christ university institute of management chaanakya 6_16.pdf · finance ministry is likely to lower...
TRANSCRIPT
Chaanakya Tracking the economy….
A Wealth Incorporation
Publication
November 16, 2012
Vol. 6
Issue 16
Christ University
Institute of Management
2
Index
News
National 3
International 5
Rates and Graphs 7
Contemporary Articles
Fiscal Cliff: What Does it Mean for India? 9
Remedy for Too-Big-To-Fail Institutions? 10
Alumni Speak: Mr. Anubhav Jain 11
Debate
Should RBI issue Banking Licenses to NBFCs? 12
Stock Watch
PowerGrid Corporation of India Limited 13
Commodity Market
Rice 17
Scams
The UP Rice Scam 18
Did You Know? 19
Crossword 20
3
National News
Srivishnu Garbham [I MBA I]
Manapuram Finance Q2 net drops 20% at `107.70 cr
Manapuram Finance Ltd reported 20 per cent decline in net profit at `107.70 crore for the
second quarter. Its net profit in July-September period of the previous fiscal was at `135.30
crore. Revenues of the company during the reported quarter marginally declined to `607.75
crore, from `615.06 crore over the corresponding period a year ago. The total assets of the
company stood at `12,461.03 crore as of September 30, 2012 against `12,076.84 crore as of March 31, 2012.
Non-banking financial sector seeing consolidation
The Non-banking financial sector was seeing consolidation, with companies placed
comfortably on the capital front, said a Reserve Bank of India (RBI) report on banking in
India, 2011-12.Currently, the sector comprises a heterogeneous group of institutions, which caters to a wide range of financial requirements. Major intermediaries include financial
institutions, non-banking financial companies (NBFCs) and primary dealers.
Micro Finance investors now eye on NBFCs
Given the ongoing churn and regulatory uncertainty in the Indian microfinance industry,
investors looking to hedge risks and diversify portfolios are now betting on the country's non-banking financial companies. Global development finance institutions, which have
together invested close to $500 million (`2,700 crore) in the Indian microfinance sector, are
exploring opportunities in the NBFC space - another sector that promises financial inclusion for India's poor.
Muthoot Finance ties up to offer National Pension Scheme
Kerala-based Muthoot Finance Ltd, a leading gold loan company, said it has tied up with
Pension Fund Regulatory and Development Authority (PFRDA), an autonomous body under
the Ministry of Finance, to act as a service provider for the National pension scheme. Muthoot Finance is the only Non-Banking Financial Company in the state to be approved by
the PFRDA to act as a service provider for the pension plan, a company release said here.
Essar Shipping sinks on forex loss, finance costs in Q2
Essar Shipping reported a consolidated net loss of `35.99 crore for the quarter end, largely
due to increased finance costs and a forex loss of `50.20 crore. The company had reported a
net loss of `85.65 crore during the corresponding quarter of the last fiscal. Total income from
operations was up 30.36 per cent to `782.41 crore during the current quarter vis-a-vis
`600.20 crore in the same period of last year. During the quarter, company‘s total
expenditure increased by over 10 per cent to `678.36 crore, while the finance cost rose by
16.53 per cent to `92.86 crore. Besides, the company also incurred a forex loss of `50.20
crore during the quarter.
4
Diwali demand for Chinese goods up 45% ASSOCHAM
The craze for Chinese products as Diwali gifts has been rising with demand going up by 45
per cent, a quick survey by ASSOCHAM-Social Development Foundation (ASDF) says. The
Associated Chamber of Commerce and Industry of India survey said the Chinese items that were most sought after were fancy lights, lampshades, Ganesha and Laxmi idols, rangolis and
crackers. Over 78 per cent costumers said Chinese lights were almost 50 per cent
cheaper compared with Indian lights and had greater variety, saving nearly 35 per cent of Diwali budgets at a time of rising inflation. Nearly 72 per cent traders said demand for the
earthen diyas has been dipping year after year in favour of designer diyas and Chinese lights.
Muthoot Finance looking to enter white label ATM space
With the Reserve Bank of India (RBI) tightening the rules for gold loan companies, Muthoot
Finance has decided to diversify into the white label ATMs (WLAs) business. The non-banking finance company, which is engaged in the business of financing against the
security of gold ornaments, wants to leverage its network of 3,853 branches spread across 21
States and four Union Territories to set up WLAs.
To accelerate the growth and penetration of ATMs in the country, the RBI, in February 2012,
decided to permit non-banks to set up, own and operate ATMs. The central bank said that the ATMs rolled out by non-banks would be in the nature of WLAs and would provide ATM
services to customers of all banks.
Panels to deal with CST compensation ,GST framework issues
With the States firm on seeking a settlement on the Central Sales Tax (CST) compensation
issue before moving ahead with rollout of the Goods and Service Tax (GST), Finance Minister P. Chidambaram announced that two committees would be constituted to address
the contentious issues and move ahead on implementation of the indirect tax regime.
India slips to 40th slot in World Economic Forum’s financial development index
India has slipped four places in a raking of 62 leading financial systems and capital markets,
because of weak institutional and business environment, the World Economic Forum said in a report. India is ranked at 40th place in the fifth edition of the World Economic Forum's
Financial Development Report 2012, down four spots from last year.
Finance Ministry to lower GDP projection in mid-year economic review
Finance Ministry is likely to lower economic growth projection for the current fiscal to 5.7-6
per cent in its mid-term review of the state of economy to be tabled in Parliament next month. In the budget for 2012-13, the then finance minister Pranab Mukherjee had projected the
economy to grow by 7.6 (+/- 0.25) per cent. The growth projection for 2012-13 was
optimistic and would have to revise in wake of the developments that have taken place during the course of the fiscal, an official said, adding "it could be between 5.7 to 6 per cent".
Reliance Comm. Profit plunges on finance costs
Consolidated net profit at the country's No.3 mobile phone carrier by customers fell to 1.02
billion rupees for its financial second quarter through September from 2.52 billion a year
earlier.
5
International News
Sailabala Nayak [I MBA I]
Global Market struggle to make gains on debt crisis worries
World share MARKETS struggled to make gains on 14th November 2012 as investors fretted about rising tensions in Europe over its debt crisis and the fast-approaching fiscal cliff in the
United States. A wave of strikes across southern Europe to protest against spending cuts and
tax hikes kept the focus firmly on the region's debt crisis as policymakers wrangle over a deal to release desperately needed funds for Greece.
The MSCI world equity index was little changed around 321.90 points as losses across
European markets were offset by a 0.4 percent rise in Asian markets outside Japan as they recovered from seven-week lows hit. The FTSEurofirst 300 index of top European shares was
down around 0.4 percent at 1,094.95 points by 10:30 GMT, giving up 0.4 percent rise, its first
daily gain in four sessions.
BBC must reform, says trust chairman Patten Britain's BBC could be doomed unless it makes radical changes, the head of its governing
trust said, after its director general quit taking the blame for the airing of false child sex abuse
allegations against a former politician.
Chris Patten, chairman of the BBC Trust, said confidence had to be restored if the publicly
funded corporation was to withstand pressure from rivals, especially Rupert Murdoch's media
empire, which would try to take advantage of the turmoil.
China Slams ‘distorted’ view of copyright piracy problem China's top official in charge of fighting copyright piracy slammed what he said was
deliberate distortion of the problem by the Western media caused by the country's poor global
image, saying important facts had been ignored.
Foreign governments, including the United States, have for years urged China to take a
stronger stand against pervasive violations of intellectual property rights on products ranging
from medicines to software to DVD movies sold on the street.
China, India economies set to dwarf G7 before long: OECD
China's economy is likely to overtake the euro zone's this year, India is leapfrogging Japan and by 2030 the Asian pair will be bigger than the United States, euro area and Japan
combined, the OECD said on Friday.
In a crystal-ball exercise to tease out long-term trends in the global economy, the
Organisation for Economic Cooperation and Development said the combined gross domestic
product of China and India was likely to exceed that of all the current Group of Seven rich economies by around 2025.Their output in 2010 was less than half the G7's GDP. The
projections of the Paris-based OECD, a club of industrial democracies, are based on 2005
purchasing power parities (PPP). At market exchange rates, it will take emerging markets a
bit longer to seize the crown - for example, Goldman Sachs reckons the BRICs quartet of Brazil, Russia, India and China will overtake the G7 by 2037.
6
Europe seeks to break log jam over regime to control banks
EU finance ministers sought to break an impasse over a new regime to supervise banks, but
with much of the plan contested, the European Union risks seeing this centerpiece reform
unravel.
So far, countries in the euro zone have attempted to contain the financial crisis with
piecemeal measures. The banking union is a cornerstone of wider economic union and the first concerted attempt to integrate the bloc's response to problem lenders to win back
confidence. Finance ministers from the bloc's 27 countries met in Brussels to attempt to
advance talks on divisive questions such as the scope of the European Central Bank's cross-border supervisory powers, which would be a first step in a banking union.
IMF's Lagarde wants "real fix" for Greece as slowdown spreads Greece needs a lasting solution to its debt burden to avoid a prolonged crisis as Europe's
slowdown and U.S. fiscal problems dampen the economic outlook in Asia, International
Monetary Fund Managing Director Christine Lagarde said .
The IMF expects a "real fix" for Greece that puts its debt on a sustainable path as quickly as
possible, Lagarde said, showing no signs of backing down in a clash with the EU over how Athens can bring its debt down to a sustainable level.
Euro zone finance ministers have suggested Greece, where the euro zone debt crisis began,
should be given until 2022 to lower its debt to gross domestic product (GDP) ratio to 120 percent, but Lagarde has insisted the existing target of 2020 should remain, in an unusually
public airing of disagreement.
FII Position on SGX Nifty Outpaces That on NSE
Foreign institutional investor exposure to Nifty futures traded on the Singapore Exchange
(SGX) hit a record high last month overtaking volumes on the NSE this year, and highlighting the continued export of India's financial markets amid relative ease of doing
business and greater offshore regulatory clarity. The average daily value of FIIs' open interest
(OI), or outstanding positions on Nifty futures traded on the SGX, was `21,700 crore against
`14,600 crore on the NSE in October.
Indian FMPs turn out a big draw for overseas investors
Fixed maturity plans (FMPs) may have lost some of their charm among domestic investors,
but these are a big hit among foreign investors, mainly from Europe, the US and the Gulf.
Foreign investors find Indian FMPs attractive because of the marginally high returns over
similar range of international fixed income products.
7
Rates
Pankaj Sharma [II MBA J]
Repo Rate 8.00%
Reverse Repo 7.00%
Call rate 7.00%-8.10% Inflation 7.45% for October 2012
Forex Reserve $293.559 Billion as on 9th November, 2012
91day T-Bill 8.1857% IIP -0.4% for September 2012
7.45 GS 2017 8.1625%
Graphs
Pankaj Sharma [II MBA J]
52
52.5
53
53.5
54
54.5
55
1-Nov 4-Nov 7-Nov 10-Nov 13-Nov
Rs/$
Rs/$
30000
30400
30800
31200
31600
32000
1-Nov 4-Nov 7-Nov 10-Nov 13-Nov
Gold(per 10 gram)
Gold(per 10 gram)
8
102
105
108
111
114
1-Nov 4-Nov 7-Nov 10-Nov 13-Nov
Oil(per bbl)
Oil(per bbl)
1000000
1100000
1200000
1300000
1400000
1500000
5000
5200
5400
5600
5800
6000
1-Nov 4-Nov 7-Nov 10-Nov 13-Nov
future rates open interest
5000
5200
5400
5600
5800
6000
17,900.00
18,300.00
18,700.00
19,100.00
19,500.00
19,900.00
01-Nov 04-Nov 07-Nov 10-Nov 13-Nov
sensex nifty
9
Fiscal Cliff: What Does it Mean for India?
Eldho Poulose [I MBA K]
Ben Bernanke, Chairman of US Federal Reserve, showcased the metaphor ‗Fiscal Cliff‘ which is driving the U.S. economy in to turbulence followed by the Presidential election.
Fiscal cliff implies a series of tax hikes along with axing of government spending which will
affects the U.S economy‘s growth. It is estimated that these tax increase and spending cuts
have to be implemented by the starting of 2013, if the government is not adept of making changes into several existing rules and legislation.
Economic Policy Institute, Washington, estimates an impact of $732 billion with several tax and spending measures which will have an impact on the living standard of the people. It
includes expiration of the Bush tax cuts of $202 billion. Across-the-board spending cuts of
$128 billion, expiration of payroll tax cut of $115 billion, expiration of extended unemployment benefits of $39 billion, expansion of the Alternative Minimum Tax of $114
billion, expiration of miscellaneous tax provisions of $120 billion and mandated cuts in
Medicare reimbursement of $14 billion.
This is the scenario in US, which can portray its impact on the global economy.IMF
Managing Director Christine Lagarde mentioned that "If expiring tax provisions and
spending cuts were indeed to come into play, growth in the United States would fall to zero or below—and the rest of the world will not be immune". On these grounds IMF urged the
US Officials to avoid the ‗Fiscal Cliff‘ in order to avoid uncertainties at global level.
Lots of discussions are on regarding what will be the impact of ‗Fiscal Cliff‘ on Indian economy. Obviously, it is going to have an impact on the markets, corporate and economy of
India. The glimpse of ‗Fiscal Cliff‘ was already reflected in the Indian markets when both
Sensex and Nifty were pulled down. The weakening of INR can accelerate the exporters, but paradoxically if the ‗Fiscal cliff‘ turns out to a recession in U.S, the exporters are going to
have bitter experience.
In the view of Indranil Sen Gupta of Bank of America Merrill Lynch, the handling of ‗Fiscal
Cliff‘ by the U.S Government will get reflected in the growth rate of Indian economy in FY
2014. As per his projections India‘s growth rate will be around 6.9% if Obama succeed in
fixing it by the mid of 2013. Also Finance Minister P. Chidambaram during IMF meet in Tokyo mentioned that ―the issues of fiscal cliff and the lifting of the debt ceiling in the U.S.
also need to be resolved‖ which shows India‘s concern on the issue. It is very important for
India for the phenomena of ‗Fiscal Cliff‘ to get solved as early as possible because the exports and foreign investment has got positive correlation with the India‘s economic growth.
Most of the experts and analyst are hopeful that the issue is likely be resolved and is not going to have an impact on global economy in long run.
Sources:
http://articles.economictimes.indiatimes.com/2012-11-16/news/35155102_1_fiscal-cliff-indian-
economy-indian-market
http://www.thehindu.com/opinion/op-ed/the-american-fiscal-cliff-and-india/article4074878.ece
http://www.marketoracle.co.uk/Article37578.html
10
Remedy for Too-Big-To-Fail Institutions?
Dhruv Chopra [II MBA I]
The Vickers Commission in the United Kingdom has advocated ring fencing of core banking activities and on the other hand The Volcker Rule in the United States prohibits banks from
engaging in certain kind of investment activities. These rules and regulations have come to
fore after the loop holes in the banking sector were magnified during the sub-prime crises and
the consensus on the implementation of these rules is still debatable. In the Vickers Commission, core activities of the bank like taking deposits from and making loans to
individuals and small and medium sized organization would be ―ring-fenced‖. Some
activities like trading, purchase of loans and securities, transactions outside the European Economic Area and with non ring-fenced banks would be prohibited. It is also stated that the
ring-fenced entity would require more capital than advocated by the Basel 3 committee.
The Volker Rule attempts to limit banks‘ exposure in certain investment activities like in
hedge funds and private equity. Proprietary trading, which is banks trading on their own
account is completely banned. Demise of Lehman Brothers and Bear Stearns is because of
these trading acts. The Glass- Steagall Act that was repealed in 1999 had the rationale of keeping the investment banking separate from the commercial banking activity and now the
new founded acts and rules are trying to advocate the same thought which was envisaged by
Glass and Steagall long ago.
Sandy Weill, the former chairman of the Citigroup advocates the return of Glass-Steagall Act
altogether and there are many academicians who are carrying Sandy‘s point of view forward
too. But the question here arises that by demarcating the commercial and investment activity of the bank can the big institutions survive? In today‘s time where the customers don‘t have
much time to spare on different investment instruments to choose from and want everything
on a single platter in a quick and organized manner, a simple commercial bank became a universal bank by providing one shop investment solutions coupled with core banking to
retain their customers.
But has this opportunity been over utilized by the bankers and has put on stake the security of
investors‘ money? But what can be the solution to this dilemma? Limiting the scope of the
banks and raising the capital requirement won‘t answer these questions appropriately.
Multiple approaches are required to unearth the solution to these issues. Mr. Raghuram Rajan, CEA to GOI, advocates that setting limits on all trading assets or income can help the
big institutions to be in the limits and so they can also manage the risk properly. Mr. TT Ram
Mohan of IIM-A states that the problem is not the scope of activities carried out by the banks but the sheer bigness of these institutions that pose a challenge. If the size of bank‘s asset to
GDP is controlled and looked carefully upon then the risk can be mitigated in a better way.
Though many solutions by the eminent leaders of the world are advocated and discussed
upon but the lag in adoption and implementation of certain rules and regulations can again
pose a challenge for the financial sector because of the paucity of time and the anemic growth
which the world is witnessing. Acting fast and shielding the global economy from another financial headwind is the only solution.
Source:
Investopedia: Glass-Steagall Act
―How do we resolve the Too big to fail problem?‖ by Mr. TT Ram Mohan from EPW, Septem-
ber issue.
11
Alumni Speak: Mr. Anubhav Jain
Nikunj Garg [II MBA M]
Company name, Designation held
Management Trainee in Risk and Analysis, Derivatives GR&A, Crisil
What is the profile you are handling in the company?
We are supposed to analyse and generate risks/scenarios for the traders’ books of an investment bank.
What influenced your decision to choose this industry and join the particular company
How and what all did you prepare to get into this Company?
I got into this company through campus recruitments. So for the process i prepared for financial statement analysis, valuations, research methodologies and few more things.
How is your experience in the company as well as industry so far?
The experience has been very nice so far. The work culture in Crisil is amazing. It is friendly
and calm so you don’t feel any stress during work. Plus everyone around you is from
esteemed colleges of India and outside, mostly holding Chartered degrees and certifications. There is always a lot to learn from them.
How is professional world different from your life in college during your MBA?
There are new demands that work life expects from you. The attitude of “chalta hai” won’t
work in real life situation. You are accounted for every action thus you have to be a
professional during your work and non work hours.
What are the opportunities for us (juniors) in your company?
I see a lot of new opportunities posted on Crisil job portal. I think there are ample of
opportunities for everyone who have the right skill-sets and wants to be a part of the
company in the future.
Will you be willing to come and share more about the industry and the company and
your experience with us in an Alumni Interface?
Yes given an opportunity and provided that I m in the city, I would definitely come and share
my experiences with everyone.
What certifications you will recommend to us to get an edge over others?
If you want to pursue any such courses and certifications I would suggest for CFA or FRM.
Any message for Christites?
Yes, Christ is a very good Brand that we have got attached with. Make use of it. The faculty we are provided in Christ is very good. Learn as much as you can from them because I think
this is the best time to do so in your career.
12
Should RBI Issue Banking Licenses to NBFCs?
Sabahat Bashir [I MBA I] India witnessed a rapid economic development with the introduction of Liberalisation policy in
1990s.Under this policy, banking licenses were issued to many small private banks like HDFC, ICICI,
Axis bank etc. Despite of all the improvements and developments a majority of our population is still
deprived of various banking benefits or rather unaware of banking technology. After almost 20 years,
the banking industry is once again proposed to issue banking licenses; a decision that follows the global financial imbroglio witnessed since 2008. RBI is also decided to provide banking licenses to
viable NBFCs.
The existing expertise and the niche operations of NBFCs make them a desirable choice for
prospective banks in the country. Since NBFCs are already regulated under RBI, their conversion into
banks will not be difficult. Microfinance, an important economy driver, could be better addressed if
NBFCs specializing in the specified sectors can better leverage their competence by converting to
banks and having access to low-cost funds. Moreover NBFCs offer various advantages they offer like:
NBFCs play a crucial role in innovation challenges pertaining to Infrastructure finance,
Agricultural finance, SMEs etc.
They offer easy access to credit for semi-rural and rural parts of India where the reach of other
banks is insufficient.
They also render the benefits of local presence and strong customer relationships.
NBFCs have a robust business model and provide cheap fund facility which is sometimes
beyond the credit appraisals of other banks.
A number of companies like Bajaj, Aditya Birla Financial Services, Reliance Capital, Indiabulls,
Mahindra and Mahindra etc have already expressed interest in obtaining banking licenses for their
NBFC wings. Now it is upto the discretion of RBI to key out the benefits by issuing banking licenses
to the NBFCs and witnessing a new direction in economic growth of the country.
But there are concerns about selecting NBFCs as an option to convert them into banks. First of all, the
performance of the financial ratios like RoA (Return on Assets) and RoE ( Return on Equity) as
the returns of banks are much lower than those of NBFCs. For instance, M&M Finance earns 4.5
percent on its assets and about 24 percent on equity. The best private bank, in contrast, earns just 1.6
percent on its assets and less than 20 percent on equity. Additionally the requirements to comply with
the regulations of the banking system will be a herculean task in the short term. Reasons like financial inclusion low returns on the investment will reap benefits to the players only after a few years. NBFCs
have significantly focussed on profits and margins much higher than that of banks. Mark Sanbom said
that ‗Your success in life isn't based on your ability to simply change. It is based on your ability to
change faster than your competition, customers and business‘. Thus, NBFCs that will be selected in
future have to adopt the mechanisms of the industry at a healthy pace.
At present the banking system is still struggling with the global crisis, especially its heavy influence on
the determination of monetary rates by RBI. Such increase is also squeezing the interest rate spread
that banks‘ margins are dependent on. The increasing competition could undermine systemic liability
and fiscal populism, high fiscal deficit and short term oriented financial markets pose additional
challenges for banks.
Sources:
http://www.iba.org.in/events/ficci-sep10.pdf
http://www.rbi.org.in/scripts/PublicationsView.aspx?id=9795
http://www.bankbazaar.com/guide/banks-in-india
http://www.firstpost.com/business/lt-fin-shriram-and-mm-lead-banking-licence-race-73781.html
http://www.indianexpress.com/news/rbi-against-bank-licences-for-corporates/979474
13
PowerGrid Corporation of India Limited
Deebadwita De [II MBA J] and Shashank Mishra [II MBA N]
PowerGrid Corporation of India Limited (powergrid), the Central Transmission
Utility (CTU), is engaged in Bulk Power transmission. Its responsibility includes
planning, coordination, supervision and control over inter-State transmission system
and operation of National & Regional Power Grids.
Company owns and operates about 96,216ckt kms of transmission lines at
800/765kV, 400kV, 220kV & 132kV EHVAC & +500kV HVDC levels and 158
sub-stations with transformation capacity of about 1,51,303 MVA as on 30th
September 2012. This gigantic transmission network, spread over length and breadth
of the country, is consistently maintained at an availability of over 99%.
POWERGRID was incorporated in 1989 and based on its impeccable performance,
Govt. Of India categorised it as the Miniratna Category–I PSU w.e.f. Oct‘98.
Further, recognizing the role of POWERGRID in the overall development of Indian
power sector ―Navratna status‖ was conferred to POWERGRID.
Power Grid (PWG) is a monopoly play in the regulated transmission business in India
and its one of the better managed PSUs. The company is in a regulated business
which assures minimum 15.5% ROE; guarantees reasonable profitability along with
steady returns. Power Grid has also consistently maintained average system
availability above 99.94% at par with the International utilities, thus leading to higher
income under the incentive based tariff structure.
Key Highlights:
Power Grid Corporation‘s net profit has increase by 58.9 percent for the
September quarter at `1125.9 crore v/s `708.7 crore in the same quarter last
year.
Total income of PGCIL has also increased significantly by 31.9 per cent to
`3242.8 crore during July-Sept quarter 2012, as against the total income of
`2458.6 crore earned during the year-ago period.
The revenue of PGCIL have grown by `31bn which is a 40% yoy growth.
14
Key Developments in the stock:
Power Grid plans a capital expenditure of `100,000 crore in the XII th five
year plan period that started this April.
When the power generating companies are facing severe burden of
under-recoveries , low tariffs, the state-owned transmission utility PCGIL has
come out with excellent results.
The company is in a regulated business which assures minimum 15.5% ROE.
95% revenue of PGCIL comes from transmission but they are trying to
diversify in other sector also such as Consultancy for T&D projects.
They have order book of worth `100bn EPC contracts.
Two UMPPs (Sasan and Mundra) to be commissioned in FY 2012-13.
Price movement of PGCIL suggests that there is a possible upward move in the
stock.
Key Financial Ratios:
15
16
Source: www.indiainfoline.com
Recommendation for the stock:
Power Grid has a monopoly play in the regulated transmission business in India and its one of
the better managed PSUs. At current levels, the valuations look attractive. Power Grid has a
strong hold in the transmission business which will help in growing further. The
recommendation for the stock is ―BUY‖ for a period of 10 months with a target of `150.
Call: Buy
CMP: `115
Target Price : `150
Time Period: 10 months
17
Rice
Srinivas Prasad K [II MBA J]
Rice is a staple for a large part of the world's human population, especially in East and Southeast Asia,
making it the most consumed cereal grain. Rice is the world's third largest crop, behind maize (corn)
and wheat. Rice cultivation is well suited to countries and regions with low labour costs and high rainfall, as it is very labour-intensive to cultivate and requires plenty of water for irrigation. However,
it can be grown practically anywhere, even on steep hillsides. Although its species are native to South
Asia and certain parts of Africa, centuries of trade and exportation have made it commonplace in many
cultures.
Rice cultivation is considered to have begun simultaneously in many countries over 6500 years ago.
Two species of rice were domesticated, Asian rice (Oryza sativa) and African rice. Throughout history
rice has been one of man's most important foods. Archeological evidence suggests that rice has been
feeding mankind for more than 5,000 years. Today, this unique grain helps sustain 2/3rd of the world's
popu l a t i on . …………………………………………………………………………………………. . .
World production of rice has risen steadily from about 200 million tons of paddy rice in 1960 to 700
million tons in 2006. Milled rice is about 68% of paddy rice by weight. In the year 2004, the top three
producers were China (31% of world production), India (20%), and Indonesia (9%). India accounts for
more than 75 percent of global trade. Japonica rice accounts for around 12 percent of global rice trade,
followed by Basmati rice that accounts for around 10 percent and Glutinous rice for most of the
remainder.
The major rice growing areas in India are West Bengal, Uttar Pradesh, Madhya Pradesh, Orissa, Bihar,
Andhra Pradesh, Assam, Tamil Nadu, Punjab, Maharashtra, Karnataka, Haryana, Gujarat, Kerala,
Jammu- Kashmir, Tripura, Meghalaya, Manipur, Rajasthan, Nagaland, Arunachal Pradesh, Himachal
Pradesh, Mizoram, Goa, Pondicherry, Sikkim, Andaman & Nicobar Island and Dadra & Nagar Haveli.
Indian rice cultivars include long-grained and aromatic Basmati (grown in the North), long and
medium-grained Patna rice and short-grained Masoori. In South India the most prized cultivar is
'ponni' which is primarily grown in the delta regions of Kaveri River. Kaveri is also referred to as
ponni in the South and the name reflects the geographic region where it is grown. Rice in East India
and South India, is usually prepared by boiling the rice in large pans immediately after harvesting and
before removing the husk; this is referred to in English as parboiled rice. It is then dried, and the husk
removed later. It often displays small red speckles, and has a smoky flavour from the fires.
Current performance in the commodity market
Good domestic demand, coupled with fresh trade enquires, kept aromatic and non-basmati rice firm for
second week of November. After witnessing a good rally last week. Increased demand in the retail
market, led the prices to rule around Rs 5,700 a quintal for Pusa-1121 (steam), while Pusa-1121 (sela)
sold at Rs 4,800. Pure basmati (raw) quoted at `5,950-6,000 while pure basmati (sela) sold at `5,000-
5,100. Duplicate basmati (steam) traded at `4,750-4,800. Sharbati (steam) quoted at `3,700 while
Sharbati (sela) quoted at `3,300. About 60,000 bags of PR variety arrived and sold for `1,100-1,280 a
quintal, Sharbati stocks of around 15,000 bags quoted at `1,600-1,770 while 6,000 bags of DB variety
sold at `2,230-2,480. About 35,000 bags of Pusa-1121 quoted at `2,100-2,500, pure basmati paddy
4,000 bags sold at `2,700-2,900.
Source:
http://www.thehindubusinessline.com/markets/commodities/new-trade-enquiries-keep-rice-firm/
article4091196.ece
http://www.commodityonline.com/commodities/cereal/rice.php
18
The UP Rice Scam
Ankita Pagaria [II MBA J]
A `2,500 crore (about $453 million) rice scam going back to 2007, involving top
ministers and officials in India and abroad, has resurfaced in India after four years,
according to local sources, but is going largely unnoticed by both politicians and the
media.
According to India Against Corruption, rice prices shot up from about $350 per ton to
over $1,000 per ton following the ban of non-basmati rice exports in 2007. A huge
stock of food grain meant for distribution under the Antyodaya, Annapurna and
Mid-Day Meal schemes was smuggled outside the state and even the country to
Bangladesh, Nepal and other nations. It is believed that top officials of the state as
well as the central government colluded to divert the food grain between 2001 and
2007.
The Commerce Minister allowed the exports on diplomacy grounds instead of
allotting the task to government export and shipping agencies, he allowed a few
private companies to circumvent the ban and sell rice directly. It is estimated that the
private companies made profits of around `2,500 crore (about $450 million) by
selling rice at the elevated prices.
The court observed that there was prima facie no doubt that the food grains meant for
poor had been smuggled into the open market and also into the neighboring
countries and none of that could have happened without the involvement of higher
authorities. Also that transportation by goods trains to far off corners of the country
indicated that smuggling happened in collusion with authorities.
The scam was reported in Uttar Pradesh between 2003-2007, the period when
Samajwadi Party leader Mulayam Singh Yadev was the chief minister of the UP. The
scam involves over 200 state and central government officials. It was a scam that
stretched to almost 7 years and 300 FIRs. Later in 2010, the government admitted to
flaws in the process and blacklisted the companies involved in the trade. However,
nothing significant was done to the ministers involved.
Source:
http://www.commodityonline.com/news/indias-latest-rice-scam-involves-rs-200000-crore-
34255-3-34256.html
http://oryza.com/Rice-News/15361.html
19
Did You Know?
Vinay Goel [II MBA L]
IS PLATINUM A BETTER INVESTMENT OPTION THAN GOLD?
Platinum is an equally precious metal as compared to gold. Nowadays its price is very
much close to the gold. On November 7 Platinum traded at `3256 per gram and gold
at `3134 per gram. The prices on October 24 were `3062 and `3178
respectively. Even though the price of platinum is lower than the gold it is the most
favorable time to buy the same as per Bombay Bullion association. Earlier the prices
of platinum used to hover around 150 times that of gold but the scenario has been
changed over the last 5 years. Many experts believe that the situation will
continue for the next coming years. Moreover the constant hike in gold prices is the
major factor which is leading to switch other investment options.
With the emerging crisis in the Euro zone and downgrading of US long term debt was
the contributing factor towards the increasing narrowing of gaps between the precious
metals. Such situation arise even when Platinum is 30 times rarer than gold.
Platinum‘s thinly traded market makes it more susceptible erratic moves caused due
to recessionary conditions.
Major reasons for low investments in Platinum in India are given below:
Past traditions which considers gold as the best investments in times of
crisis.
Platinum is silver in color similar to silver.
It is considered as a premium metal because of its low availability.
The fact that platinum is on par with gold now itself is proof that people are
buying gold in these times of crisis, and not platinum.
Sources:
http://trak.in/tags/business/2011/09/07/precious-metals-gold-silver-platinum/
http://articles.economictimes.indiatimes.com/2011-08-28/news/29935853_1_world-gold-
council-love-gold-demand-for-gold-bars
20
Crossword
Reddy Sreedhar T [II MBA L]
Across
4. This council is the
final authority to
approve 5 year plans of
India - 'National .........
council'
5. Jeet Thayil, an Indian
author was recently
nominated for 'Man
Booker Prize 2012' for
his novel...
7. The Government
recently Formed a
Committee to examine
Taxation policies for IT
Sector. This Committee
is headed by 'N. ....'
8. SEBI has recently
launched this portal to
enable investors to
lodge and follow up complaints they may have. It is named as...
9. This Indian company recently rated as second largest outsourcing firm in the
world by IOAP (International Association of outstanding professionals)
Down
1. RBI was set up in 1935 after recommendations from this high powered
commission..
2. First financial supermarket in India has been recently started in this city.
3. India's finance budget is presented every year on last working day of this month.
6. Khan commission submitted its report about this financial aspect and the
recommendations of the commission were incorporated in the mid-term policy
review of 2005-06 - 'Financial .......'
9. India recently lent $ 149 mn to this under-debt Euro zone country
21
Kritika Banerjee
Editor
Sanjeet Kumar
News
Reddy Sreedhar T
Crosswords & Quiz
Pankaj Sharma
Graph & Rates
Arnab Basak
Investors check
Bhavesh Dhanesha &
Rohit Munka
Debate
Vinay Goel
Did You Know
Nikunj Garg
Alumni Speak
Dhruv Chopra
Contemporary Articles
Ankita Pagaria
Scams
Srinivas Prasad K
Commodity Market
Debadwita De &
Shashank Mishra
Stock Watch
Prachi Sharda
Buzz Words
Vedang Dave &
Sandeep Kumar
Boyapati
Review Committee
Kritika Banerjee
Creative Head &
Design
Team Members
22
About Us
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