16thSept.

2008
Volume 2, Issue 12

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

CHAANAKYA
Issue Attractions
National Headlines International Headline Corporate Interview Students Article
Investors Check/Quiz

..Tracking the Economy

"The market does not beat them. They beat themselves, because though they have brains they cannot sit tight."-- Jesse Livermore
1 1 2 3 4
5 6 7

National Headlines

Oil prices fall below the $100/barrel for the first time in 6 months on 11th Sept. Rupee getting weaker and was 45.53 against dollar which is expected to be 46 soon. SEBI mulls e-trading of right issue and soon application of right issue will be in demat form. LIC has refused to bundle their products with mutual funds, thus no more life insurance cover along with mutual funds now. Five financial institutions have come up to a joint venture which will focus on billion dollar micro finance market in India. The Singur dispute is still not resolved after much of negotiations and Tata is not resuming work and still has a plan to shift under consideration. As per RBI survey, CAPEX of the companies may fall by 30% in FY 09. Colombia offers oil assets to the Indian companies. India focused PE funds to raise $5 billion by Dec. British airways eyes Indian tie up. Tata motors first to offer differential right issue to raise Rs. 4147 Cr. to fund Jaguar and Land Rover deal.

Company Review/Buzz Words

Crossword/Quiz Answers Crossword Answers
Inflation12.1 % , IIP 7.1%

Repo Rate-9%, Reverse Repo-6% CRR- 9%

15 days Movements
Sensex
15400 15200 15000 14800 14600 14400 14200 14000 13800 1 2 4 5 8 9 10 11 12

Sensex

Rs/$

46 45.5 45 44.5 Rs/$ 44 43.5 43 1 2 3 4 5 6 7 8 9 10

International Headlines

Gold(per gram)
1200
Gold(per gram)

1150 1100 1050 1000 1 2 4 5 6 8 9 10 11 12

Lehman plans sale , as it sees upcoming loss of $3.9 billion. Samsung may buy Sandisk for $3.2 billion. Dell plans to sell its global factories in 18 months. US unemployment rate shoots up to 6% in August. China is planning to invest $3 billion in Tibet. Commerz bank to buy Dresdner for $14.4 billion.

Oil(per bbl)
5400 5200 5000 4800 4600 4400 4200 1 2 4 5 6 8 9 10 11 12
Oil(per bbl)

Excellent firms don't believe in excellence - only in constant improvement and constant change. - Tom Peters

Interview with Mr. Chetan C.

Position Held : Manager, SBI Q1. Sir, Can you tell us about your job profile? Ans. Hello, I'm a manager working in Hyderabad, my branch is dedicated to personal banking and we serve our customers with regard to this aspect. Mostly, I interact with the customers regarding their needs and the right kind of product that they will be needing in order to fulfill their financial needs. Thankfully, there's no mobilization of deposits for me. Previously, when there were no foreign banks and computers, my job had more prominence. Computerization and introduction of CBS has made my job easier as I take care of my business by serving customers online who have taken adequate efforts to have a knowhow of the internet facility & are making online transactions. Q2. With the rising interest rates, what measures have you taken and what has SBI done in order to attract new customers ? Ans. Honestly, the market scenario is scaring the existing customers who have opted for floating rate loans as the market conditions are highly volatile and have led to certain severe consequences. Retention of customers is our current priority, new customers are always encouraged and are given utmost importance according to the policies of the bank. We are working towards ensuring that we are delivering nothing but the best services and interest rates in order to facilitate a nice banking experience & a good time. Q3. Sir, what do you think are the future products that would be introduced that would help the customer identify the new born need and will be willing to take a new product from the firm. Ans. Liquidity crunch is officially not the order, but I sense it hitting the shores of Indian financial scene soon. Well, as far as analysts are concerned, the phase is gone, but I suspect, this scenario will sustain itself for the next one year. In current scenario, there are not many proposals or talks that we are undertaking to enhance the customer experience of being part of the business family, although there are few open ended discussions about introduction of new form of loans with flexible structures that will help the customer identify his need with the product ensuring he gets the best of the deals. We are planning on a bank education featuring education of customers and prospective customers making them aware of the services available, in terms of general banking and mutual fund sector which SBI has been taking more seriously and has given a top priority. Q4. Sir, few words to the students of Finance Club of Christ University, Department of Management. Ans. Traditional banks have shown the way to the world, now these have also embraced the necessary technological and social changes that people are expected to accept willfully. It is important for the customer to know about the future needs and thereby take necessary judgments and decisions about investments and borrowings. Thank you, God Bless all.

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Stock market bubbles don't grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception. - George Soros - Stock Market

Participatory Notes

By: Neethi Jayakrishnan

Page 3

Participatory notes are instruments used by foreign funds or investors who are not registered with the SEBI but are interested in taking exposure in Indian securities. Participatory notes are generally issued overseas by the associates of India-based foreign brokerages. Brokers buy or sell securities on behalf of 1. their clients on their proprietary account and issue such notes in favour of such foreign investors. The brokerage houses then repatriate the dividends and capital gains back to these entities. They keep the investors name anonymous. Participatory Notes, somewhere down the line, hide in themselves the functions and properties of Hedge Funds. Although SEBI, as a regulator had isued KYC (Know Your Client) guidelines, which include that, FIIs must know all the requisite details about their client and be able to furnish the details of the same, as and when demanded or asked by the regulator, to which there should be strict compliance, failing which they have to face the wrath of the regulator. In the past, hedge funds had been blamed largely for the sudden sharp falls or volatile sessions in indices. Hedge funds are not directly registered with SEBI, but they can operate through subaccounts with FIIs. These funds are also said to operate through the issuance of participatory notes.

Did you Know?

In 1602, the Dutch East India Company issued their first shares through the Amsterdam Stock Exchange and it was the first company, which issued stocks and bonds. The Amsterdam Stock Exchange (or Amsterdam Beurs) was the first stock exchange, which introduced continuous trade in the earlier part of the 17th Century. Triton Insurance Company Ltd. of Calcutta (1850) is the first general insurance company to be established in India. In 1907, the Indian Mercantile Insurance Ltd, the first company to transact all classes of general insurance business. In 1972, the General Insurance Business was passed & (Nationalization Act) was passed and this nanationalized general insurance business in India. Stock Ratnas
BHEL BSE-500103 NSE-BHEL CMP-1698.50 TARGET PRICE-1800 LARSEN &TURBO BSE-500510 NSE-LT CMP-2639.15 TARGET PRICE-2700 INFOSYS TECH. BSE-500209 NSE-INFOSYSTCH CMP-1644.00 TARGET PRICE-1740

Bone of contention
The bone of contention between the finance ministry and market regulators over the issue of participatory notes is due to the participation of hedge funds via FII route. Hedge funds by their very nature hold stocks for short duration, and exit markets after booking profits, 2. which upsets the sentiments of the market. Also the instrument helps in concealing the original beneficiary of the instrument. It leads to multilayering, which makes it more difficult to find out the beneficiary. The integrity of the market takes a dampener due to such unhealthy flows in to the economy. In fact such transactions can have adversarial impact on the monetary policy and the exchange rate system of the economy, over which the RBI has been showing concerns over a period of time.

Phasing out Participatory notes

More than 40% of FIIs at any given instance comprise of money through participatory notes. Even if FIIs take 20% of the total invested money out of India, it might lead to financial crisis or destabilize the economy. FIIs lend a hand in both making and breaking a situation. Continued FII interest in the equity markets will see sustained buying by them. This will push the sensex up, consequently triggering interest of other major players. It is observed that total FII investments in 2007 touched $17.23 billion. This was instrumental for the bull run in the market. On the contrary, if FIIs decide to pull out from the market it could result in a bear market condition. The total number of FIIs registered with the SEBI has gone up to 1403 as on June 2007.

Recent Developments
Capital markets watchdog SEBI has sought details relating to issuance of Participatory notes by Foreign Institutional Investors during the past nine months. This has been done to verify whether foreign portfolio investors have confirmed to the new set of norms on issuance of P- notes issued by the regulator in October last year. The news has it that many FIIs which are authorized to issue PNs, have been lending shares in their inventory to other foreign fund houses for a fee. Since these transactions take place outside India it is impossible for the regulator to keep track. This may well prompt the regulator to make disclosures more relevant. In fact, the committee should have emphasized on how the manipulations being done by FIIs can be reduced in future and also the adversarial impact of such transactions on the monetary policy and the exchange rate system of the economy, over which the RBI has been showing concerns over a period of time.

Conclusion
Participatory notes are harbingers of hope and wealth. They help foreign investors explore the untapped potential of developing markets. Curbing of these could hence have adverse impact on the economy and markets. The adversarial impact of P notes could be reduced by plugging the loopholes through implementation of proper checks and balances that could enhance the transparency in its functioning. Participatory notes could be the root cause of all ills during a bearish phase but could well become a jewel in the crown during a bullish phase.

(CMP:CURRENT MARKET PRICE)

"You don't make money by investing in a good company . . . You make money by investing in a company that is better than the market thinks." --- Robert Vishny, Institutional Investor, January 1997

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INVESTORS CHECK
Exit options for shareholders in case of Mergers

By: Diwakar Grover

The revamped Company Law is likely to propose a mechanism that would protect shareholders value in cases where a listed entity is merged with an unlisted one and vice-versa. The soon-to-beintroduced Companies Bill, 2008, is expected to stipulate that in such situations, the shareholders should be given an exit option with a safety net. Bill is likely to envisage that while the consent of the shareholders to merge a listed company with an unlisted one and vice-versa is required, those investors who want to exit would be allowed to do so at a pre-determined price based on fair valuation. This is to ensure that after the merger, the public shareholders do not lose the value of their investment, he explained. With mergers becoming the common form of inorganic growth process of corporates, particularly in sectors such as information technology, telecommunications and business process outsourcing, a need was felt to have a proper mechanism in place. Currently, the process of mergers is courtdriven and long-drawn. The existing Companies Act does not provide for a clear mechanism for such situations. Besides, this proposal is based on the J.J. Irani Committees recommendation on company law. The committee, after examining issues relating to the merger of a listed company with an unlisted one and vice-versa, felt that the law needs to provide specifically that de-listing through a scheme of merger under the existing Section 391-394 of the Companies Act, 1956, is possible by merging a listed company with an unlisted one. However, such a process should enable a safety net or a clear exit option for the public shareholders of the listed company. Similarly, if substantial assets are moved out of a listed company in the case of de-merger, a safety net or exit option needs to be provided to the shareholders and the residual company needs to be de-listed in case more than 90 per cent of the shareholders exercise such an option, the committee had proposed. The new Bill is likely to be silent on the issue of de-listing as the matter is the domain of the capital market regulator, he explained. The committee had also suggested that the law should enable companies to purchase the stake of minority shareholders in order to prevent exploitation of such shareholders where a promoter has bought back more than 90 per cent of the equity.

Quiz:
Q1. What is the term given to the short-term funds which move quickly into or out of a country, usually in anticipation of exchange rate fluctuations or interest rate changes? Q2. What is a mutual fund which does not make investments in certain areas like liquor which are disapproved by many investors called? Q3. If you file the 'chapter number 11' in USA in the name of your company what would you do? Q4. Which financial services giant is referred as the "Thundering Herd"?

"In investing, what is comfortable is rarely profitable." -- Robert Arnott

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Company Review
Futures First:

By : Sukrutha

Futures First is a privately owned enterprise company with its head office in Gurgaon and seven offices spread over India. Futures The company is involved in activities leading to trading in derivatives in exchanges in UK, US and mainland Europe. It was established in 2004 and has already become a major participant in the Futures industry. The company has responded to recent changes in the industry by building an IT development team which provides market solutions for the company.

The Business
Futures First is involved in Trading domain on the five major futures exchanges in the world. There are over 100 separate futures exchanges which trade every sort of product from interest rates to peanuts from oil to cocoa. However the major exchanges and the ones with the greatest volume and liquidity are The CME, CBOT, Euronext LIFFE, Eurex and the ICE and it is with these exchanges that Futures First is involved.

Careers at Futures First: Being a Derivatives Trader

When you are working for Futures First, you are participating in markets where the major investment banks and the largest financial institutions in the world participate. It is not a sales or broking job which they are offering. In this profession you make decisions on a continuing basis about the events that shape our world: economic, financial, political, environmental and even sports and social news that affect the performance of markets. While at Futures First, you are at the centre of these events and can take advantage of events as they occur by using your skills and judgment. The entrepreneurial nature of this activity demands the commitment of dynamic and talented people who can compete at the highest level to meet the demands of these intense markets. To be successful means personal growth together with substantive financial rewards. A position with Futures First should be seen as a long term career move. Within Futures First, high quality graduates can forge a career based around their own ambition and aspirations resulting in financial independence and the satisfaction of working within a highly developed industry which prizes innovation and self development. The job presents a unique opportunity to Indians to work in the exotic field of derivatives in the world's most liquid and well developed markets. The challenge is breathtaking and the demands enormous. Futures First has a structured training scheme at the beginning, to help you to learn the basics. Working with mentors helps guide you through the drivers in the industry that affect the markets. Thus gradually you build a toolkit of essential skills that you can apply across different markets and products. So if you dream of being a Derivatives Trader, and believe that you have the necessary skills to be one, Futures First is one place that can take you to great professional heights.

Buzz Word

Book Quotes:

Home Equity Loan: It allows you to borrow money, using your home's equity as collateral. The lien of the mortgage might be in a first or second place and may bear interest at a fixed or adjustable rate. Angel Bond:A slang term for investment-grade bonds . An angel bond pays a lower interest rate due to the higher credit rating of the issuing company. Chastity Bond:A bond designed to prevent unwanted takeovers by having a maturity that is activated once a takeover is complete.

An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today. Laurence J. Peter, Canadian, Educator "The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell."

John Templeton

Wide diversification is only required when investors do not understand what they are doing. Warren Buffett - Stock Market - Investing - Knowledge

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Quiz Answers
1. Hot Money 2. Ethical Fund 3. Filing bankruptcy 4. Merrill Lynch

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Vietnam is the only country having paper currency and have no coins and it introduced cheque only in 1997. United States of America did not have inflation from 1789 to 1940. Apple Computers It was the favorite fruit of founder Steve Jobs. He was three monthslate in filing a name for the business and he threatened to call hiscompany Apple Computers if the other colleagues didnt suggest a bettername by 5 Oclock. They couldnt, he did! C I S C O It is not an acronym as popularly believed. It is short for San Francisco.

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

Crossword Answers

1D

E ///// I /////

2B

T C

O A

3R

///// 4E ///// ///// ///// 8D ///// /////

11L

5Q

U V /////
12I

I
9I

T D ///// ///// N R

6Y

E
7F

A S E

///// ///// ///// ///// N

E L I E F

U I D T

///// ///// ///// N T O I

I E L D ///// E B A T E S

E R

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///// ///// ///// ///// A E S S O N ///// ///// S U N E R I T S

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15C

13A ///// ///// ///// ///// /////

///// ///// 14R ///// ///// ///// ///// ///// ///// ///// ///// E T

16T ///// /////

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C O
19U

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R E N D S

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20T

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Contributions made by 2nd year:

Editing/Compiling News Company Review, Did you know, Quotes Stock Ratnas, Quiz Graphs Investors Check Interview Book Quotes, Buzzwords Students Article Coordination Arihant Patawari Fouzia Taranum B. Anoop Rajan & Ashish Poddar Sukrutha Laavanya Gnana Devi Diwakar Grover Vamsi Kanagovi Nikhil Mehta Neethi Jayakrishnan Manish Sinha

Contributions made by 1st year:

Editing/Compiling Did you know, Quiz Stock Ratna, Crossword Quotes, Book Quotes Graphs, Buzzwords Gyanesh Shroff Megha Garg Archana Kushwaha Maria Fernandes Paloma Lobo