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Economic rollers Market updates August 6, 2012 Issue 28 Volume III Nishka A FINANCIAL NEWS LETTER FROM CUIM KENGERI RBI column Metal and Mining Sector Review Finance buzz Finance quiz

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Economic rollers

Market updates

August 6, 2012

Issue 28

Volume III

Nishka A FINANCIAL NEWS LETTER FROM CUIM KENGERI

RBI column

Metal and Mining Sector Review

Finance buzz

Finance quiz

RBI COLUMN 01

ECONOMIC ROLLERS 03

CARTELIZATION OF CEMENT AND ITS LONG

TERM IMPACT

04

INDIA’S LOVE FOR GOLD HARMS GROWTH 06

INDIAN METALS AND MINING SECTOR: THE

HIDDEN POTENTIAL

08

FINANCE BUZZ 10

STOCK ANALYSIS-I

STOCK ANALYSIS-II

MARKET ROUND UP

11

12

13

CAMPUS POLL 14

PHOTO FIND 15

CROSSWORD 16

FINANCE QUIZ

ANSWERS

17

18

Ritesh

 Kejriw

al,  2

 MBA

 F1  

1

Metal   and   Mining   industries   are   an  indispensable   part   of   an   economy;  they  form  the  backbone  of  industrial  development   of   any   country.   The  metal   industry  consists  of  two  major  groups;   Ferrous   metals   and   Non-­‐Ferrous   metals.   India's   metal   and  mining   industry   grew   to   US$   120.4  billion  in  2011,  an  increase  of  27  per  cent  from  2010.  Iron  and  steel   is  the  largest  segment  of  the  Indian  metals  and   mining   industry,   accounting   for  74   per   cent   of   the   overall   industry  value   followed   by   coal   segment  accounting  20.8  per  cent.    

A  growing  sector:  

Our   main   focus   in   this   issue   will   be  Ferrous   metal   which   consist   of  different   types   of   steels   and   Iron.  

2

India   has   become   4th   largest   producer  of   crude   steel   in   the   world   as   against  the  8th  position  in  2003  and  is  expected  to  become  the  2nd   largest  producer  of  crude   steel   in   the   world   by   2015.   The  steel  sector  contributes  to  nearly  2%  of  the  GDP.  

The  major  producers  Steel  Authority  of  India   Limited,   Rashtriya   Ispat   Nigam  Limited,   Tata   Steel,   Essar,   JSW   Steel,  JSW   Ispat   Steel   and   Jindal   Steel  together   produced   29.984   MT   during  2011,   which   was   a   growth   of   8.07%  compared  to  last  year.  

The  current  market  cap  of  Indian  Metal  and   Mining   sector   is   around   $105  billion   and   major   share   held   by   Coal  India,   Tata   Steel,   SAIL,   Sterlite,   Jindal  Steel,  NMDC  etc.  BSE  metal   index  gave  

3

positive   return  of  more   than  21%   in  Q4FY2012,   Steel   stocks   gained  during  4QFY2012  mainly  on  account  of  improved  demand  in  the  domestic  market,   increased   steel   prices.   JSW  Steel   gained   42.2%   in   4QFY2012   on  the   hope   of   lifting   of  mining   ban   in  Karnataka,  fall   in  iron  ore  prices  and  improvement   in   utilization   levels   at  its   Karnataka   plant.   SAIL   and   Tata  Steel   stocks   gained   15.6%   and  40.7%,   respectively.   On   the   non-­‐ferrous   side,   stock  prices  of   Sterlite,  Hindalco,   Nalco   and   Hindustan   Zinc  increased  by  23.8%,  11.7%,  7.0%  and  10.6%  respectively.  

 

 

METAL  AND  MINING  SECTOR  REVIEW  

(Continued)  

1

Q1FY2013   will   be   tough   for   steel  companies   of   because   increase   in  excise  duty  that  would  be  marginally  negative   for   metal   producers   and  lower   industrial  demand.  The  results  of   big   companies   are   yet   to   come  and   small   player   already   posted   a  negative  growth    

Untapped  India:  

India  has   turned   into  a  net   importer  of   steel   due   to   strong   growth   in   the  manufacturing   sector   and   rise   in  infrastructure   projects.   100   per   cent  

2

foreign   direct   investment   (FDI)   is  allowed   in   the  mining  sector  under   the  automatic   route.   The   FDI   inflow  worth  US$   5.4   billion  was   registered   into   the  metals  and  mining  industry  during  April  2000   to   April   2011.  Metals   and  mining  industry  accounted  for  4  per  cent  of  the  total  cumulative  FDI  in  the  same  period.  In   2010,   mergers   and   acquisitions  (M&A)   deal   value   in   the  mining   sector  stood  at  US$  2.0  billion,  accounting   for  24.9   per   cent   of   the   total   M&A   deal  value.  There  is  significant  scope  for  new  mining   capacities   in   iron   ore,   bauxite,  

3

and   coal.   Untapped  metal   reserves  in  India  are  to  the  tune  of  82  billion  tonnes.   Strong   long-­‐term   demand  from   the   steel   industry   is   expected  to   further   boost   the   iron   ore  industry.   Booming   construction,  automobiles,   and   packaging  industries   are   expected   to   lend  substantial   support   to   the   metals  and  mining  industries.  

 

World’s  Top  10  Steel  producers:  

Source:

World Steel Association

www.ibef.org, www.moneycontrol.com/earnings/,www.steel.nic.in/overview.htm, Ernst & Young’s Reports.

Rank   2001   2010              1   ArcelorMittal     ArcelorMittal    2   POSCO     Baosteel  3   Nippon  Steel     POSCO  4   Ispat  International     Nippon  Steel    5   Shangai  Baosteel     JFE  6   Corus   Jiangsu  Shagang    7   ThyssenKrupp     Tata  Steel    8   Riva   US  Steel  9   NKK   Ansteel    

10   Kawasaki     Gerdau      

1

Reflections  on  the  growth  of  MSMEs  in  India  

Key  notes:  

The   Economic   survey   2011-­‐12   has  stated,   “MSME   is   a   dynamic   and  vibrant   sector   that   nurtures  entrepreneurial   talent   besides  meeting   social   objectives   including  that   of   providing   employment   to  millions   of   people   across   the  country”.  In  terms  of  output,  MSMEs  produce   more   than   6000   products  ranging   from   machinery   and  equipment,   to   apparels   to   food  products  to  furniture  and  account  for  45%   of   the   manufacturing   output  and   40%   of   the   total   exports   of   the  country.   About   45.2%   of   the  enterprises  are  located  in  rural  areas,  thus   offering   a   great   potential   for  

2

rural  development  and  for  reducing  the  strain   on   urban   infrastructure.   The  fourth  census  of  MSME  sector  revealed  that  only  5.18%  of  the  units  had  availed  of  finance  through   institutional  sources  while   2.05%   had   finance   from   non-­‐institutional   sources,   the   majority   of  funds   i.e.   92.77%,   had   no   finance   or  depended  on  self  finance.    

Policy  Initiatives:  

1.   With   an   objective   of   ensuring  provision  of  banking  services  in  all  parts  of   the   country,   banks   were   advised   to  draw  up  a  roadmap  to  provide  banking  services   through   a   banking   outlet   in  every   unbanked   village   having   a  population   of   over   2,000   by   March  2012.    

2.   The   limit   for   collateral   free   loans   to  

3

the  MSMEs  has  been  increased  from  the   level  of  Rs.  5   lakh  to  Rs.  10   lakh  and   has   been   made   mandatory   for  banks.   The   implementation   should  result   in   enhanced   usage   of   the  Guarantee   scheme   and   facilitate  increase   in   quality   and   quantity   of  credit   to   MSEs,   leading,   eventually  to  sustainable  and  inclusive  growth.  

3.   Timely   detection   of   sickness   is  critical   for   any   enterprise   as   any  delay   in   this   regard   impinges  on  the  revival   prospects   of   sick,   but  potentially  viable  units.    

4.   All   Scheduled   Commercial   Banks  have   also   been   advised   to   review  and   put   in   place   MSE   loan   policy,  restructuring/rehabilitation    

 

Nidhi  Ja

iswal,  2

 MBA

 F1  

RBI  COLUMN  

1  

 

(Continued)  

1

policy   and   Non-­‐Discretionary   One  Time   Settlement   scheme   for  recovery   of   non-­‐performing   loans,  duly   approved   by   their   Board   of  directors.    

5.  Products  such  as  equipment   lease  finance   can   address   the   need   for  term  finance,  whereas  products  such  as   receivables   financing,   bills  discounting,   reverse   factoring   etc.  could   provide   working   capital  finance.    

6.   Technology   is   a   game   changer.   It  has   the   potential   to   cut   down  operating   costs,   enhance   efficiency  and   also   open   up   new  markets   and  opportunities   for   MSMEs.   SMEs   will  have   to   continuously   strive   to  

2

incorporate   the   latest   technology   into  their  production  processes  as  well  as  in  their   marketing   and   management  functions,   to   cut   costs,   gain   efficiency  and  consistency.  

7.  The  MSMEs  need  to  understand  with  appropriate   support   from   the   capacity  building   institutions   in   the   form   of  seminars   and   workshops,   the  importance   of   corporate   governance  and  its  linkages  with  risk  management.    

8.   At   the   international   level,   MSMEs  may   have   to   face   global   competition,  but   the   opportunities   for   growth   are  immense  only  if  MSMEs  are  focused  on  quality   and   use   appropriate  technologies.  

9.   The   Chambers   of   Commerce   and  

3

MSME   associations   create   greater  awareness   among   their   MSME  members  about  credit  facilities  from  banks,   NBFCs   and   financial  institutions,  benefits  of  credit  rating,  alternate   finance   options   such   as  venture   capital,   factoring,   bills  discounting,   recently   launched   SME  exchange   /platform   etc.   in   addition  to   engaging   with   policymakers   and  organizing  training/capacity  building  programmes.    

10.   Human   resource   development  issues  are  fundamental  in  improving  SME   competitiveness.The  Government   of   India   and   various  State   governments   have   been  implementing  a  number  of  schemes  and  programs  over  the  years  for  skill  development  

 

 

2  

Source: www.rbi.org.in

Address by Shri Anand Sinha, Deputy Governor of the RBI, at the National Conference on Enhancing Competitiveness with MSME linkages, organised by

the Indian Chamber of Commerce, Kolkata, July 12, 2012

ECONOMIC  ROLLERS  

-­‐  Dhawal  Parmar,  2  MBA  F1  

 

• Repo  Rate:  8.00%  

• Reverse  Repo  Rate:  7.00%  

• CRR:  4.75%  

• SLR:  23.0%  

• CBLO:  7.92%  (as  on  August  1st  2012)  

• MIBOR  (1  month  as  of  August  1st  2012):  8.89%  

• Inflation  (Based  on  All  India  Consumer  Price  Index  as  On  July  16th  2012):  10.02%    

• Forex  Reserves  (as  of  July  20th  2012):  $  287.34  billion  

• IIP  (Released  On  July    12th  2012,  for  May):    2.4%  

• 91  Days  T  bills  (As  on  August    1st  2012):  8.227%  

• 10  year  G-­‐  Sec  Yield  (As  on  August    1st  2012):  8.22%  

• Exports  during  June  2012:  $  25.00  billion  

• Imports  during  June  2012:  $  35.37  billion  

 

Source:  Reserve  Bank  Of  India,  Ministry  Of  Finance,  Office  of  Economic  Advisory,  Ministry  of  Commerce,  Central  

statistics  Office,  The  Clearing  Corporation  Of  India  Ltd.,  FIMMDA.  

3  

1

The  recent  imposition  of  a  heavy  fine  of   Rs.   6300   crores   on   11   cement  companies   by   Competition  Commission   of   India   has   raised  eyebrows.   There   have   been   mixed  reactions   regarding   the   implications  of   fixing   the   prices   through   the  cartel.  

A  stringent  watchdog:  

It   is   however   said   that   the  Competition   Commission   of   India,   a  watchdog   for   the   competition   has  probed   as  many   as   39   companies   in  order   to   come   to   the   conclusion   of  finding  them  guilty  of  cartelisation.  

Those   guilty   are   supposed   to   pay   as  much   as   8%   of   their   average  turnover  in  the  last  3  years.  This  fine  also   amounts   to   50%   of   these  

2

companies’   profits   for   FY   09-­‐10   and   FY  10-­‐11.  Cartels  are  groups  of  companies  who   syndicate   in   order   to   regulate   the  prices  and  supplies  in  order  to  maintain  controlled   capacity   utilisation,  controlled  production  and  huge  profits.  Apart   from   this,   cartelisation   may   also  involve   distribution   of   market   shares,  allocation  of  sales  territories,  controlled  supplies   etc.   to   gain   above   average  profits.     Under   CPACA,   such   activities  are   strictly   prohibited.   Normally,   they  are  verbal  in  nature  and  very  difficult  to  track.    

The  adverse  effect:  

The   most   adverse   impact   of   this  decision   could   be   on   the   real   estate  sector.  Since  this  decision  is  expected  to  affect   the   FY13E   profits   of   the   major  cement   players   like   Ultratech   Cement,  

3

ACC,   Century   Textiles   and  Industries   Ltd,   Ambuja,   Jaypee  Cements   etc.   to   name   a   few,   the  prices  of  cement  are  expected  to  go  up,  which  in  turn  would  impact  the  land  and  property  rates   in  the   long  run.   CREDAI   has   sought   help   from  GOI   in   this   regard   to   regulate   the  cement  prices  in  order  to  avert  any  situations   of   crisis   pertaining   to  shortage   in   supply   or   increase   in  prices.   This   can   also   be  because  of  the  fact  that  the  cement  companies  were   found   way   below   their  capacity   utilisation,   upto   70%.  One  reason   why   industry   might   stay  brazen   despite   deterrent   fines   is  that  cartels  are  very  hard  to  detect  and   require   a   high   standard   of  proof   given   that   the   possible  punitive   liability   can   be  

Akh

ilesh

 C,  2

 MBA

 F1  

CARTELIZATION  OF  CEMENT  AND  ITS  

LONG  TERM  IMPACT  

4  

(Continued)  

1

prohibitively  high.  

Because   it   is   clearly   illegal   -­‐   and,   in  some   jurisdictions,   a   criminal  act   -­‐   it  is   also   conducted   in   great   secrecy.  This   is   why   all   modern   competition  laws   provide   for   leniency  programmes   that   offer   immunity   to  cartel  members  to  come  forward  and  

2

confess  the  details  of  the  cartel.  

The   programmes   that   have   been   the  most  successful  give  complete  amnesty  to  the  first  conspirator  to  come  forward  and   reveal   the   inner   workings   of   the  cartel   to   competition   law   enforcers,  and   experience   shows   these  programmes   work.   Under   our  

3

Competition   Act   too,   there   is   a  leniency   programme   provision   to  encourage   cooperation.   Though   the  fines  are  already  imposed,  it  would  be  interesting   to  watch  how  the  cement  companies   and   courts   react   to   the  same  and  whether  or  not,  the  smaller  companies   benefit   from   this  imposition.    

Fingers  crossed!!  

5  

1

“Gold  has   been   a   part   and  parcel   of  India's  culture  and  tradition.”  

As   money,   jewellery,   status   symbol  and   investment,   gold   has   played   a  crucial  role   in  the  lives  of   Indians  for  centuries.  The  question  arises  here  is  that   is   this   craze   for   yellow   metal  that   is   deemed   to   be   increasing   the  investors’   wealth,   hampering   the  Indian   Economy?   The   answer   is   a  definite  yes!  

According   to   Global   consultant  McKinsey   &   Company,   India   is   the  world’s   single   largest   gold   bullion  consumer   with   18000   tonnes   of  above   ground   stocks   worth   a   little  over   Rs   40   lakh   crores-­‐   almost  double   the   gold   maintained   by   the  US   Federal   Reserve-­‐   sitting   idle   in  

2

family  vaults  as  ornaments,  coins  and  bars.  Figures  show  that  in  the  first  three  months   of   2012,   gold   purchase   in   India   jumped   nearly   35   percent.   As   an  investment,   gold   has   been   an   easier   bet   to   hedge   against   inflation   and   other  risks.  Indians  have  been  buying  and  trading  in  gold  since  time  immemorial,  and  continue  to  buy  it  even  now  when  it  is  more  expensive  than  ever.    

 This  continued  fetish  for  gold  is  denting  the  country’s  economy  in  two  aspects:  

 Burden  on  the  existing  current  account  deficit:  

Massive  gold  imports  have  rung  alarm  bells  with  Indian  economists,  investment  bankers  and  analysts  stating  that  India's  fascination  with  gold  could  be  a  reason  why   growth   appears   to   be   flagging.   The   gold   import   bill   is   expected   to   touch  $100   billion   by   2015-­‐16,   putting   pressure   on   the   existing   current   account  deficit,   industry   body   ASSOCHAM   (Associated   Chambers   of   Commerce   and  Industry)   has   said.   "Calculated   on   the   basis   of   CAGR   of   period   2010-­‐11   over  1999-­‐2000,   the   gold   import   bill   could   total   $100   billion   soon.   At   these   levels,  gold   imports  are  a  huge  burden  on   the  balance  of  payments  and  accentuates  the  current  account  deficit,"  said  ASSOCHAM  secretary  general  D  S  Rawat.  

 

Apu

rva  Pa

thak

,  2  M

BA  F1  

INDIA’S  LOVE  FOR  GOLD  HARMS  

GROWTH  

6  

(Continued)  

1

Hinders   investment   in   other  financial  instruments:  

Another  important  point  to  be  noted  here   is   that   India’s   fascination   for  gold  comes  in  the  way  of  investment  in   other   productive   assets.   The  amount  of  GDP  value  lost  by  parking  Rs  40  lakh  crores  worth  of  savings  in  gold   is   very   huge   and   has   impacted  the   investments   in   property,   shares  and  mutual  funds.  Experts  say  that  if  Indians   had   invested   in   other  instruments   such   as   equity   and  mutual   funds,   the   country’s   annual  GDP  would   have   been  higher   by   0.4  percent.   The   government   would  prefer  savings  to  be  invested  in  more  

2

productive   assets   such   as   equity   and  mutual  funds  that  would  help  boost  the  growth  rate.    

However   the   repeated  warnings  of   the  Government   to   contain   the   excessive  demand   for   gold   has   been   taken  seriously   the   result   of   which   shows   as  fall   in   India’s   trade  deficit   to  15  month  low   of   Rs   10.3   billion   dollars   due   to  sharp   fall   in   imports.   Thomson  Reuters  poll  shows  that  India's  gold  imports  fell  by  more  than  a  half  in  the  June  quarter  and   could   slide   by   a   third   in   the   next  three   months   as   prices   inflated   by   a  weak  rupee  and  a  4%  import  duty.    

Now   to   curb   the   situation   excessive  

3

investment  in  gold,  the  government  should   undertake   extensive  financial   education   campaigns   and  encourage   channelizing   savings   in  other   financial   instruments.   Also  measures  must  be  taken  to  educate  Indians   who   are   apprehensive  about  investing  in  the  stock  market  and  continue  to   invest  their  money  in  gold.    

This  can  be  seen  as  a  welcome  step  in  the  age  of  rising  middle  class  who  can  better  mobilize   their   savings   in  the  unexplored  options.      

 

References:  

www.moneycontrol.com  

www.commodityonline.com  

7  

1

According   to   a   recent   report  published   by   EXIM   bank   of   India,  India   as   a   nation   holds   abundant  reserves   of   minerals   such   as   non-­‐coking   coal,   bauxite,   dolomite,  gypsum,   limestone   and   mica;  adequate   levels   of   reserves   of  minerals   such   as   lignite,   metallic  chromite,   manganese,   zinc   and  graphite.    

The   fastest   maturing   industries   in  India:  

The   Metals   &   Mining   industry   are  one   of   the   highest   contributing  sector   in   terms   to   the   economy   of  the   country   and   it   encompasses   the  extraction   (mining)   as   well   as   the  primary  and  secondary  processing  of  metals   and   minerals   such   as  aluminium,   gold,   precious   metals,  coal   and   steel.   The   industry   is  oligarchic   in   structure,   with   a   few  

2

producers   accounting   for   the   lion’s  share  of  the  output.  It  is  also  one  of  the  fastest   maturing   industries   in   India,  consisting   aluminium,   iron   and   steel,  precious  metals  and  minerals,   coal  and  base   metal   markets   as   the   major  contributors.   For   instance,   the   Indian  metals   &   mining   industry   had   total  revenues   of   $106.4   billion   in   2010,  representing   a   compound   annual  growth   rate   (CAGR)   of   15.5%   for   the  period   spanning   2006-­‐2010.   Industrial  production   volumes   have   increased  with   a   CAGR   of   5.7%   between   2006-­‐2010,   to   reach   a   total   of   684.4  million  metric  tons  in  2010.  

As  far  as  the  consumption  is  concerned,  in   this   financial   year,   India’s   steel  consumption   has   grew   to   about   8.1%  YoY(Year   over   Year)   during   April-­‐May  2012   as   growth   was   less   than   2%   last  year.   Weak   IIP   performance   and  

3

slowdown   in   GDP   growth   is   not  helping   in   reviving   weak   domestic  steel   demand.   Q1FY13   is   expected  to   be   a   lack-­‐lustre-­‐quarter   for   the  metals   and   mining   industry   due   to  expected   lower   volume   on  QoQ(Quarter   over   Quarter)   basis  and   lower  realizations  due  to  sharp  fall   in  metals   prices.   Exchange   rate  also  had  a  key  role  to  play.  

The  rupee  impact:  

Steel   prices   for   the   quarter  remained   steady   however   there  could  be  pressure   in   the  near   term  due   to   surge   in   imports.   EBITDA  margins   are   expected   to   improve.  However,   due   to   depreciation   of  Indian  rupee,  impact  on  profitability  could   be   negative   for   companies  having   foreign   currency   loans  leading  to  high  MTM  charges.  

Ank

ur  Gos

wam

i,  2  MBA

 F1  

INDIAN  METALS  AND  MINING  

SECTOR:  THE  HIDDEN  POTENTIAL  

8  

(Continued)  

1

Going   ahead,   steel   prices   are  expected   to   remain   subdued  whereas   margins   will   come   under  pressure   due   to   rupee   depreciation  and   high   coking   coal   prices.   Global  steel   spot   prices   have   declined   by  more  than  10%  over  last  two  months  but   Indian   steel   mills   were   largely  cushioned   due   to   sharp   Rs  depreciation.   The   automotive   and  construction   markets   have  historically   been   the   largest  consumers   of   steel.   The   automotive  sector  has  shown  significant  promise.  In  February  2012,  total  motor  vehicle  sales   reached   their   highest   level  since   February   2008   at   15.1   million  SAAR   (Seasonally   Adjusted   Annual  Rate).   For   the   first   five   months   of  2012,   sales   have   averaged   14.4  million   SAAR.   Many   auto  manufacturers   made   their   best  Memorial   Day   sales   in   over   five  years.   Motor   vehicle   sales   were   at  13.8   million   in   May,   declining   from  14.4   million   in   April.   Even   though  sales  slid  to  the  lowest  level  so  far  in  2012,  it  is  still  better  than  consensus  expectations   from   the   beginning   of  

2

the   year.   On   a   year-­‐over-­‐year   basis,  sales  increased  26%  inMay.  

Hurdles  along  the  way:    

One  of  the  major  hurdles  in  investment  in   metals   and   mining   sector   are   the  delays   in   approval   due   to  bureaucracy,  discretionary   interpretation   and   need  to   get   approval   of   numerous   agencies  at   state   and   central   government   level.  Also,   infrastructure   impediments   like  high   railway   freight,   inadequate  availability   of   rail   wagons   and  inadequate   power   evacuation  infrastructure  also  create  problems.  

According   to   an   estimate,   India   has   85  billion  tonnes  of  mineral  reserves  which  are   still   to   be   exploited.   There   is   an  estimated   13000   deposits   of   non-­‐fuel  mineral   types   in   India.   Also,   India  welcomes   joint   ventures   between  foreign   and   domestic   partners   to  mobilise   finances  and  technologies  and  hence   secure   its   access   to   global  markets.  

The   main   opportunities   in   the   mining  sector   lie   in   the   development   and  

3

production  of   surplus   commodities  such   as   iron   ore,   bauxite,   mica,  potash,   gold   deposits,   located   in  belts   of   Himalayas,   using   better  mining   technologies,   eliminating  mafias   and   smuggling   of   these  precious   reserves   and   to   remove  the   FDI   limit   in   order   to   use   this  sector   as   a   growth   and   stability  sector  for  a  few  years  to  come.  

 

9  

Man

isha

 B,  2

 MBA

 F1  

FINANCE  BUZZ  

BULLION  

This  denotes  gold  and  silver  that  is  refined  and  officially  recognized  as  high  quality  (at  least  99.5%pure).  It  is  usually  in  the  form  of  bars  rather  than  coins.    

LONDON  METAL  EXCHANGE:  

LME  is  one  of  the  main  metal  markets  in  the  world  and  allows  for  the  hedging  of  metals  risk  through  highly  liquid  and  standardized  exchange-­‐traded  future  contracts.    

GLENCORE-­‐XSTRATA  MERGER  

On  a  standalone  basis,  Xstrata   is  a   strong  business  with  a  bright   future  and  Glencore  as  a  34%  shareholder.  The  $65  billion  mega-­‐merger  between  commodities  giant  Glencore  and  miner  Xstrata  is  close  to  collapse  after  Qatar’s  sovereign  wealth  fund  said  it  was  unhappy  with  the  deal.    

SCRAP  RECOVERY  

Scrap   recovery   refers   to   the   worldwide   supply   of   gold   from   sources   other   than   mine   production.   This   includes  recovered  old  jewellery,  industrial  by  products  etc.    

BARRICK  GOLD  CORPORATION  

It   is  engaged   in  the  production  and  sale  of  gold,  as  well  as  related  activities.  Barrick  also  hold   interests   in  oil  and  gas  properties  located  in  Canada.  

10  

STOCK  ANALYSIS  -­‐  I  

Hindustan  Uniliver  Limited  (Bet  on  Defensives)  

Nishka  equity  research  team  suggests:  

Buy  stock  -­‐455-­‐60  level  

Average  at-­‐  440-­‐435  

Hold-­‐  for  more  than  one  year  for  20-­‐30%  returns.  

Indian  Equity  markets  were  trading  in  a  very  tight  Nifty  range  of  4900  to  5300.  There  are  no  big  global  and  local  news  to  drive  markets  except  the  current  earnings.  Markets  are  very  difficult  to  predict  they  can  swing  5%-­‐10%  on  both  sides.  Hence  investors  need  to  bet  on  defensive  like  Pharma,  FMCG.  

In  FMCG  sector  one  of  the  prominent  stock  is  Hindustan  Unilever  Ltd  whose  net  sales  grew  by  13.6%  YoY  to  Rs  6250.2  crore,  and  net  profit  increased  48%  YoY  which  is  very  good  as  compared  to  its  peers.  The  impressive  numbers  were  achieved  on  the  back  of  the  price  hike-­‐led  strong  performance  of  the  home  and  personal  care.    The  stock  is  trading  at  its  highs  and  have  strong  support  around  430  -­‐435  level.  The  stock  went  up  by  more  than  7%  after  the  result  and  looking  little  bit  overbought  according  to  stochastic  oscillator,  but  investor  can  buy  the  stock  after  5%-­‐7%  correction  from  the  current  level.        

Source:  Sharekhan  Pattern  Finder,  Moneycontrol    11  

STOCK  ANALYSIS  -­‐  II  

 

BATA  INDIA  

Buy  at:  910        

Sell  target:  980      

Stop  loss:  880  

Nishka   equity   research   team  

recommends   a   buy   on   Bata   India   at  

current  levels.  The  company  has  been  

a  continuous  outperformer   in  the   last  

1   year   giving   a   good   return   to   the  

investors   unlikely   the   index   which   is  

continuing   its   bad   run   from   last   1  

year.   Revenues   of   the   company   have  

grown   at   around   20%   YOY   to   506   cr  

and  bottomline  also  grows  with  the  same  percentage.  

Company  has  been  in  the  expansion  mode  and  expects  a  capital  expenditure  of  Rs  100  cr  in  Fy  2013  in  opening  150  new  

stores.  The  stock  has  been  recommended  by  various  analysts.  The  stock   is   trading  at   its  years  high  and   is  expected  to  

continue  its  trend.  

The  company  trades  at  a  very  high  PE  of  36.  Regarding  the  technical’s  the  short  term  moving  average  of  the  company  is  

higher  than  its  long  term  moving  averages  and  the  relative  sensitivity  Index  is  also  stable  which  gives  a  bullish  signal.  

 

12  

MARKET  ROUND  UP  

-­‐  Abhishek  Jain,  2  MBA  F1    

The  Indian  equity  markets  this  month  were  stuck  in  a  very  tight  range  where  Sensex  was  fluctuating  between  17631  and  

16598  and  Nifty  between  5348  and  5042,  The   reason   for   this   trading   in   tight   range   is  due   to  continuous  news   flows,  

both  positive  and  negative  in  nature.  There  has  been  some  stability  in  Europe  in  last  1  month  where  the  unemployment  

rate  in  nearly  all  the  European  economies  has  declined  and  also  there  has  been  positive  data  flow  from  the  American  

economy.  On  the  other  hand  there  has  been  a  lot  disturbing  news  flows  in  domestic  Indian  economy  where  the  inflation  

number   is   continuously   disappointing   and   also   there  was   a   bit   of   political   instability  when   the   presidential   elections  

were  due.    

The  most  disappointing  factor  was  the  delay  of  monsoon  in  India  on  which  the  India  economy  is  heavily  dependent.  The  

technical’s  of  the  market  has  been  good  and  fundamentally  also  the  markets  look  like  breaking  this  trading  range.  The  

only  thing  it  is  waiting  for  is  some  trigger,  which  may  be  revival  of  monsoon.  

In  brief  we  can  conclude  that  though  there  is  positive  news  flows  from  global  economy,  but  our  interior  problems  are  

restraining   the   equity   markets.   The   future   performance   of   Indian   equity   markets   is   now   hugely   dependent   on   the  

monsoon  conditions.  

 

 

13  

Best  comment  

1.  The  comment  is  more  of  a  motivation  to  India  rather  than  expecting  another  wave  of  economic  reforms   from   India   to   make   India   more  competitive  in  the  global  economy.    

 As   compared   to   other   BRICS   nation,   India   is  lagging  far  behind  in  the  growth  &  the  future  expectation  shows  there  will  not  be  more  than  6%  of  growth  for  the  coming  2-­‐3  years.  India  has  been  warned  already  to  improve  it's  economy  otherwise  we  may  lose  our  participation  from  great  BRICS  group.  

Obama's  comment  may  be  a  strategy  to  motivate  India  to  do  better  as  far  as  global  business  is  concerned.  

 -­‐  Mayank  Kumar  Gupta  -­‐1221416    

CAMPUS  POLL  

- Abhisek  Roy,  2  MBA  F1  

- Arun  P,  2  MBA  F2  

The  time  may  be  right  for  another  wave  of  economic  reforms  to  make  India  more  competitive  in  the  global  economy."  -­‐  Barack  Obama.  Do  you  agree?  

Total  respondents:  72  

Yes  –  59  

No  –  8  

Cant  Say  –  5  

Yes   No   Cant  Say  

2.  The  time  right  now  is  not  for  more  economic  reforms  but  to  implement  whatever  changes  have  been  proposed.  The  problem  in  India  is  not  about  planning  but  putting  those  plans  into  action.                                          

-­‐  Pavitra  Narayanan  -­‐  1120347    

14  

PHOTO  FIND  

-­‐  Jagadish  Kumar,  2  MBA  F2  

1   2   3  

4   5   6  

15  

CROSSWORD  

-­‐  Nagarajan,  2  MBA  F1    

16  

Across  

 1.      An  ___________  is  granted  for  undertaking  operations  to  mine  any  mineral.  This  is  for  any  mineral  or  prescribed  

group  of  associated  minerals   is   granted   for  a  minimum  period  of  20  years  and  a  maximum  period  of  30  years.  (Abbreviated)    (2)  

3.   A  specific  pattern  of  a  candlestick  chart  that  indicates  that  a  security's  open  and  close  prices  were  nearly  identical.  It  generally  looks  like  a  cross  or  a  plus  sign.    (4)  

5.   India’s   major   workable   coal   deposits   occur   in   India.   Part   of   it   is   overlaid   with   alluvium,   and   in   the   west   it   is  overlaid  with  the  igneous  rocks  of  the  Deccan  Traps.    (8)  

6.   Bharat  Coking  Coal   Limited   (BCCL)  and  Coal  Mines  Authority   Limited   (CMAL)  were  merged   to   form   the  holding  company.  This  company  is  named  as  __________.  (Abbreviated)    (3)  

7.   The  rent  fixed  for  mines  without  considering  the  fact  whether  the  mine  is  profitable  or  not.  It  is  mostly  fixed  in  a  mineral  lease.  This  rent  must  be  paid  whether  or  not  minerals  are  being  extracted  from  the  mines.    (4)  

 Down  

 2.   The  coal  segment  in  India  consists  of  three  components.  Anthracite,  Bituminous  and  ____________  (7)  3.   The  Honorable  Minister  for  Mines  (First  name)  (6)  4.   The  Honda  committee  has  come  up  with  the  setting  up  of  this  fund.  (Abbreviated)    (3)  8.   A   technical   indicator   that   measures   the   level   at   which   a   security   or   asset   is   either   oversold   or   overbought.  

Applying  the  same  factors  as  the  relative  strength  index  (RSI),  this  index  also  employs  a  self-­‐adjusting  mechanism  that  accounts  for  varying  degrees  of  market  volatility,  which  produces  a  more  accurate  reading.  (Abbreviated)    (3)  

   

 

1) Which  mineral  has  the  highest  share  in  the  Indian  mining  industry?  

2) How  many  different  types  of  minerals  are  produced  in  India?  

3) India  is  the  largest  producer  of  which  mineral  in  the  world    

4) Recently  a  mining  sector  reform  named  Executive  Order  79  was  signed  name  the  country    

5) Top  mining  company  in  India  according  to:      

i) Market  capitalization    

ii) Net  profits  

6) First  Exchange  Traded  Fund  of  World  TIP  35  is  set  up  in  1989  in  which  country?  

7) Mutual  offsetting  of  claims  and  liabilities  from  identical  types  of  transaction  between  two  parties  

8) Expand  NASDAQ?  

9) RBI  governor  Dr.Subbarao  D  is  the  successor  of    

10) Who  is  the  President  of  Federal  Reserve  Bank?  

   

QUIZ  

-­‐  Kumaran  S,  2  MBA  F1    

17  

ANSWERS  

Photo  find:  

1.   Ashok  Kumar  Sinha  CFO  of  Coal  India  pvt  ltd  

2.   Koushik  chattarjee  –  CFO  of  Tata  Steel  

3.   MG  Gupta-­‐  Director  of  finance,  MMTC  

4.   Rana  Som-­‐  MD  of  NMDC  

5.   Subhra  Sengupta-­‐  CFO  of  Tata  Metaliks  

6.   Park  Ki  Hong  –  CFO  of  Posco  

1. Coal  (80%)  

2. 89  minerals  (4  fuel  minerals,  11  metallic,  52  non-­‐metallic  and  22  minor  minerals)      

3. Mica  

4. Philippines      (President  Benigno  S.  Aquino  III)    

5. (i)  Market  capitalization:  Coal  India    

(ii)  Net  profit:  NMDC      

6. Canada.  

7. Netting.  

8. National  Association  of  Securities  Dealer  automated  Quotations  

9. Dr.Y  V  Reddy  

10. Ben  Bernanke.  

18  

Crossword:    Across  

 1.   ML  (Mining  Lease)  A  ___________  is  granted  for  undertaking  operations  to  mine  any  mineral.  This  is  for  any  

mineral   or   prescribed   group   of   associated   minerals   is   granted   for   a   minimum   period   of   20   years   and   a  maximum  period  of  30  years.  (Abbreviated)  

3.   DOJI—A   specific   pattern   of   a   candlestick   chart   that   indicates   that   a   security's   open   and   close   prices  were  nearly  identical.  A  doji  generally  looks  like  a  cross  or  a  plus  sign.  

5.   GONDWANA—India’s  major  workable  coal  deposits  occur  in  India.  Part  of  it  is  overlaid  with  alluvium,  and  in  the  west  it  is  overlaid  with  the  igneous  rocks  of  the  Deccan  Traps.  

6.   CIL   (Coal   India   Limited)   Bharat   Coking  Coal   Limited   (BCCL)   and  Coal  Mines  Authority   Limited   (CMAL)  were  merged  to  form  the  holding  company.  This  company  is  named  as  __________.(Abbreviated)  

7.   DEAD—The   rent   fixed   for   mines   without   considering   the   fact   whether   the   mine   is   profitable   or   not.   It   is  mostly  fixed  in  a  mineral  lease.  This  rent  must  be  paid  whether  or  not  minerals  are  being  extracted  from  the  mines.  

 Down  

 2.   LIGNITE—The  coal  segment  in  India  consists  of  three  components.  Anthracite,  Bituminous  and  ____________  3.   DINSHA—The  Honorable  Minister  for  Mines  (First  name)  4.   MDF   (Mines   Development   Fund)   the   Honda   committee   has   come   up   with   the   setting   up   of   this   fund.  

(Abbreviated)  8.   DMI  (Dynamic  Momentum  Index)  A  technical  indicator  that  measures  the  level  at  which  a  security  or  asset  is  

either  oversold  or  overbought.  Applying  the  same  factors  as  the  relative  strength  index  (RSI),  this  index  also  employs  a  self-­‐adjusting  mechanism  that  accounts  for  varying  degrees  of  market  volatility  which  produces  a  more  accurate  reading.  (Abbreviated)  

19  

Faculty  Coordinator  

   

Co-­‐ordinators:      

       

Niveda  S   (MBA  F1)  

Dr.  Anirban  Ghatak  

 

Abby  Jacob  

 

(MBA  F2)  

             Editors:               Creative  and  Designing:  

Sheena  Renu  

 

(MBA  F1)  

 

 

Bala  Surya  Kiran  R   (MBA  F2)  

Karthik  R   (MBA  F2)  

                     Stock  Analysis:      

 

Articles:          

Abhishek  Jain  

 

(MBA  F1)  

 

Akhilesh  C   (MBA  F1)  

Ritesh   (MBA  F1)  

 

Marina  Kurian   (MBA  F1)  

       

Sivakumar   (MBA  F2)  

             RBI  column:      

 

Crossword:      

Nidhi  Jaiswal   (MBA  F1)  

 

Nagarajan   (MBA  F1)  

             Finance    Buzz:      

 

Photo  Find      

Manisha  B   (MBA  F1)  

 

Jagadish  Kumar  

 

(MBA  F2)  

             Economic  Rollers:  

 

Campus  Poll:      

Dhawal  Parmar   (MBA  F1)  

 

Abhisek  Roy  

 

(MBA  F1)  

       

Arun  P  

 

(MBA  F2)  

Finance  Quiz:      

         Kumaran   (MBA  F1)  

           

         

 

Dolor  sit  amet.  

NISHKA is a monthly finance magazine brought by the students of the

finance club of CHRIST UNIVERSITY Institute of Management

Kengeri Campus. The Idea behind coining the issue of this magazine is

to establish a learning among the students, which helps them to gain an

insight about the world of finance.

- TEAM NISHKA

 

 

ABOUT  NISHKA  

Institute  Of  Management  

Kengeri,  Bangalore  

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