16th MAY 2008

Volume 2, Issue 4

Wealth Incorporation - A CCIM Finance Club Initiative Presents

CHAANAKYA
..Tracking the Economy Finance is the art of passing currency from hand to hand until it finally disappears - Robert W. Sarnof
1 1 2 2 3 4

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

National Headlines
RBI after raising CRR by 50 basis points raises it again by another 25 basis points to 8.25%. Despite the adverse market conditions HDFC Bank posts MTM (Mark to Market) profits of Rs. 293.59 Cr. Supreme Court held Tata Teleservices & Reliance Comm. to pay BSNL ADC (access deficit charges) of Rs. 700 Cr. as they are limited mobile services in form of Unlimited Cordless services. Steel producers agree to cut prices by Rs. 2000 to Rs. 4000 a tonne. Govt. to divest residual 26.12% stakes in VSNL. Tata steel along with other partners is undertaking expansion of the Carborough Downs coal mine in Australia.

Inflation 7.61 % , IIP 8.7%

15 days Movements
18000 17500 17000
Sensex

Sensex
(May 1-15)

16500 16000 15500 1 2 3 5 6 7 8 9 12

Hindujas plan $50 billion capex in next five years. 46 companies suffer forex losses of Rs. 1365 Cr. After SBI, ICICI, HDFC and other banks now its turn for Kotak Bank to set aside Rs. 86 Cr. for derivatives. India bags stakes in Russias Sakhalin III project.

42.5 42 41.5 41 40.5 40 39.5 1 2 3 5 6 7 8 9 12

Rs/ $

International Headlines
Mars, the privately held US confectionary group announced to acquire gum group Wrigley for around $23 billion. German biggie, Deutsche Bank plans to invest over $ 1 Billion in Indian real estate and infrastructure sector over 3 years.
Gold(per gram)

1200 1150 1100 1050 1000 1 2 3 5 6 7 8 9 10 12

Gold
(May1-15)

French cement co. Lafarge SA is all set to acquire ready mix concrete business of Larsen & Toubro for estimated Rs. 1000 Cr. Toyota struggles as the quarterly profit falls by 27% to $15.33 billion.

5200 5100 5000 4900 4800 4700 4600 4500 4400 4300 1 2 3 5 6 7

Oil
(May1-15)

BHP Billiton largest mining company may sell $50 billion of assets if it succeeds in taking over rival Rio Tinto. Microsoft walks out of Yahoo deal as it withdrew back its takeover offer.
Oil(per bbl)

9 10 12

Citi group considers $400 billion assets sales.

A weak currency is the sign of a weak economy, and a weak economy leads to a weak nation. - Ross Perot

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Interview With M.S. Murthy

EDUCATIONAL QUALIFICATION B.Sc. (Hons), M.Sc. (Electronics), CAIIB Presently, he is on the board of a bank and a pharmaceutical company, a consultant to a multinational consulting company and an adviser to a educational group. Moreover, he spends good time on reading and writing for financial news papers. CONTD. FROM LAST ISSUE (Volume 2, Issue 3).. 4. Do you expect job cuts or slowdown in recruitment in the Indian Banking Sector, taking expected Recession in US into consideration? ANS. In recessionary periods some job cuts and slowdown are inevitable. In India, particularly in utility and service organisations recruitment and training are time consuming and during minor ups and downs in economy no serious changes take place in the personnel policies. Also Indian economy is on a growth path and temporary recession in USA would have lesser impact on the job creation. Thanks to globalisation the slowdown in USA can be moderated to some extent by the growth in China and India. 5. What advice would you give MBA Finance students? What should their level of preparedness be when they enter the actual business environment? ANS. Being alert and alive to market developments is essential in business environment. Good knowledge of global markets and their monitoring is part of the risk management practices necessary for survival. Professionalism is the key word. While an element of speculation is an ingredient of any business, adventurism and greed are to be shunned.

Quiz
1. A phrase used to describe the idea that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once. It describes a scenario where a central bank, such as the Federal Reserve acts to stimulate or slow down an economy. When the first stimulus is made, the effect may not be immediate, which can cause decision makers to increase the magnitude of the change, eventually causing too much stimulus. 2. A currency trade that offers an all-or-nothing payoff based on a given currency exchange rate when the position reaches its expiration date. 3. A situation where a trader who is facing financial or legal troubles hedges his or her position in an investment with a ticket to a tropical location. 4. The market in which currencies are traded. This market is the largest, most liquid market in the world with an average traded value that exceeds $1.9 trillion per day and includes all of the currencies in the world. 5. A strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. A trader using this strategy attempts to capture the difference between the rates - which can often be substantial, depending on the amount of leverage the investor chooses to use. Business, that's easily defined - it's other people's money. - Peter Drucker

Page 3

Did you Know?

NON-BANKING FINANCE COMPANIES

By: Arihant Patawari

To commemorate centennial of the Indepe ndence f ro m Spanish rule in 1998, the govt. of the Philippines wanted to do something special. It issued the worlds largest banknote, beating the previous record (Chinas Ming Dynasty 1 Kuan). The 1,00,000 Piso note measures 356 mm x 216mm.

NBFC means a company which is a financial institution and has as its business the receiving of deposits or lending under any scheme or arrangement. NBFCs have emerged as an important player of the Indian financial system. They have grown both in magnitude and depth. NBFCs business turnover constitutes about 25% of the aggregate deposits of the scheduled commercial banks. Kotak Mahindra Finance Company and Sundaram Finance Co. are examples of NBFCs. However, in the absence of proper regulatory mechanism, all kinds of NBFCs have proposed. Further, imprudent policies, delayed repayments and shortage of funds have brought many NBFCs to the brink of disaster even as the regulatory norms are relaxed. There had been recurring failures of companies to pay high interest rates or default even in paying the principle amount. An expert group appointed under the chairmanship of Shri P.R. Khanna recommended a supervisory framework for regulation and supervision of NBFCs. Accordingly, the RBI act has been amended. The amendment which comes into force from April 1, 1997 basically seeks to protect the interests of depositors who have suffered in the recent past with firms promising high rates of interests and failing to repay the deposits in time. According to the provisions, unincorporated bodies who have banned from accepting deposits w.e.f. April 1, 1997. If these bodies hold any deposits on this date, these will be returned to the depositors within a period of two years or immediately. Besides, explicit conditions have been laid down for NBFCs to commerce or carry on their business. These include the following:
Certification from RBI.

Did you Know?

The Indian finance ministry prints the full set of budget papers in its own press, which operates in the basement of the building.

Answers To Quiz
1. Full in the Shower 2. Currency Binary 3. Rio Hedge 4. Forex (FX) 5. Currency Carry Trade

Having net owned funds of Rs. 50 lakhs or such amount not exceeding Rs. 200 lakhs as the RBI may specify, by notification in the original gazette. This has been further reduced to Rs. 25 lakhs. Every NBFC must create a reserve fund and transfer not less than 20% of its net profit each year as disclosed in the profit n loss account before any dividend is declared. The act also empowers the RBI to set the policy and issue directions to prevent NBFCs being run in a manner being detrimental to the interest of depositors. RBI will also have the power to direct special audit of accounts of the NBFCs.

Stock Ratnas

ARVIND MILLS , BSE 500101, NSE- ARVINDMILL,

CMP- Rs.50 TARGET PRICE: RS 50

DCB,BSE- 532772,
NSE DCB CMP- Rs.78.85 TARGET PRICE: RS.89

The Companies law board can now direct the NBFCs to repay the deposits that have matured if it is so satisfied that the company is unable or unwilling to repay the depositors Provisions have been made for the first time for making nomination by the depositors with regard to deposits held by them. RBI has been empowered to wind down the business of an NBFC if it feels that the latter is incapable of conducting its business to the best interest of the depositors.

STERLITE INDS, BSE

500900, NSE STER CMP- Rs. 818.20 TARGET PRICE: RS RS.1076 (CMP Current Market Price)

When buying shares, ask yourself, would you buy the whole company? - Rene Rivkin

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Tag Lines:
BUSINESS INDIA >>>> BUSINESS TODAY >>>> BUSINESS WORLD >>>> DEUTSCHE BANK >>>> CITIGROUP or CITIBANK >>>> UNION BANK OF INDIA >>>> The Magazine of the Corporate World For Managing Tomorrow Play the Game A Passion to Perform The Citi Never Sleeps Good People to Bank with

INVESTORS CHECK
Cont. from Volume 2, Issue 3. Part: BIf we notice that the volume and open interest are both increasing, then it is inferred that the current price trend (up or down) is likely to continue in its present direction. When the increase in the stock price of a particular company is accompanied by an increase in volume and open interest, it implies that the investors/ traders are flocking to the counter. As long as fresh droves of investors/traders, reflected in high volume and open interest, are interested in a particular stock, the price will continue to move in an upward trajectory. This holds true in a stock that is declining as well. When the stock price decline is accompanied by increasing volume and the open interest, it is inferred as bearish, the reason being that all the investors who bought the stock at higher levels are yet to exhaust their holdings. The downward movement will end only when all the short-term investors have divested their holdings. If we extend this logic further, the decline in volume and open interest indicates that the current price trend (up or down) of the stock is possibly close to end. When the stock price of a particular company is rising along with the declining volume and the open interest, it is inferred as a sign of bearishness and that the stocks uptrend may be close to an end. Similarly, when the stock price of a particular company is declining along with the decreasing volume and the open interest, it is inferred as signs of bullishness because the stocks present downtrend may come to an end.

Buzz Word

Fiat Money - Currency that a government has declared to be legal tender, despite the fact that it has no intrinsic value and is not backed by reserves. Historically, most currencies were based on physical commodities such as gold or silver, but fiat money is based solely on faith. Gap opening - Used in the context of general equities. Opening price that is substantially higher or lower than the previous day's closing price, usually because of some extraordinarily positive or negative news. Level-coupon bond - Bond with a stream of coupon payments that are the same throughout the life of the bond.

Book Quotes:
"The battle is not to improve our circumstances, to supply us with money, to protect us from suffering, to keep us safe from pain and struggle, or to quickly fix whatever problems develop in our bodies. We are encouraged to pray for all these things, but we must always finish our prayer with that wonderful caveat that in our immaturity we find so annoying: if it be Thy will." - Connecting by Larry Crab

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

Contributions made by :
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 Arihant Patawari Manish Sinha