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1st APR 2008

Volume 2, Issue 1

Wealth Incorporation - A CCIM Finance Club Initiative Presents

CHAANAKYA
..Tracking the Economy

Issue Attractions
National Headlines International Headline Corporate Interview Quiz Student Editorial Investors Check/Tag lines/Buzz Word 1 1 2 2 3 4

Anticipate the difficult by managing the easy. -Lao Tzu, Chinese Philosopher

National Headlines

January imports rise 47%; surge in non oil items over 10 months. Advance tax from financial firms rise up by 72%. Major import duty cuts on Edible oil, rice. GAIL may book RS 2200 crore loss, ONGC stands to gain and BPCL may run out of cash by April. Half of the companies listed since 2006 are ruling below offer prices. Tata Motors finally agreed to buy Jaguar and Land Rover for $2.3 Billion in cash. Inflation at a 13 month high touching 6.68%. R- Power to place 10k crore equipment order of 12 boilers for its plants. 40% hike for Govt. employees as per Sixth Pay Commission. UCO Bank shifts Rs.104 Cr to three ARCs (Asset Reconstruction Companies) Investors lose 24.6 lakh crore since January. Gold sales wane after price touches record Rs.13495 per gram Interbank call rates hit a 17 month high of 9%.

Inflation 6.68% , IIP5.40 %

15 days Movements
16200 15700 15200 14700 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Sensex
Sensex

40.9 40.7 40.5 40.3 40.1 39.9 39.7 39.5 1 2 3 4 5 6

Rs/$
Rs/$

International Headlines

Morgan Stanleys net falls 42%, on 42-3 Billion in write downs. Citi group planning to sell Australian retail brokerage unit, close branch in Taiwan and merge others in Singapore & Hong Kong. J.P Morgan buys Bear Stearns Cos. for just $2 (later on agreed to pay $10)-Deal backed by U.S govt. Carlyle Capital on brink of collapse. It was once $21.7 Billion Company. Taiwans Central bank raises interest rate for the 15th continuous quarter to cool inflation. Pepsico buys stake in Russian juice maker JSC Lebedyansky for $1.4 bn. Nike Q3 earnings up 35% Visa raises record $17.9bn in IPO

10 11 12 13 14 15 16 17

1300 1250 1200 1150 1100 1 2 3 4 5 6 7 8 9 Gold(per gram) 10 11 12 13 14 15 16

Gold

4300 4250 4200 4150 4100 4050 4000 3950 3900 1 2 3 4 5 6 7 8 9 Oil(per bbl) 10 11 12 13 14 15 16

Oil

Becoming wealthy is like playing Monopoly, the person who can accumulate the most assets wins the game Noel Whittaker

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Interview With Prof Bhanoji Rao


Bhanoji Rao is a renowned academician. He received his first degree at the age of 18 and started his professional career. By 2003, when he relinquished formal positions, he gained 45 years of expertise in the area of development economics and policy, with special reference to India and East Asia. Output included 15 books, 30 chapters in books and 60 published papers. We were obliged to get an interview with him. In this and the next issue we will cover the interview. You can also read about him on his website: www.bhanojirao.com

Q) You have done just about everything! Professor, Researcher, Economist, Statistician, Investigator... which part did you enjoy the most? Reply: The position of University academic in a challenging environment was the most enjoyable, especially after establishing my self as knowledgeable in a couple of special areas. Sought after by students, younger colleagues, governments and others, it was like a great joy for the ego and a lesson eventually to be humble. Q) Given your extensive exposure to and study in Singapore, what do you feel are the respective advantages of India and Singapore that have led to their growth and advancement? Please comment on the basic differences between the economic working models of the two countries. R- In India we seem to have great potential and no commensurate realization. Even the tiny island [Singapore] could teach the following as success parameters: rewarding talent and punishing corruption. Q) How different is the business environment (in India and globally) now than it was when you began your career? R- Business now has to work in an open and global environment. Gone are the days of protecting the home grown.

Q) You have studied many sectors of the Indian economy. Where do you see the most potential when the US will be under recession? R- Our strength must be in diversification of products and markets and not in subsidies and handouts to exporters. Q) Can you give us an insight into the trade linkages you think can emerge of APEC? R In my personal view APEC will continue to be a great talk-shop for many; for a few like China and Singapore it is an opportunity to network and expand business interests. (To be continued in the next issue..)

Quiz
1. What is a situation where a homeowner mails his or her house keys to a mortgage lender due to an inability to meet mortgage payment obligations and a lack of equity in the property known as? 2. What is an investment scheme that claims to reduce income tax without changing the value of the user's income or assets? 3. Name a type of bond that offers investors the option to reinvest coupon payments into additional bonds with the same coupon and maturity. (Also known as a "multiplier bond" or a "guaranteed coupon reinvestment bond) 4. Name a debt security that doesn't pay interest (a coupon) but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its full face value. Everyone has the brainpower to follow the stock market. If you made it through fifth-grade math, you can do it. Peter Lynch

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7 KEY RATIOS FOR PICKING STOCKS

Compiled by: Nikhil Purohit

Did you Know?

The following 7 financial ratios offer terrific insights into the financial health of a company -- and the prospects for a rise in its share price. 1. Ploughback and reserves After deduction of all expenses, including taxes, the net profits of a company are split into two parts -- dividends and ploughback. Dividend is that portion of a company's profits which is distributed to its shareholders, whereas ploughback is the portion that the company retains and gets added to its reserves. The figures for ploughback and reserves of any company can be obtained by a cursory glance at its balance sheet and profit and loss account. Ploughback is important because it not only increases the reserves of a company but also provides the company with funds required for its growth and expansion. All growth companies maintain a high level of ploughback. So if you are looking for a growth company to invest in, you should examine its ploughback figures. Companies that have no intention of expanding are unlikely to plough back a large portion of their profits. 2. Book value per share You will come across this term very often in investment discussions. Book value per share indicates what each share of a company is worth according to the company's books of accounts.

On May 2, in Nicholas Lane, London, UK, John Goddard a courier from Sheppard's money brokers was robbed of a briefcase containing almost 300 bearer bonds worth a total of 292 million ($435 million). However, as well as being one of the biggest muggings it was probably the most unprofitable at the same time: by midday, every major bank had been warned not to accept the certificates and the thief was unable to trade them.

Answers To Quiz

The company's books of account maintain a record of what the company owns (assets), and what 1. Jingle Mail it owes to its creditors (liabilities). If you subtract the total liabilities of a company from its total assets, then what is left belongs to the shareholders, called the shareholders' funds. If you divide 2. Abusive Tax Shelter shareholders' funds by the total number of equity shares issued by the company, the figure that 3. Bunny Bond you get will be the book value per share. 4. Zero-Coupon Bond Book Value per share = Shareholders' funds / Total number of equity shares issued 3. Earnings per share (EPS) EPS is a well-known and widely used investment ratio. It is calculated as: Earnings Per Share (EPS) = Profit After Tax / Total number of equity shares issued This ratio gives the earnings of a company on a per share basis. In order to get a clear idea of what this ratio signifies, let us assume that you possess 100 shares with a face value of Rs 10 each in XYZ Ltd. Suppose the earnings per share of XYZ Ltd. is Rs 6 per share and the dividend declared by it is 20 per cent, or Rs 2 per share. This means that each share of XYZ Ltd. earns Rs 6 every year, even though you receive only Rs 2 out of it as dividend. The remaining amount, Rs 4 per share, constitutes the ploughback or retained earnings. If you had bought these shares at par, it would mean a 60 per cent return on your investment, out of which you would receive 20 per cent as dividend and 40 per cent would be the ploughback. This ploughback of 40 per cent would benefit you by pushing up the market price of your shares. Ideally speaking, your shares should appreciate by 40 per cent from Rs 10 to Rs 14 per share. Under ideal conditions, ploughback should push up the price of your shares by 20 per cent, i.e. from Rs 20 to 24 per share. Therefore, irrespective of what price you buy a particular company's shares at its EPS will provide you with an invaluable tool for calculating the returns on your investment. (The other 4 ratios will be covered in the next issue.) Stock Ratnas JET AIRWAYS BSE- 532617, NSEJETAIRWAYS, CMP- Rs. 557.50 TARGET PRICE: RS 765 GAMMON INDIA BSE- 509550, NSEGAMMONIND CMP- Rs. 399.75, TARGET PRICE: RS 461 SATYAM COMPUTER, BSE- 500376 NSE SATYAMCOMP CMP- Rs. 408.45 (CMP-Current Market Price) 5. Created in 1924, the Massachusetts Investors Fund heralded the arrival

A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain. Robert Frost

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Tag Lines:
THE WORLD ON TIME -FEDERAL EXPRESS GOOD PEOPLE TO BANK WITH - UNION BANK THINK SMALL AKAI WHEN YOU'RE SURE - BUSINESS STANDARD ENTER A BETTER LIFE -CHOLAMANDALAM LIFE INSURANCE YOU AND US; UBS. HERE TODAY. HERE TOMORROW UNITED BANK OF SWITZERLAND WHATEVER MAKES YOU HAPPY - CREDIT SUISSE PRIVATE BANKING A. B.

A. Commonwealth Bank B. Africa Merchant Bank C. Finance Group D. Perspective Inc. C. D.

INVESTORS CHECK
Tech Mahindra: Buy position
At Rs 723, the stock trades at 12 times its current earnings and 10 times its FY-09 earnings. Tech Mahindra broadly caters to three sets of clientele telecom service providers, telecom equipment manufacturers and independent software vendors. The company is also working with clients on latest Internet technologies to cover newer delivery standards such as WiMAX. Tech Mahindras focus on the European markets, a critical geography for telecom spending. The client base of Tech Mahindra comprises, among others, AT&T, Motorola, Alcatel-Lucent, Convergys, Vodafone, and O2. Tech Mahindra derives 70 per cent of its revenues from European clientele. Tech Mahindra has recently won a $350-million, five-year deal with British Telecom Group (BT). This being a volume service deal, BT has indicated that a good part of the work is to be carried out offshore, suggesting scope for higher margins, high growth, portending more business for Tech Mahindra

Buzz Word

Odd lot A trading order for less than 100 shares of stock. Greenmail Situation in which a large block of stock is held by an unfriendly company, forcing the target company to repurchase the stock at a substantial premium to prevent a takeover. In the tank Used in the context of general equities. Slang expression meaning market prices are dropping rapidly. Pac-Man strategy Takeover defense strategy in which the prospective acquiree retaliates against the acquirer's tender offer by launching its own tender offer for the other firm.

Book Quotes:
"Generally, by the time you are Real, most of

your hair has been loved off, and your eyes drop out and you get loose in the joints and very shabby. But these things don't matter at all, because once you are Real you can't be ugly, except to people who don't understand." - Margery Williams, The Velveteen Rabbit

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

Contributions made by :
Logos, Taglines & Editing News Did you know, Quotes Stock Ratnas, Quiz Graphs Investors Check Interview Book Quotes, Buzz Word Article Coordination Arihant Patawari Fouzia Taranum Anup Rajan & Ashish Poddar Sukrutha Lavanya Gnana Devi Diwakar Grover Sasmit K. Sahu Nikhil Mehta Nikhil Purohit Manish Sinha