1st JUNE 2008

Volume 2, Issue 5

Wealth Incorporation - A CCIM Finance Club Initiative Presents

CHAANAKYA
..Tracking the Economy

Issue Attractions
National Headlines International Headline Corporate Interview Quiz Student Editorial Investors Check/Tag lines/Buzz Word/Logos 1 1 2 2 3 4

Inflation is when you pay fifteen dollars for the tendollar haircut you used to get for five dollars when you had hair. - Sam Ewing, American Writer

National Headlines

Bharti Airtel on Saturday announced that it had decided to disengage from the merger talks with South Africa-based telecom giant MTN after the latter deviated from the agreed terms decided during exploratory discussions.

City Union Bank has reported a good performance in the 12 months ended March 31, 2008. It has achieved two landmarks in 2007-08. Total business touched the Rs. 11,000crore mark and the profit after tax surpassed the Rs. 100-crore mark.
Stock broking firm Geojit Financial Services said that the companys board had approved the offer from French banking major BNP Paribas to acquire a 35 per cent stake in one of its subsidiaries

Inflation 8.1% , IIP 8.1%

15 days Movements
18000 17500 17000
Sensex

The Securities and Exchange Board of India proposed a payment process for public issues which do not require retail investors to block their money unless they are allotted shares. HSBC, through its group subsidiaries, is to acquire 73.21 per cent of IL&FS Investsmart Limited (Investsmart), the broking arm of Infrastructure Leasing and Financial Services Limited (IL&FS).

Sensex

16500 16000 15500 1 2 3 4 5 6 7 8 9 10 11 12 13

Dhamra Port Company Ltd. (DPCL), a 50:50 joint venture of Larsen & Toubro (L&T) and Tata Steel to set up a port at Dhamra, Orissa is expected to commission the port by April 2010. Estimated to cost Rs. 2,463 crore in the first phase, more than 25 per cent of the work

43.5 43.3 43.1

Rs/$

Rs/$

International Headlines
Eicher Motors Ltd. (EML) and the worlds second largest truck maker Volvo formalized their joint venture in which the Swedish auto major will pump in Rs. 1,082.10 crore. Samsung Electronics is going merge its home theatre, DVD and Blu-ray player businesses with its global No. 1 TV business as part of its restructuring plan. Nissans joint venture with electronics maker NEC Corp. Automotive Energy Supply Corp. will invest 12 billion yen ($115 million) to start mass production of lithium-ion batteries a technology widely viewed as key for next-generation green cars. The U.S. accused China of keeping its yuan currency substantially undervalued. Kawasaki Heavy Industries will start selling Kawasaki brand sports motor bikes in India through carmaker Bajaj Auto by the summer of 2009 to tap growing demand. Vodafone will acquire Denmark-based ZYB, which operates a social networking site focused on mobile phone users, for about 31.5 million euro. ZYB would be incorporated into Vodafones Internet Services Division. Nokia shut down its mobile-phone production in the western German city of Bochum near Dortmund, cutting down more than 2,000 jobs and moving the plants production to Romania. IFC, a member of the World Bank Group, and Standard Chartered Bank, announced that they had collaborated on the launch of the first-ever issuance of notes backed by loans to micro finance institutions in Africa and Asia.

42.9 42.7 42.5 1 2 3 4 5 6 7 8 9 10 11 12

1250 1200 1150 1100 1050 1000 1 2 3 4 5 6 7 8 9 10

Gold(per gram)

Gold

11

12

13

What separates the winners from the losers is how a person reacts to each new twist of fate.-Donald Trump

Page 2

Interview With Mr. M.R.Betdur, Head- SLMG, ING Vysya Bank

Mr. Betdur is a BCOM, ACA and A&CWA. He started his career in VYSYA BANK (now known as ING VYSYA BANK) in 1979 and is still working there. He is now the Head-SLMG. His role is to monitor and check the movement of NPAs across all branches of the bank throughout the country and to maximize the recovery efforts to ensure that SLMG contributes most to the bottom line and ultimately enhances the profitability of the bank. Sumiran Raj interviewed him. Here are his views. Q- What is your view about the market of securitization of bad loans in India? R- The original idea of securitization is to clean the balance sheet completely and obviously securitization will reduce the NPAs, unblock the funds and recycle the money. Initially few players were there, now some more players have come in. but the market for securitization of bad loans is yet to stabilize and achieve the desired the result. Q- What could be the impact of sale/purchase of NPAs on the operational efficiency of the bank? R- I dont think Banks as on today are purchasing NPAs except very few players like Kotak Mahindra. Though banks are selling NPAs but the irony is that the amount banks have been getting, is not at all lucrative and then realization of money takes lot of time. At times, it is on upfront basis also. Hence the impact of sale/purchase of NPAs on operational efficiency of bank is expected to be very feeble. Q- Do you feel the adoption of Basel II norms will enhance the market of securitization of NPAs in India? If yes, please comment on the extent of impact? R- Obviously, once Indian banks shift towards Basel II norms in September, 2009 meeting the adequate capital requirement would be prime most agenda. Hence bank will go for more and more securitization of NPAs. But keeping in view the market condition, the impact would be sizeable and positive. Q- When the seller and buyer are from the same institution (in context to ARCIL) i.e. seller (the loan side) and buyer (the treasury), then how does it reduces the risk of the bank? R- It is a very rare and very unique case. It does not happen generally. But if it happens there wont be any impact of balance sheet of the Bank. The prime motive would be fulfilled. Q- Where does your bank stand, in context of securitization of loans or sale/purchase of NPAs? R- Standard assets are exit ones. Our bank does very nominal in this context. But our further move will depend upon market condition & number of QIBs. Q- What do you feel, should be next prudent move in terms of recovery after SARFEASI Act 2002, to improve NPA management practices in banks? R- It is very good act. But during the amendment, the shift of 75% deposit to 0% of total repayable amount has weakened it. If it is brought back up to 50%, then only it can be more useful. The borrower can file as many petitions as he wants & as many times as he wants without depositing any amount and it is also left to the discretion of the presiding officer/ judge. This is what needs to be strengthened. A piece of advice from your side to MBA-Finance students R- Be practical. Try to enrich your knowledge base and explore the possibility of maximum utilization of your skills and expertise in a positive manner irrespective of the field you enter into. Christ College is one of the premier institutes in Bangalore, rolling out class students. I have been there once as a judge for a management event. It was great experience and the college is doing well. All the best!

Quiz
1. Name the method used by monetary authorities to equalize the effects of foreign exchange transactions on the domestic monetary base by offsetting the purchase or sale of domestic assets within the domestic markets. The process limits the amount of domestic currency available for foreign exchange. 2. What is the name given to the day of deregulation of the securities market in London, England (on October 27, 1986), in which the London Stock Exchange (LSE) became a private limited company? The event revitalized the LSE because outside corporations were allowed to enter its member firms and automated price quotation was established. 3. What is a foreign exchange term for a thinly traded currency? 4. A differential measuring the gap in interest rates between two similar interest-bearing assets. Name the term we are referring to. Literature was formerly an art and finance a trade; today it is the reverse Joseph Roux, French Artist

Page 3

Bubble in Oil (Part 1)

The situation

By: Sasmit K Sahu

Did you Know?

The term "buck" relating to the slang for U.S. dollar originated from the Old West when buckskin was a common medium of exchange with Indians. Later as currency replaced the barter system, people still refer to a dollar as a buck. Morarji Desai was the only I n d ia n Finance Minister to have presented two budgets on h is birthday, February 29, in 1964 and 1968.

Oil was at $26 a barrel when the US vowed to go into Iraq and secure oil supplies. It is now trading at over $130 a barrel. And while the price of oil is soaring, the Indian government continues to fool around with what the price of oil should be to the end consumers. What is formula? How much of the "oil subsidy burden" must be shared between the government, the oil producing companies, the oil refinery companies, and the oil marketing companies. And they change the formula when they want - for any reason.
$140.00 $120.00 $100.00 $80.00 $60.00 $40.00 $20.00 $0.00 2002 2003 2004 Global Oil Price 2005 2006 2007 2008

Retail Price (Mumbai)

Answers To Quiz
1. Sterilized

The petroleum ministry has been pushing for a combination of duty cuts and price hike Intervention (Rs 10 per litre in petrol, Rs 5 a litre in diesel and Rs 50 per LPG cylinder) to bail out 2. Big Bang PSUs IOC, HPCL and BPCL that are on the verge of running out of cash in the next 2-3 months to import crude. At inflation rising over 7.5%, the price hike will definitely give it 3. Exotic Currency a push. 4. Interest Rate Reason for the rise in Global Oil Price The price of oil is rising due to a combination of rise in demand from developing countries, a weakening dollar, the reduction in supply from the Persian Gulf nations and the unprecedented spurt in crude price is speculation. The speculated oil bubble will burst if the US & UK goes into recession, thus the demand for oil will fall making oil cheaper in the international market. In this case, hedge funds & the companies which are bullish about the future oil price will incur huge losses. Oil Pricing in India
Break up of petrol & Diesel (In Delhi) Petrol Diesel Sales tax Customs Excise Total taxes Without taxes Total 7.74 1.83 15.02 24.59 20.93 45.52 3.81 2.23 4.76 10.8 HDIL, BSE 532873 20.96 31.76 NSE HDIL CMP- Rs. 742.65 TARGET PRICE: RS RS.812 (CMP Current Market Price) Differential

Stock Ratnas GREAT OFFSHORE, BSE 532786, NSE GTOFFSHORE, CMP- Rs. 748.35 TARGET PRICE RS 1195 ITC ,BSE- 500875, NSE ITC CMP- Rs. 218.20 TARGET PRICE: RS.179

Source: Petroleum Planning & Analysis Cell

To be continued in next issue...

Global interdependence today means that economic disasters in developing countries could create a backlash on developed countries. - Atal Bihari Vajpayee

Page 4

Tag Lines:
ITS TIME FOR CLARITY KPMG IMAGINE IT. DONE. UNISYS LIFE. MONEY. BALANCE BOTH CANADA SCOTIABANK,

ONE CLIENT AT A TIME - MORGAN STANLEY FACTORING SPREADING ITS WINGS - FCI (FACTORS CHAIN INTERNATIONAL) HAVE YOU MET LIFE TODAY?/GET MET. IT PAYS METLIFE - METROPOLITAN LIFE INSURANCE COMPANY TAKING CARE OF WHAT'S IMPORTANT - AVIVA INSURANCE GROUP, UK A. Capital Bank of Latvia C. Deutsche Bank B. National Australian Bank D. Saudi Investment Bank A. B.

C.

D.

INVESTORS CHECK
10 tips for Stock market investors
Investing in stock markets is an art. It is a science as well. You can never earn money in markets without hard work. Here are some tips for stock market investors. Follow these tips and your judgements, mix in some analysis and hardwork, and you are bound to earn more than just your money back! 1. Never invest in stock just based on rumors. If they become news, you may hit jackpot, if not you will be bankrupt. 2. Never invest in stocks just based on the broker or magazine recommendations. That stock price may have already risen due to these recommendations. 3. Never invest in IPOs which are overpriced or from promoters who have bad credentials. 4. Entering or exiting a stock that bid late may be better than making instant decisions based on rumors that could lead to losses. 5. Fundamentals are more important along with entering price. Though Reliance industries, SAIL, Bharti, ABB and Sun Pharma are good stocks with strong fundamentals, you may not get good returns due to their share price (over valued). (To be continued in the next issue)

Buzz Word
Yield curb Mainly applies to convertible securities. Difference in current yield between the convertible and theunderlying common.

Quotes:
"There comes a time when you look into the mirror and you realize that what you see is all that you will ever be. And then you accept it. Or you kill yourself. Or you stop looking in mirrors. Tennessee Williams I am enough of an artist to draw freely upon my imagination. Imagination is more important than knowledge. Knowledge is limited. Ima g in at io n e nc ir c les the wo rld . Albert Einstein

Parallel loan A process whereby two companies in different countries borrow each other's currency for a specific period of time, and repay the other's currency at an agreed maturity for the purpose of reducing foreign exchange risk. Also referred to as back-to-back loans.

Path dependent option An option whose value depends on the sequence of prices of the underlying asset rather than just the final price of the asset.

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

Contributions made by :
Logos, Taglines & Editing News Did you know, Quotes Stock Ratnas, Quiz Graphs Investors Check Interview Book Quotes, Buzz Word Article Coordination Arihant Patawari Fouzia Taranum B Anup Rajan Ashish Poddar Sukrutha Lavanya Gnana Devi Diwakar Grover Sumiran Raj Nikhil Mehta Sasmit K Sahu Manish Sinha