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© In-FIN-NITIE | VOL 1| ISSUE 1| FEB 2010 Page 1

Ingenuity and enterprise are the mindful insights that provide a

vision for the future. As the years have passed, NITIE has stood the

tests of time by scaling new heights and reaching pinnacles against

all odds. It has maintained the tradition of featuring in the top

league of Business Schools across the country with our students

achieving accolades in every sphere. With the alumni occupying

coveted positions in the industry, with the areas of excellence being

Operations, SCM, Marketing, Finance and Information Technology,

NITIE has built a reputation for itself over the years.

It gives me immense pleasure to introduce you to the first issue of

our quarterly Finance magazine. ‗In-Fin-NITIE‘ is an initiative by

$treet, the Finance Forum at NITIE. $treet, the Finance Interest

Group seeks to assist the budding managers in assimilating

classroom as well as practical learning in the field of Finance,

thereby nurturing them to evolve as better managers. The initiative

is truly a showcase of the talent of the students in the area of

Finance with contributions towards the field in the form of

multifarious articles. These articles are well complimented by

quizzes and other compilations to grab the interest and attention of

the reader. The knowledge of Finance as a domain is essential to the

understanding of business administration and management. All the

fields of business be it Production, Marketing, Manpower

Development or Research Development revolve around Finance.

This initiative by $treet is a step that will help students gain a better

knowledge of the domain and also innovate to offer solutions to the

challenges that continue to confront the industry and society.

I applaud the zealous efforts of the meticulous students and Prof. M.

Venketaswarlu under whose competent auspices the initiative has

been undertaken. I congratulate them for their endeavour in

helping NITIE continue to be the preferred destination for leading

business establishments seeking the finest and most innovative

managers.

Dr. Subhash D. Awale

Director, NITIE

Message from the Director


was the Joint Educational

Advisor (Tech),

Government of India

before he took up the

Directorship of NITIE.

He was Vice-Chancellor of

Dr. Babasaheb Ambedkar

Technological University,

Lonere from 2000-2005.

He holds a B.E (Civil),

M.E. (Structures) Degree

and Ph.D. from IIT Delhi.

During 1998-99, he

functioned as Member-

Secretary of All India

Council for Technical

Education (AICTE) in

addition to his duties in

the Ministry. Over the past

30 years, he has been

actively involved in the

field of Technical

Education as a Researcher,

Teacher, Planner and

Administrator and has

handled all aspects of

Technical Education

including Engineering,

Technology, Architecture,

Management, Pharmacy,

etc.


It was money that drove human civilization from the barter system

to more complex forms of business and trade. Whatever may have

been the form of money during the progress of civilization, be it

animals, metals, coins, paper notes or e-money, there is no denying

the fact that businesses and economies have and always will revolve

around money. ‗Money is as money does‘ is one statement that is

often cited to explain the function of money.

Finance is the science of money management. In the past, as

economies grew larger and transactions grew more complex, finance

assumed a bigger role in the functioning of the economy. Banks were

setup to act as custodians of money and Central Banks evolved to

regulate the functioning of banks. Before mankind could introspect,

we had a complex financial system in place.

The above assumes more importance in the wake of the economic

downturn that recently engulfed the planet. It started off with the

sub-prime crisis which arose out of poor lending standards and

within the blink of an eye, the global economy was in shambles. Some

referred to it as the biggest economic recession to hit the globe post

1929, whereas others called it the ‗death of capitalism.‘ Whatever

may have been the reaction to the same, the bottom line is there for

all to see. The new global economy needs a ‗new world financial

system‘, one that is poverty-alleviating, stable, economically viable,

ecologically sustainable and mutually acceptable.

At NITIE, we believe Finance is more than just a field of

management. It is much more than the analytics, the exciting

intricacies and the high paying careers. It is a social science that has

played a stellar role in the evolution of mankind and will always be

closely linked to the holistic development of economies and societies.

We believe finance is about expression and innovation. And it is this

very spirit that we have attempted to capture and portray through

In-Fin-NITIE.

In-Fin-NITIE gives you a glimpse of finance at NITIE, underscoring

the reverence that NITIEians have towards finance and the

importance it commands in their scope of thinking and innovation.

We would like to hear from you regarding the magazine. Letters to

the editor can be sent to [email protected].

‗Bon voyage‘ for the journey through In-Fin-NITIE!

Team $treet

From the Editor’s Desk

Patron:


Convener:

Prof. M. Venkateswarlu

Editorial Board:

Aakash Chawla Gaurav Bajaj

Gaurav Malhotra Ritika Arora

Design Team:

Rajneesh Umesh Karthy LRJ

Special Thanks:

Team IMPACT Abhishek Kumar Amitabh Vatsya

Rohit Kumar

Disclaimer:

The opinions expressed in the magazine are those of the respective authors. In-Fin-NITIE or Team $treet does not necessarily endorse them and cannot be held responsible for the same. © Team $treet, 2010

mailto:[email protected]


Perils & Prospects of Private Equity

in India - Amitabh Vatsya, NITIE

Home Equity Insurance:

Redistributing Risk - Shailabh

Kothari and Rishabh Bhandari,

NMIMS

Dollar Docked (Cover Story) - Rohit

Kumar, NITIE

Innovative Monetary Policy Tools-

Ajay Jain, IIM Bangalore

Qualified Institutional Placements –

Innovation or Convenience - Abhinav

Saini, NITIE

Events @ NITIE

Fin - Quizzitive : The Finance Quiz

Contents

–Page 7 Page 8

–Page 9 Page 10

–Page 14 Page 15

–Page 18 Page 19

– Page 21 Page 22 Page 24


OVERVIEW The chart above depicts very succinctly, the success

story of the Indian Private Equity (PE) sector. It boasts of

a glorious Compound Annual Growth Rate (CAGR) of

43.67%. But these figures belong to a different era, one

before the collapse of the Lehman Brothers. A world

where raising capital was not the ordeal it is today. Back

in May 2009, I had posted a query on Nicube (a

professional networking website popular in Europe)

about careers in Private Equity. I got an instant response

from Donnie Brasco, an Investment banker with

Barclays: “PE is dead, virtually dead and it seems that it

will remain so for several years to come. There seems to

be some activity in terms of PE funds buying debt from

‘distress sellers’ (i.e. other PE funds, hedge funds, etc.),

but other than that, why do you want to go there? I

don't see how money could become as cheap as in

2003-2007 again.” This was indicative of the general

sentiment towards PE in the western world. Chart 1

suggests that the concerns of Mr. Brasco about the

global market were not unfounded. Indian Private

Equity, a relatively nascent market compared to its

global counterparts was left at cross roads in the post-

Lehman era. This article will mostly address the issue

raised by Mr. Brasco about the fate of PE in the Indian

context. The discussion will move from the challenges

ahead of Private Equity in India to the current status of

Perils and Prospects of Private Equity in India

- Amitabh Vatsya, NITIE


the same. The last section will bring forth the growth

opportunities for PE firms.

Recent reforms regarding LPs and GPs

In an environment where access to capital will decide

the future of private equity, institutional investors

(Limited Partners), sitting on huge pools of capital are

setting their own terms to turn things in their favour.

About 10 European and Asian development financial

institutions including CDC, who invest in emerging

market private equities including India, have endorsed

the Institutional Limited Partners Association (ILPA)

Private Equity Principle. ILPA, a not-for-profit

association, represents the interests of institutional

private equity investors.

These principles recommended that the general partner

community should charge moderate management fees

and stick to the fund’s investment purpose. Also,

changes in tax laws that impact general partners should

not be passed on to the investors. According to a recent

report by London-based research agency Preqin, there

are about 78 firms from India, out on the roads to raise

private equity money. Adoption of such principles by

these Limited Partners (LPs), who commit to emerging

markets, will only add to the woes of PE fund managers,

who are already finding it difficult to raise cash in an

extremely challenging environment.

Decreasing Confidence of Venture

Capitalists Venture capitalists often talk about downturns being

the right time to invest in start-ups. Yet the data does

not reflect this belief. An interesting study was

conducted by University of San Francisco Associate

Professor of entrepreneurship, Mark Cannice. He asked

local venture capitalists how confident they were about

the high growth industry for the next 6 to 18

months. The ‘Confidence Index’ above shows an upturn

and downturn by quarter.

Disappointment of Asian LP with

performance of their PE portfolio According to the recent ‘Coller Capital Global Equity

barometer’, many LPs report that poor performance of

PEs during the downturn has damaged the perception of

the asset class within their organization. This has

resulted in a change in their risk appetite and

investment criteria. A good percentage of investors

have deepened their Due Diligence prior to committing

to funds. Many have demanded improved reporting

from their GPs.

Complexity regarding Transfer Pricing In recent years, Transfer Pricing (TP) has attracted a lot

of attention from taxing authorities around the world. A

robust TP policy should be a critical component of any

global private equity manager’s overall tax risk

management strategy. A recent judicial pronouncement

in India underscores the importance of a robust TP, as

an Indian court held that where a foreign

enterprise has a dependent agent in India

(and thus an agency PE), then nothing

further is taxable in India in the hands of

the foreign enterprise if the correct arm’s

length price is applied and paid. As private

equity houses expand their global

management company footprint and

deploy more senior executives to local sub

advisory offices, fund managers should

revisit their TP models.1

Treaty-based structures Most private equity houses employ treaty

based structures to mitigate exposure to source country

taxation by investing through treaty-protected special

purpose holding companies. The use of Special Purpose

Vehicles (SPVs) to obtain treaty protection and other tax

benefits is subject to ever-increasing scrutiny by taxing

authorities across the world.

In India, the tax authorities have been scrutinizing PE

investments and have been aggressively investigating

deals involving the transfer of interests in companies


with underlying Indian investments. In the high-profile

Vodafone case, the Indian tax authorities attempted to

tax a non-resident on the profit from the transfer of

shares in a Mauritius company on the basis that the

profit arose from the underlying shares in an Indian

company. The matter is currently pending before the

Bombay High Court, and the Indian revenue authorities

have proceeded to issue notices to several other

multinational companies in similar situations. In light of

the prevailing uncertainties, fund managers face

challenges while structuring in India. This may prove to

be detrimental for the growth of Private Equity in India.

2009: A year of moderate activities for

PE On 05 Dec 2009 VCCircles, a VC / PE research firm

reported: “PE / VC deals show signs of comeback with

29 transactions in November.”

“Private Equity (PE) and Venture Capital (VC) firms cut,

on an average, one transaction a day in November 2009,

indicating clear signs of a pickup in deal activity.

Although the absence of large PE transactions meant

that the total deal value was lower in November this

year compared to same month last year, the number of

deals rose to 29 against 22 in November 2008.” 2

This was led by strong growth in VC and seed funding

which accounted for more than half of all PE / VC deals

last month. In the VC space, those striking multiple deals

included Intel Capital, Mumbai Angels and Gujarat

Venture Finance Ltd’s SME Technology Venture Fund.

According to the latest ‘Asian Private Equity Barometer’

report, produced by AVCG in association with KPMG

India, 3Q09 at US$932 million from 36 deals, exhibited a

small shift in value or numbers from 2Q09’s US$1.3

billion from 35 investments, and signs are that the

Indian market will remain consistent over the next few

quarters. CPP IB, a prominent Australian investor

participated once again in India in 3Q09, in partnership

with Kohlberg Kravis Roberts & Co., taking a 15% stake

in Aricent Technologies for US$255 million. IDFC Private

Equity, along with Oman Investment Fund and SREI

Infrastructure Finance, delivered another TMT deal, an

infrastructure one, with a US$224.4 million investment

into Quippo Telecom Infrastructure, and also bought out

BP Energy India’s wind power interests for $95 million.3

Laws of Attraction The total no of foreign Venture Capital firms registered

with SEBI is 135. Out of the 135, 20 firms were

registered in 2009. So what is the reason for the sudden

entry of foreign PE firms in India? The reason lies in the

underlying structure of the Indian Industry. Medium-size

companies in India need to access capital markets

because of the traditional shortage of private capital,

whereas in other parts of the world, similar size

companies are often privately or bank-funded and can

get away with being less transparent. Another factor

which favours the attractiveness of

India is that post the opening up of

the economy in 1991, the country

has seen huge improvements in

both capital markets regulation

and in corporate governance. In

fact, even some medium-size

companies in India compare

favourably with similar companies in industrialized

countries. The capital markets impose higher standards

of governance on these companies listed in India.

Furthermore, Indian capital markets regulation today is

of a high standard. However, enforcement has the

potential to improve further.

The Road Ahead India’s newly-elected government came to power with a

strong mandate for change: Infrastructure spend is

expected to increase along with various initiatives to

help the rural poor, including expansion of the

government’s NREGA (National Rural Employment

Company Investor Value ($ Mn)

Dish TV Apollo Management 100

IPL Theatrical Rights Dar Capital 71

Gateway Rail Freight Blackstone 64

Manthan Software Services ePlanet, IDG Ventures, Fidelity Ventures

15

Ansal Properties & Infrastructure

IPRO Growth Fund 14

In light of the prevailing uncertainties

regarding tax structure, fund managers

face challenges while structuring in

India.


Guarantee Act), which will put more spending power in

the hands of India’s rural consumers. Expansion of road-

building plans, from the current 2 km to 20 km a day by

2012, should help ease congestion and make the

country’s supply chains operate more efficiently.

At the same time, the creation of ready-to-run projects

in the power sector will make it significantly more likely

that the government will hit its target of building the

ultra-mega power projects (generating more than 4,000

MW each) via the public-private-partnership (PPP)

model. Regulations governing the flow of foreign capital

into the country are also expected to be relaxed

although the taxation treaties which streamline that

flow are being reviewed at present.

The Demand for ‘Owner Mentality’ On the human value addition front, more private equity

firms will hire operating partners who become deeply

involved in the management of buy-out investments

and other portfolio companies. In many cases, private

equity firms retain the incumbent management,

preferring not to rock the boat when buying out a

company. As seasoned managers with an in-depth

industry or functional expertise, operating partners act

as sage counsellors and critical advisors on operating,

financial and strategic issues for the portfolio

companies’ management teams. With a clear mandate

to add value to an investment within a fixed time-frame,

they can adopt a less sentimental approach and focus

unflinchingly on results to make fast decisions and act

rapidly where necessary. It has been shown that running

the business as an owner inevitably helps unlock value.

The benefit of this joint management ownership

program is that it instantly puts in place, highly

motivated owner executives to run the company from

day one.

The Rise of Entrepreneur-In-

Residence This concept is a popular practice among

Silicon-Valley start-ups and can be copied

successfully in the Indian terrain as it is

abundant with tech start-ups and start-ups

coming out of B-School campuses. Basically

this system allows a venture capital firm to support a

senior executive, who has had a significant experience in

executing programs in a certain segment or has been an

entrepreneur and can build a team around a technology

or a vertical. This model is gaining significance by

application by some VC firms such as Cannan Partners

and venture incubation organizations such as CIIE.

Are you listening, Mr. Brasco? PE is certainly not dead in India. Indian market is

currently the favourite destination of PE investors and it

will remain so in the foreseeable future. The relatively

nascent Indian financial sector has a large number of

practices to learn from veteran markets. The influx of an

entrepreneurial culture is due, but it is just a matter of

time before the same happens. Indian financial markets

need to structure the taxation system to entice more

investments from abroad. Indian domestic PE firms such

as IDFC PE and ICICI Ventures are getting matured and

will hopefully be able to develop a perfect ‘value

addition’ model. Success stories like the Bharti -Warburg

Pincus deal will be the order of the day. The wounded

Indian PE will strike back and its resurgence is actually

occurring in front of our eyes.

References: 1. PriceWaterhouse Coopers Global private Equity Report 2008 2. www.vccircles.com 3. Asian Venture Capital Journal Private Equity barometer Q3 2009. The author is a first year management student at NITIE and can be reached at [email protected]

Another factor which favours the attractiveness of

India is that post the opening up of the economy in

1991, the country has seen huge improvements in

both capital markets regulation and corporate

governance.

The influx of an entrepreneurial culture

is due, but it is just a matter of time

before the same happens.


A lot has been written about the sub-prime crisis of 2008

and its causes, but little has been probed into the ways of

avoiding or mitigating the aftershocks of such a

tumultuous meltdown that brought the world economy to

a grinding halt. The sub-prime crisis was certainly an

effect of information cascade that caused the people to

believe that the growth in real estate prices would

continue indefinitely. Statistics show that the real home

Source: The Businessweek dated June 21, 2007

prices for the US as a whole increased by 85% between

1997 and 2006 when they hit peak though there were no

fundamental changes in construction costs, population or

long term interest rates during the boom; a result of

speculation spelt by social contagion.

What is Home Equity Insurance?

This article is an attempt to apprise the readers of a

financial innovation through which risks of owning houses

can be redistributed among the institutional insurance

companies while ensuring that the individual

homeowners don’t have to bear the brunt of falling

prices.

Why an equity insurance? Why not simply insurance, the

kind we have against fire, burglary, etc? The reason is

simple. Both the securities markets and the insurance

industry help people manage risks but their payment

schedules and structures are grossly different. The

insurance industry pays only when an unexpected event

has occurred whereas in securities contracts one’s

position is valued almost every second resulting in a

change in value of one’s contracts. Since the value of real

estate keeps changing, traditional

insurance contracts cannot be of much

help. This issue can be resolved by

hedging through financial markets.

However, hedging through conventional

futures markets can also be problematic

as most of these contracts require posting

margins, margin calls, etc. Such

obligations can be burdensome for

ordinary households.

An option contract is one where one can

have benefits of both the insurance

industry by having a premium for entering

into the contract and the futures markets that allow for

frequent change in the value of the asset. By paying a

premium, the homeowners can buy a PUT option that

gives them the right to sell the house if the prices fall

below the strike price, thereby minimizing the losses

[Premium + Price at which the house was bought –

Current price – (Strike Price – Current Price)]. The option

writers in this case will be usually the real estate

developers or insurance companies.

An attractive strategy for the insurance companies would

be to build insurance products based on the futures

markets on real estate indices and pass it on to the home

owners. Such insurance products will completely

eliminate the downside risk for the home owners, while

Home Equity Insurance: Redistributing Risk

- Shailabh Kothari and Rishabh Bhandari, NMIMS


also limiting the upside potential. Having pass-through

options would allow them to realize the benefits of

appreciation of their home prices while minimizing

downside risk.

The traditional insurance contract can also be replicated

through home equity insurance by having European put

option contracts with exercise date contingent on ‘Life

Event’. The premium charged by the Insurance companies

will be low since such life events are rare. This makes it

profitable for Insurance companies and an effective

means for homeowners to hedge risks through financial

markets.

Example:

Consider a house bought at Rs. 25 lakhs. A put option is

bought at a premium of Rs. 1 lakh with a strike price Rs.

20 lakhs. The graph shows the profit/loss with and

without home equity insurance.

As can be seen from the graph, the downside risk is

minimized to a large extent while the upside potential has

not been affected much.

What can be the roadblocks in implementing

Home Equity Insurance?

Eliminating real estate risks by hedging through financial

markets seems very inviting. However, the fundamental

issue is that Real estate is very illiquid, unlike most of the

assets. The result is inefficiency in real estate market and

indices.

The options can’t be priced through the conventional

Black-Scholes model as it prices options based only on the

current price of the underlying asset, but real estate

prices depend on the trend in prices. The Black-Scholes

model also assumes that costless continuous arbitrage is

possible between the option market and the market for

underlying asset. This assumption is flawed in real estate

markets where transaction costs are enormous. Prof.

Robert Shiller of Yale University has come up with a new

option pricing model which eliminates the drawbacks of

Black-Scholes’, though its viability remains to be tested.

The entire home equity insurance is based on an index

instead of a case by case basis which may cause the

homeowners to sell their homes at less than what they

deserve and not be adequately reimbursed.

The individual homeowners may not be well versed with

the derivatives markets which may cause them to stay

away from it. Any product that is being designed must be

done by keeping in mind such homeowners who lack the

skills and knowledge possessed by financial analysts. Also,

it must be marketed in a way they find attractive and easy

to understand.

Concluding notes

It is imperative for the policy makers to constantly update

the mandatory risk management practices by way of

implementing innovations in the financial domain to avoid

events leading to crises similar to those that have

occurred in the past. At the same time, these innovations

must also be thoroughly tested before implementing on a

wider scale to ensure that they are not a threat to the

existing financial system. Home Equity Insurance can

definitely play a vital role in protecting the interests of

individual homeowners - the underside being that it may

cause losses to insurance companies during Life Events.

References 1) The Sub Prime Solution: http://www.vedpuriswar.org/book_review/The%20Sub%20Prime%20Solution.doc. 2) Home Equity Insurance by Robert J. Shiller and Allan N. Weiss: http://cowles.econ.yale.edu/P/cp/p10a/p1007.pdf 3)http://kth.divaportal.org/smash/record.jsf?searchId=1&pid=diva2:248800 The authors are management students at NMIMS and can be reached at [email protected] and [email protected]

Payoff

-30

-25

-20

-15

-10

-5

0

5

10

1 5 9 13 17 21 25 29

Current price of house

Prof

it/Lo

ss

Profit/loss

with put

option

Profit/loss

without put


The numerous factors which play in favour of the dollar as

the appropriate choice include its size,

quality and stability of the dollar asset

markets, particularly the short term

government securities market where

the central banks tend to be the most

active. The high liquidity of these

financial markets makes the dollar an

excellent medium for exchange.

The history of the US Dollar as the

choice of the reserve currency dates

back to the year 1944 near the end of

the World War II.

There was a vacuum

created in the

World financial

system due to

weakness of pound

sterling. With the

world economy and the international

economic and financial systems in near

shambles, delegates from all 44 allied

nations gathered in Bretton Woods,

New York with an aim of setting up a

system of rules, procedures and

institutions to regulate the

international monetary system. There

the US Dollar took over the role that

pound sterling / gold had played in the

previous international financial system.

In 1971, the Bretton Woods System was revoked by USA.

At that point in time the amount of gold backing the dollar

had depreciated to record low

levels. No other currency

emerged as an alternate reserve

currency. Japan was riding on a

huge current account balance.

Although the German Mark had a

reputation as one of the world's

most stable currencies, its

contribution in the world

economic affairs was not

overwhelming. French Franc was

also not strong enough to play

the role of a reserve currency at

that point of time. The Swiss

Franc was based on full gold

convertibility until 2000. So after

a brief marriage with the

Smithsonian agreement, the

world moved on to a free float economy and dollar

remained the dominant currency in the world market.

The demand of dollar was artificially inflated after the

collapse of the Bretton Woods system. USA made good

use of its relations with Saudi Arabia, one of the largest oil

producers. It supported the power of the House of Saud in

exchange for accepting only U.S. dollars for its oil in 1972-

73, just after the collapse of the Bretton Woods

arrangement. Saudi Arabia received military cover and

recognition of the legitimacy of the monarchy in

exchange. The rest of OPEC soon followed suit. As

COVER STORY AWARD WINNING ENTRY

Dollar Docked

- Rohit Kumar, NITIE

As the

demand

of oil was

increasin

g at an

ever

increasin

g rate, the

demand

of dollar

could only

increase.

http://en.wikipedia.org/wiki/Swiss_Franc

http://en.wikipedia.org/wiki/Swiss_Franc


everybody in the

world needed oil,

they had to hold

dollars. As the

demand of oil was

increasing at an ever

increasing rate, the

demand of dollar

could only increase.

Thus oil became one

of the most important

strategies in the USA

policy. Until recently

oil could only be

bought and sold in

dollars, (except from

2008 at Kish, Iran)

thus inflating the demand of the dollar. So the earlier

system of exchanging dollar to gold (Bretton Woods

System) was now changed to dollar exchange for oil. As a

matter of fact, USA has never taken any challenge to its oil

policy lightly.

Mr. Saddam Hussein is said to have planned to sell oil in

non-dollar currencies during 2002. Suddenly biological

weapons were claimed to be present

in Iraq and war was imposed on her.

It is another fact that these

biological weapons and ‘Weapons of

Mass Destruction (WMD)’ were

never unearthed. Iran planned a

new oil bourse which would trade in

any currency way back in 2005. It

finally opened in February 2008

after a lot of hiccups which were

said to be externally influenced. Iran

was also on the verge of war

because it was said to be in process

of manufacturing nuclear bombs.

In the not-too-distant future, all that

may be history. ‘The Independent’

reported confirmed talks between Gulf Arab and Chinese

representatives in Hong Kong of oil trade in non-dollar

denomination. Brazil has shown interest in collaborating

in non-dollar oil payments, along with India.

The recent downturn has shown that we can’t have only

one reserve currency. The size of the US economy has

become relatively smaller to the amount of global balance

it is expected to serve. Its trade deficit is continuously

increasing. The US dollar peaked in value in 2000-2001

and has been in a significant decline ever since. There was

a relatively brief period in 2008 when the dollar

rebounded quite sharply due to the worldwide financial

crisis. But since then, the dollar has resumed its long-term

downtrend. There were voices which argue that it was

excessive dependence on dollar which led to world being

dragged into the mess created by the US financial sector.

They said that another reserve currency was required to

de-risk the world economy from another downturn.

While making a decision about the choice of a reserve

currency there are four factors which are largely

considered – share of world output and trade,

macroeconomic stability, degree of financial market

development and network externalities. There had been

Figure 1 - Variation of dollar against currencies

The US

dollar

peaked in

value in

2000-2001

and has

been in a

significant

decline ever

since.


multifarious reserve currencies

over the previous centuries and

the dollar has fluctuated widely in

the past 65 years as well.

The ‘shop till you drop’ attitude of

Americans is showing signs of

change with personal savings rate

rising to about 7% from less than

1% a year before. With increase in

savings, spending is less. As

consumer spending accounts for

70% of USA spending, the

economy is going to contract in

short term due to increased saving

rate. Leading economists call it

“the paradox of saving”.

The Commission of Experts of the

UN General Assembly on Reforms

of the International Monetary and

Financial System, led by Joseph E.

Stiglitz, has suggested a gradual

move from the US dollar to the

Special Drawing Rights (SDRs). It

wants to increase the share of

SDRs in total international

reserves in a gradual manner

starting from an issue of $ 250

billion.

Hong Kong is issuing bonds

denominated in Chinese Renminbi

(Yuan). Countries are starting to

use their currencies in mutual

trade instead of the dollar (China

and Brazil). Thus the US would

have a tougher time financing its

trade deficit. Would China be the

next superpower? Only time would

have a definite answer.

China was the first economy to

pitch for the dollar’s replacement as the world’s reserve

currency. ‘The stability of the international financial

system can’t hinge on the currency of one single country,

even though it is the largest economy in the world’ said

Hua Ercheng, Chief Economist at the China Construction

Bank in Beijing. However, the bigger question remains –

which currency will be able to replace the mighty dollar as

the currency reserve? China has been criticized roundly

for the handling of its own currency Renminbi. Talks about

the replacement of the dollar as the reserve currency had

proliferated at the G-20 summit held in London in early

April. Thereby nations such as Russia, France and Brazil

had suggested that the US Dollar should be supplemented

by the other major currencies as a shared reserve

currency. President Dmitry Medvedev of Russia had also

questioned the future of the US Dollar as a global reserve

currency and had said that using a mix of regional

currencies would enable in making the world economy

more stable.

This is similar to Special Drawing Rights (SDRs) created by

the International Monetary Fund in 1969 in an effort to

stabilize the international foreign exchange system. The

basic definition of SDRs given by the IMF is as follows –

“The SDR is an international reserve asset, created by the

IMF in 1969 to supplement its member countries’ official

reserves.” Its value is based on a basket of four key

international currencies – US Dollar, Euro, Yen and British

―The stability

of the

international

financial

system can‘t

hinge on the

currency of

one single

country,

even though

it is the

largest

economy in

the world‘‖ -

Hua

Ercheng,

Chief

Economist

China

Construction

Bank


Pound. The US Dollar itself makes up almost half of the

value of the SDR. The exact amounts of currency making

up SDRs are determined by the IMF Executive Board in

accordance with the relative importance in international

trade and finance every five years.

The IMF’s so-called Special Drawing Rights could be used

as the basis for

a new currency.

Its first Deputy

Managing

Director John

Lipsky famously

said “There are

many, many

attractions in

the long run to

such an

outcome.”

Arguments against making SDR

the world's reserve currency

include the fact that the US

dollar, the Euro and the Pound –

which make up the large majority

of SDRs – have all lost value since

late 2007 when the recession

began. Why replace a falling

dollar by an index which so

heavily includes the dollar? Also,

SDRs do not contain the Chinese

Renminbi, Indian Rupee,

Australian Dollar or Canadian

Dollar, all of which are important

benchmark or secondary global

reserve currencies. However,

even if the dollar is replaced by

the SDR, the IMF does not have

the financial prowess to

safeguard the exchange risk.

SDRs would have to be delinked

from other currencies and issued by an international

organization with equivalent authority to a central bank in

order to become liquid enough to be used as a reserve.

Russia has proposed several regional reserve currencies

including the ruble as a part of the response to the global

financial crisis. Dominique Strauss Kahn, MD of IMF said

that the Remnimbi can be added in the future to the

basket of currencies of SDRs, “So, this is not a quick, short

or easy decision,” said Mr. Lipsky, adding that it would be

“quite revolutionary.”

The status of the dollar as the reserve currency may also

be challenged by the Euro, the other global currency. It

has equivalent advantages and fewer risks offered against

the dollar. The Euro area does not have a large current

account deficit as a whole (although Germany has a large

surplus and Spain, Greece have a large deficit). The Euro

area intra trade is very high. However Euro, in spite of its

huge success in Europe remains a regional currency. Euro

has not overcome its self-imposed limits on usage and

adoption moving beyond the boundaries, due to the

maintenance of the ERM-II Exchange Rate Stability

requirements and the Maastricht deficit, inflation and

interest rate criteria. The share of dollars in global

reserves stands almost thrice of the euro.

The power of "incumbency" is conferred by the "network-

externalities" that accrue to the currency that is

dominant. Together these factors make it unlikely there

SDRs would

have to be

delinked from

other

currencies

and issued by

an

international

organization

with

equivalent

authority to a

central bank

in order to

become liquid

enough to be

used as a

reserve.

http://search.bloomberg.com/search?q=John+Lipsky&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1

http://search.bloomberg.com/search?q=John+Lipsky&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1


will be a large or abrupt change in the dollar's reserve

currency status. The sheer magnitude of dollar assets in

the official reserves of foreign central banks and the

realistic prospect of continued, and perhaps disorderly,

depreciation of the dollar

against most currencies, place

central banks at considerable

risk of incurring large capital

losses on their dollar asset

holding. With more than

enough dollar reserves to

meet liquidity needs, prudent

asset management would

seem to dictate some

diversification away from the dollar and towards the euro.

The only reason why the Dollar hasn’t collapsed

completely is because economies largely continue to

recycle their surplus wealth and

trade surpluses back into dollar-

denominated assets. One

columnist connects the dots with

regard to the forex implications,

“Less Chinese intervention to

prevent renminbi strength would mean China, slowly over

time, would build up fewer dollar reserves.” In other

words, economies no longer concerned with pegging their

currencies, would have very little reason to build up large

pools of reserves.

We all are entitled to our opinions, but not to our facts. So

let’s get the facts right before we fell into the folly of

stumbling to forecasting. As much as 70 percent of the

world’s currency reserves are held in dollars, according to

the IMF, leading to calls for nations to diversify their cash

piles to avoid excessive exposure to the U.S. economy as

it quadruples its budget deficit in a bid to counter the

worst recession since the Great Depression. To quote the

Economist “It is hard to think of a parallel in history. A

country heavily in debt to foreigners, with a government

deficit it is making little effort to control, is creating vast

amounts of additional currency. Yet it is allowed to get

away with very low interest

rates. Eventually such an

arrangement must surely

break down and a new

currency system will come

into being, just as Bretton

Woods emerged into the

1940’s.” Cost of an abrupt

switch over from dollar to

other reserve currency is

prohibitively high. Its replacement as the reserve currency

of central banks would be slow and painful process. As

IMF chief Mr. Kahn said about a new global currency

based on SDR “it is not going to happen tomorrow, but it

may happen in 10 years.” The

replacement seems

imminent. When and which

currency is a question which

only time would tell.

References

1. http://windowtowallstreet.com/oildollarvalues.aspx

2. http://whatmatters.mckinseydigital.com/currencies/c

hina-s-exchange-rate-policy-and-what-it-means-for-

the-dollar

3. http://en.wikipedia.org/wiki/Special_Drawing_Rights

The author is a first year management student at NITIE

and can be reached at [email protected]

―My greatest challenge has been to

change the mindset of people. Mindsets

play strange tricks on us. We see

things the way our minds have

instructed our eyes to see.‖ — Prophet

Muhammad

“History is a nightmare from

which I am trying to awake” -

James Joyce

http://online.wsj.com/article/SB125374798483235707.html


The financial meltdown, which brought the world down to

its knees, caused a major havoc in the money markets in

the US in 2007-08.

The Federal Reserve controls liquidity in the system

through its network of Primary Dealers (PD). When the

interbank markets are functional and smooth, these PDs

distribute liquidity to banks and thus throughout the

system facilitating transactions in the broader economy.

Banks lend to each other based on their evaluation of

creditworthiness of counterparties.

During the crisis period however, a sudden loss of trust

amongst the banks resulted in a reduction in the

willingness or ability of banks to distribute reserves

through interbank transactions, thereby severely

disrupting the funding markets. Banks scaled back their

term lending to other banks as they grew uncertain of the

creditworthiness of their counterparties as well as their

own ability to raise future funds. This severely strained

liquidity conditions in the market in late 2007, resulting in

AWARD WINNING ARTICLE

Innovative Monetary Policy Tools

- Ajay Jain, IIM Bangalore

EXECUTIVE SUMMARY The financial meltdown, which brought the world

down to its knees, caused a major havoc in the

money markets in the US in 2007-08. The Federal

Reserve controls liquidity in the system through its

network of Primary Dealers (PD). When the

interbank markets are functional and smooth, these

PDs distribute liquidity to banks and thus throughout

the system facilitating transactions in the broader

economy. Banks lend to each other based on their

evaluation of creditworthiness of counterparties.

During the crisis period however, a sudden loss of

trust amongst the banks resulted in reduction in the

willingness or ability of banks to distribute reserves

through interbank transactions, thereby severely

disrupting the funding markets. Banks scaled back

their term lending to other banks as they grew

uncertain of the creditworthiness of their

counterparties as well as their own ability to raise

future funds. This severely strained the liquidity

conditions in the market in the late 2007.


massive widening of spreads between the overnight inter

- bank lending rates such as the Overnight Index Swap

(OIS) and term London Inter-Bank Offer Rates (LIBOR),

which is considered to be a measure of interbank funding

pressure.

Failure of conventional tools

In a bid to address the rapidly deteriorating financial

conditions, the Fed initially resorted to the conventional

monetary policy tools of cutting the fed funds rate and

the discount rate. Unfortunately, these tools failed to

break the halt in the interbank market forcing the Fed to

design innovative tools to inject liquidity into the market.

The Fed tried to flush the market with liquidity through its

Open Market Operations but owing to a heightened

reluctance of banks to lend to each other in the inter-bank

money market, the banks ended up hoarding the money

the liquidity seizure continued. The hoarding of money

was also clearly visible from the falling money multiplier in

the US economy.

As an alternate measure, the Fed also cut down the

discount rate to encourage the depository institutions to

borrow from the discount window. In response to the

soaring strains in the money market,

the Federal Reserve brought down

the discount rate premium, from 100

basis points to 25 basis points. The

Fed also made the terms of loans

more flexible. However, their efforts

failed to bring the desired results, due

to the so-called ‘stigma’ problem:

during a financial crisis, the banks may

be reluctant to borrow from the

discount window, worrying that such

actions would be interpreted by the

market as a sign of their financial weakness.

As it became evident that the conventional monetary

policy tools were not fetching the desired results, the

Federal Reserve innovated to introduce new facilities to

provide liquidity to those banks which needed it the most.

The Monetary Policy Tools innovation -

Term Auction Facility (TAF) As the liquidity conditions deteriorated, the Fed

introduced a new tool called TAF to make funds directly

available to the banks.

TAF provided term funding on a collateralized basis, at

interest rates set by auction. The Fed auctioned fixed

amount of short-term loans to depository institutions that

were judged to be sound by their local reserve banks. The

minimum bid was set at an overnight indexed swap rate

relating to the maturity of the loans. This credit facility

allowed depository institutions to borrow from the Fed

for 28 or 84 days against a wide variety of collateral and at

rates below the discount rate. The facility improved

liquidity by making it easier for financial institutions to

borrow when the markets are strained and not operating

efficiently.


TAF reflects some features of both open market

operations (OMO) and discount window lending. It

distributes the lending to the participants through

auctions of set amounts of funds in a fashion similar to

OMOs. At the same time, using the discount window and

its collateral management operations, it lends on a

collateralized basis. What sets the TAF apart from the

discount window, however, is the competitive auction

format and use of a market-determined interest rate

instead of a fix policy rate. Also, TAF offers an anonymous

source of term funds without the stigma attached to

discount window borrowing.

The TAF represents an improvement with respect to

repurchase agreements in their capacity to provide

liquidity. First, the range of collateral it accepts is widened

from General Collateral to discount window collateral.

Second, by providing funds for a longer term, it eliminates

the need to roll over the loans every day or every week.

And third, unlike discount window loans, the money goes

to the institutions that value it most as the interest rate is

determined in the marketplace.

Asset-Backed Commercial Paper Money

Market Fund Liquidity Facility (AMLF) The Asset-Backed Commercial Paper (ABCP) Money

Market Mutual Fund (MMMF) Liquidity Facility was

intended to foster liquidity in the ABCP market in

particular and money markets in general.

This lending facility provided funding to depository

institutions and banks to finance their purchases of high-

quality ABCP from money market mutual funds who were

finding it difficult to meet heavy redemption demands by

investors. This facility was created to counter the large

number of redemptions at money market funds which

had left these funds in a quandary.

The funds that had redemptions in excess of their cash

and Treasury positions were facing a situation where they

could meet their redemption needs only by selling other

assets. But these other assets, high-grade short-term

paper, had become unusually illiquid given the

uncertainty in the market about the creditworthiness of

the issuers. So sales could occur only at a substantial

discount. Without AMLF, money market funds would have

been forced to make the unpleasant choice between

either suspending redemptions, or liquidating paper at a

deep discount.

This facility allowed highly rated ABCP to be pledged by

eligible borrowers (banks, bank holding companies, or

brokers) to secure advances. The Federal Reserve charged

the primary credit rate/Discount Rate for the loan.

With announcement of the AMLF, redemptions from

prime funds slowed appreciably.


Term Securities Lending Facility (TSLF)

TSLF as a lending facility allowed primary dealers to

borrow Treasury securities on a 28- day term by pledging

eligible collateral. The range of securities which can be

used as collateral was wider than for the TAF. TSLF is a

‘bond-for-bond’ form of lending and it affects only the

composition of the Fed’s assets without increasing total

reserves. The eligible securities under the facility included

investment grade rated mortgage-backed securities (MBS)

not under review for downgrade, and all securities eligible

for repo agreements. In exchange, the primary dealers

received a basket of Treasury general collateral, which

includes T-bills, T-notes, government bonds and inflation-

indexed securities form the Fed's system open market

account. So, operationally, the TSLF is an auction process

where PDs bid for Treasury securities.

While the TAF was aimed at easing interbank lending, the

TSLF was directed toward the spreads on MBS that had

widened as financial market participants started to shun

them. The idea was that if primary dealers can exchange

MBS for Treasuries through this lending program, then

asset managers, traders and other market players would

be willing to hold them again.

Primary Dealer Credit Facility - PDCF

The PDCF is an overnight loan facility that provides

funding for up to 120 days to primary dealers in

exchange for collateral at the same interest rate as the

discount window does. This facility was initiated to

provide an equivalent of discount window (available

only to depository institutions) to the primary dealers

(usually investment banks). This facility allowed primary

dealers to borrow against a relatively broad set of

collateral, pretty much similar to the discount loans

made to commercial banks. However, the PDCF was

immediately popular unlike the traditional discount

window, which commercial banks continue to shun.

Borrowing averaged slightly over $30 billion per day for

the first 10 days since its introduction.

There were two objectives behind the launch of PDCF. The

first was to ensure the liquidity of the investment banks.

With this facility, they now had direct access to

borrowing. Secondly, the PDCF was designed with the

idea of helping to reduce spreads on the securities

included in eligible collateral. Since primary dealers could

now take a relatively broad set of bonds to the Fed and

obtain immediate cash, the idea was that these securities

should now be more readily acceptable as collateral in

private borrowing arrangements as well. This facility thus

allowed the Fed to extend liquidity assistance directly to

major investment banks that were previously ineligible.

References Olivier Armantier, Sandra Krieger, & James McAndrews, The Federal Reserve’s Term Auction Facility www.newyorkfed.org www.dallasfed.org www.bloomberg.com The author is a second year management student at IIM Bangalore and can be reached at [email protected]


Companies listed on the stock exchange are eligible to

raise funds in the domestic

market by placing securities

with Qualified Institutional

Buyers (QIBs). These

securities can be equity

shares or any securities

other than warrants, which

are convertible into or

exchangeable with equity

shares.

The major benefit of

Qualified Institutional

Placements (QIPs) is that it

involves lesser disclosures

and does not require a pre-issue filing with SEBI which

gradually has made it a preferred instrument for entities

to raise funds. This raises the important question - Is QIP

an innovation churned out by SEBI or is it just a more

convenient way of raising capital, introduced to

encourage companies to raise more from domestic

markets?

In the first year of its introduction, 16 QIPs were

introduced, which grew to 29 QIPs in the year 2007

through which about $5 billion (about Rs. 20,011 crore)

was raised. The year 2008 saw a bear run grip the market

and even QIPs could not provide enough fuel as only 4

deals were made while on the other hand, deals struck

during the Bull Run turned into losses for most of the

institutions. It was thus concluded that a secondary

market revival was necessary for the QIPs to revive.

However in the year 2009, QIPs made a comeback backed

by some of the bigger deals, like those by Unitech (Rs

2,789.33 crores) and Axis Bank (Rs 3,007 crores). A total of

31,102.25 crores was raised through 42 deals. This is seen

as a recovery on the back of a strong market run. The

surge in preference is viewed as result of a few

advantages QIPs offer, firstly it being a hassle free method

and secondly it being less time

consuming.

SEBI defined a pricing norm for QIPs

which stated, “The average of the

weekly high and low of the closing

prices of the related shares quoted on

the stock exchange during the six

months or two weeks whichever is

higher preceding the relevant date”.

One of the major changes made by

SEBI in the year 2008 to boost

investments was the pricing norms of

Qualified Institutional Placements – Innovation or Convenience

- Abhinav Saini, NITIE

SEBI, at the time of introducing

Qualified Institutions Placements

(QIPs) in May 2006, defined it as

an additional mode for listed

companies to raise funds from

the domestic market. This,

according to SEBI, was

introduced to make the market

more competitive and efficient.


QIPs, allowing it to be based on the two-week average

share price, so that companies could price the issue closer

to the market value of the shares. In 2009 again, the

investment bankers had requested for a change in pricing

norm to allow current market price as the issue price to

bring down the difference, a request which was rejected

by SEBI.

QIP and the Domestic Fund Instruments QIP is majorly seen as competitor to other domestic fund

raising options and an alternative way of meeting the

same capital requirement, though an easier and less

costly route.

When we analyze the preference of each as a money

raising tool by companies, we observe a paradigm shift

towards QIPs in the year 2009. This can be majorly

contributed to lower confidence that companies

had in IPO successes in that particular year and

the positive outlook of QIBs, a lower inclination

towards rights issues and derailed interest in the

execution of FPOs.

In the year 2009, a whopping 60% of the total

domestic capital raised was through the QIP

route. Unaffected by the lower prices in the

previous years and the losses incurred by the

institutions, QIPs managed to steal the limelight in

the fund raising process of Indian corporations.

This share of investment through QIPs, in terms of

percentage and amount stand highest ever since

2007, a year in which close to 25% was raised through

QIPs.

When we study the distribution of domestic

funds raised over the last three years, a period

which has experienced both bull and bear

show, we observe that QIPs have managed to

grab the share of funds earlier raised by rights

issues. It must be taken into consideration that

for the companies which do not mind dilution

of stakes, QIPs offer a much better and more

convenient source of fund as compared to

rights issue. Rights offers are made at a

discount to the market price, and hence are not

preferred by existing shareholders' especially

when the secondary market is doing well and

this turns companies the QIP way.

QIP and Overseas debt funds Qualified Institutions Placements, at its introduction was

launched as an instrument to attract the Indian

companies which were increasingly attracted towards

international funding through depository receipts,

something that was conceived as undesirable export of

Indian equity.

When we consider the capital source fund channels used

by companies in the last 3 years, it is observed that QIPs

have come strongly in comparison to the overseas funds

options. In the year 2007, the overseas funds had started

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2007 2008 2009

Do

me

stic

fu

nd

s (i

n c

rore

s)

Domestic Fund distribution in 2007-2009

Rights Issue

FPO

IPO

QIP

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2007 2008 2009

(in

Rs.

Cro

re)

Funds raised through QIP and Depository Receipts (DR)

QIP

DR(ADR & GDR)


feeling the recession heat, which burnt them in the year

2008, which saw only $100 million (Rs 467 Crores) being

raised by India Inc. through this channel. This was majorly

seen as drying up of credit, volatility of the dollar and

easing of pricing norms of QIPs.

Even though funds raised through the ADR and GDR

routes made a strong comeback to jump back to $3.44

billion (Rs 16000 crores) in 2009, they still stood small in

comparison to the QIPs. Also it must be taken into

consideration that only 13 issues of DRs were issued in

the year and the major portion of fund raised was the

$1.5 billion raised by Sterlite Industries. When we

compare this to 42 issues of QIPs, it is safe to say that QIP

had been the flavour of the year and has managed to

notch up some of the desired space from the global debt

instruments.

The Future Ahead When we peek into the year 2010, it looks promising with

around 54 companies waiting in line with valid

shareholder approvals in hand to raise an aggregate

capital of about Rs. 42,942 Crores, a projected growth of

approximately 36%. If all these QIPs are successfully

executed, it would result in establishment of a QIP fund

raising structure at par with other instruments.

As observed from previous years, the success of QIP in

2010 will depend majorly on the performance of the

secondary market. Estimating the future of QIP and its

standing in the domestic fund market, based on

conclusion drawn from the last year data would not be

sufficient, given the volatile nature of the market and the

regular changes in government policies in these years. The

performance of QIPs is yet to be gauged over longer

period of time and it still requires restructuring as the

market adapts to the new offering.

It is yet to be seen how the performance of QIPs will

change, once the western economies recover from the

recessionary setbacks and the government pulls the rates

back. It would be interesting to see whether companies

would still prefer domestic funds or they would look to

raise capital through foreign debt instruments.

One of the major hurdles seen in the path of QIP growth is

the pricing norm which has affected the valuations gained

by companies. The minimum price set by SEBI, to uphold

minority shareholder interest, leaves the issuer with no

room to negotiate on price, as the pricing formula is rigid.

So, even though there are many deals in hand, the

regulatory floor price might prove to be a dampener.

When we quantify the impact of QIP on the stability of

share price of a company, it proves to be a weakening

instrument as it allows control of share prices in hands of

few institutions, which may exit, leading to a sharp

decrease in the share price.

Taking a holistic view of the domestic and overseas fund

raising market situation since the introduction of QIP, it is

appropriate to tag QIP as a bit of both Innovation and

Convenience. Innovation which has managed to create its

own space in the domestic corporate capital finance

market. Convenience because of what it offered,

especially to the cash starved companies in the credit

crunch period. At times when retail investments were not

looking up, QIPs managed to shine distinctively in the

funds sky. It is still early days hence future amendments

by SEBI and market conditions will play a major hand in

the further development of Qualified Institution

Placements.

The author is a first year management student at NITIE

and can be reached at [email protected]


Development Program on Derivatives, August 2009 Dun & Bradstreet is the leading provider of business-to-

business credit, marketing, purchasing, collection services

and decision-support services in India and worldwide. As

part of D&B‘s Financial Education Solutions (FES), D&B‘s

team of highly qualified professionals and academicians

regularly conduct innovative, high quality, comprehensive

financial education and training programs.

A day long Executive Development program on

Derivatives was conducted by D&B at NITIE on 23rd

August 2009. The workshop covered areas like Introduction to Derivatives, Indian Equity F&O

Derivatives Market, Futures, Options, Options Pricing Overview, Basic Trading Strategies using

Option, etc. Around 125 students attended the workshop with students themselves evaluating

different exotic and vanilla options and deciding where best they can be applied.

Prerana 2009 The best brains from India‘s premier business

schools were in Mumbai from the 5th to the 7th of

November, as NITIE played host to Prerana 2009,

the annual management festival of the institute.

The 3 day extravaganza which aimed at promoting

business excellence, was a grand success.

With Prerana Business Meet 2009, NITIE continued

its tradition of providing the students with a

platform to meet and interact with luminaries from

the Indian corporate sector. This highly awaited elite business conclave was a resounding success,

with the stalwarts like Ms. Meera Sanyal, Country Executive, Royal Bank of Scotland India and Mr.

Narayan Ramachandran, Country Head, Morgan Stanley India.

Events @ NITIE


The other big chain of events was the Summer Project Contest where students benchmarked their

summer projects against the best in the country. This year, the Summer Project Contest received over

500 entries across 5 verticals of management namely Marketing, Finance, IT, HR and SCM.

‗Beat-the-$treet‘ was a legacy event conducted by $treet that asked participants to explore ‗fund-

raising options‘ for a company in the midst of a secondary market slowdown.

B-School Trading Competition, November 2009 NITIE was part of a pan India B-School Stock Picking

and Derivatives Trading Competition from November

16 through 27, 2009.

The online competition was played across India's top

16 B-Schools and over 500 teams competed for the title

of Stockezy Stock Market Pundits 2009. The first

round was a stock picking game where the picks were

evaluated according to their returns. Three teams

from every b-school qualified for the final round which was on Futures and Options Strategies.

NITIE had the second largest participation from the pool of colleges selected.

Investment Banking and Equity Advisory Course This is an ongoing training program for MBA students wanting to build their career in Investment

Banking and Equity Advisory. The program is run by 4

professionals from the industry. The focus of the program is to

give an in-depth knowledge about the ground realities of

Equity Research, Project Finance, Corporate Finance and

Investment Banking.

Samiksha - Deliberations on Matters that Matter

‗Samiksha‘ a series of panel discussions on contemporary business themes, born out of a need for

greater interaction between the industry and the academic community, has been successfully

bringing together students and experts from the industry since its inception.


After the demise of some of the biggest banking and

financial companies worldwide, Samiksha tried to

find out how the RBI regulated Indian Banking

sector has been evolving in conjunction with the

Indian economy. The honchos from the Indian

Banking industry were invited to discuss the topic

―Indian Banking – An Evolving Landscape‖ on the 5th

of February 2010.

The distinguished panelists included Mr. Pramod Kasat, Director - Credit Suisse, Mr. Abhijit Biswas,

Director - Equirus Capital, Mr. Sanjay Agarwal, DGM - Global

Risk Management - ICICI Bank and Mr. Aspy Engineer, Senior

VP - Retail Banking - Axis Bank

B Gyan B Gyan, an industry interaction session at NITIE was

organized on the 16th of February 2010. The topic for the session

was ‗Venture Capital Funding‘ and Mr. Vipul Mankad,

President SIDBI Ventures, delivered an enlightening lecture on the same. Budding entrepreneurs

also presented their business plans to Mr. Mankad, who obliged by offering his views on the same.

1. Establish the connect for the following

FIN- QUIZZITIVE


2. Connect the 2 pictures

3. Mathematicians in Poland

have pointed out a new

problem with these items.

Because they are struck

asymmetrically, using different

dies that depict national

symbols on one side and a standard map and denomination on the other, they may produce

faulty results when spun by gamblers. The reality is, when students in Poland spun them for

250 times, King Albert of Belgium appeared 140 times, instead of a fair 125. What are we

speaking about?

4. The American public worry that they were becoming too materialistic resulted in

something which focused on intangibles that make life worth living. It was the

brainchild of McCann-Erickson. What are we talking about?

5. Connect the following

6. Establish the connect

Mail in your answers to

[email protected] with

the subject ‘Fin - Quizzitive’

before the 15th

of March 2010.

Winner to get a cash prize of

Rs. 1000/-


The Team that is … $treet

$treet is a student run Finance Interest Group at NITIE that assists

budding managers in assimilating class-room as well as practical

learning; thus nurturing them to evolve as better managers. Having

completed 5 years of existence, $treet has grown from being an informal, in-house discussion forum to

a truly national b-school society. In the year 2009-10, $treet organized a wide variety of activities

ranging from workshops to lecture series to inter b-school competitions. Come 2010, the financial sector

and the broader markets are trying to come to terms with an economy evolving out of slowdown.

$treet aims to play an active role in helping the students comprehend the effects, challenges and

opportunities that are thrown by the current economic situation. We also aim to strengthen the Brand

‗$treet‘ by fostering partnerships with the alumni, academia and the corporate world.

The Team:

Aakash Chawla [email protected] Gaurav Bajaj [email protected] Gaurav Malhotra [email protected] Ritika Arora [email protected] Rajneesh [email protected]

About Us …

About NITIE

The National Institute of Industrial Engineering (NITIE), Mumbai is

a centre of excellence recognized by the Government of India. It was

setup in 1963, in collaboration with the International Labour

Organization (ILO). Since its inception, NITIE has been providing

solutions to complex problems of the industry and business. NITIE

today is constantly ranked among the top 10 business schools in the

country and its Post-Graduate Programmes are among the best in the

country. Throughout the years, NITIE and its alumni have carved a

niche for themselves in the industry.

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