keeping the price of the
securities across various markets more or less
same and it removes the price difference and
equalizes the price in various markets after a
certain number of transactions.
Types of Arbitrage
Merger Arbitrage
Municipal Bond Arbitrage
Convertible Bond Arbitrage
Regulatory Arbitrage
Statistical Arbitrage
- By Priti Sureka
Survey showed manufacturing
activity expanded at its fastest
pace in two years in December
boosted sentiment of the
market.
“India needs reforms in
banking sector, more
autonomy for state banks”.
INDIAN MARKETS
The major international markets were closed for most of the week for Christmas. The
volumes traded in the week were not high. The Benchmark BSE index ended higher at
1.38 percent and broader NSE index ended at 1.35 percent higher, hitting highest levels
in three weeks as banking stocks surged on expectations from industry meet underway.
Indian shares are expected to trade range bound in the week ahead.
BSE SENSEX
CNX NIFTY
Open High Low Close
SENSEX 27479.87 27937.20 27091.38 27887.90
NIFTY 8214.70 8410.60 8214.70 8395.45
COMMODITIES
EXCHANGE RATES
INTERNATIONAL MARKETS
Open High Low Close
NYSE Comp 10985.00 11007.82 10770.00 10830.92
NASDAQ 4315.00 4320.75 4201.00 4216.90
S&P 500 2086.00 2088.75 2038.75 2047.75
FTSE 100 6653.50 6655.30 6508.80 6547.80
CAC 4309.80 4319.80 4222.80 4252.29
DAX 9915.00 9929.50 9689.00 9764.73
NIKKEI 225 17914.00 17914.55 17450.77 17450.77
SSE 50 3157.00 3239.16 3128.40 3233.96
Hang Seng 23831.00 23931.00 23423.00 23857.82
Commodity Unit Rs / Unit % Change
Gold 10 grams 26730.00 0.11
Silver 1 kg 36235.00 0.17
Crude Oil 1 bbl 3391.00 -0.27
INR/ 1 USD 63.285
INR /1 EURO 75.91
INR/ 100 JAPAN YEN 52.49
INR / 1 POUND STERLING 96.94
Construction spending fell 0.3
percent in November, while the
pace of growth in US
manufacturing sector slipped to
six month low in December.
S&P 500 closed the year with a
double digit gains for the third
consecutive year.
India needs reforms in banking sector, more autonomy for state banks - Arun Jaitley
India needs to "conceive" several reforms in the banking sector, Finance Minister Arun Jaitley
told reporters on Saturday on the sidelines of a two-day banking retreat. Jaitley added that
there is a need to give greater autonomy to banks and that non-performing loans in some
cases was "unacceptable". India's state-run banks recorded the highest level of stressed loans
at 12.9 percent of their total advances in September last year, while the same ratio for private
sector banks was at 4.4 percent, according to central bank data. India's top bankers have
gathered in Pune to discuss long-pending reforms vital to improving the health of ailing
public sector banks in Asia's third-largest economy.
December factory growth at two-year high as orders surge - PMI
Indian manufacturing activity expanded at its fastest pace in two years in December as new
orders flooded in and factories kept price increases to a minimum, a business survey showed
on Friday. Strong new business reinforces Finance Minister Arun Jaitley's view that the
economy will grow "much better" in 2015/16, while weaker inflation gives the Reserve Bank
of India (RBI) more room to cut interest rates as expected this year. The HSBC Manufacturing
Purchasing Managers' Index (PMI), compiled by Markit, rose to 54.5 in December from 53.3,
its highest since end-2012 and its 14th straight month above the 50-mark that separates
growth from contraction. The survey also showed input prices slumped to a near six-year
low as oil prices tumbled.
Micromax plans upto $500 million IPO
Micromax Informatics, India's second-largest smartphone maker, plans to raise as much as
$500 million through a stock market listing in its financial year beginning in April, the
Economic Times newspaper reported on Saturday. Micromax, which entered the Indian
handset market in 2008 with cheap large-screen phones, will sell a minority stake in its initial
public offering of shares, the newspaper said, citing unnamed bankers and a company
executive. The company has shortlisted Morgan Stanley and Goldman Sachs to manage the
offering, the report said, adding that Micromax expects a valuation of 14 times its operating
profit.
annual consumer price inflation
fell to 4.38 percent below the 8
percent which the RBI had
hoped to achieve by the end of
the year and the lowest since
the government started
releasing it in 2012.
The private equity activity grew
47.3 percent to touch $10.9
billion in 2014, mainly due to
436 duels fuelled by online
services like e-commerce firms.
Digital connectivity should become as much a right as access to school: Modi
Prime Minister Narendra Modi on Saturday called for greater academic autonomy, focus on
research, and need to nurture future generations of scientists. Mr. Modi was talking at the
inaugural function of the 102nd Indian Science Congress at Mumbai University. The need of
the hour for a sustainable and prosperous country is to put science and technology at the top
of our national priority, Mr. Modi said. "Digital connectivity should become as much a basic
right as access to school," he said, adding that India Inc. needed to fund more research
through various initiatives including Corporate Social Responsibility.
West Bengal to woo investors at summit
Projecting itself as an ideal investment destination, the Government of West Bengal is
organising Bengal Global Business Summit — Bengal Leads 2015 — on January 7 and 8 to
attract investment from foreign and domestic companies. Union Finance Minister Arun
Jaitley and Union Minister of Road Transport and Highways Nitin Gadkari are expected to
attend. The State is seeking investment in sectors such as urban infrastructure and housing,
IT software and hardware, food processing, horticulture and floriculture, MSME and textiles,
health care, education and skills development, manufacturing, energy and infrastructure,
hospitality and tourism and business of entertainment and financial services.
Indonesia search and rescue chief says four large parts of AirAsia jet found
Indonesia search and rescue teams hunting for the wreck of an AirAsia passenger jet have
located four large objects in the Java Sea, agency chief Fransiskus Bambang Soelistyo told
reporters on Saturday. The Indonesia AirAsia Airbus A320-200 plunged into the Java Sea on
Sunday while en route from Indonesia's second-biggest city Surabaya to Singapore with 162
people on board.
After graduating with a bachelor’s degree in
electrical engineering from IIT, Delhi, Vinod
failed to start a soymilk company to service
the many people in India who did not have
refrigerators. Instead, he came to the U.S. to
further his academic studies and received a
master’s degree in biomedical engineering
from Carnegie Mellon University. Eventually,
his startup dreams led him to Silicon Valley,
where he received a master’s degree in
business administration from the Stanford
University Graduate School of Business.
Career
Vinod started the standards-based Sun
Microsystems in 1982 to build workstations
for software developers. As the founding
CEO of Sun, he pioneered open systems and
commercial RISC processors. In 2004, driven
by the need for flexibility to accommodate
four teenaged children, the desire to be more
experimental and to fund sometimes
imprudent “science experiments,” Vinod
formed Khosla Ventures to focus on both for
profit and social impact investments.
Vinod Khosla along with Srikanth
Nadhamuni set up Khosla Labs in 2012 as an
innovation lab to focus on solving large scale
problems driven by technology and
entrepreneurial zeal. The team has attracted a
set of highly experienced entrepreneurs and
professionals who have created successful
businesses in India and in the Silicon Valley,
with deep product development and
implementation experience.
Goal
His goals remain the same: work and learn
from fun and knowledgeable entrepreneurs,
build impactful companies by leveraging
innovation and spend time with a
partnership that makes a difference.
In News
In September 2014 a judge ruled that Khosla
must let the public access his private beach
near Half Moon Bay in California. Khosla’s
attorneys fought to change Mallach’s
tentative judgment. On 5th December, 14, San
Mateo County Superior Court Judge Barbara
Mallach issued her final ruling in this matter,
rejecting venture capitalist Vinod Khosla’s
latest argument that he shouldn’t have to
open the gate on a private road leading to the
coast.
28th January, 1955
IIT Delhi
Carnegie Mellon University
Stanford Graduate School of
Business
$1.68 Billion
United States
Cloud Computing is a type of
computing that relies on
sharing network devices rather
than relying on personal
devices to handle application.
Amazon Web Services, the
pioneer for public cloud
infrastructure will launch C4
cloud computing instances
soon
Cloud Computing is a type of computing that
relies on sharing network devices rather than
relying on personal devices to handle
application. It is a type of Internet-based
computing where cloud is used as a metaphor
for Internet. Different services such as
storage, applications and servers are shared
with the organization’s computer and devices
through the Internet.
Megatrends that will dominate Cloud
Computing in the next decade:
1. Cloud computing as an innovative driver
of the future:
New computing platforms are coming up
and all the services are being integrated.
Efficiency, scale and cost are the major
drivers to the development of such new
platforms.
2. Mobility:
The biggest driver of growth is mobility.
What benefit it has is it makes convenient for
people who need to handle multiple devices
at the same time. For businesses, we see a
huge potential as it can be an enabler with
data sharing and storage. It helps in
integrating the information systems of an
organization. It will help developing work
platforms like Work From Home.
3. Social Networking entering the
enterprise space:
With social media becoming all the more
relevant in business space, be it messaging,
document sharing, collaborative workspaces
etc. , Cloud computing is to see an upward
trend in the coming decade
4. Analytics: Big Data:
Analytics: using data to greater effect is the
area where businesses can look forward to the
cloud as it will help them get business at the
right time and at the right place.
- By Yojana Ranasaria
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