VOLUME 4.17ISSUE 79

DECEMBER 1, 2010

Economics is not about things and tangible material objects; it is about men, their meanings and actions.

-Ludwig Von Mises

Rates 01Graphs 02Student Cartoon 03News 04National & International events in the world of financeDebate 05Lalit Modi as a better Finance ManagerContemporary ArticlesFII inflow in India in comparison to its Asian peers 07 Axis Bank-Enam Securities Deal 08Currency War 09

Stock Watch 10Reliance Industries LimitedScam 11LIC Housing ScamCommodities Article 12Commodity future exchanges: Biggest Business EnigmaDid You Know? 13Banking Terms and how to use themInvestor’s Focus 16Technical and fundamental analysisAlumni Speak 17A peek into the corporate world through our Alumni’s experienceBuzz Words 18FincopediaQuiz 19Check your Financial Quotient

Repo 6.25% Reverse Repo 5.25%Call rate 4.50-6.90 %Inflation (as on 15th Nov) +8.58%Forex Reserve $ 297.985 billion(as on 19th Nov 2010)91 day T-Bill 6.8536%IIP (for September) +4.4% 6.90 GS 2019 8.0907-8.0907%

RATES

01

It’s good to have money and the things that money can buy, but it’s good, too, to check up once in a

while and make sure that you haven’t lost the things that money can’t buy. ~George Horace Lorimer

Money isn’t the most important thing in life, but it’s reasonably close to oxygen on the “gotta have it”

scale. ~Zig Ziglar

44

44.5

45

45.5

46

15-Nov 18-Nov 21-Nov 24-Nov 27-Nov 30-Nov

Rs/$

GRAPHS

02

18500

18700

18900

19100

19300

15/Nov 18/Nov 21/Nov 24/Nov 27/Nov 30/Nov

Gold(per 10 gram)

2500000

7500000

12500000

17500000

22500000

27500000

5600

5750

5900

6050

6200

6350

15/Nov 18/Nov 21/Nov 24/Nov 27/Nov 30/Nov

future rates open interest

5700

5850

6000

6150

6300

19,000.00

19,300.00

19,600.00

19,900.00

20,200.00

20,500.00

15-Nov 18-Nov 21-Nov 24-Nov 27-Nov 30-Nov

sensex nifty

82

84

86

88

90

15/Nov 18/Nov 21/Nov 24/Nov 27/Nov 30/Nov

Oil(per bbl)

By- Raunak Doshi I MBA M

STUDENT’S CARTOON

03

Just as a cautious businessman avoids investing all his capital in one concern, so wisdom would probably admonish us also not to

anticipate all our happiness from one quarter alone. ~Sigmund Freud

INTERNATIONAL NEWS

• The European debt crises has been worsened after Ireland declared a need for help to restruc-

ture its debt in order to safe off a possible financial collapse. The European Union and the In-

ternational Monetary Fund (IMF) were hoping to wrap up the bailout package of €85 million.

• China has hiked the interest rates for the first time in 3 years.

• The People’s Bank of China said it will raise the one-year interest rate ceiling on deposit ac-

counts from 2.25% to 2.5%, and the floor on lending rates from 5.31% to 5.56%. Commodity

markets given the implication that it would cause the Chinese economy, one of the primary

drivers of world growth, to slow down.

• A global stock rout between North Korea and South Korea which could escalate to a large scale

conflict has led to selling of shares by investors. The sovereign credit risk is now spreading to

Spain and Portugal.

• UK fixes a cap of 21700 on the number of visas issued to skilled workers from India and other

non European countries from April 2011.

NATIONAL NEWS

By- Apurva Gupta I MBA J

04

• The Central Bureau of Investigation (CBI) has arrested eight finance executives,(officials

from Bank of India, Punjab National Bank) including the chief of LIC Housing Finance, ac-

cusing them of taking bribes to give big corporate loans.

• Mobile Number Portability (MNP) will be officially launched in India on 20th January 2011 .

Recently Haryana became the first state where MNP is being implemented. It allows customer

to switch operators without changing their numbers.

• SEBI has asked Asset Management Companies (AMC) not to invest in bonds issued by real

estate companies. The reason being the inability of debt repayment by certain AMCs.

• Small cap software service provider Zensar Technolohies to acquire US infrastructure man-

agement Service (IMS) company Akibia which raised its stock to \` 164.50.

• Mahindra And Mahindra will acquire 70 % of the south Korean SUV Ssangyong Motors for

$463 million by March 2011.

05

LALIT MODI AS A BETTER FINANCE MANAGERBy- Richa Jain I MBA L

PROSLALIT MODI, the creator of ‘THE INDIAN PREMIER LEAGUE’, could justify the position of a finance manager in the true sense. He is also known to be an innovator, has wide experience in the field of marketing, however the most remarkable aspect being, the way in which he dealt with the financial aspect of the IPL. To turn a few million dollars board into a model that makes billions of rupees could have been pulled off only by LALIT MODI. It would be wrong to deprive him of the accolades he deserves. Let us look into what makes him such a brilliant finance manager.

Mr. Lalit Modi looked into all the loopholes that were present in the other leagues. No sports league promised profits and revenues the way the IPL did. Take for example the EPL. Not many are aware that most of its teams are running into debts. The IPL is a debt-free model. Here the players are put into an auction process. All teams are provided with lots of money. Hence each team gets an equal opportunity. Mr. Modi has looked into the downside and upside of every league and then created a model that ensures a protection against all the risks. This is precisely what makes him better than the rest. To create $4 billion revenues in the first year is not something that is common even with a sports league. Mr. Modi has created a company called IPL which will continue to generate profits for years to come. No company can show break-even in the first year. But the IPL has one such team. The Kolkata Knight Riders broke-even in the first year.

Mr. Modi has created a model from which every stake-holder benefits. These include the sponsors, the advertisers, the media channel, the sportsmen, the BCCI board, the several cricket authorities, the celebrities, event managers, etc.. Even the general public benefits in the form of entertainment for the entire family. This also caters to one of the requirements of a finance manager, i.e. to see the welfare of all involved and ensure they benefit from the investment. No individual would spend time and money on something that does not hold some benefit/profit. What puts Mr. Modi at a better position than the rest is that he has ensured profits to every single individual involved. The IPL is a loan-free model. Many established cricket players have received lots of money in the bidding process. Even new and aspiring cricketers have received good fee in the bidding process. The IPL ceremony had one of the highest ratings of viewership.

Mr. Modi is known for taking risks. The IPL was a completely new product conceived by him. He believed in his dream, his innovation. He had done his research. He created billions of dollars out of nothing, and that has happened because he has the capacity and ability to take risks. He is not a blind risk-taker. He had brought in with him, his personal staff who had been working with him for a long time. He has paid for every single expense of his. He has not benefitted financially on a personal level. All the money made by his relatives is by way of stake in different IPL teams. Therefore the profits made by his relatives are not any personal gain.

Mr. Modi made it possible to take the IPL to South Africa when enough security was not avail-able due to elections and conducted it without any hiccups within 21 days. He managed to shift almost 10000 fans base out of the country to cheer their players. The tournament turned out to be an international product and turned out to be a worldwide success. He had the ability to convince the BCCI to bring up the IPL model in the first place, taking the idea out of the 20-20 matches prevalent at the time of conceiving the idea. To be able to convince people to invest in a model that’s new and to convince them, in its potential, is a difficult task. It has taken years for other

06

leagues to establish themselves. To be able to obtain the finances for such an undertaking takes a minimum of two to three years. Mr Modi has managed it all within a year’s time and made it into a profit making company.

Mr. Modi has made use of advertising, celebrities, music artistes etc.in the most creative to generate revenues. He merged entertainment along with cricket and sold it as a family package which no one can resist and hence capitalized on its TRP. The IPL has been consistently getting the highest rating across the country.

In short, Mr. Modi is a better finance manager as he has made the impossible ‘possible’. He has left the BCCI in such a state that it will continue to earn revenues in excess of 2 billion dollars for few years to come. He has used every element involved in the league to generate profits, be it through media, through stage events, taking it international, through the bidding process, adding glamour and did everything that made the IPL a high profit generating company.

CONSThough Lalit Modi has created huge revenues for all involved in the IPL, his business plan is set up to fulfill his personal dream of creating a sports league.

There is a lack of transparency in the dealings of IPL which creates the problem of not being able to track down the details of how the franchisees were bought. No where will you find the complete description of whom, how many entities & how much is their ownership of the fran-chisee. No one has ensured to implement the right to information act to get the details either. Mr. Modi’s finances are such that it is impossible to track down the details of money collected for the franchisees. One cannot undermine the corrupt practices of the BCCI especially when there is so much money riding on it. Integrity needs to bend over before money. The same has happened in case of Mr. Modi.

When IPL franchisees were first formed, the Income Tax officials looked into the matter of funds. They were astounded to uncover that some IPL franchisees had routed their money through vari-ous tax havens like British Virgin Isles, Bahamas, Mauritius & Hong Kong. This put them off guard to investigate further into the matter. Not having a detailed account of the matter due to the law restrictions of the above mentioned countries they could no longer pursue the cases. All they could surmise was that entities were formed in these countries to route investments to Indian companies that bought the franchisees.

In a certain case (name withheld) it was found that a particular UK based firm was awarded the rights for an IPL franchisee. Now this firm was not registered in India. (so technically they can-not bid in India) But once it obtained the rights (as Mr. Modi gave away to the bidder) it made a joint venture with an Indian company in Mauritius which in turn operated the franchisee through a fully Indian owned company. To save themselves from investigation of their books by the au-thorities they took the long route and it worked. At a time when politicians are demanding the return of black money of Indians from Swiss banks such practices continue to thrive. The only glimpse we can have of these is when fellow ‘scamsters’ throw dirt on each other. Still we are unable to nail them due to the legalities involved. In such a situation it is absolutely wrong to call Mr. Modi a better finance manager. It is just trying to say that lets put the country in the hands of

5 CHAANAKYA VOL 4_17 07

businessmen who engineer such business plans that are fool-proof in their undercover dealings and will help make little revenues for the country in the process of drawing billions of dollars for relatives and family and call such men as good finance managers.

Mr. Modi might have generated revenues that left everyone gasping in the first year itself, but definitely integrity needs to bend over large amounts of money and such practices will not work in the long-run. Being a finance manager and conducting such activities can only lead to further messing up with the country’s financial system which someday might put all its citizens into a vicious circle of money-laundering and malpractices, which are bad practices for the country’s prosperity. Hence Mr. Modi is not a great finance manager but rather a very shrewd, sharp and extremely intelligent businessman who has managed to look into every loophole that might have caused him loss of money and which leaves even the IT officials with no power to keep a vigilant check on his resources.

FII INFLOW IN INDIA IN COMPARISON TO ITS ASIAN PEERS

This year, India has seen overseas investors investing huge amounts in primary and secondary markets. The net inflow this year stands at $28.5 billion dollars which not only surpasses the pre-vious yearly high recorded in 2007, but is also one of the highest among the Asian stock markets. Bloomberg shows that FII’s were highest this year when compared to any other Asian countries.

The net inflow of $28.5 is much higher than other Asian FII’s received by countries like South Korea and Japan which stood at $16 billion and $13 bil-lion respectively.

Net inflow into Indian stocks in the same period last year stood at $15.7 billion. FIIs appear to have been more en-thused with prospects of Indian stocks this year and have recorded 80 per cent higher inflows this year.

The FII over-subscription of $26 billion in Coal India and the inflow into debt of $10 billion is not accounted in this figure. The difference between FII flows into India and other countries would be much higher if these figures are taken into account.

Indonesia, Japan and the Philippines also recorded higher FII inflows between 140 and 220 per cent this year. At the same time, countries like South Korea and Taiwan recorded lesser FII’s ranging between 28 and 50 %.

The benchmark indices of India and South Korea that received the largest amount of funds have returned a modest 15 per cent so far in this calendar.

Indonesia after receiving only $2.2 billion of inflow has outperformed this year with 47 per cent

By- Pavan S Rao I MBA L

7 CHAANAKYA VOL 4_13 08

gain, Similarly Thailand’s benchmark has gained 39 per cent, while the inflow into the country was only $1.8 billion.

It is important to take into consideration the fact that since the market capitalisation of Indonesia and Thailand are relatively smaller; their equity prices can be considerably affected by even such smaller inflows.

Net FII inflows as a percentage of the market capitalisation is also the highest in India at 1.8 per cent this year, followed by South Korea at 1.6 per cent.

By- Saurabh Khator I MBA L AXIS BANK-ENAM SECURITIES DEAL

INTRODUCTION:From Banks’ exposure to MFI(Microfinance Institutions)to inflation touching new low of 8.58 per cent, the Banking sector witnessed a lot of action. But one development which is bound to bring more frenzy in capital market is the Axis Bank acquisition of Enam Securities in an all share deal worth ` 2067 crore. Axis Bank, earlier known as UTI bank, is the fourth largest bank in terms of market capitalization, which is around $12.9 bil-lion. It began operations in 1994 after government of India allowed new private banks to be established. It rebranded itself as Axis bank in 2007 in order to avoid confusion with similar entity names. While Enam se-curities is a well-known name in investment banking operations, equity, debt market and in mobilizing re-sources for IPOs, the latest being Coal India Ltd.

DETAILS:Axis securities & Sales the wholly owned subsidiary of Axis Bank in an all share deal acquired sell side business, including Investment banking, Institutional & Retail broking, Distribution and Advisory businesses of Enam securities. Enam shareholders will get 5.7 shares of Axis bank for every one share they hold in Enam. This would result in Enam shareholders getting 3.3 per cent of Axis bank. Axis bank would use Enam brand for two years and there is also non-compete agree-ment for 5 years signed with Enam for merged business. Vallabh Bhansali, co-founder and chair-man of Enam would be inducted as independent director on Axis Board while Manish Chokhani would be the MD & CEO of new entity. Jagdish Master would continue to provide guidance as a board member of the wholly owned subsidiary. As a part of the deal Enam’s 400 employees would shift to Axis and Enam would transfer net current assets worth ` 300 crore.The profit before tax for the Enam Unit was ` 92 crore during FY10 and in a period from April 1 to October 20 this year, the total revenue stood at `182 crore with a PBT of ` 77 crore. Enam would continue to hold its mutual fund and Insurance business. Macquarie group Ltd. advised Axis bank while Anil Sing-hvi, vice chairman of RNRL advised Enam on transactions.

CONCLUSION:It’s a win-win deal for both Axis and Enam. With this deal, Axis bank would be able to strengthen its position in investment banking and equity underwriting. Till now it was a major player in bond and debt market and was virtually absent in equity market business. With this deal, Axis bank will be able to compete with their close rivals in financial sector like ICICI bank, HSBC holdings Plc.

09

Axis Bank shares fell by 7.2 per cent as soon as the news came about the deal, as valuation offered was on the higher side.In such sort of acquisitions 10-20 per cent premium is generally paid. The deal resulted in EPS dilution of Axis Bank by 0.6 per cent.

Enam is ranked no. 3 in Equity underwriters in India while Axis bank is ranked no. 16 as per the data available with Bloomberg. Axis bank with its strong network of 1100 branches and Enam with strong presence in retail is sure to create synergies that would help both the organizations to grow. In the long run we are quite bullish on Axis bank as this deal would give them the required expertise to enter into the most growing Global security market after their successful venture in debt and bond market and the current P/E multiple stands at 17-18x which is slightly higher than its peers.

By- Pavan S Rao I MBA L CURRENCY WAR

What is currency war?As the name suggests, currency war does not literally mean two countries with daggers drawn against each other. Currency war between different countries means the attempt by a government of a country to prevent its currency from appreciating too steeply and too fast against competing nation. Curren-cy war dates back to the Great Depression era when major economies devalued their currencies as a part of a measure to give preference to local goods over im-ported ones. Currency war mainly benefits the export sector and is one of the major reasons why a nation gets into what is known as currency war.

What is its impact on Indian economy?In the process of devaluation of countries currencies, the main market player who gets hit are the domestic exporters since they cannot take price advantage and since the buyers would prefer to buy from a country whose currency value is cheaper. This creates a cascading effect in the sense that exports are hit, which in turn hits the income. The role of central bank is most prominent here; they act by buying dollars to create artificial demand for dollar, devaluing the value of rupee in the process and try to retain some price advantage with the exporters. But in buying the dollars central bank has to incur cost since equivalent amount of rupees need to be pumped into the market, by selling of bonds and other instruments. These bonds need to be generated from the government. This worsens the fiscal position.

Implications of currency warCurrency tends to solve a country’s economic problems by causing worse difficulties in other markets. It is a complete downhill when all countries engage in this kind of a war. No doubt the currency war saves the interest of the exporters; it reduces the demand for foreign goods. The major implications of this war are increasing foreign currency and inflated asset prices.

Examples:-The best example in the current scenario is the devaluation of Chinese Yuan. Yuan is currently 50% to 66% less than the actual value .This is a perfect example where China is posing a threat in the form of currency war.

10

RELIANCE INDUSTRIES LIMITED

Fundamentally speaking, RIL has had an impressive performance in the last half year and has set new records in the company’s history. High operating rates across manufacturing facilities, and improving refining margins have resulted in the highest ever half year revenue and net profit.

RIL has forayed into the exciting and emerging field of shale gas production in the United States of America. RIL has forged three joint ventures to acquire significant acreage holding and con-siderable net reserve potential. Reliance Marcellus LLC, a subsidiary entered into a joint venture with Atlas Energy Inc., USA under which Reliance acquired 40% interest in Atlas’s Marcellus shale acreage position. RIL through its subsidiary, Reliance Eagle Ford Upstream Holding LP, entered into a joint venture with Pioneer Natural Resources Company, USA under which Reli-ance acquired 45% interest in Pioneer’s Eagle Ford Shale acreage position. RIL also entered into a joint venture with Carrizo Oil & Gas Inc. USA through its subsidiary, Reliance Marcellus II LLC. Reliance acquired 60% interest in Marcellus shale acreage in Central and Northeast Pennsylvania.Infotel Broadband Services Limited, a RIL subsidiary is the only successful bidder in all the 22 circles in the Government’s auction for Broadband Wireless Access (BWA) Spectrum. This provides the company the opportunity to participate in yet another value creation sector with im-mense potential. RIL signed a Memorandum of Understanding to set up a joint venture in India with SIBUR, Russia’s leading petrochemical company. This JV will produce butyl rubber at Reli-ance’s integrated petrochemical site at Jamnagar.

In addition, the company also achieved several records in terms of its financial performance. RIL achieved a half yearly turnover of ` 120,969 crore (US$ 26.9 billion), an increase of 48.8% over the corresponding period of the previous year. Increase in volume accounted for 28.8% growth in revenue and higher prices accounted for 20% growth in revenue. During the same period, exports were higher by 55.5% at ` 66,936 crore (US$ 14.9 billion) as against ` 43,035 crore in the cor-responding period of the previous year. PBDIT increased by 34.8% and achieved a record (US$ 2.2 billion). Production from KG-D6 was 583,348 tonnes of crude oil, and 10,699 MMSCM of natural gas, a growth of 163% and 122% respectively over the corresponding period in the previ-ous year.

Reliance Retail continued on its growth journey and now operates over 1,000 stores, spanning the ‘Value’ and ‘Specialty’ segments, in more than 85 cities in India.

Recommendation:Although the stock has underperformed compared to the market, it is recommended for BUY at dips. Long to medium term investors can benefit from the stock as it is expected to run in the next quarter propelled by the good results.

BUY PRICE: `980

STOP LOSS: `925

TARGET: `1120

TIME PERIOD: 3 MONTHS

ESTIMATED GAIN: 15.46%

By- Gaurav Jain I MBA M

11

LIC HOUSING SCAM By- Amit Prakash I MBA L

Exposing a massive bribery scam in corporate loans given out by prominent public sector banks and financial institutions, the CBI on 25th November arrested the chief executive officer (CEO) of LIC Housing Finance Ltd in Mumbai, a top officer of LIC and officers of Bank of India, Cen-tral Bank of India and Punjab National Bank. CBI has arrested eight senior officials of banks and financial institutions on charges of taking bribes for sanctioning loans. The agency has accused them of causing wrongful gains to themselves and wrongful loss to the public ex-chequer. They were also accused of gathering confidential business information from banks and financial institutions.

According to CBI “Officers of top manage-ment and middle management of various pub-lic sector banks and financial institutions were receiving illegal gratifications from the private financial services company who were acting as mediators and facilitators for corporate loans and other facilities from financial institutions.” The companies which are under scrutiny in the CBI’s report include Lavasa, Avatika, Krishna group, Suzlon, JP group, MBD, Gold Sukh Project, Emmar MGF and DB Realty.

CBI has accused R.R Nair(Director and CEO, LIC housing finance) of showing undue favour to companies like D B Realty, Pashmina Ltd, Mantri Realty, Sigrun Holdings Ltd, Entertainment World and Indore City Treasures. It has also alleged that Rajesh Sharma of Money Matters deliv-ered ̀ 45 lakh to Nair last November besides financing the purchase of a flat, at a discounted price, by Nair in Goregaon, Mumbai. CBI has alleged that R.N Tayal(GM , Bank Of India) received ` 25 lakh from Sharma for assistance in a matter connected with Ashapura Minechem. Tayal is also accused of assuring Sharma to associate him in the power project proposals of BGR Energy worth ` 200 crore and OPG Group worth ` 300 crore.

CBI has said it is clear cut case of top bank officials receiving kickbacks from financial services intermediary for sanctioning large corporate loans. This means that loans, by themselves are not bad ones. It is only the manner in which they have been obtained and the role of public servants that are under the scanner. These cases are unlikely to have a systematic impact as these are iso-lated bribery cases. Loans have to pass through a several –layered sanctioning process.

A sharp reaction to this news led to panic selling and Banking, finance and real estate stocks plunged on 24th Nov. Sensex shed 2.82 % over the week, Banking dropped 4.35 % and the Realty index 12.42 %. Shares of BOI fell 9.49 percent over the week, Central Bank of India 12.39 %, PNB 9.29 % and LIC Housing Finance fell 28.75% over the week.

On 26th November SEBI has been given the task of investigating trading patterns in stocks of firms named in the CBI’s probe into the bribes-for-loans scam. The regulator will look at the trad-ing patterns of their stocks, their adherence to corporate governance and listing agreement. The

12

COMMODITY FUTURE EXCHANGES: BIGGEST BUSI-NESS ENIGMA

By - Mayuri Jain I MBA K

Commodity markets have been gaining attraction of everyone since the government of our coun-try lifted regulations from commodity trading. Everyone seems to be very bullish on commodity trading but there is an underlying fact that along with these immense opportunities. there lays a huge enigma too.

First, I will talk about the opportunities which everyone is speculating in the present scenario. Government has notified 110 commodities for futures trading; few are active, leaving a huge scope for the development of many others. The market structure still needs to be settled. Also, about ` 30,000 crore worth of commodity fu-tures are traded everyday on the currently opera-tional five exchanges – MCX, NCDEX, NMCE, R-ADAG’s ICEX and Kotak – promoted ACE Derivatives & Commodity Exchanges. This is about one-fifth of the volumes traded on Indian stock exchanges. In mature markets like the US and Europe, commodity exchanges register 1.5 - 3 times the volumes of equity exchanges. In India the figure is only 0.25. Globally, trading in com-modity derivatives is 30-40 times the physical commodities market. In India it’s only 3-4 times. Thus, there is a scope to achieve lot more in commodity market in India. Secondly, it’s not just the opportunities but luring profit which attracts businesses to come up with new exchanges the most. If we look into the facts then in 2009-10, MCX earned an EBITDA mar-gin of 65% on revenues of ` 494 crore. Also, initial cost to set up an exchange is low. It takes ` 25-30 crore to set up an exchange.

Thirdly, with the introduction of new entrants in commodity exchanges, investors are attracted a lot, who speculate growth and thus are boosting the valuation of commodity exchanges. And this

probe will include block and bulk deals by the firms that allegedly received loans by unfair means

Consequences:-• It will be even more difficult for those real estate companies which are likely to come out with their initial public offerings now.• It will be difficult for the companies to get bank loans now.• The credibility risk is higher and is likely to be priced into banking stocks.• The concern that remains would be liquidity to the sector, which could be slightly squeezed, as banks are the largest lenders to the realty estate.• Bankers do admit to there being the need to review lending practices, valuations of securities provided against these loans.• The scam provides a strong case for a real estate regulator.

12 13

is why everyone is bullish for commodity market. Also, at present, apart from the above men-tioned five national exchanges which are running in a full fledge manner, one more is expected to come up in a year, and two are waiting for approval. Now it depends on how new entrants will encash these opportunities.

But the question is whether these new entrants will be able to work as a platform to help farmers, miners, manufacturers, companies, intermediaries and consumers? Or will they fade away amid the competition and business challenges? This is where the enigma comes in and this is the sec-ond aspect of commodity future exchanges.

International experience tells us that dozens of commodity exchanges are needed to develop the market in the early years. Worldwide, the experience in commodity exchanges has been bold expansion followed by painful consolidation. In China, a decade ago, 42 commodity future ex-changes existed. But in 1998, the China Securities Regulatory Commission, the market regula-tor, reduced the number from 42 to 15 to enable better oversight. Later in 2000, the number was brought down to just 3. Similarly, Japan went from 17 in 1994 to 6 now. Most Asian countries are now operating with one or two exchanges only. In India, the conditions are different just because it is in the early stage of its life cycle. So, consolidation is likely to follow after expansion in our country which will take place in forms of mergers and acquisitions. It is not possible that all new exchanges which come up will be successful in attaining zeniths. At some point they can possibly shakeout. Thus, players need to work in such a manner that they can be one among the handful left standing.

DID YOU KNOW?

By- Deepak Jose I MBA N

Banking terms & How to use them

As banking gets more tech-friendly and automated, we need a skill upgrade on the terminology and its use. A quick guide on terms and their meaning

“Sign a PAP or MCC, even better do an NEFT or RTGS, but then you will need to know the IFSC.” Does this sen-tence make sense to you? Banking has become easier to-day than ever before, but banking jargons may still flum-mox you.

If you haven’t encountered them already, you are bound to do so at some point soon. In fact, knowing them may make some of your banking tasks much simpler.

MICR: Magnetic ink char acter recognitionWhat is it: MICR code (pronounced my-ker) is a nine-digit number printed on banking instru-ments such as a cheque or a demand draft using a special type of ink made of magnetic material. The first three digits denote the city. The fourth to sixth digits denote the bank, while the last

14

three digits denote the branch number. The code is read by a machine, minimizing the chances of error in clearing of cheques, thereby making funds transfer faster. For example, in the MICR code 400240019, 400 denotes Mumbai, 240 denotes HDFC Bank Ltd and 019 denotes the Colaba branch of the bank.

You will find the number on the right of the cheque number at the bottom of the cheque leaf.

When do you need it: MICR code allows money to drop directly into your bank account for pay-ments such as salaries and dividends. Your tax refund will come to you faster if you remember to mention this on the refund form. Refunds of unwanted money in initial public offers, too, drop back if you put down your code on the application form.

RTGS: Real time gross settlementWhat is it: It’s a fund transfer mechanism that enables money to move from one bank to another on a real time and gross basis. Simply put, real time means the transaction is settled instantly without any waiting period and gross means that it is not bunched with any other transaction.

You can transfer a minimum of `1 lakh through RTGS; there is no upper ceiling though. The bank will charge you ` 25-` 50 for an outward RTGS transaction, inward transactions are free. RTGS is the fastest inter-bank money transfer facility available through secure banking channels in India.

But not all branches in India are RTGS enabled. Visit the Reserve Bank of India’s (RBI) website for a list of branches where you will get this facility.

When do you need it: This facility would be handy during an emergency, when you need to trans-fer funds quickly, imagine an ill child studying in another city or a parent in an emergency situation and needing money at once. You would be able to use this facility if you use Internet banking as a channel.

It is mostly used by high networth individuals and businessmen, who have at least ` 1 lakh to be transferred business associates or clients.

NEFT: National electronic funds transferWhat is it: NEFT enables funds transfer from one bank to another but works a bit differently than RTGS since the settlement takes place in batches rather than individually, making NEFT slower than RTGS.

The transfer is not direct and RBI acts as the service provider to transfer the money from one ac-count to another. You can transfer any amount through NEFT, even a rupee.

You won’t have to pay any fee for inward transfer of funds, but for outward transactions the charges can be from ` 5-` 25 depending on the amount transferred.

When do you need it: You can use this facility if you want to transfer funds online in a day or two.NEFT can make life easier for those who need to send money to their parents or children living in another city. It cuts the trouble of issuing a cheque or draft and posting it.

14 CHAANAKYA VOL 4_131515

NEFT, too, can be done only through Internet banking. Visit RBI website for a list of branches where you will get this facility.

IFSC: India financial system codeWhat is it: An 11-digit alphanumeric (letters and numbers) code that helps identify bank branch-es. The first four numbers represent the bank’s code (alphabetic), the fifth number is a control character (0), and the next six numbers denote a bank branch. For example, the IFSC for HDFC Bank Ltd’s Colaba branch in Mumbai reads as HDFC0000085. This code is mentioned on your cheque. Different banks mention it at different places on the cheque.

When do you need it: When sending money through RTGS or NEFT, you need to know the IFSC of the receiving branch.

CVV: Card verification valueWhat is it: CVV is an anti-fraud security feature that helps verify that you are in possession of your credit card and making the transaction. CVV is usually a three-digit number printed on the signature panel at the back of your credit card.

When do you need it: You need this number when shopping online or over the phone. You need to be careful with this number as it can make you a victim of fraud. It’s best to remember this number and blacken it off from your card.

PAP: Payable at par or MCC: Multi-city chequesWhat is it: PAP or MCC cheques can be encashed anywhere in India, irrespective of the city they were issued in. They are treated as local clearing cheques across the country. The amount is credited in the account the same day and there are no inter-city collection charges associated with a normal cheques being encashed in another city.

A cheque issued at a branch in Chennai, can be encashed at a branch in Dibrugarh as if it were a local cheque.

There would be a notation on the top or the bottom of a cheque indicating its status as PAP or MCC cheque.

When do you need it: By issuing a PAP or MCC cheque, you can save demand draft or cheque clearing costs.

Usually, these cheques are issued by companies to disburse dividends or redemption amounts.

Source: http://www.livemint.com

An investor without investment objectives is like a traveler with-out a destination. ~Ralph Seger

16

INVESTOR FOCUS By- Madhukar Das I MBA G

Technically Speaking

HCL Infosystems Ltd.The Indian Equity Markets witnessed correction in the past few trading ses-sions over below expectation IIP numbers and European economic concerns. The LIC scam crushed the markets further. The benchmark indices have cor-rected over 8% and may correct a little more, however further correction would not be very deep.HCL Infosystems Ltd. is India’s premier hardware, services and ICT systems integration company offering a wide spectrum of ICT products that includes Computing, Storage, Networking, Security, Telecom, Imaging and Retail.

Fundamentally Speaking:The company is growing leaps and bounds. The management is aggressive and company has bagged big deals in recent past which will drive the sales for the company. They recently picked up a majority stake in Dubai based NTS systems. The Dubai arm will soon begin work on IT project of Flydubai. They also bagged offers from Census of India (`40 crores), Delhi International Air-port Limited, Government of Madhya Pradesh which has driven the order book higher. HCL Infosystems announced its entry into business with the launch of HCL O’zone service which will offer business applications, productivity appli-cations and IT service solutions to the users. Expanded software development facility in Jaipur for system integration projects. The company raised money by issuing warrants to its promoters which were recently converted at `153.

ALUMNI SPEAKBy- Manan Datt I MBA M

17

In this edition, we have Ms. Deepa A.V who shared her experience..

Name- Ms. Deepa A.VCompany: IndusInd BankQualifications: B.Sc, MBAWork Experience: 8 yearsDesignation- ManagerE-mail ID: deepa.astha@gmail.comBatch- 2002

Chaanakya: What do you think are the biggest threats banks/insurance companies are facing today? Ms. Deepa: There is an opportunity to talk about the economic outlook and/or the emergence of new competitors. For example, supermarkets have started selling bank products and mobile operators are well positioned to disinter mediate banks.

Chaanakya: What is your take on stock analysis, fundamental analysis Versus technical analy-sis?Ms. Deepa: For me it is only the Fundamental analysis, I believe in buy and hold strategy and I also believe that for a growing market like India the best approach would be to invest in high potential companies with strong management and wait for the company’s growth.

Chaanakya: Are you prepared to relocate around the country/state if there is a business demand for this? Ms. Deepa: Some branch based roles come with a contract which says that the bank can move you to another branch if they need to fill a vacancy there.

Chaanakya: What are the factors to be considered while making an investment decision?Ms. Deepa: There are many things that have to be taken into consideration while making an investment decision like maturity matching, asset-liability matching, future expected cash in & out flow, the nature of fund, market conditions, regulatory requirement, availability of informa-tion etc.

Chaanakya: As Christites prepare themselves for the corporate jungle, what is the best choice for them – big company, small salary or small company, big salary? Ms. Deepa: As students venture out into the corporate world with their careers taking off, big companies are the one to look out for. Brand image is what the the corporate look for.

Chaanakya: What you’ll suggest to our budding managers? Ms. Deepa: My message to students... In the market, the employers want the students desper-ately... The need for the right candidate is their need of the hour. It is now up to you to match up to their expectations.

Thank You!!!

18

BUZZ WORDS

BreakoutIn practice, a breakout is most commonly used to refer to a situation where the price breaks above a level of resistance and heads higher, rather than breaking below a level of support and heading lower. Once a resistance level is broken, it is regarded as the next level of support when the asset experiences a pullback. Most traders use chart patterns and other technical tools such as trend lines to identify possible candidates that are likely to break through a support/resistance level.

Momo Play It is a slang term used to describe an investment purely as a momentum play, not worrying about the company’s fundamentals. This is practiced more often by day traders.

Broadening Formation A pattern that occurs during high volatility, when a security shows great movement with little direction. The formation is identified by a series of higher pivot highs and lower pivot lows. A trend-line which is drawn over the pivot highs and under the pivot lows frames out the widening pattern. It looks like a megaphone and, in fact, it is also known by that name.

Buck the TrendThis is a situation when a security or a class of assets sees its market-driven price move in the opposite direction of the broad market or its competition. The move could be in either direction, but generally occurs as a result of good performance in the face of negative broad market per-formance.

The meaning is often extrapolated out from just asset prices to business and market fluctuations. If a company is recording increased sales while its competitors lose business, that company would be bucking the trend.

Double UpAn investing strategy in which a trader doubles his or her current position in an asset when an adverse price movement occurs. By doubling the risk, the trader hopes to earn a larger return when the security moves in a favourable direction. When executing a double-up strategy, the investor believes that the latest adverse price fluctua-tion is only temporary and will shortly correct itself. To capitalize on the price reversal, the inves-tor amplifies his or her current position.

Sideways MarketIt is a situation where stock prices change little over a specific period of time. Consequently, traders who follow trends when making their investment decisions will tend to perform poorly during a sideways market. It is also known as horizontal price movement or flat market.

Flip-Over Pill A flip-over pill is a shareholder rights plan used as a defence against hostile takeovers, and is one of the more commonly-used poison pill strategies. The rights plan can be included in the bylaws of the company, meaning that it must be permitted by an acquiring company.

By- Pragati P I MBA K

16 CHAANAKYA VOL 4_13 19

QUIZ

1. Name the company and its CEO who was arrested for a recent loan scam?a. LIC Housing , Ramchandran Nairb. HDFC , Keki Mistryc. LIC Housing , Keki Mistryd. HDFC, Ramchandran Nair

2. Which country is the latest to apply for bailout?a. Germanyb. Irelandc. Englandd. Mexico

3. Who has been recently appointed as the new chairman of Spicejet?a. S. Sridharanb. J. Ravindranc. M. K. Harinarayanand. Kalanithi Maran

4. A realty company came under scanner for ‘end use’ of loan from Tata Realty & Infra-structure to ‘buy’ an ‘international telecom company’ to form its telecom subsidiary. Name the international company.a. NTT Docomob. Etisalatc. Telenord. Sistema

5. French parliament recently passed a law to use its pension assets to pay off the debts of France’s welfare system. What is the amount?a. €45b. €50c. €36d. €28

6. Who will lead Fortis Global Healthcare as a CEO, in the creation of a pan-Asia integrated healthcare business?a. Vishal Bali b. Malvinder Singhc. Shivinder Mohan Singhd. Vishal Singh

7. Broadcom Corporation announced that it has signed a definitive agreement to acquire a company which is a privately-held company that develops system-on-a-chip (SoC) solutions for home networking over power lines. Name the company.

By- Abhijeet Singh I MBA G

CROSSWORDS

Across

5. The card which is used for a short period to present money to somebody7. The card which is not physical and aimed at the e-shopper8. The company that is acquiring yogurt maker YoCream

Down

1. The department that is introducing plastic money and insurance2. The professor who will undergo surgery to implant camera on the back of his head3. The Protection Court that will address against manufacturers and service pro-viders4. This is removed recently in mutual funds6. R-Adag is in talk to buy which radio station

20

1. a2. b3. d4. c5. c6. a7. Gigle Networks Inc

21

QUIZ ANSWERS

JUNIOR TEAM

Apoorv Jhudeley

& Rajat Sikri

Editor-in-chief

Zafar Iqbal Cartoon

Vaibhav Nagar

News

Naveen Kulkarni

Crosswords & Quotes

Sumit Kumar Gupta

Graph & Rates

Amit Prakash

Book and Magazine Review

T. Deekshith Ravi Chandra

Student Article

Rohit Dhannawat &

Saurabh Khator

Investors check

Amit Prakash &

Chinmay Uchhrang Jethwa

ScamMandeep Kaur &

Mayuri Jain

Commodities Market

Richa Jain &

Sona Joseph

Debate

Akshat Malik,

Geetika Gupta &

Manan Datt

Alumni Speak

Abhijeet Singh &

Deepak Jose

Quiz & Did You Know

Gaurav Jain

Stock Watch

Madhukar Das

Investor Focus

Apurva Gupta &

Pragathi P.

Buzz Words

Kumar Gaurav &

Meenakshi Ramnath

Review Committee

Apoorv Jhudeley &

T. Deekshith Ravi Chandra

Creative Head & Design

Institute of ManagementHosur Road, Bangalore - 5600029, Karnataka, India

Tel: +91-80-4012 9350/9351/9355 Fax: +91-80-4012 9000

Website: www.christuniversity.in

Please mail your valuable feedbacks, reviews at chaanakya@mba.christuniversity.in