A Wealth Incorporation Publication CHRIST UNIVERSITY ...

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A Wealth Incorporation Publication CHRIST UNIVERSITY ...

July 16, 2013Vol. 7Issue 3ChaanakyaTracking the economy….Christ UniversityInstitute of ManagementA Wealth Incorporation Publication


News National ………………………………………….…..3 International ………………………………….……..57….....……………………………………… Rates and GraphsContemporary Articles Financial Inclusion………………...………………....9 Banks rush for perpetual bonds issue to shore up tier-Icapital..…………...…..……………………………………..10Debate11………………………….………………..Food Security BillStock Watch (Biocon Ltd.)………………………………..1216..……………………………………………..Alumni SpeakCommodity Market (Gold)……...……………….……..18Scam (Railway Bribery)………………………………....19Buzzword…………………………………………………1920…....……………………….………………..Did You Know21…...…………...…....Financial Services Industry AnalysisQuiz……………………………………………………….25Crossword………………………………………………..262


NATIONAL NEWSSrivishnu GarbhamII MBA IRBI receives 26 applications for new bank licensesThe Reserve Bank of India (RBI) received 26 applications for new bank licenses, withTata Sons Ltd, the holding company for India's largest conglomerate, among thoseseeking the right to set up the first new Indian banks since 2004. Other applicantsinclude Reliance Capital (RLCP.NS), controlled by billionaire Anil Ambani, andAditya Birla Nuvo (ABRL.NS), part of the diversified Birla conglomerate. InFebruary, the RBI issued guidelines to allow corporate houses to set up banks, part ofan effort to expand access to financial services in a country where only about half thepopulation has a bank account. License winners are expected to be announced by thefirst quarter of 2014.Finance minister P Chidambaram advises banks to cut interest ratesFinance Minister P. Chidambaram urged state-run banks to lend money at cheaperrates as he looks to stimulate consumer demand, the main driver of a sluggisheconomy that has been pulled down by high inflation and interest rates. The ReserveBank of India (RBI) has cut repo rates, the rate at which it lends money to banks, by75 basis points since January this year, but most banks have not lowered lending rates.RBI allows asset financing companies to raise ECBsThe Reserve Bank of India has permitted asset financing companies to tap the externalcommercial borrowings market. In a notification issued to banks, the RBI has said thatit has decided to allow "NBFCs, categorised as Asset Finance Companies or AFCs toavail of ECB subject to conditions". AFCs will be allowed to raise ECB under theautomatic route for up to five years to finance equipments imports for leasing toinfrastructure projectsGovernment in dilemma over Finance BillWith the chit fund scam proving a thorn in its flesh, the State Government is worriedover the delay in Odisha Protection of Interest of Depositors (in FinancialEstablishment) Bill, 2011 getting President’s approval. The Department of FinancialServices under Ministry of Finance had made certain observations about the content ofthe Bill and called for appropriate changes. The State Government now has learnt,much to its concern, that the modifications necessitate ratification by the StateAssembly failing which Presidential assent cannot be obtained.Tax & Finance Services, Bank of Nova Scotia Buys Into Goenka DiamondsTax and Finance Services India along with Bank of Nova Scotia acquired stake inGoenka Diamond through bulk transaction on exchanges. Tax and Finance ServicesIndia bought 1.99 MN shares of Goenka Diamond at `25.97 on the NSE and bought1.85 Mn shares at `25.91 on the BSE, aggregating to `9.98 Cr. However, the Bank OfNova Scotia Asia Limited bought 2.5 Mn shares at R24.28 on the NSE and 2.5 Mnshares at `24.27 on the BSE, aggregating to R12.13 Cr.3


Finance Minister P Chidambaram to leave for four-day US tour on MondayFinance Minister P Chidambaram will leave for a four-day visit to the United States during which he will meet USTreasury Secretary and industrialists and seek investments into India. During his four day visit between July 9 and12, Mr Chidambaram is expected to meet US business leaders, including Walmart Asia CEO Scott Price, BoeingInternational President Sheperd W Hill, Microsoft's General Counsel and Executive Vice President (Legal andCorporate Affairs) Brad Smith, among others. "The Finance Minister is likely to discuss the issue of investment byUS companies in India especially in infra sector, various policy measures taken by the Government to boostinvestment in the country and tax related matters among others,Gruh Finance Q1 Net profit up 26per centAhmedabad-based Gruh Finance Ltd, a subsidiary of HDFC Ltd, has recorded a netprofit rise of 26per cent for the first quarter (Q1) ended on June 30, 2013. Accordingto a press statement issued by the company, profit after tax (net profit) stood at `33.77crore as compared to `26.72 crore for the previous year for the same period. Housingloan portfolio increased by 32per cent, amounting to `5727.21 crore as against`4338.49 crore in the previous year.RBI eases offshore borrowing rules for non-bank asset finance companiesNon-bank asset finance companies can raise offshore debt up to $200 million in afinancial year to finance import of infrastructure equipment, the central bank said.The RBI also allowed them to raise such debt from all recognized lenders with aminimum average maturity of five years.Housing finance market likely to grow by 20per cent in FY 14The housing finance market is likely to grow by about 20per cent in 2013-14,according to a top official of the National Housing Bank (NHB). In the last fiscal, thebanks and housing finance companies together disbursed around `130,000 crore andNHB refinanced the banks and other financial institutions to the tune of `14,300crore.IDFs to play key role in infra financing: Arvind MayaramInfrastructure Debt Funds (IDFs) will play a key role in financing projects that wouldrequire $1 trillion over the next few years. We require about one trillion dollar forinfrastructure sector out of which 50 per cent or about $500 billion has to come fromthe private sector. Therefore, we have to provide multiple instruments to the privatesector to raise funds," Department of Economic Affairs Secretary Arvind Mayaramtold at a function to handover highest rating to Infradebt.Muthoot Finance applies for bank licenseKerala based gold loan player Muthoot Finance has applied to the Reserve Bank ofIndia for a banking license. "We are looking to convert our existing network of 4,400branches into full fledged bank branches subject to RBI approval," KP Padmakumar,executive director, Muthoot Finance said. He added that 70per cent of the branchnetwork was in rural and Tier II locations. RBI regulations mandate new banks toopen at least 25per cent of its branches in unbanked rural centres.4


INTERNATIONAL NEWSSailabala NayakII MBA IS&P cuts Italy's rating to BBB, 2 levels above junkItaly’s credit rating was lowered to BBB, or two levels above junk, by Standard &Poor’s because of expectations for a weakening of economic prospects and thenation’s impaired financial system. The outlook on the rating, reduced from BBB+,remains negative, the New York-based ratings company said in a statement late 9 thJuly’13. S&P analysts said that, even with unprecedented easing by the EuropeanCentral Bank, real interest rates for non-financial companies in Italy exceed the levelbefore the financial crisis.WikiLeaks Leaking Cash After Snowden-Inspired Surge SlowsDonations to the European anti-secrecy website initially surged after it offeredfinancial support for Edward Snowden, the former U.S. National Security Agencycontractor who revealed secrets about American surveillance, the group’s sponsorsays. Contributions since have slid, according to the Hamburg-based Wau HollandFoundation, main collector of funds for WikiLeaks. Donations surged to 1,000 Euros($1,285) a day after Snowden stepped forward as the source of June newspaper reportsabout U.S. telephone and Internet surveillance. Daily contributions have since droppedto about 100 Euros ($128.50), or about three times the rate before Snowden’semergence, a level that is unlikely to put WikiLeaks in the black again after two yearsof deficits, Fix said in an e-mail.NYSE Euronext to be Libor regulatorNYSE Euronext will replace the British Bankers' Association, the lobby group thatstarted the benchmark more than two decades ago, as Libor's administrator, in early2014, according to a statement 10 th July’13. Britain's Financial Conduct Authoritybegan regulating Libor, the benchmark for more than $300 trillion of securities, inApril as part of the overhaul.IMF cuts global growth forecast as US expansion weakensWorld economic growth will struggle to accelerate this year as a US expansionweakens China's economy levels off and Europe's recession deepens, the InternationalMonetary Fund said. Global growth will be 3.1per cent this year, unchanged from the2012 rate, and less than the 3.3 per cent forecast in April, the Washington-based fundsaid on 9 th July’13, trimming its prediction for this year a fifth consecutive time. TheIMF reduced its 2013 projection for the US to 1.7per cent growth from 1.9per cent inApril, while next year's outlook was trimmed to 2.7per cent from three per centinitially reported in April.Tech giants under governments scanner over tax avoidanceWestern governments are set to target a range of tax loopholes used by technologygiants, including Apple and Amazon as part of an international drive to tacklecorporate tax avoidance.Corporate tax avoidance has become a hot political issue following public outrageover revelations in the past year that companies such as Apple and Google had usedstructures US and European politicians said were designed to minimize the amount oftaxes paid. The Organization for Economic Co-operation and Development (OECD) isnow due to present an "action plan" highlighting broad areas where changes will bediscussed to a G20 meeting later in July.5


IMF and Pakistan agree to a $5.3-bn bailoutThe International Monetary Fund and Pakistan reached a provisional agreement on 4t July’13 on a $5.3-billionbailout package that aims to bolster Pakistan's flagging economy and its perilously low foreign exchange reserves.The rescue package is expected to soothe Western fears about the state of Pakistan's economy, which has slumpedin recent years amid unrelenting Taliban violence and deeply rooted corruption that have shaken investorconfidence. The IMF package also would provide a tangible lift for the newly elected Prime Minister, NawazSharif, who has already become bogged down by a seemingly intractable energy crisis.Rates to stay at record low for extended period: ECBThe European Central Bank will keep interest rates at record lows for an extended period and could yet cut themfurther, the bank's chief, Mario Draghi, said on 4th July'13.Less than two hours after the Bank of England gave a steer about future interest rate moves at Mark Carney's debutpolicy meeting as governor, the ECB president adopted the same tactic. The ECB left its main refinancing rate at0.5per cent and the deposit rate at zero, as was expected by economists in a Reuterspoll.US jobs data upbeat, trade deficit widensPrivate employers in the US stepped up hiring in June and new applications forunemployment benefits fell for a second straight week last week, pointing toimproving labour market conditions.Private payrolls increased by 1,88,000 last month, the ADP National EmploymentReport showed on 4 th July’13 compared to 134,000 jobs added in May. Economistshad expected a gain of 160,000 jobs.China services sector expands, but fails to soothe growth worriesChina's services sector expanded modestly in June with the vast construction industryacting as a drag on output, in a further sign that the world's second-largest economy islosing its momentum. A lacklustre services sector will not help buffer a deeper slowdownin manufacturing at a time when China's top leaders appear reluctant to loosenthe policy reins to shore up growth. The headline services PMI published by theNational Bureau of Statistics slipped to a 9-month low of 53.9 in June from May's54.3, and the reading from a Markit/HSBC survey improved a touch to 51.3 from51.2 in May.Fed pledges to get tough on Wall Street as adopts Basel rulesThe U.S. Federal Reserve pledged to draft tough rules for Wall Street while shieldingsmaller banks from some of the harshest impact of the global Basel III capital rules itadopted on 2 nd July’13.The central bank voted in favour of the long-awaited U.S.version of the global rules that require banks to use more equity capital to fund theirbusiness, to make them more robust after the 2007-09 credit meltdown. It providedsome flexibility to benefit the housing recovery and smaller banks in its final rule, butsaid it would write four new rules in the coming months to address concerns aboutthe risk the eight largest U.S. banks pose to the financial system.Private Banks Leave Switzerland as End of Secrecy Hurts profitFor European lenders with private-banking aspirations, a presence in Switzerlandused to be a must. Now, with bank secrecy eroding and rising compliance costschipping away at profits, more are saying adieu. The number of foreign-owned Swissbanks fell to 129 by the end of May from 145 at the start of 2012, according to datafrom the Association of Foreign Banks in Switzerland. Assets under management slidby a quarter to 870.7 billion Swiss francs ($921 billion) in the five years through2012 as clients withdrew money or paid taxes on undeclared accounts, the data show.6


RATES AND GRAPHGaurav AgarwalII MBA MRate Repo7.25per centReverse Repo6.25per centCall Rate6.00 per cent –7.25per centInflation +4.70 per cent for June 2013Forex Reserve $284.644 Billion as on 28th June 201391day T-Bill7.4769per centIIP 2.0per cent (increase) for May 20136.90 GS 2019 8.0907per centGraph61Rs/$605958Rs/$575611-Jun 15-Jun 19-Jun 23-Jun 27-Jun 01-Jul 05-Jul 09-Jul28000276002720026800264002600025600Gold(per 10 gram) Rs.Gold(per 10 gram)7


GRAPH109107105103101Oil(per bbl) $Oil(per bbl) $9911-Jun 15-Jun 19-Jun 23-Jun 27-Jun 01-Jul 05-Jul 09-Jul20,000.0019,500.00sensexnifty5900580019,000.00570018,500.00560018,000.005500600059005800570056005500future ratesopen interest17000000150000001300000011000000900000070000005000000300000010000008


Financial Inclusion: Is it only covering the Unbanked?Eldho PouloseII MBA KIt all started in Mangalam village in the year of 2005 where all households ofthe village were provided with No frill bank accounts and other bankingfacilities. But the approach of Apex bank towards financial inclusion clearlydefines that it is not only a basic process of equipping everyone with bankaccounts. The mandate of RBI is to find a solution for financial exclusion overa period of time and to make people more aware and ensuring theirparticipation in terms of financial market and services. RBI has adoptedbank-led model Financial Inclusion programs along with other non-bankingentities who were allowed to join the Financial Inclusion Initiatives. Being abasic service, banks has been encouraged by Reserve bank to leverage theirtechnology, which will result in widening and penetration of financial servicesat a minimum cost.The banks have to look financial inclusion activities with a business mindinstead of treating it as a charity or social service. Only a commercially viableand self-sustainable financial initiative can help the banks for expanding theiroperations and their by covering more unbanked areas. For expanding theirfinancial inclusion initiatives banks need to adopt innovative business modelsand delivery channels along with customized products which can satisfy theunique financial needs of financially excluded population. The structured andplanned approach of RBI has provided banks the opportunity and the room toidentify, formulate their own strategies in order to achieve their targets throughthe proposed financial inclusion initiatives.Considering the geographical features and huge scale of operations required forfinancial inclusion RBI has created a lusty institutional structure whichincludes The Financial Stability and Development Council (FSDC) chaired bythe Union Finance Minister, Financial Inclusion Advisory Committee (FIAC),35 State level Bankers’ Committees, 644 Lead District Managers, more than100000 bank branches and more than 700 Financial Literacy Centres toenhance more financial literacy. Also banks has been advised to prepare boardapproved second phase financial Inclusion Plans which extends from 2013-2016, prioritizing new branch openings in rural unbanked areas and conductingfinancial literacy camps along with many other Financial inclusion programs.It is very clear that creating bank accounts for financially excluded populationis not the final objective .The effective utilization of financial infrastructurewhich is possible only through financial literacy is the ultimate aim of financialinclusion initiatives. Financial inclusion should result in availability of timelyfinancial services, good credit facilities at minimum cost, financial literacy andparticipation of mass in financial activities across the country. For this, alongwith banks other financial institutions should gain the trust and confidence ofpopulation and thereby can ensure people participation.Reference:http://www.rbi.org.in/scripts/BS_SpeechesView.aspx?Id=8139


BANKS RUSH FOR PERPETUAL BONDS ISSUE TO SHORE UPTIER-I CAPITALAnnapoornaa GII MBA KBasel-III is the global regulatory standard on bank capital adequacy, stresstesting and market liquidity risk. Tier-I capital is the core measure of a bank’sfinancial strength from a regulator’s point of view. Under Basel-III norms,equity capital and retained earnings are the predominant form of tier-I capital.The government has formed a committee with representatives from India’s topinsurance companies and few state owned banks to suggest ways to raise longterm capital for banks as per the new international rules. The committee hasdecided to give long term perpetual or long dated bonds in line with the newBasel norms which kick start from 2014.Indian banks have virtually stoppedissuing perpetual bonds as investors are declined to invest in such long termmaturity bonds given credit and interest rate risks involved. Besides the pool ofinvestors which have deep pockets have stopped investing in such bondsthough they are keen to do so. The committee headed by LIC’s executivedirector will have members from State Bank, PNB, IOB and Andhra Bank.The new version of PDIs therefore closely resembles equity and owing to thisincreased riskiness the Credit Rating Agencies are expected to lower the CreditRating of PDIs by one or two notches. These changes have made investorswary of investing in PDIs. It should be noted that investors in these debentureswere insurance companies and retirement benefit funds (Pension Funds,Provident Funds, Super annuation Funds etc.) that prefer investing ininstruments with capital protection and good credit rating. Further, InsuranceCompanies and Retirement Benefit Funds follow very stringent statutoryguidelines that discourage investing in equity or equity-like products.The new rules state that perpetual bonds raised by banks will be classified ascore or tier one capital only if there is a clause stating that if bank incurs loss itwould be free to convert the bonds into equity shares. LIC and other Banks willdecide upon the structure of the bonds and decisions will be made. Accordingto RBI an additional capital of `5lakh crores will be needed by banks to meetBasel III norms and of which equity capital is 35per cent and non-equitycapital is 65per cent.LIC which has a portfolio of `2.25 crore is keen to investin state run equity bonds which are perpetual in nature. They view it as asource of long term investment strategy.Reserve Bank of India’s mid-quarter monetary policy review will throughsome insights and the prices will be based accordingly. These bonds will alsohave a call option after 10 years. The incremental equity requirement due toenhanced Basel-III capital ratios is expected to be in the range of `75,000 croreto `80,000 crore by end-March 2018 for public sector banks, according to theRBI report on “Trend and progress of banking in India for 2012-13”.Reference:www.economictimes.com10


FOOD SECURITY BILL ::SAFEGUARDING THE ECONOMY vs. SECURING VOTE BANKS!!!Sabahat BashirII MBA IAkansha BansalII MBA LThe National Food Security Bill (NFSB-2013) aims at providing food and nutritionalsecurity to the people of the country by ensuring access to quality food at anaffordable price. The initiative consolidates various food related programs and PublicDistribution Systems (PDS) to cater to the problem of endemic under nutrition in thecountry.India has fared worse than any other nation on the grounds of malnutrition(particularly in children). But, will offering rice, wheat and coarse cereals at `3, 2 and1 a kg to two-third of the population (more than 800 million people) solve thisproblem? Some economists believe that it is better to pass the NFSB; in its not sobeneficial structure, than not doing anything at all.However, it did not take much time for the “Right to Food” to become a political issuein the country. With the forthcoming elections, everyone is ready to demonstrate or atleast proclaim their commitment towards the issue of food security. The government isnot very clear about what it wants to do and is facing a lot of internal hindrance andresistance. Various political parties barely understand the dynamics and react only byanalyzing the leverage of the ruling government can build upon by introducing thebill.Analysts argue that the NFSB barelyhas any economic benefits. On thecontrary, it might hit India’s tradedeficit as it requires around 70-80million tones of more food grain everyyear. India obviously does notproduce that much and the shortfallwill have to be met from importswhich in turn will increase foodinflation. The decision may also resultin rise in prices of food grain fornon-beneficiaries of the program andhurt the ongoing economic recovery.The benefits meant for poor can evenfind a way into the black marketwithout fulfilling the actual objectives.Cash transfers instead of food securitycan offer same benefits at a muchlesser cost.It is a small step and not inflation indexed, so benefits are likely to erode within ashort span of time. As Amartya Sen says, “Benefits meant exclusively for the pooroften end up being poor benefits”. The Centre has budgeted food subsidy for FY14at `900 billion (0.80per cent of GDP). Extra burden on the government's finances inFY14 could be `100 billion (0.10 per cent of GDP) depending on the pace ofimplementation. Post NFSB's complete rollout, the bill's burden could be `300-350billion per year (0.30-0.40 per cent of GDP).If the bill faces implementation issues, it can lead to resource wastage on a largeeconomic as well as social level. The important component however is to implementan efficient and effective system which is not just a societal benefit device but a smarteconomic policy as well.References:http://www.thehindu.com/multimedia/archive/01404/National_Food_Secu_1404268a.pdfhttp://www.business-standard.com/search?type=news&q=Food+Security+Bill11


STOCK WATCH:: BIOCON LIMITEDAnkit Dewani II MBA KSriKrishna II MBA MIntroduction:Biocon Limited is an Indian biopharmaceutical company basedin Bangalore. Within biopharmaceuticals, the Company manufactures genericactive pharmaceutical ingredients (APIs) that are sold in the developed marketsof the United States and Europe. It also manufactures biosimilar Insulin'swhich are sold in India as branded formulations and in both bulk andformulation forms.Located with R & D in Bangalore and API unit in Hyderabad, India, Bioconhas two subsidiaries— Syngene, a custom research organisation, andClinigene, a clinical research organisation. Biocon’s presence straddles fourmain therapeutic areas—Diabetology, Cardiology, Nephrology andOncology— and plans to introduce two new divisions, Comprehensive Care,and Immunotherapy.Shareholders Pattern:Keyfinancials-Revenues:12


Annual results in brief(Rs crore)Mar ' 13 Mar ' 12 Mar ' 11 Mar ' 10 Mar ' 09Sales 1,938.00 1,555.85 1,566.62 1,198.64 939.88Operatingprofit 405.69 333.55 584.16 327.67 246.20Interest 1.23 1.70 2.38 1.99 4.94Gross profit 455.93 398.40 607.29 355.96 288.50EPS (Rs) 13.79 12.78 22.96 12.42 5.59Annual results in detailsMar ' 13 Mar ' 12 Mar ' 11 Mar ' 10 Mar ' 09Other income 51.47 66.55 25.51 30.28 47.24Stock adjustment -17.90 -41.42 -27.84 -38.95 -26.77Raw material 829.99 697.12 617.25 554.14 398.87Power and fuel - - 81.63 67.25 71.22Employeeexpenses 227.62 191.60 145.54 99.66 82.00Excise - - - - -Admin andselling expenses - - - - -Research anddevelopmentexpenses - - - - -Expensescapitalized - - - - -14


Other expenses 492.60 375.00 165.88 188.87 168.36Provisions made - - - - -Depreciation 95.08 94.00 90.17 79.73 74.28Taxation 71.30 48.90 57.87 27.87 10.40Net profit / loss 275.70 255.50 459.25 248.36 111.81Extra ordinary item -13.85 - - - -92.01Prior year adjustments - - - - -Equity capital 100.00 100.00 100.00 100.00 100.00Equity dividend rate - - - - -Agg.of non-prom. shares (Lacs) 780.76 781.76 781.65 781.65 781.65Agg.of non promotoholding (%) 39.04 39.09 39.08 39.08 39.09OPM (%) 20.93 21.44 37.29 27.34 26.19GPM (%) 22.92 24.56 38.14 28.97 29.23NPM (%) 13.86 15.75 28.85 20.21 11.33Stock PerformanceRecommendations:The company continues to hold leadership in Simvastatin market whilepravastatinsupplies continue to do well. Also, it holds a healthy 30% market share acrossthe Immuno suppressants launched in US so far.Currently, there are 1650 MRs in its branded formulations business. Thecompany plans to add more MR's gradually backed by new product launchesin order to achieve its revenue target of ` 5bn for FY14E.The growth in the Biopharmaceuticals business was driven by small moleculessales in the US & EU and Insulin & Immunosuppressant sales in the emergingmarkets.CMP : `288Target : 315Duration : 3 months15


ALUMNI SPEAK:: Sana Jameel HashimMithil Kumar AII MBA LName: Sana Jameel HashimCompany name, Designation held:Oracle Financial Services Software Limited , Functional LeadPut some light on your Company, the job profile and the role you play in yourorganization?I am currently working for Oracle Financial Services Software Limited. It wasformerly called i-flex Solutions Limited and is a subsidiary of OracleCorporation. It is an IT solution provider to the banking industry. OracleFinancial Services Software Limited is ranked No. 9 in IT companies of Indiaand overall ranked No. 253 in Fortune India 500 list in 2011.I was recruited as a fresher in the company and have been working there eversince. I am the functional lead for my project which is called OFSAA BalanceSheet Planning. My role is to gather requirements for my project, analyzethem, create prototypes and documents and then explain it to the technical teamwho create the final banking solution (banking software). My role alsoinvolves giving training to various sales teams and consultants. I am alsoinvolved in demonstrating the product to clients and provide support duringproduct implementation.What encouraged you to choose this industry and join the particular company?The combination of IT and Finance was something which i was looking for andalso the brand name of the company. The profile offered was also a good one.These factors encouraged me to choose the industry and join the company.How is your experience in the company as well as industry so far?The experience has been very good. OFSS is a great company to work for.There are lots of opportunities to learn many things, as you get involved inevery stage of the Software Development Life Cycle (SDLC).How is professional world different from the life in MBA?There is a vast difference. The care free attitude that we have during collegelife doesn’t really work in professional life. You need to be focused at alltimes. The moment you slack, it could lead to loss of your credibility andopportunities to move forward.Are there any additional courses / certifications that you recommend in thisfield?The more you learn, the better it is. Additional courses are definitely an addedadvantage. The courses offered by NCFM on capital markets, derivatives etc.are very helpful.16


Who is your role model and how he/ she inspires you?I do not have a role model. Every person in this world has something in them that inspires others. I takethe good points from everyone I meet.What are you doing to ensure that you continue to grow and develop in industry?Constantly educating myself on topics related to Finance, socializing with people in the company andgetting to know their perspective on things, networking across teams and attending internal trainingsessions.What are the characteristics you believe one should possess to join this company?An open mind, willingness to learn and good analytical skills. You should have the ability to think clearlyand communicate well.What are the opportunities for us (juniors) in your company?There are many opportunities for you all in OFSS. All the projects requirefunctional people to manage the product starting from design to developmentto delivery.Not only Finance, there are opportunities for people in Marketing and HRalso, since I am from the finance field, my knowledge regarding the otherstreams are limited. But I can assure you there are opportunities for all, as lotof people from our college have been recruited for all the 3 streams (Finance,Marketing and HR).Will you be willing to come and share more about the industry and thecompany and your experience with us in an alumni interface?Most definitely.What are your short-term, mid-term and long-term plans, respectively, forfuture?I do not categorize my goals. At every stage the goals keep changing. As ofnow it is to handle more projects and be a product manager.A message for Christites?Enjoy your college life as these days will never come back, but at the sametime be focused about what you want to achieve in life and plan accordingly.17


COMMODITY:: GOLDVattam BhargavII MBA VGold is one of the oldest precious metals known to mankind. Gold has beenone of the most important parts of the world economy from a long time. Fromthe ancient times where gold was used as a currency till present date, wheregold is used as a reserve by almost all the countries of the world, we can’timagine a global economy without gold.Major uses of Gold in India are:Gold is used in jewelry, monetary reserves, as a commodity for trading. Indiais one of the biggest importers of gold with 7per cent of its GDP this yeargoing towards gold imports.In MCX (Multi Commodity Exchange) Gold is measured in units of grams,quoted in units of 10 grams and sold in lots of 1 kilogram.Positive news on Gold:Gold prices have been hammered in the past two months. In India specifically,the Government is trying to pull down the demand of gold in the countrybecause of the increasing current account deficit. The government has imposedan import duty of 6per cent on gold as a measure to bring down the imports.But, gold has a history of coming back hard whenever it went down. Therecent figures related to the buying of gold by central banks of differentcountries are going up. China has increased its gold imports by 40per cent inthe month of May 2013 when compared to the last year. Globally the demandfor gold is going up and in India the marriage and Diwali season goldpurchases will start in two months, which is a good sign for the yellow metalwhere its demand in India will go up.Current performance of Gold in the Commodity Market:Gold has been going down from the past two to three months. Gold is currently(10 th July 2013) being traded with a spot price of `25,997/10 grams.The current Spot prices in MCX for Gold futures are (10 th July, 2013):`25,997 / 10 grams for 5 August, 2013.`26,119 / 10 grams for 5 October, 2013.`26,247/ 10 grams for 5 December, 2013.Gold price can be expected to touch `27,000 for 5 October 2013 contract as amedium term investment.References:http://www.commodityonline.com/news/chinese-dragon-gets-into-actionimports-40-more-gold-in-may-55357-3-55358.htmlhttp://www.commodityonline.com/news/lehman-nightmare-haunts-as-goldforward-rates-turn-negative-55354-3-55355.htmlhttp://www.commodityonline.com/commodity-market/commodity-prices/goldhttp://www.mcxindia.com/sitepages/contractspecification.aspx?Productcode=GOLD18


SCAM:: RAILWAY BRIBERY SCAMAkanksha JhaII MBA JCBI arrested Vijay Singla, nephew of Indian Railway Minister Pawan KumarBansal, on 3 rd May 2013 for alleged bribery of `90 lakhs for fixing keyappointment in the railway board.It has been reported that Mahesh Kumar who was the member (staff) of therailway board, was to pay `10 crore for an appointment as member (electrical)on the board. The money to be given as bribe to Singla was raised by a groupof fellow business men, who were promised business from railways. Thesebusiness men were dealing with train equipments. Kumar was to pay half ofthe money in advance, before appointment and rest after his appointment as themember (electrical) of railway board.Kumar could not get the position as per his choice and was appointed as amember (staff). He was not happy with the results. Kumar was said to wait forthe elevation of the current member (electrical) Kulbhushan as a boardchairman after the retirement of the current chairman Vinay Mittal in June,2013. He agreed to wait on a condition that he will be allowed to continue asGM of Western Railways. For this he agreed to pay extra `2 crore of bribes.Railway Minister, Pawan Kumar Bansal refused his involvement in the case.He had to resign from his post on 10 th May 2013, after a long meeting held atthe Prime Minister’s house. CBI said that it may seek clarifications from theminister and his two sons Manish and Amit and at least one more nephew inconnection with the case.Ankit Dewani II MBA KBUZZWORD'Sin Stock'A stock of a company either directly involved in or associated with activitieswidely considered to be unethical or immoral. Sin stocks are found in sectorswhose activities are frowned upon by some or most of society, because they areperceived as making money from exploiting human weaknesses and frailties.Sin stock sectors therefore include alcohol, tobacco, gambling, and the military.Also known as “sinful stocks", they are the polar opposite of ethical investingand socially responsible investing, whose proponents emphasize investmentsthat benefit society.Reference:http://www.investopedia.com/terms/s/sinfulstock.asp19


DID YOU KNOW ?THE CONCEPTS OF – Hammer, Doji and Dragon fly DojiTina Patricia D’SouzaII MBA NThe Hammer candlestick is a bullishreversal pattern that mainly occurs at thebottom of the trend. It is created when theopen, high and close are almost the sameand also, there is a longer lower shadow,twice the length of the body. When theclose and the high prices are the same, astrong hammer is formed and it isindicative of the fact that the bulls rejectedthe bear’s contention and were capable ofpushing past the open price. On the otherhand, if the open and the high are almostthe same, then too, it is said to be bullish.The Hammer is an extremely usefulpattern as it signals the traders regardingthe end of the downtrend and that the shortpositions will be covered soon.A Doji is a powerful candlestick whichsignifies indecision between the bulls andthe bears. It can be found at the top and inthe bottom of the trend. It could beconsidered as a possibility of pricereversal direction or a continuationpattern. A Doji is formed when theopening and the closing price are equal. Arickshaw man Doji, also known as thelong legged doji, is formed when theupper and the lower shadows are longer.When the markets open for trading, theopen price is pushed higher by the bulls,only to be rejected by the bears. Howeverthe bears are unable to keep the priceslower, as a result the prices are pushed upby the bulls.The Dragonfly Doji is a significantbullish reversal candlestick patternwhich is mainly found at the bottom ofthe trend. It is created when the open,high and the close are the same or aboutthe same price. The most important partis the lower long shadow part whichsignifies where the demand area waslocated and found. The bears try to pushthe prices down, but an area of support isfound wherein the buying pressurepushes the price back up to the openingprice.References:Online Trading Concepts - TechnicalAnalysis - Candlestick Charts - OptionsTutorials. Retrieved July 11, 201320


FINANCIAL SERVICES INDUSTRY ANALYSIS:: INSURANCEAnkit DewaniSabahat BashirSri VishnuTina Patricia D’SouzaINTRODUCTIONInsurance Industry primarily caters to Risk Management and Hedging againstcontingencies and uncertainties (losses). Estimating the risk associatedsometimes becomes more crucial than estimating the returns. Any risk that canbe quantified can potentially be insured. The Insurance Company, comprisingof multiple agents, offers insurance policies to its customers. The company’sproduct offerings come in varied forms like Auto, Life, Property, Casualty,Health, Credit etc.India has a deep rooted history of Insurance. In 1818, life insurance business inthe country started with the establishment of Oriental Life Insurance Companyin Kolkata (then Calcutta) and went through various development andamendment procedures (like globalization and deregulation), becoming one ofthe fastest growing sectors in the current economy. Today there are around 24general insurance companies operating in the country.REGULATORY ENVIRONMENTThe Insurance industry in India is primarily regulated by Insurance Regulatoryand Development Authority (IRDA). It is a parliament constituted body whichoperates under the Government to serve and protect interests of policyholders.It regulates, promotes and ensures orderly growth of the insurance andre-insurance business.The Insurance sector is also governed by various laws like The Insurance Act(1938), Life Insurance Corporation Act (1956), Consumer Protection Act(1986) etc.KEY SUCCESS FACTORS:Some of the key success factors to prosper in Insurance sector are: Strong Brand presence: It promotes consumer awareness, increase ofsales and customer loyalty. Building required niche or group programswhich help to fulfill consumer needs. Skilled Actuaries: It includes adequate rates and forecasting, and smartinvesting. Skilled Agents: These are used in front line gatekeepers and for fulldisclosure of risk. Channel Strength: Involves Quality and Speed of delivery which areneeded to reach the customer. Quality Underwriting: The second line of the industry which is used todefend and decline the risks by setting parameters. Good access to Customer base: This conserves the overhead expensesand decreases wasteful spending. Employees are treated very well tooffer a professional stress free environment. Sound Risk Management and Management practices: By building anoptimal product portfolio and effective management procedures, the riskcan be efficiently mitigated. Scales of Operations: Key requirement for ensuring operating and costefficiencies.21


MAJOR PLAYERS:Insurance sector includes various categories of insurance companies like General Insurance, LifeInsurance, Agriculture Insurance, Health insurance, Re-insurance etc.Some of the major players in Insurance industry in India, based on theirmarket share holding are: Life Insurance Corporation (LIC) of India, ICICIPrudential, SBI, Reliance, Kotak Mahindra, TATA AIG etc.RECENT GLOBAL TRENDS:2011 was marked by a historically high incidence of disasters and the ongoingfinancial and economic crisis. These affected the insurance industry to varyingdegrees across countries. In some countries, natural disasters were the maintheme, affecting the non-life insurance sector. In other countries, especiallythose of the euro zone, difficult macroeconomic conditions posed challengesfor the industry as a whole.By contrast, the non-life sector was able to sustain the premium levels. In anumber of countries, growth was achieved through premium rate increasesfollowing disasters. That said, price competition in some non-life segmentscontinued to curb premium income growth in some countries.The low-yield environment remained one of the most important challenges ofthe insurance industry since, in most countries, debt instruments continued todominate insurers’ investment portfolios. While falling yields generateinvestment gains, they increase insurance liabilities for long-tailed businessand, if prolonged, increase reinvestment risk.The financial crisis also poses challenges regarding the investment activitiesof the insurers. For some countries, turbulence in the euro zone will remain arelevant risk for the industry. More generally, the low interest rateenvironment and financial market volatility remain continuing themes in termsof key risks and vulnerabilities for the insurance industry, particularly forthose life insurers offering guarantees.22


SCOPE OF MBA FINANCE:Insurers enter new domainsExpectations are pointing to insurers entering new domains, as well as expand their presence in currentmarkets. While there are signs of stabilization, consumers and businesses continue to tighten their pursestrings. For much of the European and US insurance markets, these conditions continue, with only slightimprovement.Investment in foreign marketsIndeed, with capital and surplus overflowing for many if not most multinational insurers, there aretantalizing opportunities for prudent investment in other foreign markets, depending on the region. InIndia, for instance, significant opportunities beckon.Actuarial Job DescriptionAnalyze statistical information to estimate mortality, accident, sickness, disability, and retirement rates.Ascertain premium rates required and cash reserves and liabilities necessary toensure payment of future benefits. Collaborate with programmers,underwriters, accounts, claims experts, and senior management to helpcompanies develop plans for new lines of business or improving existingbusiness.Insurance Adjusters, Examiners, and InvestigatorsCollect evidence to support contested claims in court. Communicate withformer associates to verify employment record and to obtain backgroundinformation regarding persons or businesses applying for credit. Examineclaims form and other records to determine insurance coverage. Examine titlesto property to determine validity and act as company agent in transactionswith property owners.KEY SKILLS REQUIRED:Sound understanding of accounting concepts for credit appraisal.Knowledge of various laws and regulations to ensure compliance.Risk management concepts.Ability to coordinate with teams from other departments.Aptitude for compliance and documentation.COURSES AND CERTIFICATIONS:NAME OF THECERTIFICATION/COURSEInternational PostGraduate Diplomain Life Insurance(IPGDLI)International PostGraduate Diplomain GeneralInsurance(IPGDGI)DESCRIPTION FEES (`) URLDistance LearningCertification Courseoffered by theInstitute ofInsurance and RiskManagementThis Course asoffered by The Instituteof Insurance andRisk Management isfor a period of 1Year with 2 semesters.Employment isa must for applicationto these courses.1,30,000 http://www.iirmworld.org.in/distance_feeparticulars.htm1,30,000 http://www.iirmworld.org.in/distance_courses.htm23


NAME OF THECERTIFICATION/COURSEInternational PostGraduate Diploma inRisk Management(IPGDRM)DESCRIPTION FEES (`) URLCourse offered by theInstitute of Insurance andRisk Management, subjectto the fulfillment ofcertain essential criteria.1,30,000 http://www.iirmworld.org.in/distance_courses.htmCIS EXAMINATION This course is aimed toenhance professionalstandards among theinsurance agents /advisors.http://www.bimabazaar.com/career/357-professionalcourses-offered-byinsurance-institute-of-indiaLICENTIATEEXAMINATIONThis is essentially anintroductory coursedealing with thefundamentals of Principlesand Practice of Insurance(Life and Non-Life) andRegulations of InsuranceBusinesshttp://www.bimabazaar.com/career/357-professionalcourses-offered-byinsurance-institute-of-indiaASSOCIATESHIPEXAMINATIONAt this level, students mayspecialize in the chosenfield. i.e. Life and Non-Life. The scheme of studyprovides knowledge of sixtechnical subjects in thechosen branch. However,candidates will have to getfamiliar with the practicalaspects related to thesesubjects.http://www.bimabazaar.com/career/357-professionalcourses-offered-byinsurance-institute-of-indiaFELLOWSHIPEXAMINATIONThis is the highest leveland involves advancedstudies of specified areas.http://www.bimabazaar.com/career/357-professionalcourses-offered-byinsurance-institute-of-indiaReferences:http://www.nsdcindia.org/pdf/bfsi.pdfhttp://www.oecd.org/daf/fin/insurance/globalinsurancemarkettrends.htmhttp://www.icicibank.com/aboutus/zip/200307InsuranceInvestor.pdf24


QUIZVattam Bhargav II MBA VSriKrishna II MBA M1. The listed company with the largest market capitalization in India is_________2. The company that paid the highest amount of tax for the last financialyear in India is _______________.3. The amount of market capitalization that the following types ofcompanies holda. Small cap - ___________b. Mid cap - ___________c. Large cap - ___________4. Big four companies in the consulting services are ____________,________________, ________________ and _________________.5. Largest bank in the world in terms assets held by the bank is____________ .6. Highest paid CEO of India is ____________.7. The largest PSU in India in terms of market cap is __________.8. The difference between the outflow and inflow of foreign currency isknown as ___:9. In which year , the Foreign Exchange Management Act (FEMA) cameinto force ?10. Largest shareholder in “Infradebt “, India’s first Infrastructure Debt Fund(IDF) under the non-banking financial company?11. First state in India to pass a Food Security Act is ___:12. Which stock exchange launched first carbon-based thematic index“Carbonex” ?13. What is the share of ATMs operated by SBI and its five subsidiaries inthe total ATMs in India?14. What is the minimum age required to open a current account?15. Mutual funds are regulated by?Answers Of Quiz of June Issue1) Mario Draghi, 0.5%2) 0.25%3) Mumbai, Kolkata, Hyderabad,Noida4) 77590 crore rupees5) 6%6) Dr. Manmohan Singh7) 1st January 19998) 4.89%, 1.1%, 2.1%, -0.70%9) Treasury bills or bonds10) Kuwaiti Dinar, $3.51/Kuwaiti DinarAnd theis…Aakash Ashesh1320701I MBA V25


Answers:1.Backpricing 2.FlowerBond 3.RiskReturnTradeOff 4.Netmargin 5.ImplicitCost 6.DuPontAnalysis7.Beta 8.PreemptiveRight 9.CandleStick 10. Hiccup 11.GibsonsParadox 12.Reinsurance13.ExtrinsicValueCROSSWORDGanesh PrabhuII MBA K1 2 3 4Across1185679 10122. Fixed income products that wereoriginally purchased by investors ata discount for the purpose of payingfederal estate taxes upon theirmaturity.5. A cost that is represented by lostopportunity in the use of acompany's own resources, excludingcash.8. A privilege extended to selectshareholders of a corporation thatwill give them the right to purchaseadditional shares in the companybefore the general public has theopportunity in the event there is aseasoned offering11. An economic observation made byJ. M. Keynes during the period ofthe gold standard that there is acorrelation between interest ratesand the general price level.12. The practice of insurers transferringportions of risk portfolios to otherparties by some form of agreementin order to reduce the likelihood ofhaving to pay a large obligationresulting from an insurance claim13. The difference between an option'smarket price and its intrinsic value.13Down1. A pricing method used in specific futures contracts whereby the price of the commodity to be delivered is priced by thepurchaser at some future date after entering into the position3. The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated withlow potential returns, whereas high levels of uncertainty (high-risk) are associated with high potential returns.4. The ratio of net profits to revenues for a company or business segment - typically expressed as a percentage – that showshow much of each dollar earned by the company is translated into profits.6. A method of performance measurement in which assets are measured at their gross book value rather than at net bookvalue in order to produce a higher return on equity7. A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole9. A chart that displays the high, low, opening and closing prices for a security for a single day10 A slang term for a short-term disruption within a longer-term plan, goal, or trend.26


EDITOR :Eldho Poulose & Sailabala NayakNEWS:Srivishnu Garbham & SailabalaGRAPHS & RATES:Gaurav AgarwalCONTEMPORARY ARTICLES:Eldho PouloseINVESTOR’S CHECK:Abhishek AggarwalDEBATE:Akansha Bansal & Sabahat BashirALUMNI SPEAK: Mithil Kr. ASTOCK WATCH : Ankit & SriKrishnaCOMMODITY MARKET:Vattam BhargavBUZZWORD: Ankit DewaniCROSSWORD: Ganesh PrabhuSCAM:Akansha JhaDID YOU KNOW:Tina D’SouzaQUIZ:SriKrishna & BhargavREVIEW:Paridhi GoyalFINANCIAL SERVICES INDUSTRY ANALSISAbhishek , Gaurav, Sabahat, Ankit, Srivishnu, Tina,CREATIVE HEAD AND DESIGN:Arpita Samanta27


chaanakya`About UsChaanakya is the official Finance Magazine ofWealth Incorporation, the Finance Club. It is released monthly.Its objective is to keep each & everyone abreast with the activities and events of the world offinance.Christ University Institute of ManagementChrist University, Hosur Road,Bangalore - 560029,Karnataka, IndiaTel: +91-80-4012 9531/9532Fax: +91-80-4012 9000Website: www.christuniversity.inPlease mail your valuable reviews and feedbacks atchaanakya@mba.christuniversity.in(For Private Circulation Only)28

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