1st Dec 2008

Volume 2, Issue 17

Wealth Incorporation Christ University Institute of Management Finance Club Initiative Presents...

CHAANAKYA
Issue Attractions
National Headlines International Headline Corporate Interview Company Review/Buzz Words
Crossword/Quiz Investors Check Placement Special Quiz/Crossword Answers Comments
Repo Rate-7.5% IIP - 6% Reverse Repo- 6%, Forex Reserves-$254.8bn CRR- 5.5%, Inflation Rate - 8.84%

..Tracking the Economy

"Profit in business comes from repeat of customers, customers that boast about

your product or service, and those who bring friends with them." W. Edwards
1 1 2 3 4
5-6 6-7 7 8

National Headlines
Terror Attack

on Mumbai on 26th Nov targeted at foreign visitors and wealthy people. City returned to peace on Saturday after 60 hours of intense battle. Hayabusa hits metro roads. to raise Rs.1500 crore through asset sale.

Suzuki

Unitech GDP

growth rate in Second Quarter slips to 7.6%. new strategy to target at small towns and rural markets. likely to bag Indian railways IT contract.

Cokes Satyam CITI

India sacks senior Executives. buys 72% stake in Fem Care Pharma.

15 days Movements
9300 9150 9000 8850 8700 8550 8400 17 18 19 20 24 25 26
Sensex

Dabur

Sensex

International Headlines
Obama

Rs/$
49.2 49.4 49.6 Rs/$ 49.8 50 1 50.2 2 3 4 5 6 7 8 9 10

names former Federal Reserve Chairman Paul Volcker to head panel on reviving economy.

Citigroup

Inc, facing the threat of a break-up or sale, received $306 billion of US government guarantees for troubled mortgages and toxic assets. pull out Rs 1 lakh cr from equity market since January. forms steel JV with UK -based company Severfield-Rowen. Chem acquires 35% in Singapore Jatropha firm. seeks changes in IPI pipeline pact.

Oil(per bbl)
50.7 50.2 49.7 49.2 48.7 48.2 47.7 17 18 19 20 24 25 26
Oil(per bbl)

FIIs

JSW Tata Iran

Gold(per 10gram)
13200 13000 12800 12600 12400 12200 12000 17 18 19 20 24 25 26
Gold(per 10gram)

Union

Cabinet nod to fresh India-UAE air services pact in order to spur trade & investment.

Success is a lousy teacher. It seduces smart people into thinking they can't lose.-Bill Gates

Page 2

Interview with Mr. Deepak Kumar Guha

Position Held : Dy. General Manager, Central Zone, Bank of India. Q1. In the wake of the current sub-prime crisis, is it right to say that the Indian banks are safe? Ans. The current subprime crisis hasnt caused much impact on Indian banks. The total exposure of the Indian banks is very less, which I believe is not a significant amount to create a havoc. Indian banks were prudent and cautious in their approach towards investments in foreign markets. Q2. How effective were the policies of RBI in tackling the present crisis? Ans. RBI should be appreciated for its pre-emptive measures. It has been very strict with the banks having foreign exposure/presence and has kept a strong vigil over the movement of funds both internally and externally. Q3.What changes do you see in the Indian banking space with regard to the entry of foreign banks? Ans. Indian markets are grossly under served and we are way behind in the achievement of the target set by the Prime Minister for financial inclusion. Foreign banks will bring in better technology and better banking practices which will drive the Indian banks to perform and serve better. I foresee a lot of activities especially M&A, and joint ventures in the coming years. Q4.What are the major components which affect the pricing of loan in any bank? Ans. There are many factors which affect the pricing of a loan. Primarily, the basic components are the expected return on equity for the bank, CRR, servicing cost of the particular loan, deposit insurance premium cost for the bank, expected loan loss rate (associated risk), idle balances allocated by the bank and finally the securitization of the loan. These components have different costs across different banks. Thus you will find banks charging different rates for different loans. Q5.Can you tell us what factors lead to the determination of PLR in different bank? Ans. As per the RBI norms every bank is supposed to determine its PLR based on the marginal cost of funds. The marginal cost of funds here would mean the provisioning requirements of the bank, capital charges of the bank, its profit margin requirements, cost of funds (fixed deposit, savings a/c, current a/c, NRE a/c, NRO a/c, NRNR a/c ), changes in benchmark rates, servicing cost and deposit insurance premium. Apart from these the kind of loans the banks offer to different sectors also play a crucial role in determining its PLR.

"Good management consists in showing average people how to do the work of superior people." John D. Rockefeller

Page 3

Company Review: TARGET INDIA

The second-largest general merchandiser in the U.S., known for innovation, great design and community involvement, has a thriving presence in Bangalore. In May 2005, Target began its operations in Indiafirst at Embassy Prime in Bangalore, then expanding to the Embassy Golf Links. Target India started as a technology unit providing technology solutions and developing systems for the retail domain. After a period of rapid growth, they now support all business units of the Target retail operations. Target has nearly 350,000 team members. Target India is the global extension of a $59 billion business that is one of the most admired companies in the United States. Located in Bangalore, Target India fulfills a unique role in ensuring the success of this widely loved retailer that ranks 33 in the Fortune 500 List2007.

Raising the bar and setting precedents.

Target

India has been appraised at CMMI Level 3, a quality certification that places them among the best in the industry. The Six Sigma system of improving business process is practiced at Target India, and new team members are certified with Yellow Belt- within 90 days. Target Gift Cards set the industry standard in variety and design, making gift-giving easy and fun for their guests. Their Clear Rx pharmacy system delivers prescriptions in an easy-to-read, color-coded bottle, minimizing the chance of taking the wrong dose or confusing medications between family members. LIFE AT TARGET The energy is contagious. Once you're part of their team, you can't help but get swept up in : Speed-is-life Working at smart pace Goals are clear, challenging and met every day through collaboration and teamwork. CAREERS AT TARGET Ambitious growth plans combined with an array of training and development opportunities make Target the best in the industry for career advancement. Through the annual review process and using tools like the Individual Development Plan, you can work with your supervisor to plan your career, set and achieve your goals, and grow along with the company. The Benefits include :
Earn while you learn Ongoing company-sponsored classes. Customizing your professional development.

Buzz Word
Fast Market: A financial market that has a combination of
high volatility and heavy trading.

Book Quotes:
Economy is too late when you are at the bottom of your purse. Seneca If all the economists were laid end to end, they'd never reach a conclusion-George Bernard Shaw Stressing output is the key to improving productivity, while looking to increase activity can result in just the opposite.- Andrew Grove

First In, Still Here FISH: An accounting buzzword that

describe when companies still have inventory on hand that is not being sold due to inattention or obsolescence.

Drip Feed: The process of investing on an ongoing basis in a

small but growing firm over a period of time. Essentially, a drip feed results in a start-up company receiving capital contributions.

"Wealth is not a matter of intelligence it's a matter of inspiration." Jim Rohn

CROSSWORD: Down
1.What are the Bonds that carry low ratings with correspondingly higher yields called? 2.Supply of credit falls, though there is sufficient demand. 5.What is the over-the-counter market which connects dealers across the US through a network of computers and other electronic equipment called? 8.A highly volatile stock that goes up and down a lot. 9.Which word was derived from the French word Bougette meaning 'Little Bag'? 11.The name for the common currency of most European countries.

Page 4

Did you Know? million in U.S. Government bonds that were issued in 1790 to refinance Revolutionary War debt were the first publicly traded securities in the U.S.
The $80

Across
3.Money spent for payment towards the influential persons for the benefit of organizations. 4.Which was the first futures and options exchange to get its shares listed on a stock exchange? 6.This 'valuable animal' is a profitable business which generates regular cash flow due to sustained popularity or demand for its products. What is it? 7.A form of indirect sales tax paid on products and services at each stage of production or distribution, based on the value added at that stage and included in the cost to the ultimate customer. 10.The rate at which RBI lends securities & money to other banks. 12.What is a mutual fund which does not make investments in certain areas like liquor which are disapproved by many investors called? 13.Name the first company from India to get listed on the Nasdaq.

Honolulu Stock Exchange which operated from 1910 to 1976 in Hawaii was the first stock exchange to be operated on American soil in the pacific ocean. Funds were first sold in the US in the 1920s. They were then called investment trusts and often were sold by $2 billion invested. was

Mutual

unscrupulous brokers. In 1929 over

First US Income Tax ran from 1861-1872. It was Quiz: designed to pay for Q1. A hybrid of debt and equity financing that is typically used to finance the the Civil War and was a tax of 3% of income expansion of existing companies. in excess of $800. Q2. Which company is going to Sell Bonds in First FDIC-Backed Offering? Martha Washington Q3. When was the Basel committee on banking supervision established by was the only first lady to appear on U.S. central banks of G-10 countries? currency. She appeared on a $1 Q4. Who owns the largest share of GE stock and voting rights (8.2%, $425 silver certificate in million worth)? 1886 and 1891, as well Q5 Which American economist in the mid 1970s developed a model of asset as on the back of bubbles fuelled by credit growth who has been talked much in the financial the $1 silver press? certificate in 1896. Q6. Money or property held by a third party until a contract is fulfilled. The creditor has a better memory than the debtor.- James Howell

The

Page 5

INVESTORS CHECK : Forex Minis

Trading currencies means buying one country's currency while simultaneously selling another country's currency. Every currency trade therefore involves two currencies. The usual size of a currency pair is 100,000 units, known as a "standard lot". In most cases, beginner traders do not want to stomach the risk that comes with the exposure of a standard lot. As a result, most online forex brokers offer the ability to trade mini lots, which are 10,000 units of the currency rather than 100,000. For a new trader, these mini lots can be an especially effective tool for learning to trade forex. What is a pip? Before one can fully understand the benefits of a mini lot, it is important to review the concept of a pip. A pip is the smallest increment that a currency pair can move. For most currency pairs, a pip is a change in the fourth decimal place of the currency quote. For example, if EUR/USD is quoted at 1.5567 and it moves to 1.5568, it has increased by 1 pip. The value of 1 pip is calculated by the size of the lot that is traded. So, if you buy a standard lot of 100,000 EUR/USD at 1.5567 and it goes to 1.5568, a 1-pip move, then the value of your trade has increased by $10 (or 100,000 x 0.0001). If we do exactly the same calculation using a mini lot, then we would multiply the 1 pip by the size of a 10,000 mini lot instead of the usual 100,000 lot. So 10,000 x 0.0001 = $1. When you trade a standard lot, the value of the pip is $10 but when trading a mini lot the value of a pip is $1. This is true when the U.S. dollar is the second, or quoted, currency in the pair. Base Currency Vs. Quote Currency: One other piece of information to remember is that a currency pair is comprised of a base currency, which is the first currency listed in the pair, and the quote currency, which is the second currency listed in the pair. In the case of the EUR/USD, the euro is the base currency and the dollar is the quote currency. The profit or loss is always expressed in terms of the quote currency. If the currency pair is the GBP/USD, then the base currency is the British pound and the quote currency is the U.S. dollar. For the USD/CAD, the base currency is the U.S. dollar and the quote currency is the Canadian dollar. The Value of a Pip: The last important point that should be noted before we talk about mini lots specifically is the value of a pip. Suppose you are trading the GBP/JPY; the British pound is the base currency and the Japanese yen is the quote currency. Now in this instance, we have an exception to the fourth decimal place rule for the size of a pip. In the case of the yen, 1 pip is measured in the second decimal place. The yen is the only exception. To calculate the value of the move, if we buy dollars against the yen and the dollar goes up from 103.45 to 103.46, then we have a 1-pip move. Multiplying by the standard lot of 100,000 x 0.01 = 1,000 yen. To bring this back to dollars, you would then divide the 1,000 yen by the dollar rate, let's say it's 103.46, which equals $9.66. Why Trade Minis? The real value of trading minis is in the versatility it provides in matching the trade size to an acceptable level of risk. For example, suppose you decide to take a long position in the USD/JPY. Let's assume that your entry point is 103.55 and that you've set your stop-loss order 15 pips away at 103.40. Continued on page 6.

INVESTORS CHECK

Page 6

. Contd.

Did you Know? The US markets introduced circuit breakers after the crash of Oct. 1987. The circuit breakers halt trading for 30 minutes when the Dow falls by 350 points or more, and for 1 hour when the Dow falls 550 points or more. These came into use for the first time on Oct. 27, 1997 when the DJIA tumbled 554, the biggest points drop in history.

If you have $1,000 in your trading account, the maximum risk you should take in any trade is 3% of your trading capital. Because your capital is $1,000, 3% of your capital is $30. If you are stopped out of this trade and you are trading a mini lot, you will lose $15. But if you are prepared to risk $30, you can actually trade two mini lots and get the power and benefit of some leverage. If you were only trading standard lots, this trade would not be possible because a 15-pip loss, as per this example, would be $150, which is 15% of your $1,000 trading capital. Given a risk tolerance of 3% of the portfolio, this is too much risk for one trade. Mini lots allow a trader to adjust the amount of effective leverage used in each trade. With mini contracts, you can trade the equivalent of one standard lot by simply trading 10 minis. If you only want to trade a half of a standard lot, you can do so by buying five mini lots.

CONGRATULATIONS FOR PLACEMENTS!!! STATE BANK OF INDIA

ELIZABETH

M C SAAGAR

TUSHAR

In 1618 it was estimated that 3000 tons of spices were bought in what is now India and the surrounding area. The spices cost about 91,000. By the time they reached the eastern Mediterranean they were worth almost 800,000! So it is easy to see why trading companies were so important.

RAHUL SINGH

AVIJIT THAKRAL

ASHISH PODDAR

PRATEEK

In 1641 the Japanese threw out most European trading firms on religious grounds. However, the Dutch East India Company have no missionaries and are allowed to stay on the conditions that "company officers visit Edo once a year, turn somersaults in the street, spit on the Cross, and pay rent in peppercorns."

Don't try to buy at the bottom and sell at the top. It can't be done except by liars.- Bernard Baruch

Page 7

IDBI

Did you Know?

Bread, the slang word for money, comes from an old cockney rhyme, Give me your money. Give me your bread and honey. ANOOP RAJAN ARNAB LAVANYA In 1693 King William

III of England raised money for the operation of the government by selling 1,000,000 of 10% annuities.
DIVYA THOMAS JERRY SHRIYA Lloyd's of London,

MOHAMED F.N

WIPRO

the world-famous insurance association, has insured everything from the 1st airplane and Hollywood sex symbols to John Glenn as America's 1st astronaut, but wrote only marine insurance at its inception. Lloyd's takes its name from a coffeehouse operated by Edward Lloyd, the earliest record of whom is in 1688 and who died in 1713.

SIDDHARTH

NITHIN A.

Quiz Answers 1.M e z z a n i n e financing 2.Goldman Sachs 3. 1974 Chase 4.T h e Manhattan Bank 5.Hyman Minsky 6.Escrow

ORACLE

SEBIN EMMANUEL

GNANASUNDARI

VAMSI KANAGOVI

SUKRITI

SHIVANI

SASMIT

READIMINDS

SUNIL GUPTA

CROSSWORD ANSWERS

>>>>>>>>>>>>>>
4

1 2

J U N K B D

C R
3

A
5 6

S N A S D

E D I

X C S H C

O N D

V B U D G

A
10

T C
8

Y O Y O R

A Q
11

U N C T H I C
13

E U R N S D Y S

12

E T

A I

L N

F F

EclipseCrossword.com

COMMENTS
Its a good initiative, students are putting good effort to make it a successful one. G. Prof. RAMACHANDRAN G. Chaanakya helps CUIM students in keeping up with the time and the economy at both micro CYRILSAMUEL FINANCE IIyr and macro levels.

Contributions made by 2nd year:

Editing/Compiling News Company Review Investors Check/Stock Ratnas Interview Coordination Arihant Patawari Chetan P. Shriya Mohammad Nimakwala Sebin Jerry Fouzia Tarannum B.

Contributions made by 1st year:

Editing/Compiling Did you know, Quiz Quotes, Book Quotes Graphs, Buzzwords Indices Crosswords Communication Gyanesh Shroff Megha Garg Maria Fernandes Paloma Lobo Paulomi Breganza Hitesh Archana

Please mail your valuable feedbacks, reviews at chaanakya.ccim@gmail.com