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V O L U M E 2 I S S U E 2 3

INSIDE THIS ISSUE: Scandal Interview Investors Check Investors Continued Commodities market Students Article Interim Budget Central Bank Policies Central Bank Policies Continued Quiz Crosswords 2 3 4 5 6 7

International Headlines

The U.S. government and Citigroup have reached a deal to convert up to $25 billion in government-held preferred shares in the bank to common equity.

8 9 10 11

JPMorgan Chase and Co said it is cutting up to 14,000 jobs, more than previously disclosed, as it tries to reduce costs in the face of a slumping economy and higher credit losses.

Within the enormous caverns of the Obama's USD 787 billion stimulus plans is a nugget for US companies to spend a few billions to construct mass transit rails & national parks.

Indian-born steel tycoon Lakshmi Mittal and Reliance Industries' Chairman Mukesh Ambani are among the 20 most powerful billionaires in the world, as they possess not only the riches but also economic dominance as well as political clout, says Forbes.

IMF chief Dominique Strauss-Kahn reiterated that the global economic situation had got worse since the IMF issued its last growth forecasts in January. He believes that the world economy might stagnate in 2009.

48.5 48.9 49.3 49.7 50.1 50.5 16-Feb

Rs/$

National Headlines

Rs/$ Feb 26

Manmohan is PM candidate for UPA: Rahul 'Slumdog Oscaraire': perfect blend of Indian exotica and brilliant cinema Indias first elevated rail transit system to be established in Kolkata Interim Trade Policy announced; export target of $200bn set for '09-10 Exit or opinion polls banned by Election Commission ArcelorMittal will get government land for their steel project Tata Motors to launch 'Nano' on March 23 Inflation at 15-month low of 3.36% RBI tries to calm jitters as govt borrowing rises

Gold(per 10 gram)
14500 14350 14200 14050 13900 13750 13600 Feb 16 Feb 26
Gold(per 10

Repo 5.50%, Reverse Repo- 4.0%, CRR- 5.0%, Inflation- 3.36%, IIP- 3.2%, PCR Nifty- 1.19 Forex Reserve- $249.692 billion , 91day T-Bill- 4.50%, 10 year G-Sec Yield- 6.02%, AUM- Rs.4.62 Trillion

Scandal

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Harshad Mehta, also known earlier as the big bull of the trading floor, started his career as an employee of the New India Assurance Company, Bombay and later as a stock broker of the BSE. With the help (financial assistance) of Mr. Shah and Mr. Nandlal Seth, his previous broker mentors, he started the GrowMore Research and Asset Management Company Limited. During his good old days, in the early 1990s, Harshad Mehta commanded a large resource of funds and finances as well as personal wealth. THE SCAM : Exploiting several loopholes in the banking system, Harshad and his associates siphoned off funds from inter-bank transactions and bought shares heavily at a premium across many segments, triggering a rise in the Sensex. In the 1990s, Mehta started buying large number of shares of ACC at a premium of up to Rs10000. He earned the sobriquet of being responsible for the bull run, though nobody knew the source of his funds. He used the ready forward deals (a short term loan from one bank to another against a security). A broker acts as an intermediary between the buyer and the seller and normally does not deal with the cash or the security. But here, deliveries of securities and payments were made through the broker and the buyer and seller did not know who they were dealing with except the broker. The brokers could manage primarily because by now they had become market makers and had started trading on their account. He also used Bank receipts (receipt for the money received by the bank and states that the seller holds the security in trust of the buyer). He made use of Bank Of Karad and Metropolitan Cooperative Bank to issue false Bank Receipts to the banks. This money was used to drive up the prices of stocks in the stock market. When time came to return the money, the shares were sold for a profit and the BR was retired. The money due to the bank was returned. The entire scam was found to be of a whopping Rs4000 crore.

HARSHAD MEHTA Responsible for causing a loss of Rs 4000 Cr. to various individuals

Receipts to the banks. This money was used to drive up the prices of stocks in the stock market. When time came to return the money, the shares were sold for a profit and the BR was retired. The money due to the bank was returned. The entire scam was found to be of a whopping Rs 4000 crore. THE CONSEQUENCES :

The scam adversely affected 10 commercial banks of India, The National Housing Bank, a subsidiary of RBI and a number of foreign banks operating in India. Arrest and sacking of a number of top bank officials including K. M. Margabandhu, then CMD of the UCO Bank, V. Mahadevan, one of the Managing Directors of Indias largest bank, the State Bank of India etc. Harshad Mehta was arrested and investigations by the CBI continued for a decade. Harshad was charged with 72 criminal offenses and more than 600 civil action suits were filed against him. He died in 2002 with many litigations still pending against him.

Buzz Words
Kondratiev Wave: An economic theory created by Soviet economist Nikolai Kondratiev that states that Western capitalist economies are susceptible to high performance volatility. Also known as "Kondratiev cycle". Corporate Kleptocracy: Buzzword that describes the greed of corporate executives who use underhanded tactics to siphon off wealth at the expense of shareholders. Scalping: A trading strategy that attempts to make many profits on small price changes. Traders who implement this strategy will place anywhere from 10 to a couple hundred trades in a single day in the belief that small moves in stock price are easier to catch than large ones. Pyrrhic Victory: A victory or success that comes at the expense of great losses or costs.

Socialism failed because it couldn't tell the economic truth; capitalism may fail because it couldn't tell

the ecological truth. Lester Brown

Interview
Q. Tell us briefly about you background.

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Ans. I did my MBA from Christ College in the year 2005. I started my career with HDFC wherein I worked in the credit card department in capacity of assistant product manager. It involved little direct contact; it mainly was a support function. My stint was very successful there. The card base grew from 8000 to 4, 00,000 under me and even the quality of portfolio improved (quality of portfolio relates to how much revenue is generated from the credit card holders). Since I felt it is very important to have direct interaction with the end consumer so I decided to join Standard Chartered to get experience in the area of direct sales. I mainly dealt with high net worth client in the starting. I was responsible for the sales figure and some bit of operations in my branch. From there I moved on to priority bank division. Q. Can you tell us about your current job profile? Ans. In my current job as a customer relationship manager in priority division I am mainly dealing with clients from different sphere of life who have been very successful in their field. We are mainly responsible for Sunil Sebastian achieving revenue target from these priority clients. Q. What is your opinion about the impact of economic slowdown on the banking business in general? Ans. I feel that Indian banks are well equipped to deal with economic slowdown mainly due to the fact that Indian banks follow a conservative policy, partly by choice and partly due to court and government regulations. I feel that Indian banks are well capitalized and are highly liquid. In fact public sector banks are able to easily recapitalize themselves with permission from the government.

Customer Relationship Manager, Priority Banking, Standard Chartered

Q. How long do you feel this slowdown is going to last? Ans. Although FIIs have suffered losses in terms of market fall and dollar conversion and the real estate market is deeply impacted by prices going back to the level of 03-04 but we expect the recession to be over sooner than later and things should start stabilizing by the end of this year. Of course we are not expecting prices to rise to the level of 07 but definitely the situation would be better. It may also be possible that since America is facing slowdown at a greater scale so it may decide to outsource jobs in order to cut cost. This will prove beneficial for Indian economy. Q. Would you like to give any message to the budding managers? Ans. The first thing that is a must to be successful in life is to be optimistic. If you are optimistic then you can definitely change the world. As for the finance students I just want to say that every economy goes through ups and downs but as long as you are a good performer you dont need to worry much. So what matters in the end is your individual performance.

Isn't it interesting that the same people who laugh at science fiction listen to weather forecasts and economists? Kelvin Throop III

Investors Check: ETF

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Exchange-traded funds (ETFs) are a type of financial instrument whose unique advantages over mutual funds have caught the eye of many an investor. If you find the tasks of analyzing and picking stocks a little daunting, ETFs may be right for you. In this article we define ETFs, highlight their advantages, and list some of the most popular ETFs available to investors. What Is an ETF:An ETF holds assets such as stocks or bonds and trades at approximately the same price as the net asset value of its underlying assets over the course of the trading day. Think of an exchange-traded fund as a mutual fund that trades like a stock. Just like an index fund, an ETF represents a basket of stocks that reflect an index such as the S&P 500. An ETF, however, isn't a mutual fund; it trades just like any other company on a stock exchange. Unlike a mutual fund that has its net asset value (NAV) calculated at the end of each trading day, an ETF's price changes throughout the day, fluctuating with supply and demand. It is important to remember that while ETFs attempt to replicate the return on indexes, there is no guarantee that they will do so exactly. By owning an ETF, you get the diversification of an index fund plus the flexibility of a stock. Because ETFs trade like stocks, you can short sell them, buy them on margin and purchase as little as one share. Another advantage is that the expense ratios of most ETFs are lower than that of the average mutual fund. When buying and selling ETFs, you pay your broker the same commission as you would pay to the broker.

Application of ETF :Efficient Trading : ETFs provide investors a convenient way to gain market exposure viz. an index that trades like a stock. In comparison to a stock, an investment in an ETF index product provides a diversified exposure to the market. Depending on the index, investors may obtain exposure to countries/ markets or sectors. Equitising Cash : Investors with idle cash in their portfolios may want to invest in a product tied to a market benchmark like an index as a temporary investment before deciding which stocks to buy or waiting for the right price. Managing Cash Flows : Investment managers who see regular inflows and outflows may use ETFs because of their liquidity and their ability to represent the market. Diversifying Exposure : If an investor is not sure about which particular stock to buy but likes the overall sector, investing in shares tied to an index or basket of stocks provides diversified exposure and reduces stock specific risk. Filling Gaps : ETFs tied to a sector or industry may be used to gain exposure to new and important sectors. Such strategies may also be used to reduce an overweight or increase an underweight sector. Shorting or Hedging : Investors who have a negative view on a market segment or specific sector may want to establish a short position to capitalize on that view. ETFs may be sold short against long stock holdings as a hedge against a decline in the market or spe-

Economics is extremely useful as a form of employment for economists -John Kenneth Galbraith John (1908 - 2006)

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Types of ETF Traded in India :S&P CNX NIFTY UTI NOTIONAL DEPOSITORY RECIEPTS SCHEME (SUNDER) S&P CNX Nifty UTI Notional Depository Receipts Scheme (SUNDER) is a passively managed open-ended exchange traded fund, with the objective to provide investment returns that, before expenses, closely correspond to the performance and yield of the basket of securities underlying the S&P CNX NIFTY Index. SUNDER will have all benefits of index funds such as diversification, low cost and a transparent portfolio and the flexibility of trading like a share. Thus it provides the best features of both open-ended fund and a listed stock. Liquid Benchmark Exchange Traded Scheme (Liquid BeES) Liquid BeES (Liquid Benchmark Exchange Traded Scheme) is the first money market ETF (Exchange Traded Fund) in the world. The investment objective of the Scheme is to provide money market returns. Liquid BeES will invest in a basket of call money, short-term government securities and money market instruments of short and medium maturities. It is listed and traded on the NSE Capital Market Segment . Junior Nifty BeES Junior BeES trades on the Capital Market segment of NSE. Each Junior BeES unit is 1/100th of the CNX Nifty Junior Index value. Nifty BeES Nifty BeES, the first ETF in India, is being introduced by BENCHMARK, an Asset Management Company on January 8, 2002.Nifty BeES trades on the Capital Market segment of NSE. Each Nifty BeES unit is 1/10th of the S&P CNX Nifty Index value. Nifty BeES units are traded and settled in dematerialized form like any other share in the rolling settlement. Bank BeES Banking Index Benchmark Exchange Traded Scheme (Bank BeES) is an Open Ended Index Fund listed on the National Stock Exchange in the form of an Exchange Traded Fund (ETF) tracking the CNX Bank Index. Bank BeES is designed to provide returns that closely correspond to the total returns of stocks as represented by the CNX Bank Index. ETFs Traded In NSE

PSUBNKBEES GOLDBEES QUANTUMGOLD

KOTAKGOLD KOTAKPSUBK RELBANK

GOLDSHARE RELGOLD QNIFTY

Conclusion A great reason to consider ETFs is that they simplify index and sector investing in a way that is easy to understand. If you feel a turnaround is around the corner, go long. If, however, you think ominous clouds will be over the market for some time, you have the option of going short. The combination of the instant diversification, low cost and the flexibility that ETFs offer, makes these instruments one of the most useful innovations and attractive pieces of financial engineering to date.

Commodities Market
GOLD ETF

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A mutual fund scheme that invests in gold, which is held in paper or dematerialized form, just like stocks. Returns on gold ETFs are more or less same as that of physical gold. Investors get units for their holding in the gold ETF. Gold ETFs are listed and traded on the stock exchange. At present, there are five gold ETFs in India; one each by Benchmark, Kotak, UTI, Reliance and Quantum mutual fund.

Some gold ETFs and their absolute returns over the last one year: 1 month (%) 18.5 18.5 18.4 18.2 18.4 3 month (%) 28.5 28.4 28.3 28.0 28.2 6 month (%) 36.7 36.6 36.6 35.3 36.7 1 year (%) 29.3 29.2 29.2 27.2 26.1 Last Price on 26/02/09 1505.99 1498.00 1500.00 1454.00 747.60

Mutual fund
Benchmark Gold BeES Kotak Gold ETF UTI Gold Exchange Traded Fund Reliance Gold ETF Quantum Gold Fund

REASONS FOR FLUCTUATIONS:


If you take a look at gold prices in the past few months, they have been moving in just one direction-- upwards. From Rs 10, 650 for 10 grams last January 2008, the price has moved to Rs 15,490. Gold price is at a seven month high and is up by 10 per cent since January this year. The World Gold Council reports that global demand was up by 4 per cent in 2008.The spurt in prices could be attributed to following reasons.

WEAK EQUITY MARKETS


The volatility and instability in the stock market has boosted investors sentiments to move towards gold as an investment. Gold has been viewed to give steady and assured returns and hence investors move from choppy market to save haven like gold. Analysts say that people are rather bullish on gold, due to which gold prices have been rallying for a while now where Sensex is down 45 per cent during same time.

DEPRECIATING RUPEE
In simple words, when rupee depreciates, gold price increases. The international price of gold depends on the strength of dollar. When dollar weakens, gold prices shoot ups and vice versa.

CENTRAL BANK BUYING


The monetary policies issued by the Reserve Bank of India influences the investors actions, which in turn affects the investors decision to invest in gold or any other asset class.

GLOBAL ECONOMIC CRISIS


There are reports of several governments like the Chinese; Russian who are diversifying their reserves into gold which is giving additional momentum to gold demand that is apart from the investment demands through gold exchange traded funds or gold ETF.

Anoop Rajan: PGDM II Year(Finance)


INSURANCE SECTOR REFORMS - LEARNING NOTHING, FORGETTING EVERYTHING

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UPA Government tables two bills in parliament hurriedly to amend the laws applicable to the insurance sector. The two bills namely THE INSURANCE LAWS (AMENDMENTS) bill and THE LIFE INSURANCE CORPORATION (AMENDMENT) bill. By tabling these, the process of privatization and liberalization has been kept open despite the global shift in favour of public ownership in the wake of the financial crisis. The aim is obviously to keep the focus on privatization and dilution of public control and provision of a greater role for foreign firms in the insurance sector. This emphasis comes through the four principle elements of the current legislative effort. The first is to permit public insurance companies to mobilize additional money from the market. The second is to relax the cap on FDI or ownership of foreign players in the insurance sector as a whole. The third is to reduce the capital requirements for private players in certain areas, such as health insurance. The fourth is to emphasize on self regulation with capital adequacy over structural regulation of the sector. In the case of general insurance sector, FDI cap has been raised from26 to 49 percent and the four state owned companies ,i.e. Oriental Insurance Company, New India Assurance, United India Insurance and National Insurance Company, have been allowed to tap capital markets for funds subject to permission from the government. In a move widely seen as aiming to help Lloyds of London, foreign insurance companies can now open offices and conduct business in the country with a minimum capital of Rs.200 crore (only general Insurance Corporation could provide general Insurance in India until now). The bill also seeks to reduce the minimum investment limit for health insurance companies from Rs.100 crore to Rs.50 crore. It also seeks to do away with the requirement that promoters have to divest specified part of their equity after 10 years, allowing promoters to retain control. Finally as part of the new regulatory frame work, a life insurance council and a general insurance council are to be set up as self regulatory bodies. The plans given above allow for a dilution of government holding with mobilization if funded from the capital market. This signifies the move to accelerate the shift in the form of regulation away from direct control through public ownership of institutions in the general and life insurance sectors to self regulation based on IRDA norms and guidelines and capital adequacy requirements. Use of capital adequacy in the bill caps the sovereign guaranty provided to those insured by the LIC and replace it with the provision that a part of the surplus (excess of assets over liabilities actuarially calculated) be treated as a solvency margin and placed in a reserve fund that the corporation can use in the time of need. As of now, 95% of the surpluses are distributed to policy holders as bonuses and rest is transferred to government as dividend against 5 crore investment. The bill provides for the transfer of surplus to policy holders to be capped between 90 to 95 percent with the balance divided between government and reserve fund. Thus state control and state guaranty are to be replaced with self regulation, capital adequacy and solvency margin. The insurance business is characterized by a high degree of risk depending on the extent of imperfection of the different kinds of Information required. This makes excessive competition in Insurance a problem. In an effort to drum up more business and earn higher profit, insurance companies could underprice their insurance contracts, be cavalier with regard to the information they seek about policy holders, and be adventurous by deploying their funds in High risk but high return ventures. Not surprisingly, countries such as US where competition is rife in the insurance industry, have been characterised by a large number of failures. AIG was a glaring example of the failure of self regulation and the efficiency of Competition. The promised private gains in terms of the efficiency of service providers, we need to compare the potential private loss in the form of the inability of the state as a representative of social interest to direct the insurance industrys investments. Also, if insolvencies become the order of the day, there could be private losses as well as social losses because of the state being forced to emerge as the insurer of last resort. The losses may far exceed the gains, implying that the industry should be restructured with the purpose of realizing in full the advantages of public ownership. Yet the Indian government is pushing ahead with the privatization despite the fact that there is no evidence of the nationalised insurance industry failing to meet its obligations either to insurers or to the government. The LIC has not been merely put at the governments disposal of large volumes of capital for investment but it has also addressed the problems of insurance for the poor. It is not only the global experience with privatized insurance but the Indian experience with nationalized insurance that does not seem to matter. In such a situation, the two bills appear to be declarations of Indias intention to globalize further during the current Prime Ministers tenure, independent of the consequences for its people.

Interim Budget 2009

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This years budget is important in many ways. For a start its not a full fledged budget but an interim budget or a vote on account budget. Secondly, this budget proposal is clearly driven by political motives so economic variables may just take a back seat. Thirdly, in this budget lies the hope of a better tomorrow in terms of fighting the global recession. Lets take a closer look at the highlights of this years budget, the documents presented by the Finance Ministry include: THE ANNUAL FINANCIAL STATEMENT,DEMAND OF GRANTS, APPROPRIATION BILL,FINANCE BILL, MEMORANDUM EXPLAINING PROVISIONS IN THE FINANCE BILL, MACRO ECONOMIC FRAMEWORK FOR THE COMING FISCAL,FISCAL POLICY STATEMENT, EXPENDITURE BUDGET, RECEIPTS BUDGET, HIGHLIGHTS OF THE BUDGET. In addition to the above, individual Departments/Ministries also prepare and present to Parliament their Detailed Demands for Grants, Performance and Outcome Budget, and their Annual Reports. The Economic Survey which highlights the economic trends in the country and facilitates a better appreciation of the mobilization of resources and their allocation in the Budget is brought out by the Economic Division of Department of Economic Affairs, Ministry of Finance. The Economic Survey is presented to Parliament usually in advance of the Union Budget. In this article we take a closer look at the recommendations made in each of these articles by the ministry. The Budgeted Estimates for 2009-10: The proposed total expenditure for fiscal 2009-10 stands at Rs.9,53,231 crore. This includes a provision of Rs.2,85,149 crore under plan and Rs.6,68,082 crore under non-plan. The budgetary support to the Plan for 2009-10, in comparison to BE 2008-09 has been increased for Department of Rural Development, Department of Road Transport and Highways, Railways, Ministry of Power, Department of Industrial Policy and Promotion and Department of Information Technology with a view to maintain the fiscal tempo to address the economic slowdown and meet the requirements of rural and infrastructure development. In addition, enhanced Plan allocations have been provided for Ministry of Youth Affairs and Sports and Ministry of Culture to ensure availability of adequate resources for the preparation towards hosting of the Commonwealth Games next year. The Unique Identification Authority of India is being established under the aegis of Planning Commission for which a notification has been issued in January 2009. A provision of Rs.100 crore has been made in the Annual Plan 2009-10 for this. To ensure continuity in financing of rural infrastructure projects, the government has proposed Ridf-XV(Rural Infrastructure Development Fund) with a corpus of Rs.14,000 crore and continuation of the separate window for rural roads with a corpus of Rs.4,000 crore. To counter the negative impact on exports due to the global financial crisis, the finance ministry proposes to extend the interest subvention of 2 per cent on pre and post shipment credit for certain employment oriented sectors i.e. Textiles (including handloom & handicrafts), Carpets, Leather, Gem and Jewellery, Marine products and SMEs beyond March 31, 2009 till September 30, 2009. This is expected to involve an additional financial outgo of Rs.500 crore during Financial Year 2009-10. Government would recapitalize the public sector banks over next two years to enable them to maintain Capital to Risk Weighted Assets Ratio (CRAR) of 12 per cent and to ensure that credit growth continues to sustain economic growth. In the current environment, there is a clear need for contra-cyclical policy and it calls for a substantial increase in expenditure in infrastructure development where we have a large gap and in rural development where the programs such as Bharat Nirman and NREGS(National Rural Employment guarantee scheme) are playing a vital social role. Since the scope for revenue mobilization is bound to be limited in a period of economic slowdown, any increase in plan expenditure will increase the fiscal deficit. Indeed, we may have to consider additional plan expenditure of anything from 0.5 per cent to 1.0 per cent of the GDP and gear up our systems accordingly.increase the allocation for Defence, which is a part of non plan expenditure to Rs.1,41,703 crore. This will include Rs.54,824 crore for capital expenditure. There is a provision of Rs.95,579 crore for major subsidies including food, fertilizer and petroleum. For the fiscal 2009-10, Gross Tax Revenue receipts at the existing rates of taxation are estimated at Rs.6,71,293 crore and Centres net tax revenue at Rs.5,00,096 crore. With revenue expenditure estimated at Rs.8,48,085 crore, the revenue deficit amounts to 4.0 per cent of GDP. Fiscal Deficit is estimated at Rs.3,32,835 crore which is 5.5 per cent of GDP. This would be lower than in 2008-09, but higher than would be appropriate under normal circumstances. However, conditions in the year ahead are not likely to be normal and, therefore, the high fiscal deficit looks inevitable.

Central Bank Policies Since 2008


USA

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Through the study of some of the countries Central bank policies we have tried to put forward the major steps taken by the following countries in this article. Federal funds rate target was reduced by 50 basis points (bps) each on October 8 and October 29, 2008 to 1.0 per cent. It was further reduced to a target range of 0 to 0.25 per cent on December 16, 2008. Foreign exchange swaps were established with major central banks for infusing dollar liquidity. Write downs were made by financial institutions approximating US$ 635 billion. Troubled Assets Relief Program, authorising the US Government to purchase troubled assets of US$ 700 billion was introduced. Limit on deposit insurance was raised at banks and credit unions from US$ 100,000 to US$ 250,000 per account. unveiled an $825 billion fiscal recovery package, a combination of spending and tax cuts aimed at putting millions of unemployed Americans back to work. Official bank rate was cut thrice by 300 bps during October- December, 2008 and further by 50 bps to 1.5 per cent on January 8, 2009. The collateral eligible for the long-term repo operations was extended Short selling in specific stocks in stock exchanges was temporary banned. Reciprocal currency arrangements (swap lines) were established with major central banks on September 18 and 26, 2008. ECB decided to conduct a special term refinancing operation. Central banks in the Euro area reduced their policy rates by 50 bps on October 8, 2008. ECB announced measures to further expand the list eligible for collateral, enhance the provision of liquidity through long-term refinancing and to provide US dollar liquidity through foreign exchange swaps. ECB cut its policy rate thrice by a total of 225 bps between OctoberDecember 2008 to 2.0 per cent. Increased bank bid for 505 billion rubbles in repo auctions and 139 billion rubbles in an auction of unsecured loans. Switching from bailing out individual companies to attempting to directly support the economy. Investing to strengthen banking sector in order to refinance it with new capital & subordinate debt in an effort to transfer the burden for bailing out companies on to commercial banks. Bank of Japan reduced its policy rate by 20 bps each on October 31, 2008 and December 19, 2008 to0.1 per cent. The Agricultural Debt Waiver and Debt Relief (ADWDR) Scheme has been successfully implemented throughout the country. The cumulative reduction in the CRR, MSS unwinding, term repo facility, increase in export credit finance, and other refinance & liquidity facility have created a total of potential/primary liquidity amount of 3,88,045crores.

UK

EUROPE

RUSSIA

JAPAN INDIA

Given below are the figures that shows the Changes in the Short-term Interest Rates during the third quarter for the year 2008-09.During the third quarter of 2008-09, short-term interest rates in advanced economies witnessed an easing trend, moving broadly in tandem with cuts in the policy rates on the back of recession concerns. In the US, short-term interest rates declined, reflecting liquidity injections and reduction in the fed funds target rate in October and December 2008. . In the UK, short-term interest rates declined, following cuts in the policy rate thrice during October-December 2008 and again on January 8, 2009.

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Short-term Interest Rates Country March 2006 1 Advanced Economies Euro area Japan UK US Emerging Market Economies Brazil China 16.54 2.40 12.68 2.86 11.18 4.50 12.17 4.48 13.66 4.31 13.66 1.86 13.66 1.48 2 March 2007 3 March 2008 4 June 2008 5 September 2008 6 December 2008 7 January 2009* 8

2.80 0.04 4.58 4.77

3.91 0.57 5.55 5.23

4.72 0.75 6.01 2.26

4.96 0.75 5.93 2.29

5.07 0.75 6.25 2.04

2.97 0.62 2.73 0.44

2.65 0.62 2.23 0.29

India

6.11

7.98

7.23

8.73

8.56

4.71

4.58

Did You Know ?


Similar trends were witnessed in the Euro area with cuts in ECB policy rate thrice between October-December 2008. Among the EMEs, short-term interest rates generally softened in China, and remained stable in Brazil. After the dotcom bubble, venture capitalists became more concerned about the start-up companies that they would finance. Many venture capitalists decided to set up pledge-fund style angel investor clubs largely because using a pledge fund format would not force individual angel investors to invest in ventures that the majority of the group decided on, but would allow each member to elect whether to take part in an investment opportunity on a case-by -case basis. Carl Icahn is most famous for his work as an activist shareholder, but has also been referred to as a corporate raider. He purchases shares in a company that he believes is undervalued, and then creates a plan to fix the problems. This usually involves spinning off profitable segments, changing management, cutting costs and buying back stock. The name given to the rise in stock price that occurs when Carl Icahn begins to purchase shares in a company is The Icahn lift. On Wall Street, an air-pocket stock is a stock that drops suddenly and sharply in price, usually because of lower-than-expected earnings or other bad news. When it comes to the stock market, a temporary recovery in stocks or commodities after a deep drop or a prolong bear market is known as dead-cat or dead-broker bounce. Spiders - SPDR is a short form of Standard & Poor's depositary receipt, an exchange-traded fund (ETF) managed by State Street Global Advisors that tracks the Standard & Poor's 500 Index (S&P 500). Spiders are listed on the American Stock Exchange (AMEX) under the ticker symbol SPY. By trading like stocks, spiders have continuous liquidity, can be short sold, bought on margin, provide regular dividend payments and incur regular brokerage commissions when traded. The Andorran franc was replaced as the national currency of Andorra by the euro (EUR) in 1999. Prior to being replaced by the euro in 1999, the Andorran franc was pegged at parity to the French franc. Unlike in Monaco, there was no formal union of currencies with France. Because of this, no Andorran coins/notes were minted/printed.

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Quiz
Q1. The Life Insurance Corporation of India launched its first close-ended, regular premium, guaranteed return money back policy. Name the policy. Q2. Among the suitors for Satyam, which group suggests that the Satyam Board should go for an e-auction of shares? Q3. Which company is in race to takeover maytas infra other than Ritwik projects, SEW Infra and IL&FS? Q4. Which newly promoted stock exchange in India is going to be a competitor of the NSE, BSE and MCX in the current derivatives segment? Q5. Which mid-sized Indian Telecom infrastructure services company plans to ac quire two overseas companies, one in Nigeria and the other in the US? Q6. A trading strategy used by forex traders to buy a currency pair and then to hold it for a short period of time in an attempt to make a profit.

In all recorded history there has not been one economist who has had to worry about where the next meal would come from. Peter Drucker (1909 2005)

The meaning of economic freedom is this: that the individual is in a position to choose the way in which he wants to integrate himself into the totality of society. Ludwig Von Mises

Crosswords
Across

3. The situation when the price of an asset rises far higher than can be explained by fundamentals 5. A long term investment that provides tax-deferred growth & income at regular intervals
6. A measure of the total flow of goods and services produced by a country

in a financial year (Abbr)


Down

An economist is a man who states the obvious in terms of the incomprehensible. Alfred A. Knopf

1. An act of selling commodity at different prices in different markets is termed as


3

2. A speculator in the stock market who believes that prices will go down is called 4. The sale of a block of bonds and the purchase of another block of similar market value is called

EclipseCrossword.com

Education is both a tool of social justice as well as a fundamental driver of economic development. Kevin Rudd

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ALUMNI SPEAK

Chaanakya is crisp, punctual, and knowledgeable and keeps the students well informed. KEEP IT UP Amit Garg Alumni 2005-2007

Crosswords Answers
1 3 4

TEAM
Senior Coordinators Sebin Sasmit

D M P I N T Y

B A R

B U B B L E

S A N N U P
6

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