16th FEB 2008

Volume 1, Issue 12

Wealth Incorporation - A CCIM Finance Club Initiative Presents

CHAANAKYA
..Tracking the Economy

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

Look at a day when you are supremely satisfied at the end. It's not a day when you lounge around doing nothing; it's when you've had everything to do, and you've done it. Lord Acton

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

soda ash maker.

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

18663.16 to 16630.91 on 12th Feb. Loosing almost 2032.25 points.

Inflation4.07 % , IIP 7.6%

India after much hype in increase in GDP rate see a low GDP rate for the year

15 days Movements

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

towards IPO as both had to call off their IPO.

Govt. hikes petrol, diesel prices; taxes untouched Swiss bankers urge RBI to relax norms The finance ministry is considering a proposal to abolish the stamp duty on

electronic issuances of bonds and debts by corporate houses.

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

previous year.
Microsofts Bear hug deal to buy yahoo Inc. for $44.6 billion, but yahoo rejects

the hug from Microsoft.

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

billion posted in the fourth quarter.

Motorola and Nortel are in talks for joint venture that will pull both the

companies out from the problem of falling market share.

News Corp joins Yahoo battle Japan GDP grows more than expected

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

Corporate Interview

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( Name not disclosed on personal request)

1. Do you think the Indian banks are well equipped to implement Basel-II norms? Yes, most of the Indian Banks are to a large extent are well equipped to handle the Basel Norm implementation. The RBI has properly prepared a road map for the smooth transition of the process. Majority of the risk factors have been taken care expect some of the Intangible risks associated with the banking operations. 2. To what extent will our banking sector be affected due to any recession in the US? And how? Indian banking sector will not have a direct impact of the sub-prime crisis, as none of the Indian banks are directly exposed to the US sub-prime crisis. But there is always an indirect impact on the economy and the Banks due to the crisis and the recession that is following it. As we can see the credit take off from the Indian banks has fallen from the level of 30% in the previous year to 22% in the current year, signaling a slow down of the credit take off or stabilizing of the of credit take off. So, the direct effect of the impact of the US recession will be the slow down of growth and business of the Indian banks. 3. The Indian banks are getting more & more aggressive each day in the lending business. Without any organized credit rating system, unlike developed markets, arent we pushing ourselves into a similar kind of situation that US is into now, due to its sub-prime lending? Indian bank have developed their own sophisticated credit appraisal technique, and the private bank have built a strong credit appraisal process which put them in a greater state of safety when it comes to the lending. On the other side, Indian consumer or the borrowers are also Risk Aversion natured as they borrow only when the see a need for which the money is borrowed, which is not the same case as it comes to the US consumers. Some banks like HDFC and AXIS have a strong credit lending process which put all the risks at bay. 4. How important is it for the Indian banking sector to consolidate right now? With elections around the consolidation in the public sector is a tough as it lead become a big political issue and with strong unions backing the Banking employees its long way to see consolidation in Banking sector in case of the Public sector banks. There is opportunity for consolidation in the private sector. The consolidation in the PSU banks will take another 4 to 5 years minimum to form a structured process. 5. Will the merger of SBI & its subsidiaries enable them to face the global biggies, once they enter Indian in 2009? With SBI and SBH consolidation is under process the results can be know minimum after one year and it will all come down to how well the SBI will accommodate the SBH employees and other operational issues. Only than the real picture will come out to know where they are standing. 6. With the entry of foreign banks and the Indian banks being looked up as Lilliputs when put next to the foreign banks like Citigroup what will be the future of the Indian Banks? The entry, of foreign banks with full freedom wont be possible. The will always be restrictions and control from the RBI and the Government. The protectionist approach for the Indian Banks will continue. And the foreign banks are only earning revenues only out of their off balance sheet activities, they are still finding difficult to earn revenues of their main business activities of banking. There is great scope for the Indian domestic to grow and big major players in the local market. 7. Few words for the students If you want to enter into any profession you must be having that likeness and interest for that field and job. The job will always be hectic, needing to know lots of people with huge amount of money floating around. One should not be carried away by all these and should have the attitude and passion for the job, and learn to be humble and self driven.

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

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The Federal Reserves Fight Against Recession

Did you Know?

More coins are swallowed by American children in six months than are produced by the treasury mint of Luxembourg in six years The total cost of manufacturing a dollar bill, including labor, supplies and energy is now $1.37 Due to the large attendance, number of races and all the gas-guzzling vehicles involved, US economists estimate that canceling NASCAR would drop gasoline prices by $0.40 per gallon, but could possibly lead to a depression.

Throughout history, free market societies have gone through boom-and-bust cycles. While everyone enjoys good economic times, the downturns are often painful. The Federal Reserve was created to help reduce the injuries inflicted during the slumps and was given some powerful tools to affect the supply of money. The founders viewed the Fed as a means of preventing the supplies of money and credit from drying up during economic contractions. One of the principal ways in which the Fed was to provide such insurance against financial panics was to act as the "lender of last resort". That is, when risky business prospects made commercial banks hesitant to extend new loans, the Fed would step in by lending money to the banks, thus inducing banks to lend more money to their customers. The function of the central bank has grown and today, the Fed primarily manages the growth of bank reserves and money supply in order to allow a stable expansion of the economy. The Tools A change in reserve ratio is seldom used but potentially very powerful. The reserve ratio is the percentage of reserves a bank is required to hold against deposits. A decrease in the ratio will allow the bank to lend more, thereby increasing the supply of money. The discount rate is the interest rate that the central bank charges commercial banks that need to borrow additional reserves. It is an administered interest rate set by the Fed, not a market rate; therefore, much of its importance stems from the signal the Fed is sending to the financial markets. As a result, short-term market interest rates tend to follow its movement. If the Fed wants to give banks more reserves, it can reduce the interest rate that it charges, thereby tempting banks to borrow more. Alternatively, it can soak up reserves by raising its rate and persuading the banks to reduce their borrowings. Open-market operations consist of the buying and selling of government securities by the Fed. If the Fed buys back issued securities (such as Treasury bills) from large banks and securities dealers, it increases the money supply in the hands of the public. In the case of an open-market purchase of securities by the Fed, it is more realistic for the seller of the securities to receive a check drawn on the Fed itself. When the seller deposits it in his or her bank, the bank is automatically granted an increased reserve balance with the Fed. Thus, the new reserves can be used to support additional loans. Through this process, the money supply increases. Today, the Fed uses its tools to control the supply of money to help stabilize the economy. When the economy is slumping, the Fed increases the supply of money to spur growth. Conversely, when inflation is threatening, the Fed reduces the risk by shrinking the supply. While the Fed's mission of "lender of last resort" is still important, the Fed's role in managing the economy has expanded since its origin.

Stock Ratnas

PANTALOON RETAIL, BSE523574 , NSE PANTALOONR CMP648.57, TARGET695 SAIL, BSE500113, NSESAIL CMP205, TARGET230 DISHMAN PHARMA, BSE532526, NSEDISHMAN, CMP314.19, TARGET535 RELIGARE, BSE532915, NSERELIGARE, CMP532, TARGET615.5 ( CMPCurrent Market Price )

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

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Tag Lines:
Its everywhere you want to be The next stage - Wells Fargo Where technology means business - ZD et The toughest job youll ever love - U.S
A. B.

- VISA

Peace Corp
Ingredients for life - Safeway

A. United Overseas Bank C. Public Bank

B. IAmBank Group D. Hong Leong Bank

C.

D.

Interview with Bob Kahl

(Continued from last issue)

Q: How do you identify stocks to research? RGK: There are a number of sources. Value Line is my primary source. I look through the weekly statistical screens and many of the reports on individual companies. I sometimes do my own statistical screens on databases that are available on the internet. I look at some companies that are favored by investment managers that I respect. Sometimes an industry contact or publication will mention a company and I will request information on it. I try to keep an open mind about where to find a good stock. Q: How do you research a stock? RGK: I request information from the company. I review the annual report, 10-K, quarterly statements, and press releases. I call the investor relations department to ask some follow-up questions. If its a smaller company, I usually talk with the chief financial officer. I also look at some of their competitors because I want to find the best value within the industry. If I buy a company, I monitor it by reviewing press releases, changes in earnings estimates, listening to conference calls and calling the company.

Buzz Word

Make a market: A dealer is said to make a market when he quotes bid and offered prices at which he stands ready to buy and sell. Antidilutive effect: Result of a transaction that increases earnings per common share (e.g. by decreasing the number of shares outstanding). Jensen index: An index that uses the capital asset pricing model to determine whether a money manager outperformed a market index. The " alpha " of an investment or investment manager. Take a swing: Used in the context of general equities. Execute a trade at a price which the trader feels is more rich/risky than he would normally, in order to gain market share within the institutional arena. Naked strategies: When you write an option without owning the underlying asset. You are naked because often you agreed to sell something that you do not own.

Book Quotes:
If everything was easy, what enjoyment would you get by completing anything? Sure theres money and reputation, but in the long run, knowing what your capable of from what youve been through is the only way to really feel satisfaction.(book: think and grow rich) The key is to either get your job done without using those nontalents, or find someone with those talents to help you in that situation. You probably have awesome talents youre better suited using than fumbling around on the ones you dont care about.( book: First, Break All the Rules)

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

Contributions made by : (1st Year Students)

Article Book Quotes Graph News Logo Coordination Nikhil Purohit Nikhil Gnana Devi Anup Rajan & Ashish Poddar Fouzia Tarannum Manish

(2nd Year Students)

Editing Stock Ratnas Interview Sindhu B. Navali, Mathew A Thomas Ritesh Verma Ravi Shekhar