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16st JUNE 2008

Volume 2, Issue 6

Wealth Incorporation - A CCIM Finance Club Initiative Presents

CHAANAKYA
..Tracking the Economy

Good management consists in showing average people how to do the work of superior people. John D. Rockefeller Issue Attractions
National Headlines International Headlines Corporate Interview Quiz Student Editorial Investors Check/Tag lines/Buzz Word/Logos 1 1 2 2 3 4

National Headlines

Daiichi Sankyo, Japans third-largest pharmaceutical company, is to take control of Ranbaxy Laboratories, Indias biggest generic drugs maker, in a cash deal worth up to $4.6bn. It is the biggest acquisition of a listed Indian company.

Country's economy is expected to grow 8.5 per cent in the fiscal year ending March 2009, Finance Minister Palaniappan Chidambaram said. Growing literacy and new technology have resulted in India emerging as the second largest newspaper market in the world, according to latest research by the World Association of Newspapers (WAN).

Indian business titan Ratan Tata, already named among the world's most influential business people from India, has now made to a list of 30 most powerful in the British construction space.

Inflation 8.75% , IIP8.3%

15 days Movements
16500 16300 16100 15900 15700 15500 15300 15100 14900 14700 14500 30 2 3 4 5 6

Great Eastern (GE) Shipping, Indias largest private sector shipping company, is rapidly expanding its fleet size. The standalone entity has crude, product and LPG carriers The market capitalisation of Cairn India has risen 18% since the beginning of May 08, against the 7.5% fall in the BSE Sensex during the same period. Credit Suisse entered into the high growth business segment of wealth management, targeting high net worth individuals, Credit Suisse Head of Wealth Management Puneet Matta in Mumbai said.

Sensex
(June 1-15)

9 10 11 12

Bharat Heavy Electricals Ltd. has proposed the setting up of a joint venture in Egypt for manufacturing utility and industrial boilers with an investment of $250 million.

43.4 43.2 43 42.8 42.6 42.4 42.2 42 30 2 3 4 5 6

Rs/$
(June 1-15)

International Headlines

9 10 11 12

Yahoo Inc said that talks with Microsoft Corp on a partnership or other type of deal have concluded without an agreement, sending Yahoo shares down 13 percent. InBev began courting Anheuser-Busch owners and staff and its stock rose strongly after it made a $46.3 billion bid to add Budweiser to its own Stella Artois and Beck's beers and create the world's largest brewer. General Motors Corp's head of European operations said rising oil prices, high commodity costs and the strength of the euro could drive European sales down to levels not seen in decades. Merrill Lynch CEO John Thain said that if it raised more capital, it would consider selling its stakes in news and financial data company Bloomberg and money manager BlackRock. A steady rise in energy prices has fueled an inflationary psychology in the United States and could be a problem if it does not reverse, Federal Reserve Vice Chairman Donald Kohn said.

Gold
(June 1-15)

1200 1150 1100 1050 1000 31 2 3 5 6 7 9 10 11 12


Gold(per gram)

6000 5900 5800 5700 5600 5500 5400 5300 5200 5100 31 2 3 5 6 7 9 10 11 12

Oil
(June1-15)

Oil(per bbl)

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

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Interview With Mr. K.N.Guha, Banker and Visiting Faculty


Mr. Guha is a familiar face on campus being a visiting faculty at CCIM since 1999. He has served in State Bank of India from 1969 to 1995 in various capacities. From 1990 to July 1995, he worked in the Merchant banking department of the Bank and SBI capital markets Ltd. In 1995, he took voluntary retirement from the Bank after completing 26 years of service. Since then he has been working as a freelance advisor for Corporates. Since 1995 he has been a visiting faculty to many of the Bank training centers in Bangalore and gives lectures on Banking and Capital markets subjects pertaining to Indian financial market scenario. Sasmit K Sahu interviewed Mr. Guha. Here are his views. Ques- You have played many roles in the field of finance in many organizations across the globe. Which part of it you enjoyed the most and why? Reply- Lending activity and Capital market operations are my favourite fields where where your involvement is very much there. Q- The sector that has got punished the most in the recent times, apart from real estate, is the whole infrastructure space - power, capital goods, and construction. What should be done there? Do you start buying because value has emerged or do you think it is best to stay away? R- All the sectors have ups and downs. Each sector should have a development criteria and limitations for growth. India is losing manufacturing sector and the skill force. If the question is about buying of scrips for investment, a regular investor looks at the upcoming industry. Q- What is it most contingent right now? Is it crude or FII Flows? What would be the decider on determining we are somewhere close to a bottom or whether we still have downside to go? R- Crude is one of the important things for India as we cannot reduce the use of it nor we have capacity to produce on own the quantity required. On one side the automobile sector is showing a growth which cannot be stopped. FII flows are one thing which comes and goes on an on going basis as it is an investment opportunity for foreign investors. I feel the benefit accrued to Indian economy is substantial in this funding route. But deciding factor is crude price which has major impact on Indian economy. Q- There are apprehensions about the oil prices & the taxation system on them. Assuming international oil is at Rs 100; there is first a Rs 50 tax, then a Rs 25 subsidy. The government claims it is subsidising by Rs 25, when it is indeed taxing by the same amount, how do you look at it? R- Subsidy is part of the economy. This point was raised long back to reduce in certain area. Subsidy must be for more essential requirements. Tax aspect is at two levels: Centre and state. Finance commission should evolve a policy to ensure the sharing of revenue properly to reduce the burden of subsidy from the budgetary allocation. Q- Rising inflation, fiscal deficits and the bear run of the market where do you see these things affecting the inflows of investment through FIIs route? R- FII`s have structured plan to enter the market and exit. They are not very much bothered about the Indian market situation. During the last decade FII`s saw the opportunity and started bringing the funds. The government should look at unplanned expenditure where to reduce which normally will be around 2000 to 3000 crores. For a past ten years I think is the first time the inflation is just galloping. It is a surprise that none of the financial wizards have given proper views of this situation than just giving plain statements. Q- What advice would you give MBA Finance students? R- Which ever area you take it up, have proper job knowledge, analyze the situation, be proactive, update your knowledge as the finance field is ever changing. Decisions should have justification. Always be positive in your approach. Nobody can give a 100% solutions to any finance problem.

Quiz
1. Name the style of management associated with mutual and exchange-traded funds (ETF) where a fund's portfolio mirrors a market index. 2. What is the name given to a slight competitive advantage that one company enjoys over competing firms operating in the same or similar type of industry? 3. What is the term used to describe the risk that the income stream paid by a fund will decrease in response to a drop in interest rates? 4. Name the term used to describe an irrefutable takeover offer made to a target company by an acquiring company, if the target company's management refuses the offer, shareholders may initiate lawsuits or other forms of revolt against the target company for not performing their fiduciary duty of looking out for the best interests of the shareholders. Today, a skilled manager makes more than the owner. And owners fight each other to get the skilled managers. Mikhail Khodorkovsky, Russian Businessman

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A MESSAGE FROM PROF. T.S. RAMACHANDRAN FOR THE FIRST YEAR MBA STUDENTS:
CHAANAKYA, is a fortnightly news letter by the finance students of CCIM and is intended to benefit the student community of Christ College at large. It is an initiative by the students and for the students and hence worth a lot. I am very glad to note that from this issue onwards it will reach more mail boxes of the students. I am very proud to say that CHAANAKYA is released every month on 1st and 16th, rain or shine. My appeal to all the students would be that, if CCIM is training ground for the future managers, this is the game you need to play by participating actively by writing articles and reading CHAANAKYA every fortnight and keeping yourself updated.

Did you Know?

The note with the most zeros is a Y u g o s l a v i a 500,000,000,000 Dinara, issued in 1993 with 11 zeros. The highest marginal rate of personal income tax in In d i a was 42.5 percent in FY 1992. Wall Street gets its name from a defensive wall that was put up to protect New Amsterdam (now New York) from New Englanders.

Bubble in Oil (Part 2)

By: (Continued from previous issue) Sasmit K Sahu

If we go by the 2002 and 2008 oil prices changes, the application of the price relative for crude would imply a present Indian retail price of Rs 175, which is way above the current Rs 50.51.

Answers To Quiz The Committee on Pricing and Taxation of Petroleum Products under the Chairmanship of Dr C. Rangarajan, submitted its report to the Government. The following principles were adopted by the Committee: 1. Passive strategy"

Pricing and taxation of petroleum products should be rationalised to transmit the right price signals so as to minimise, if not eliminate, distortions and inefficiencies that result in misallocation of resources;

or "passive investing" or "index investing." 2. Narrow Moat 4. Godfather Offer Stock Ratnas CAIRN INDIA, BSE 532792, NSE CAIRN, CMP- Rs. 285.10 TARGET PRICE RS 340 THERMAX, BSE- 500411, NSE THERMAX CMP- Rs. 413.00 TARGET PRICE: RS.480

Prices of petroleum products should, as far as possible, be aligned with international 3. Income Risk prices; Across-the-board subsidies result in inefficiencies and place an undue burden on an already strained fiscal situation; Subsidies should be minimal, targeted and restrained by a monetary ceiling; To the extent the Government decides to extend subsidies, the burden should be borne entirely and transparently in the Budget; Oil marketing companies should be freed from the burden of subsidy; Customs tariff on crude and products should be rationalised so as to moderate the effective rate of protection to a level that will offset the disadvantages suffered by the domestic producers without, at the same time, allowing them any undue cushion. Excise tariffs should be restructured to protect the consumers from excessive volatility in prices.

Beginning of the Burst of the Bubble

As oil prices continue their seemingly endless trek skyward, the whispers about peak oil SHRIRAM TRANS FIN, have turned into a roar. Peak oil is the hypothetical date when the combined daily output BSE 511218 of global oil producers has reached its maximum and then begins to decline. Essentially, NSE SRTRANSFIN this is the point where supply starts to move downward, while demand continues to climb. You don't need to be an economics major to figure out what the effect on prices CMP- Rs. 302.75 will be. TARGET PRICE: RS RS.344
(CMP Current Market Price) Profit in business comes from repeat customers, customers that boast about your project or service, and that bring friends with them. W. Edwards Deming

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Tag Lines:
SENDING SO MUCH MORE THAN MONEY/UNITING PEOPLE WITH POSSIBILITIES/THE FASTEST WAY TO SEND MONEY WORLDWIDE - WESTERN UNION THINK. FEEL. DRIVE. SUBARU CARS MORE THAN JUST ECONOMICS/FREE ENTERPRISE WITH EVERY ISSUE THE ECONOMIST THE DAILY DAIRY OF THE AMERICAN DREAM WALL STREET JOURNAL ALL THE NEWS THATS FIT TO PRINT NEW YORK TIMES NEWSPAPER

A.

B.

A. Royal Bank of Scotland B. Bank of Credit and Commerce International (BCCI) C. Barings Bank D. Bank of America

C.

D.

INVESTORS CHECK (Continued from previous issue)


6. Never invest in as stock that rose too much too soon. Though Mind tree consulting, Idea and ICRA are good stocks, they rose too much within a short span of their listing. 7. Invest in fundamentally sound stocks at reasonable price. Stocks like Hindalco, Reliance Petro, Crompton Greeves, Finolex cables are good bets. Sectors like shipping, power and Bio-technology are future stars. 8. You may never get high returns in the already over heated market. If you want very good returns, invest in good midcaps (future large caps). 9. Never invest in penny stocks which may hog lime light in bull markets. 10. Never change your targets without any reason. Greed is the major reason for the losses of investors. Always invest. Never speculate. Do your own research. Never follow herd.

Buzz Words
GEMs (growing-equity mortgages) Mortgages in which annual increases in monthly payments are used to reduce outstanding principal and to shorten the term of the loan. Active portfolio strategy A strategy that uses available information and forecasting techniques to seek a better performance than a portfolio that is simply diversified broadly. Direct quote For foreign exchange, the number of U.S. dollars needed to buy one unit of a foreign currency. Economic exposure The extent to which the value of the firm will change because of an exchange rate change.

Quotes:
Let's assume that each person has an equal

opportunity, not to become equal, but to become different. To realize whatever unique potential of body, mind and spirit he or she possesses. John Fischer "Emptiness is a symptom that you are not living creatively. You either have no goal that is important enough to you, or you are not using your talents and efforts in a striving toward an important goal." Maxwell Maltz

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

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