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Wealth Incorporation Presents

Life is ten percent what happens to you andninety percent how you respond to it

-Lou holts b1937, American football coach

National Headlines The Infosys incubated OnMobile is acquiring VoxMobili , Frances leading player in

multi access products(telecom solutions), for about Rs. 150 crore.

The Indian mining sector is set to make killing from overseas sale of ore that is likely

to increase their revenues by over 100% over the last year. Spot iron ore prices haveshot up from $50 per tonne to FoB price of $100 per tonne.

The Ministry of Finance has shot down RBIs proposal of refinancing the offshoresubsidiary of IIFCL to fund infrastructure projects , saying it would increase the costof borrowing. It has now asked the RBI to subscribe to bonds issued by this co.

Large PE funds General Atlantic , Blackstone and Warburg Pincus have showninterest in ICICI Ventures 63% stake in Infomedia the publisher of Businessdirectory Yellow Pages and some well known niche magazines.

Reliance Industries has agreed to buy the assets of Hualon Corporation , a sickMalaysian Corporation which will increase Reliances polyester capacity by 25% to2.5 million tonne and boost its annual revenue by about $ 1 billion.

Small cap companies could soon have an alternative stock exchange for trading .The Interconnected Stock Exchange of India(ISE) is being revived with an inductionof foreign funds.

International Headlines Nasdaq Stock Market Inc and Reuters Group Plc are shutting down an independent

stock research venture (IRN) amid weaker than expect demand form investors.

ArcelorMittal bought a 51% stake in Turkeys major steel stock holding companyRozak

The worst US housing slump in 16 years may lead to mortgage companies to cut

almost 1 lakh jobs, which is more than double already been cut.

Two major international trade union organizations i.e. Asia Pacific Regionalorganization of the International Confederation of Free Trade Unions and theBrotherhood of Asian Trade Unions (BATU, the regional organization of WLC) havemerged to form Asia pacific regional unit of International Trade Union Confederation(ITUC)

A study of International labour organization (ILO) has commented that South Asianlabour productivity has risen by 50% in the last decade.

The Zimbabwe President has banned all pay rise without authorisation and givenhimself extra power in a bid to curb the inflation rate which currently stands at over7600%.

16th SEP 2007

Volume 1, Issue 2

..Tracking the Economy

Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years.Warren Buffett

Inflation 3.82% , IIP(Q2)-9.6 %

Issue Attractions

NationalHeadlines

1

InternationalHeadline

1

CorporateInterview

2

Quiz 2

Guest Editorial 3

Student Editorial 3

Pearls of Wisdom 4

15 days Movements

CHAANAKYACHAANAKYACHAANAKYACHAANAKYA

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Corporate Interview

Quiz

The business schools reward difficult complex behavior more than simple behavior, but simple behavior

more effective . Warren Buffett

1. Only one life insurer in India offers a policy specifically designed for women. Name the policy

2. Apollo health street has recently acquired its US based competitor for $ 170m. What is the name of the firm?

3. Recently SEBI has initiated adjudication proceedings against 20 Companies for non compliance with clause 49 nor

What is clause 49 meant for?

4. Two Indian Corporate have tied up for Air Ambulance Service. Which are they?

5. HSBC is tying up with which two other banks of India for venturing into life insurance sector.

(Answers will be published in the next issue)

Answers to the previous issue

1. ICICI and Korea Exim bank 2. Core Insurance Solution 3. Standard chartered, 49% 4. Tata power Co Ltd

5. Simplify the process of credit delivery to small-scale industries 6. Benjamin Graham 7. Hughes Software

Mr.Shoumitro Goswami, CEO Austal Group shares with Chaanakya his views

on Indian Stock Market.

Chaanakya-What do you think about the Indian Stock market?

Mr.Goswami-Well Indian Stock market is no doubt one of the emerging market, in fact it is emerging at a very fast pac

is also getting more and more efficient were the informations are taking lesser time and we are getting faster reactions fthe market.

Chaanakya-Your company Austal international is into IT business, what makes the company concerned about the marke

Mr.Goswami-Every business has the relation with the economy in which it functions, and no doubts that markets are g

indicators of the health of the economy, also Austal is very much inclined towards starting a fund which will invest in

market. and the market has also got lot of momentum which can be understood as the market is a growing market, s

becomes necessary for the company which is planning to enter in the market to find the characteristics and tools which

proved good in the market, because every market is different in characteristics and one need to understand the tools

interpret those characteristics.

Chaanakya-What kind of fund will it be? A hedge fund?

Mr.Goswami-Not exactly a HEDGE FUND but it will be a diversified fund, actually the market growth and condition i

good that any one can become a fund manager, there are diversified fields and lot of new ventures in various fields to

upon. However the fund will also hedge the risk factor so it would be more sort of a hedge and diversified fund hybrid.

Chaanakya-What would your take on stock analysis, fundamental analysis Vs. technical analysis?

Mr.Goswami-For me its only the Fundamental analysis, I believe in buy and hold strategy and I also believe that fo

growing market like India the best approach would be to invest in high potential companies with strong management

wait for the company growth, I know its hard to find such companies but fundamental analysis would definitely help yo

identify the options.

Suggestion to Investors- I would say that for a true investor anytime to enter in the market is right time, if you h

done your homework fine and you are willing to stay in the market for at least one cycle of the economy then I think y

investment will be able to generate decent returns because market is all about discipline and self control.

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Did you Know?

Poised at a phenomegrowth of 500 per cethe Indian insuranindustry is expected reach US$ 60 billion the next four years

UNITECH, BSE-507878, N

-UNITECH

CMP- Rs.252.5

TARGET PRICE- Rs.285

RCF,BSE-524230, NSE-RCF

CMP- Rs.53.5

TARGET PRICE- Rs.65.2

AREVA T&D, BSE-522275,

NSE GECALSTHOM

CMP- Rs.1622.9

TARGET PRICE- Rs.18

BALKRISHNA INDS, BSE

502355, NSE-

BALKRISIND

CMP- Rs.520

TARGET PRICE- Rs.66

(CMP Current Market Price

Stock Ratnas

You only have to do a very few things right in your life so long as you don't do too many things wrong

. Warren Buffet

Any lending carries with it some risks and traditional bankers are always cautious in takingassets on to their books, evaluating the impact on their balance sheet under differentprobabilistic considerations. Todays creative bankers scoff at the traditionalists and claimthat with exotic financial instru-ments they have entered a new world of banking. Loans aretradable securities, to be packaged, sold and forgotten about (securitized). In the housing

sector, the push in the US to raise home ownership mortgage credit reached its peak in2004 and 2005, supported by a wide array of investors across the globe who picked upsecuritized credit instruments, which had been evaluated and rated by the leading global

rating agencies. The problem started when with the rise in asset prices, mortgage lendersencouraged sub-prime borrowers to get loans and buy houses, a clever strategy to

stimulate sanguine and ardent borrowers. The appreciation of house prices dilutes risk

perception and more leverage is of no consequence; asset books get built up with hardlyany margin requirement. Risk management standards lay buried in that ambience. In the

sub-prime sector, the delinquency rates have risen sharply, to about 12 per cent, roughlydouble the recent low seen in mid-2005. The estimated loss is between $ 50 and 100 bil-lion, roughly about 1 per cent of the US GDP. It would not have happened if the originatorsof the loans had not loosened their standards. In a market that is getting globallyintegrated, any crisis that has its roots in financial market behavior can in no way becountered by any single country acting in isolation.

It is time we realise that standard conservative banking principles should not be given thego-by in the name of the new fangled, exotic kind of banking.

Aggressive Banking and Passive RegulationsBy: Soumya Ranjan

Did you Know?

The U.S. Bureau Labor Statistics repothat the average persworking 45 hours pweek earns 44% mothan someone wworks 40 hours

US-Sub Prime Market and Interest Rate SwapsBy: Prof. Ramachandran T.S.

Reams and reams of pages have been written about the now infamous US-Subprime issue in

the news media in the recent past. The issue is still blowing hot and cold and it is believed that

the global markets are yet to see the full impact of this problem. Adjustable Rate Mortgage is

a bad word now. What is puzzling to me in this scenario is, why did the loaners not hedge their

interest rate risk through Swaps. After all the interest rates did not move overnight. It moved

over a period of 24 months. Are Interest Rate Swaps not available to this segment of themarket-US retail mortgage market- which is suppose to be the biggest in the financial markets

world?

Broadly, Swaps are derivative instruments to help those who genuinely want to mitigate theinterest rate or currency risks by transferring it to others who are willing to take the risks.Interest rate swaps are derivative instruments to help manage Interest Rate Risks and

interest rate risk arises on account of having contracted a loan, the interest for which ispayable on a floating rate basis. The interest is reset periodically (quarterly or half-yearly) asper loan agreement terms and is benchmarked to an interest rate like LIBOR or US Treasurybill that is again agreed upon in the contract. Generally the reset period is every 6 months anddepending upon the movement in the bench-mark rates, the interest rate for the loan

contracted also moves. In this context, we need to remember that between June 2003 (when

the fed funds rate was 1%) and June 2006, the fed funds rate was raised 17 times in steps ofquarter percentage point to 5.25%. Hence all the loans, which are on a floating rate basis, arebound to move up on account of their benchmark rates moving up including the US mortgageloans in general and sub primes particularly. Yes, everyone is right on hindsight.

But what happened to the hedging mechanism through Interest Rate Swaps? None of thearticles which I read so far on US-Sub Prime Mortgages problem dealt with hedging of interestrate risks by this market.

Did you Know?

The average AMEX cardswiped for $9,500 charges a year, whichfour times as much aVisa or MasterCard. Taverage fee for merchaaccepting AMEX is $2per $100 charged, whilis only $2.00 per $1charged for Visa

MasterCard

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Tag Lines:

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

Buzz Word

Macaroni Defense an approach taken by company that does

not want to be taken over, it issues large number of bonds with

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Casino Finance an extremely risky finance Strategy.

Garbatrage an increase in price and trading volume in a

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Aspirin Theory-A market theory that states stock prices and

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Management Mantras

Discover what your customers want, and the

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Don't ever take anything for granted, no matthow safe and secure it may seem. The day th

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