nishka dec 5

8/2/2019 Nishka Dec 5

1/22

BANGALORE

nishkaA FINANCIAL NEWS LETTER FROM CUIM KENGEwhere knowledge relates mondate- DECEMBER 5, 20ISSUE-2


2/22

INDEX

2

ECONOMIC ROLLERS 3

RBI COLUMN......... ........ 4

RUPEE DEVALUATION . 5

CONTEMPLATORS. 6

THE RUPEE STORY.. 8

THE GREAT DEPRESSION 9

KINGFISHER MISHAP. 10

PHOTO FIND .. 1 1

FINANCE QUIZ.. 12

STOCK ANALYSIS 13

FINANCE BUZZ 15

CROSS WORD. 16

CAMPUS POLL 18

ANSWERS 20

TEAM NISHKA. 22


3/22

Repo Rate: 8.50%Reverse Repo Rate: 7.50%CRR: 6.0%SLR: 24.0%

thCBLO :8.41%(as on 18 November 2011)Inflation as on October 2011:WPI: 9.73 %

thFood inflation(as on 17 November, 2011): 10.63%thForex Reserve(as on 11 November, 2011): $ 314.339 billion

IIP (for November 2011): 1.9%91 Days T bills(for November 2011): 8.9454%

th10 year G- Sec Yield (as on 15 October 2011): 8.82%Exports during October 2011: $ 19.9 billionImports during October 2011: $ 39.5 billion

Source: Finance Ministry, Office of Economic Advisory,HDFC Securities Reports, Ministry of Commerce

BYMANOGYA RAOMBA I- C

ECONOMIC ROLLERS

3


4/22

RBI COLUMN

4

Introduc tion of New C ategory of NB FC s - Non Ban king Financial Com pany-Micro

Finance Institutions (NB FC-MFIs)

In the Second Q uarter Review of Monetary Policy in N ovember 2010, a Sub-Com mittee ofthe Ce ntral Boa rd of the RBI (Chai rman: Shri Y. H. Malegam ) was cons titu ted to studyissu es and concerns in the MFI sect or. The Comm ittee had s ubmitted its report in Januar y2011. In the Mon etary Policy S tateme nt 2011-12, it was a nnounced that the bro adframework of reg ulations recomme nded by the Comm ittee has bee n accepted b y the B ank.

Creation of a Sep arate Category of NBF C-M FI

RBI d ecided to create a s eparate category of NBF Cs viz; Non Banking F inancial C ompany-Micro Finance Instit ution (NBF C-M FI). Consequ ently there woul d be following categories ofNBFCs:

i. Asset Finance Compan y (AFC)

ii. Investm ent Company (IC)iii. Loan C ompany (LC)iv. Infrastructure Finan ce Com pa ny (IFC )v . Core Investm ent Company (CIC)vi. Infrastructure Debt Fund- Non- Banking Financial Compan y (IDF-NBFC)vii. Non-Bank ing Financial Comp any - Micro Finance Institution (NBF C-MFI).

NB FC-MFI as defined by RBI

An NB FC-M FI i s def ined as a no n-de posi t tak ing NBF C (othe r than a com p any l icense dunder S ection 25 of the Indian Comp an ies Act, 1956) that fu lfils th e follow ing conditio ns:

i. Minimum N et Owned Funds of Rs .5 crore. (For NB FC-MFIs registe red in the North

Eastern Regi on of the country, the minimum N OF requireme nt sha ll stand a t Rs. 2 crore).

ii. Not less than 8 5% of its net assets ar e in the nature of qualifying ass ets.

For the purpose of ii. above,

Net assets are d efined as total assets other than cash and bank balances and moneymarket instruments.

Qua lif yin g asset shall m ean a loan whi ch satisfies the follo wing criteria:-

lo an disbursed by an N BFC-MFI to a borrower w ith a rural household annual incomenot exceeding R s. 60,000 or urban and semi-urban household income not exceeding

Rs. 1,20,000; lo an amou nt does not exceed R s. 35,000 in the first cycle and Rs . 50,000 in

subsequent cycles; total indebtednes s of the borrow er does n ot exceed Rs. 50,000; tenure of the loa n not to be less than 24 mon ths for loan amou nt in e xce ss of Rs.

15,000 with prepayment without penalty; loan to be extend ed without collateral; aggregat e amount of loans, given for incom e generation, is not les s than 75 per ce nt

of the total loans given by the MF Is; loan is repay able o n weekly, fortnightly or mont hly instalme nts at the cho ice of the

borrower

iii. Fur ther the inc ome an NBFC -MF I derives from the remain ing 15 percent of assets shallbe in accordanc e with the regulations spe cif ied in that beha lf.

iv. An N BFC wh ich do es not qualify as an NBF C-M FI shal l not exten d loans to m icro financesector, which in aggregate exc eed 10% of its total ass ets.


5/22

RUPEE DEVALUATION

5

RUPEE DEVALUATION

Rupee, the worst performing currency of Asia in the year 2011, which hasdeclined about 14.6% in the year 2011 and has reached to 52.3225 per dollarvery close to its low at the time of 2008 economic slowdown. The downwardpressure on rupee has been very severe from the month of September, as theeuro zone debt crisis emerged. Now the most important thing to think is that, ifall the problems are in America and Europe then why our equity markets arefalling more than them? Why our currency is getting devalued against theircurrency? If we look at the statistics, a few days back the current year change inAmerican stock exchange was around +2% for the year, but at the same timeIndian equity markets were down about 20% this year to date. Its not that onlyglobal markets have impacted on us, but also our domestic indicators are not

stable.

Effects of this rupee devaluation

Increase in exports that result in benefit to export units specially the ITcompanies who have most of the business outside India

It will lead to hike in the cost of imported goods and some of the capitalintensive industries may face losses

Increases the cost of dollar loans taken by the companies Increase in foreign debt Reduces the overall economic growth rate Higher inflation rate Increase in current account deficits

Conclusion:

These are some of the reasons that are responsible for the bloodshed in thecurrency market. RBI being the central bank of India tried to stop this rupeedevaluation and did interfere in the process by selling some dollars in the open

market. Analysts believe that rupee will soon break its lows and will reach to 55per dollar very soon .

~ABHISHEK JAIN (I MBA B)


6/22

CONTEMPLATORS

6

Q2 E arnings: W ill it bring cheer to FII, M arkets and Corporates:

The Q2 Earnings (July to September) is almost completed on 15 N ovember and

this season is n ot so good for earnings.

Corporate earnings had been we ak. The combined botto m line of a total of

3,560 companies d eclined 35.8% to Rs. 67543 crore and 20.7% growth in s ales

to Rs. 1133616 crore in Q2 September 2011 over Q2 S eptember 2010. The only

good news is the top line remained unchanged and other income rose by 2.44%

QoQ. If we look sector or company wis e pe rformance IT, Oil & G as and

Banking s ector w ere performed well b ut Telecom, Cement, Metal, Real Estate

and Auto were the worst performers.In IT sector Infosys top line in crease by 16.58% and top line increased by

9.72% despite of econo mic uncertainty around the w orld, off course rupee

depreciation has helped the IT company in their growth. R eliance Industries net

profit rais ed 15 .8 YOY and turnover r aise d by 35 %, ONGC net pro fit ros e b y

60% m ainly because of the higher price realization and lower fuel subsidy

payout . L ook a t the banks like ICICIs ba nk profit ros e by 18.9% YOY and

HDF C profit ju mped by 31.49% year-on-year. But w hen we look othe r way

round some w orst earnings like Bharti Airte l net profit declined by 15.5% du e

to forex losses and telecom sector have posted negative earnings consecutivefrom last five quarter, Unitech reported flat net sales but their profit dec lin e by

more than 40% and EB ITD A decline by 30%, TATA S teel net down by 89%

bigges t shoc k of the quarter the steep f all in net prof it is due to lower

realization, lower income and a sharp rise in raw material and fuel costs.Indias

bigges t ca rmaker reported a decline in prof it by 59 .8 per cent at Rs. 240 .44

crore, due to Ma nesar labor strike and adverse foreign exchange mov ement.

M ost of the company ab le to meet the revenue growth but the ir PAT is

declining because they need to s ell their p roduct in lower margin. The main

reason of lowe r earnings is ris e in input cos t, cu rrency fluctuation economicslow do wn, high depreciation and interest cost As macro headwinds gain

mom entum many company will start looking to protect cash because of rising

interest ra te, deteriorating g lobal macroeconom ic scenario and continued policy

and regulatio n unce rtainty.

FII outflow witnessed 1379 core in the October month and last outflow is higher

than Lehman collapse outflow tha t is also a main reason of R upee depreciation.


7/227

Citi and CLSA have said that Indian companies are the worst performing incomparison of other Asian companies. The domestic and retail investors are the

biggest losers in this kind of market because they cannot invest in other market

were as FII and HNI are able to recover their losses by investing in other capital

markets..

With sluggish earnings many brokerage firm are advising investor to invest in

asset class like Gold, forex bonds etc and they are targeting FY13 will be better

and Sensex will able to meet the EPS and growth target of 1300 and 11-13%

respectively. Companies need to adopt different cost cutting measure and try toincrease their operating efficiency and margin in order to achieve high Net

profit and to sustain in global markets

The street is expecting Q3 earnings also down because most of the data like IIP,

PMI, Inflation and Export , GDP were not encouraging and normally FII take

out their money in the month of the December during Christmas and New Year

which is negative sign for Indian Stock Markets


8/22

THE RUPEE STORY

8

THE RUPEE ST ORY..

The rupee touching the 52/$ mark from 44/$ during August. A jump of R s8/$.The question arises whether any mea sures have been taken to curb thiseffect by the RBI. The impact

Ma ny car man ufacturers are plannin g to increase the car price b y also keeping their profitmargin minimum wit h companies likeM aru tiSuzuki, India's largest carmanufacturer imported parts worth Rs 8,000 c rores eve ry year, the prices

are on the rise.

With cotton for example costing more brands like Calvin Klein, Tomm yHilfige r, B enetton and Blackberry could also face rough times ahead withtheir margins on a reducing no te.

AnOutsiderw ill get good bargain for their home country currencies he re.At the s ame time people will think twice before purchase of import goodsfrom their favourite des tin atio ns like Singapore and Thailand.

A sharp fall of about 17% in the value of rupe e -- has made the cost ofrepaying these foreign loans costlier

Steelmakers who depend on coking coal for their p rocess aims at lookingat their import bill for their rescue.

Even the petrol prices touched Rs.76 and the central governmen t forc ing

the states to reduce their taxes.

Analysis: The reasons for this to happen

Inflation around the 10% mark Interest Rate repo rate at 8.50 per cent and the reverse repo rate moved to

7.50 per cent.

Deficit ba lance of payment of 9200 crores The scenario with r espect to the Europesovereign debt problem, US

economy problem.

The va rious scams like the 2g scam, Co mmon w ealth gam es etc.

Conclusion:

The RBI has s old the dollar currency in the market to increase the value ofrupees. There has been a significant policy increase with regard to the ceiling ofthe exchange for F II inve stment in corporate and government bonds.Will it savethe current scenario?

-Ka rthik.R{ I M BA D}


9/22

THE GREAT DEPRESSION

9

It originated in the United States, starting with the stock market crash of

Octobe r 29, 1929 (know n as Black T uesday), but quickly sp read to almost everycountry in the wo rld.

It was the time whe n Gold w as used to determine the value of poundste rling. With the fall of the F irst Wor ld W ar the pound va luedepreciated.

Th e decline in the US economy wa s the factor tha t pulled dow n mostother countries at first, and then internal weaknesses or strengths in eachcountry made conditions worse or better.

Stock market prices reached their highest levels to date. The continua lincrease of stocks seemed inevitable. But the reality w as fa r from w hat itseemed

A group of bankers pooled their mon ey and invested a large sum backinto the stock m arket trying to convince others from s elling.

By late in 1930, a stead y decline set in which reached bottom by Ma rch1933.

W hat caused this severe econom ic failure,

Th e Wall Stre et C rash o f October, 1929 B ank failures Prosp erity Decade of the 192 0s. U neven income distribution C redit-buy now, pay later

Smoot-Hawley Tariff Act

Did In dia g et affected by this?

High prices along with the stringent taxes prevalent in British India had adreadful impact on the comm on man.

With various mov emen ts like the Swa deshi and boycott of foreig n goodsby Indian nat ionalists , Inte rnat ional tra de dec reased a grea t d eal

Th ere was a shift from m anufacturing o f food crops to cash c rops due tothe in creased dem and in the m ills a t United K ingdom

Due to a decline in e xports and imports, and thereby, in the transp ortationof goods , the railway re venues decreased exponentially

Th e Central bank came into being on April 1, 1935.

Conclusion:

In the 20s the banks were lending huge amount of money for people to buyrisky stocks .The stocks did fall and the banks crashed as the end result. Buttoday the banks hesitate to provide loans even after sufficient collateralsecurities being pledged. Is it to avoid another great depression, Its a thought toponder about.

Pavitra Na rayana { I Mba -D }


10/22

KINGFISHER MISHAPIntroduction

Kingfisher Airlines was established in 2003. It is owned by the Bengaluru basedUnited Breweries Group.. In April, some members of a consortium, whichincluded 13 banks led by SBI, converted around Rs. 1400 crore of short-termloans into equity at a price of Rs. 64.48 a share-a nearly 41% premium over thethen market price. The company share price then was Rs. 47.60. It is Rs. 19.65now. After the conversion, promoter shareholding including Vijay Mallyas andvarious UB Group companies, fell to 58 percent.

Problems:

The debt pegged at Rs.7500 crores Fuel cost being 50% of operating cost Taxes on jet fuel at 24% and rising Increasedinterest rates on money borrowed Bail out strategy plan

Kingfisher red, the low cost airline,running into loss

Solution:

Debt can be converted into foreign currency loans that attract lower rates. Around 700-800 crore working capital loan and term loan from HNI. Exit from all the loss making routes Both aircraft and crew utilization can be maximized to the optimum level Reduction on in flight entertainment for domestic flight Cutting down business class seats by 50% to accommodate economy

class. A talk with the government to reduce customs duty by5 percent% and

excise duty 10 % on jet fuel

Raising the FDI investment in aviation sector

Kingfisher Airlines is a member-elect of the airline alliance, 'OneWorld A tie up with go air whose revenue grew by 61% this financial year

~KanikaBansal{I MBA C}

10


11/22

P H O T O F IN D

1 2

3

4

5

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12/22

1. What is the stock ticker symbol for ICICI Bank on NYSE?2. What is the total amount upto which Foreign Institutional Investors

(FIIs) can invest in Government securities in India?

3. There has been news that government-run oil marketing

companies suffered a loss of Rs 64,900 crore as under-recoveries

due to selling diesel, kerosene and domestic LPG on subsidised

rates. What is under-recovery?

4. Which global private equity firm has recently picked up a stake in

ethnic wear retail chain Fabindia?

5. What is the term used to describe 6.5% in the nomenclature 6.5%

GS 2019?

6. These are fixed-income securities denominated in the Chinese

currency and issued in Hong Kong. Name them.

7. It is a strategy where investments are made in companies that are

providers of necessary equipment for an industry, rather than in

the industrys product. What is this strategy called?

8. The International Monetary Fund (IMF) maintains 2 multilateral

borrowing arrangements- NAB and GAB. What is its borrowing

capacity under NAB?

9. What principle of stock speculation was first propounded by

Thomas F. Woodlock?

10. This is a typical underwriting agreement that allows the

underwriters to buy upto an additional 15% of shares at the

offering price. How is it better known as?

FINANCE QUIZ

12


13/22

STOCK ANALYSIS

13

Yes Bank Analysis (Buy Recommendation 6-9 months horizon)

Technical Analysis:

Yes Bank delivered a strong set of numbers in Q2FY2012 driven by a strongoperating performance and healthy asset quality. The increase in NIM was a

positive surprise, though it could decline slightly in the coming quarters due to alow CASA base and high interest rates. The bank would continue to grow

significantly ahead of the industry and is likely to retain its asset quality. Thebanks earnings to grow at a CAGR of 27% over FY2011-13. Niksha EquityResearch maintain Buy recommendation with a price target of Rs360 (2x

FY2013E BV) for the stock.

The stock has touch a high of Rs 375 in November last year , after that it is

facing a resistance around 330-335 level and getting support around 250-260

that is near 100 Day SMA average . The ADX stochastic also show that the

stock is currently in the oversold zone and positive breakout can be seen thestock.


14/2214

CMP 265

Price target 350Stop loss 234

Market capRs9,997

crore

52 weekhigh/low Rs388/236Free float( No ofShare) 25.9 crore

BUY

By - R itesh Kejriwal {I MBA B}

{Sources: Moneycontrol, Sharekhan , Yes Bank Annual Report, Share Khan

Pattern Finder}

STOCK ADVICE- BUY BAJAJ ELECTRICALS

THE TRIGGERS

BEL intends to bring down the number of projects from 82 to ~ 50

projects in the E&P division. This will aid in b ringing do wn the cost,check inventory management, improve working capita l position and itsbalanc e sheet, going forward. The manageme nt expe cts the E BITmargin to improve in the E&P d ivision from negative 6.7% in Q 1FY12 to10%+ by Q 4FY12, ind icating a full-year margin at 8% to 9%approximately . BEL expects to clock a grow th of 22-24% in the consumerdurable business in FY12E and also expects to maintain the margin ofFY11.The steps taken by the m anagement to reduce f ixed overheads will helpBEL to post better margins by end FY12 E .Th e consumer durablessegm ent is also expected to post 24% growth and ma intain its EBIT

margin in FY12E.

THE CALL

The stock is available at an attractiv e value at current levels and offers apotential upside from thes e levels.Buy Price-155-160rs. , Target price-185-190rs. , CMP-175.20rs.


15/22

FINANCE BUZZAir Pocket Stock

A stock that experiences a sudden drop, similar to a plane hitting an air pocket. Air

pocket stocks are usually the result of investors reacting to negative news

Baby Bells

A common nickname given to the U.S. regional telephone companies that were

formed from the breakup of AT&T in 1984. Baby Bells were created in accordance

with antitrust legislation, which is designed to create more competition within the

industry.

Bag Holder

An informal investment term used to describe an investor who holds a position in a

stock which decreases in value until it is worthless. Typically, the bag holder will hold

the position for an extended period of time in which most of the investment is lost.

Bagel Land

A slang term that represents a stock or other security that is approaching $0 in price.

Arriving in bagel land is usually the result of one or more major business problems

that may not be resolvable.

Bear Tack

A fall in the price of a stock, sector, or market, or investor sentiment that assumes a

fall will happen soon. A bear tack is usually used to describe bearish movement in

the short to medium term.

Bull Market

A financial market of a group of securities in which prices are rising or are expected

to rise. The term "bull market" is most often used to refer to the stock market, but canbe applied to anything that is traded, such as bonds, currencies and commodities.

Circuit Breaker

Any measures used by stock exchanges during large sell-offs to avert panic selling.

Sometimes called a "collar."

15


16/22

CROSS-WORD

16


17/22

Across

1. A large extra payment that may be charged at the end of a loan orlease (7)

3. A colloquial word meaning an English Pound (4)5. A loan structure in which the entire principal is repaid at maturity (6)7. The progressive reduction of debt through repayments or

installments (12)11. A short-term lease for seasonal needs, including the aircraft, crew,insurance and maintenance (ACIM) during the period of the lease.(8)

12. Part of the capital of a company (5)

Down

2. The relative amount of fixed costs in a company's cost structure.(The term derived from the physics notion of doing more work withless effort) (8)

4. A type of borrowing by corporations. They are bonds not backed orsecured by any collateral. (10)

6. The portion of a company's profit allocated to each outstanding shareof common stock. Also an indicator of a company's profitability.(Abbreviated) (3)

8. Money paid to owner of copyright or patent (7)9. Individuals who invest their own funds, unlike venture capitalists (6)10. Amalgamation of two companies (6)

17


18/22

Do you think considering advices from social networking

sites while investing funds is bad for you wallet?

YES

NO

CANT SAY

CAMPUS POLL

RESPONSES NO. OF RESPONSES

YES 38

NO 34

CANT SAY 28

TOTAL 100

As per the survey conducted, Out of 100 respondents, 38 (38%) have an

opinion that ,Investing funds considering advices from social networking

sites is bad for our wallet , whereas 34 (34%) say that, it is not bad but

we should think about it before investing, whereas 28(28%) people are

not sure about it .

18


19/22

Do you think T.V programs like Bigboss should be censored

for its vulgarity (Since it comes in a family Entertainment

channel)?

YES

NO

CANT SAY

CAMPUS POLL

YES 50NO 40

CANT SAY 10

TOTAL 100

As per the survey conducted, Out of 100 respondents, 50 (50%) have an

opinion that ,programs like Bigboss should be censored , But 40 (40%)

say that it need not be censored but the timings has to be set

accordingly. whereas 10 (10%) people are not sure about it .

Akhilesha K

1120336

1st MBA D

19


20/22

ANSWERSVERIFY YOURSELF

PHOTO F IND

1 . DO NALD TRUMP

2. GU RBAKSH CHAHAL

3. EDW ARD JOHNSON

4. PRA FUL P ATEL

5. EDUARDO SAVERIN

ANSWER S FOR FINANCE QUIZ

1. IBN

2. US $ 15 bi l lion

3. I t is th e gap between the lo cal pr ice of fuel and what would hav e been the pr ice i f thefuel were imp orted

4. Carlyle5. Coupon Rate6. Dim sum bonds7. Pick-and-Shovel P lay

8. US $ 590 bi l lion

9. He ga ve the concept that o dd-lot ters are always wrong.

10. G ree nshoe Opt ion

C R O S S W O R D

Across

1. BALLOON A large extra payme nt that may be char ged at th e end of a loan o r lease3. QUID A col loquial word m eaning an Eng lish Po und5. BULLET A loan s tructure in w hich the en tire principal is rep aid at maturi ty7. AMORTISATION the progress ive re duction of debt through r epaym ents or

instal lments11. WETLEASE A short - term lease for seasonal needs, inc luding the ai rcraf t , crew,

insurance a nd maintenance (AC IM) dur ing the per iod of the le ase.12. SHARE Part of the capital of a com pany

Down

2. LEVERAGE The relat ive am o unt of fixed costs in a com pany's cost s t ructure. (Theterm derived f rom th e physics n ot ion of doin g more work with less effort)4 . DEBENTURESA typ e of borrow ing b y c orp orat ions . T hey are bon ds no t back ed orsecured by any col lateral .6. EPS Earnings per Share. The p ort io n of a com pany's prof it a l located to eachoutstanding share of com mon stock. It is an indicator of a c ompan y's prof itabi li ty.8 . ROYALTY money paid to owner of copyr ig ht or patent9. ANGELS Individ uals who in vest their own funds , unl ike ventu re cap italists10. MERGERA m alg am atio n of tw o c om panies

20


21/2221


22/22

TEAM NISHKA

22

FACULTY CO-ORDINATORS

Prof. Anirban Ghatak

Dr. Jeevananda

Co-ordinators:

Abhishek Jain (sec B)

Sathya (Sec A)

Editors:

Karthik.R (Sec D)

Sanju (Sec A)

Creative and Designing:

SIDDHARTHA (Sec c)

Meenambika (sec c)

RBI column:

Raghav (Sec A)

Manasa (Sec C)

Articles:

Akhilesh (Sec A)

Aniket (sec D)

Varsha (Sec D)

Stock Analysis:

Ritesh (sec B)

Arpit (Sec A)

Crossword:

Nagarajan.T (Sec B)

Finance Buzz:

Kumaran (Sec B)

Photo Find

MUTEEB (Sec C)

ECONOMIC ROLLERS:

Manogya (sec c)

Campus Poll:

Akhilesha.K (Sec D)

Pruthv i(Sec A)

Finance Quiz:

Gaurab Sen (Sec C)

nishka dec 5

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