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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.
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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.
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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
March Vol , 2011. Ecobizz Newsletter
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.
March Vol , 2011 Ecobizz Newsletter
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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MOVEMENTSIN S&P 500 V/S NIFTY
- 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
March Vol , 2011. Ecobizz Newsletter
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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MOVEMENTSIN S&P 500 V/S NIFTY
- 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
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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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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?
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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
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MOVEMENTSIN S&P 500 V/S NIFTY
- 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
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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
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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
March Vol , 2011. Ecobizz Newsletter
A Creative Economy is the fuel of Magnificence
- Ralph Waldo Emerson
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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.
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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
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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?
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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
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IBS Hyderabad
Guest Contributions
March Vol , 2011. Ecobizz Newsletter
IBS Hyderabad
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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.
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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
March Vol , 2011 Ecobizz Newsletter
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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
March Vol , 2011. Ecobizz Newsletter
Economy is the method by which we prepare today to afford the improvements
of tomorrow
- Calvin Coolidge
8/3/2019 The Focus by Club Ecobizz - March Issue
27/27
27
IBS Hyderabad
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