12_16th february 2008 (160208)

8/6/2019 12_16th February 2008 (160208)

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Look at a day when you are supremely satisfied at the end. It's nwhen you lounge around doing nothing; it's when you've had everyand you've done it. - Lord Acton

National Headlines • Tata chemicals to buy US based firm for $1 Billion to become the 2 nd largest

soda ash maker.• Power cut for R-power IPO as it lost 17% on its debut.• HDFC cuts PLR rate by 25 basis points.• “Sab Zameen par” as From 7 th Feb. the steep fall of Sensex started as it fell from

18663.16 to 16630.91 on 12 th Feb. Loosing almost 2032.25 points.• India after much hype in increase in GDP rate see a low GDP rate for the year

2007-08 at 8.7%.• Wockhardt hospital and Emaar MGF face the heat of investors poor response

towards IPO as both had to call off their IPO.• Govt. hikes petrol, diesel prices; taxes untouched• Swiss bankers urge RBI to relax norms• The finance ministry is considering a proposal to abolish the stamp duty on

electronic issuances of bonds and debts by corporate houses.

International Headlines • Boeing soars a record profit of $4.07 Billion which is 84% more than the

previous year.

• Microsoft’s ‘Bear hug’ deal to buy yahoo Inc. for $44.6 billion, but yahoo rejectsthe hug from Microsoft.

• US budget deficit set to hit $410 billion.• US based Morgan Stanley puts its Indian BPO on the block due to loss of $3.61

billion posted in the fourth quarter.

• Motorola and Nortel are in talks for joint venture that will pull both thecompanies out from the problem of falling market share.

• News Corp joins Yahoo battle

• Japan GDP grows more than expected

16 th FEB 2008Volume 1, Issue 12

…………..Tracking the Economy

“If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank'sproblem.”—- J. Paul Getty

Inflation–4.07 % , IIP– 7.6%

Issue AttractionsNational Headlines

1

International Headline

1

Corporate Interview

2

Student Editorial 3

Tag lines/Buzz Word

4

15 days Movements

CHAANAKYA CHAANAKYA CHAANAKYA CHAANAKYAWealth Incorporation - A CCIM Finance Club Initiative Presents

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Corporate Interview ( Name not disclosed on personal request)

“In the business world, everyone is paid in two coins: cash and experience. Take the experiencefirst; the cash will come later.—” Harold S. Geneen

1. Do you think the Indian banks are well equipped to implement Basel-II norms?

Yes, most of the Indian Banks are to a large extent are well equipped to handle the Basel Normimplementation. The RBI has properly prepared a road map for the smooth transition of the process. Majority of therisk factors have been taken care expect some of the Intangible risks associated with the banking operations.2. To what extent will our banking sector be affected due to any recession in the US? And how?

Indian banking sector will not have a direct impact of the sub-prime crisis, as none of the Indian banks are

directly exposed to the US sub-prime crisis. But there is always an indirect impact on the economy and the Banksdue to the crisis and the recession that is following it. As we can see the credit take off from the Indian banks hasfallen from the level of 30% in the previous year to 22% in the current year, signaling a slow down of the credit takeoff or stabilizing of the of credit take off. So, the direct effect of the impact of the US recession will be the slow down of growth and business of the Indian banks.3. The Indian banks are getting more & more aggressive each day in the lending business. Without any

organized credit rating system, unlike developed markets, aren’t we pushing ourselves into a similarkind of situation that US is into now, due to its sub-prime lending?

Indian bank have developed their own sophisticated credit appraisal technique, and the private bank havebuilt a strong credit appraisal process which put them in a greater state of safety when it comes to the lending. Onthe other side, Indian consumer or the borrowers are also Risk Aversion natured as they borrow only when the see aneed for which the money is borrowed, which is not the same case as it comes to the US consumers. Some bankslike HDFC and AXIS have a strong credit lending process which put all the risks at bay.4. How important is it for the Indian banking sector to consolidate right now?

With elections around the consolidation in the public sector is a tough as it lead become a big political issueand with strong unions backing the Banking employees its long way to see consolidation in Banking sector in case othe Public sector banks. There is opportunity for consolidation in the private sector. The consolidation in the PSUbanks will take another 4 to 5 years minimum to form a structured process.5. Will the merger of SBI & its subsidiaries enable them to face the global biggies, once they enter Indian

in 2009? With SBI and SBH consolidation is under process the results can be know minimum after one year and it

will all come down to how well the SBI will accommodate the SBH employees and other operational issues. Onlythan the real picture will come out to know where they are standing.6. With the entry of foreign banks and the Indian banks being looked up as Lilliput’s when put next to the

foreign banks like Citigroup what will be the future of the Indian Banks?

The entry, of foreign banks with full freedom won’t be possible. The will always be restrictions and controfrom the RBI and the Government. The protectionist approach for the Indian Banks will continue. And the foreignbanks are only earning revenues only out of their off balance sheet activities, they are still finding difficult to earnrevenues of their main business activities of banking. There is great scope for the Indian domestic to grow and big major players in the local market.7. Few words for the students

If you want to enter into any profession you must be having that likeness and interest for that field and job. The job will always be hectic, needing to know lots of people with huge amount of money floating around. Oneshould not be carried away by all these and should have the attitude and passion for the job, and learn to be humbleand self driven.

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Did you Know?

♦ More coins as w a l l o w e d American childrein six months thanare produced by thetreasury mint oLuxembourg in siyears

♦ The total cost omanufacturing dollar bill, includinlabor, supplies andenergy is no$1.37

♦ Due to the largattendance, numberof races and all theg a s - g u z z l i nvehicles involvedU S e c onomise s t i m a t e t h acanceling NASCAwould drop gasolinprices by $0.40 pergallon, but coulpossibly lead to depression.

PANTALOON RETAILBSE—523574 , NSE—

PANTALOONR CMP—648.57, TARGET—

SAIL,BSE—500113, NSE—SACMP—205, TARGET—

DISHMAN PHARMABSE—532526, NSE—DISH

CMP—314.19, TARGET—

RELIGARE,BSE—532915, NSE—RELIG

CMP—532, TARGET—6

( CMP—Current Market P

Stock Ratnas

The majority of men meet with failure because of their lack of persistence in creating new plansto take the place of those which fail.— Napoleon Hill

The Federal Reserve’s Fight Against Recession

Throughout history, free market societies have gone through boom-and-bust cycles. While everyone enjoys good economic times, the downturns are often painful. The FederalReserve was created to help reduce the injuries inflicted during the slumps and was givensome powerful tools to affect the supply of money.

The founders viewed the Fed as a means of preventing the supplies of money and creditfrom drying up during economic contractions. One of the principal ways in which the Fed

was to provide such insurance against financial panics was to act as the "lender of lastresort". That is, when risky business prospects made commercial banks hesitant to extendnew loans, the Fed would step in by lending money to the banks, thus inducing banks tolend more money to their customers. The function of the central bank has grown andtoday, the Fed primarily manages the growth of bank reserves and money supply in orderto allow a stable expansion of the economy.

The Tools

A change in reserve ratio is seldom used but potentially very powerful. The reserveratio is the percentage of reserves a bank is required to hold against deposits. A decrease inthe ratio will allow the bank to lend more, thereby increasing the supply of money.

The discount rate is the interest rate that the central bank charges commercial banksthat need to borrow additional reserves. It is an administered interest rate set by the Fed,not a market rate; therefore, much of its importance stems from the signal the Fed issending to the financial markets. As a result, short-term market interest rates tend to follow its movement. If the Fed wants to give banks more reserves, it can reduce the interest ratethat it charges, thereby tempting banks to borrow more. Alternatively, it can soak upreserves by raising its rate and persuading the banks to reduce their borrowings.

Open-market operations consist of the buying and selling of government securities by the Fed. If the Fed buys back issued securities (such as Treasury bills) from large banks andsecurities dealers, it increases the money supply in the hands of the public. In the case of anopen-market purchase of securities by the Fed, it is more realistic for the seller of thesecurities to receive a check drawn on the Fed itself. When the seller deposits it in his or

her bank, the bank is automatically granted an increased reserve balance with the Fed. Thus, the new reserves can be used to support additional loans. Through this process, themoney supply increases.

Today, the Fed uses its tools to control the supply of money to help stabilize theeconomy. When the economy is slumping, the Fed increases the supply of money to spurgrowth. Conversely, when inflation is threatening, the Fed reduces the risk by shrinking thesupply. While the Fed's mission of "lender of last resort" is still important, the Fed's role inmanaging the economy has expanded since its origin.

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Interview with Bob Kahl (Continued from last issue) Q: How do you identify stocks to research? RGK: There are a number of sources. Value Line is my primary source. I look throughthe weekly statistical screens and many of the reports on individual companies. Isometimes do my own statistical screens on databases that are available on theinternet. I look at some companies that are favored by investment managers that Irespect. Sometimes an industry contact or publication will mention a company and I willrequest information on it. I try to keep an open mind about where to find a good stock.Q: How do you research a stock?

RGK: I request information from the company. I review the annual report, 10-K,quarterly statements, and press releases. I call the investor relations department to asksome follow-up questions. If it’s a smaller company, I usually talk with the chief financial officer. I also look at some of their competitors because I want to find the bestvalue within the industry. If I buy a company, I monitor it by reviewing press releases,changes in earnings estimates, listening to conference calls and calling the company.

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

Buzz Word • Make a market: A dealer is said to make a market when he quotes

bid and offered prices at which he stands ready to buy and sell. •

Antidilutive effect: Result of a transaction that increases earnings percommon share (e.g. by decreasing the number of shares outstanding).

• Jensen index : An index that uses the capital asset pricing model todetermine whether a money manager outperformed a market index.The " alpha " of an investment or investment manager.

• Take a swing: Used in the context of general equities. Execute a tradeat a price which the trader feels is more rich/risky than he wouldnormally, in order to gain market share within the institutional arena.

• Naked strategies : When you write an option without owning theunderlying asset. You are naked because often you agreed to sellsomething that you do not own.

Book Quotes: ♦ If everything was easy, what enjoyment would

you get by completing anything? Sure there’smoney and reputation, but in the long run,knowing what your capable of from whatyou’ve been through is the only way to reallyfeel satisfaction.(book: think and grow rich)

♦ The key is to either get your job done withoutusing those nontalents, or find someone withthose talents to help you in that situation. Youprobably have awesome talents you’re bettersuited using than fumbling around on the onesyou don’t care about.( book: First, Break All theRules)

Tag Lines:

It’s everywhere you want to be - VISA

The next stage - Wells Fargo

Where technology means business - ZD et

The toughest job you’ll ever love - U.S Peace Corp

Ingredients for life - Safeway

A. United Overseas Bank B. IAmBank Group

C. Public Bank D. Hong Leong Bank

A.

C. D.

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Contributions made by :

(1st Year Students) Article Nikhil PurohitBook Quotes NikhilGraph Gnana DeviNews Anup Rajan & Ashish PoddarLogo Fouzia TarannumCoordination Manish

(2nd Year Students)Editing Sindhu B. Navali,

Mathew A Thomas Stock Ratnas Ritesh VermaInterview Ravi Shekhar

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