VOLUME 5.19ISSUE 105

january 1, 2012

about us

Rates 01

Graphs 02

News 03

International & National events in the world of finance

Contemporary Articles

D st – at the absolute bottom? 06RUPEE Depreciation – “A shock or an Inevitable Event” 07

Stock Watch 08Hindalco Industries Limited

Did You Know? 12

Buzz Words 13

Crossword 14

Check your Financial Quotient

C H A A N A K Y A

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released fortnightly.

Its objective is to

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tivities & events in the

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Rates

01

Repo 8.50%Reverse Repo 7.50%Call rate 7.25%-9.15% Inflation (as on 11th Nov. 2011) +11.81% Forex Reserve (as on 16th Dec. 2011) $302.100 billion91 day T-Bill 8.4782%IIP (For Oct. 2011) -5.2%6.90 GS 2019 8.0907-8.0907%

By- Pankaj Sharma I MBA J

GRAPHS27000

27500

28000

28500

29000

16-Dec 19-Dec 22-Dec 25-Dec 28-Dec

Gold(per 10 gram)

3200000

6200000

9200000

12200000

15200000

4400

4500

4600

4700

4800

4900

16-Dec 19-Dec 22-Dec 25-Dec 28-Dec

future rates open interest

4300

4600

4900

5200

15,000.00

15,400.00

15,800.00

16,200.00

16,600.00

16-Dec 19-Dec 22-Dec 25-Dec 28-Dec

sensex nifty

GRaPHs

02

102

105

108

111

114

16-Dec 19-Dec 22-Dec 25-Dec 28-Dec

Oil(per bbl)

51

51.5

52

52.5

53

53.5

54

16-Dec 19-Dec 22-Dec 25-Dec 28-Dec

Rs/$

By- Pankaj Sharma I MBA J

inteRnational newsBy- Sanjeet Kumar, I MBA J

03

Siemens to invest €66 m in gas turbine test centre Siemens is investing €66 million to build a combustion test centre for gas turbines near Berlin. The

projected test centre will commence operation in 2014. It will have three cells for investigating combustion processes of burners under real-life operating conditions. Siemens said that centre of competence in Berlin-Moabit and a recently commissioned production facility in Charlotte, North Carolina, form the basis of the global manufacturing, sales and service network for Siemens gas turbines.

• ABB bags $11-m deal from Facebook arm Power and automation technology group ABB has won a $11-million order from Facebook's sub-

sidiary Pinnacle Sweden, to power its first server facility outside the US. ABB will build two high- and medium-voltage air- and gas-insulated switchgear substations that will supply power to a data centre being built in Lulea, a coastal town in northern Sweden.

• Maldives Govt vows to implement all deals with foreign companies The Maldives Government is committed to implementing all contracts that have been entered into

with foreign companies wanting to do business in the island state. The assurance came at a time when the GMR Group-led consortium, which is taking up the modernisation of Ibrahim Nasir International Airport here, is facing trouble in imposing a $25 airport development charge on pas-sengers travelling abroad.

• Global regulators prepare supervisory framework to prevent Lehman-like collapses Global banking, securities and insurance regulators have proposed a framework for supervising

financial conglomerates to ward off a Lehman-like crisis. For example, the framework discusses techniques for the detection and correction of double or multiple gearing, where the same capital is used as a risk buffer for two or more legal entities within the conglomerate. The consultative report has been jointly authored by the Bank of International Settlements (BIS), International Organisa-tion of Securities Commissions (IOSCO) and International Association of Insurance Supervisors (IAIS).The objective of the framework is to close regulatory gaps, eliminate confusion on entities that fall in the interface of two or more regulators and effectively supervise unregulated entities in a financial conglomerate.

• Wipro Tech bags AstraZeneca deal Wipro Technologies, the global information technology, consulting and outsourcing business of

Wipro Ltd, has been selected as an IT partner for a multi-million dollar engagement with Astra-Zeneca, a leading global biopharmaceutical company, sources close to the company said. Wipro has been selected as one of four IT partners, after a six-month evaluation period, to enhance As-traZeneca's end user computing infrastructure.

• Infosys BPO to buy Australia's Portland Group Infosys BPO has signed an agreement to acquire all of the outstanding share capital in Australia-

based Portland Group. Infosys expects the acquisition, which will cost Australian $37 million (around Rs 195.6 crore), to be completed by early January 2012.

• GMR to bid for airport projects in Brazil The Bangalore headquartered GMR Group is set to participate in the modernisation of airports in

national news

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Brazil. “This will be the first time that GMR Infrastructure will be bidding alone for a project. The Brazil airport (bid) is coming at the end of January. Brazil is only giving 51 per cent equity, they want to keep 49 per cent with the (country's) Airport Authority. Brazil is taking up the modernisa-tion of airports ahead of the 2014 soccer world cup which the South American country is hosting. Currently, the GMR Group operates the Hyderabad, Delhi and the Istanbul airports.

• Rupee free fall continues on inflation, growth worries The rupee's free fall continued as it closed at a new record low of 53.72 to the dollar on the back

of a weak euro, outflow of foreign funds, high inflation, and growth slowdown. According to dealers, there was heavy dollar demand from importers, especially oil companies.

The weakening of the euro in the overseas market fuelled ‘panic dollar buying', perhaps in an-ticipation of further dollar appreciation, said a public sector bank dealer.

The rupee closed 50 paisa lower on 21st December, against the previous close of 53.23. It had briefly crossed the 54 level during the day when it touched 54.67.

• Fall in food prices eases inflation to 9.11% While industry responded by renewing the call for the RBI to soften its anti-inflationary stance

in its forthcoming monetary policy review, analysts continued to express concern over the per-sistence of inflationary pressures in the non-food manufactured products group. Government data released on 21st December showed headline inflation in November eased to 9.11 per cent, down from the previous month's 9.73 per cent annual rise, as price levels of food items dipped on account of items such as cereals, vegetables and fruits.

• To support rupee, RBI tightens forward contracts The Reserve Bank of India on 22nd December announced a slew of measures to support the

rupee and curb build up of speculative positions in the foreign exchange market. The measures include withdrawal of the facility to cancel and rebook forward contracts by resi-

dent and foreign institutional investors with immediate effect. Though this contract locks in the dollar price to protect a resident or FII against changes in the

exchange rate, market players say the facility is being misused to take speculative bets against the rupee.

The rupee closed a tad stronger at 53.66 per dollar on the back of RBI's intervention on Thurs-day against the previous close of 53.71. During the course of the day's trading it touched an all-time low of 54.2925

• Forex reserves fall $69 million India's foreign exchange reserves fell by $69 million to $306.775 billion in the week ended

December 9, central bank data showed on 23rd December. According to the Reserve Bank of India's weekly statistical supplement, the reserves fell mainly due to a decline of $56 million in the bank's foreign currency assets.

• Govt, RBI must find a lasting solution to tackle NPAs The NPA (non-performing asset) menace which was kept under some check for a few years

has again started raising its ugly head disturbing the peace of mind of the Government and the

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Reserve Bank. Further, the changes in economic scenario which are influenced by several micro and macro eco-

nomic factors, on both domestic and international fronts, such as declining GDP growth, high inflation, financial instability, exchange and interest rate volatility and monsoon conditions also affect the working of banks adversely and result in increased level of NPAs.

• IDFC raises Rs 538 cr via infra bonds Infrastructure Development Finance Company Ltd has raised a total of Rs 538.08 crore from ap-

proximately 2.7 lakh investors through the first tranche of its “Long Term Infrastructure Bonds.” The company is looking to raise a total of Rs 5,000 crore by March 2012 through the infrastructure

bonds, said a press release issued by the company.

• Kingfisher flies into tax turbulence The debt-laden private carrier is now under the Income-Tax Department's lens for non-deposit of

tax deducted at source (TDS) from employees' salaries to the exchequer. Out of the total amount of Rs 153.82 crore for these two years, the Department has collected Rs

21.04 crore. Kingfisher Airlines has filed a commitment letter and undertaken to pay the balance TDS liabilities by the end of the current financial year.

• Food inflation dips to 1.81%, near 4-year low Food inflation eased sharply to 1.81 per cent in the week ended December 10, from the previous

week's annual rise of 4.35 per cent, largely on account of the high base effect of the previous year. The continuing slide in vegetables and cereals too contributed to the dip in the year-on-year food inflation rate.

Inflation in non-food items too came down sharply, even as fuels held steady, Government data showed on 22nd December.

• Forex reserves fall by $4.6 b to $302 b Foreign exchange reserves declined by $4.675 billion to $302.100 billion for the week ended De-

cember 16, according to the Reserve Bank of India's ‘Weekly Statistical Supplement'. This is the second week in a row that foreign exchange reserves have declined. In the earlier week ended De-cember 9, Forex reserves had dipped by $69 million to $306.775 billion. The decline in reserves was mainly on account of currency revaluation. The foreign currency assets fell by $4.668 billion to $266.968 billion.

• FII Inflows to Dip on US, Europe Woes The Reserve Bank of India has hinted that FII investments in stocks may dip due to uncertainties

in the US and Europe, banks may have to grapple with more bad loans and current account deficit can widen.

D st – at tHe absolute bottom?

By- Dhruv Chopra, I MBA I

06

3 January, 2011 – 20561 and now on 23 December, 2011 – 15738, that is our Sensex’s performance.

3 January, 2011 – 13454 and now on 23 December, 2011 – 9629, that is the Bankex’s fall.

The above mentioned data forces us to contemplate that has the Dalal Street reached close to its bottom, will it ever go deep down even further and even if it recovers then will it be able to last its surge for a period of time?

After a year which investors would definitely want to forget as index plummets almost 21% over its position earlier, the financial gurus are making comments that the markets are close to bottom but not out of woods yet. They still have a view that index would hover in and around the 16k and 17k mark. Though it is very difficult to indicate the mark on the exact bottom but through Price to Earnings ratio things become clearer.

Concerns about lower economic growth, policy paralysis, lack of investors’ confidence, burgeon-ing fiscal deficit, surging oil prices and lower industrial production clearly breaks the growing trajectory’s flow and rather retards the growth. And when Sensex and Dalal Street are the topics of discussion then sentiment plays pivotal role and with so many speed breakers sentiments are inevitably negative.

A report by ING Investment Management suggests that for FY12, fiscal deficit could rise to 5.7% of GDP as compared to 5.1% of GDP in FY11. Corporate earnings could slow down further, given the slower economic growth, which means there could be more downgrades from analysts in 2012.And it is not only the domestic lack of growth which pulls the trajectory down but the global eco-nomic scenario which is glooming too plays a great role in this negativity. Be it USA or Europe, both being our largest exporters are severely hit by the downturn. This directly impacts our pro-duction system and indirectly our growth too. 1991 reforms if played a positive role in making our country a global contender of being a super power, then it also glued us with the direct impacts of the global negativity.

OPPORTUNITY- D St on the lowest level is also an opportunity for the investors for bottom fish-ing which gives them a chance to buy stocks which have fallen much below their actual level. These stocks are expected to bounce back as the time moves on and the markets improve, as this is the best strategy in the bear markets. Also investors can eye upon the beaten down sectors like automobiles and banking, which has the ability to come back sharply if the central bank cut rates in the upcoming quarters.

Since the markets are close to a bottom, it still opens a viable option to invest in for the future events. Now markets even when down offers opportunities, it’s the investors who need to smell the right one and keep the sentiment positive.

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RuPee DePReciation–a sHock oR an inevitable event

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By- Dhruv Chopra, I MBA I

Rupee depreciation in the recent times has created a panic situation in the economic environment of the country. People and the economists want the RBI to intervene and curb the forex reserve outflows but is it really a long term fixation of the problem or just a short term fix? That is the question which can be answered by the macroeconomic conditions of the country.

The rupee fall was inevitable, as the ingredients for the rupee plummet were present in the economic conditions for some time and rather they were getting stronger by the each passing stroke of time. For the last year, portfolio flows have slowed down or even partially reversed, current account deficit is about to shoot beyond 3% target, euro zone crisis has reduced global liquidity, a lot of borrowings from 2007 are due for repayment now, our inflation has been high that has been reduced now and FDI has slowed down drastically. So, rather than handling the “Rupee” fall we should look into the underlying factors and should try to manage them for the further degradation.

Now, data from the RBI for rupee’s trade weighted REER against a basket of six currencies reveals a different picture. Till end October, the rupee had appreciated by over 8% over the average of 2004-05 and over 6% over the average of 2009-10. So, the long standing fact is that the rupee was overvalued for quite a long time and its fall is a long standing adjustment.

And most of the underlying causes i.e. inflation, euro zone crisis or repayments are either beyond our control or the effective measures have already been taken. So what is that which can bring the mo-mentum back on the positive track? Ans: Boost Inflows and the confidence (intangible but extremely important aspect) and for these two factors to kick start;

• We need fiscal control and easier interest rate scenario coupled with boosting inflows,

• Initiate Supply-side reforms and get the confidence induced back into the system.

FDI has always been the weak point for the India’s economy and we need to correct it now. It repre-sents long term forex reserves and to improve it we need to take some tough decisions in quick suc-cession. So far policy ambiguity has led to the investors’ weakening confidence and if it is aggravated then it would really become an appalling situation.

Rather Rupee fall can be used as a catalyst to address these deeper economic issues and get India back to the growing trajectory.

We need to act now!

08

stock watcH By- Deebadwita De, I MBA J

Shashank Mishra, I MBA N

HINDALCO INDUSTRIES LIMITED

The Global society has faced a great challenge to shift human economic activity and lifestyleson to a sustainable path in the 21st century,including meeting threats from climate change.The story of the al-uminium industry over the decades ahead must be one of how it is part of the solution for a sustainable future. The metal aluminium has a vital role in successfully addressing the sustainability challenge. Aluminium is the third most abundant element in the earth's crust and constitutes 7.3% by mass. The existence of was first established in 1808 but there were a few historical mentions of aluminium use. The aluminium metal was extracted from the ore after many years of research. It was possible only in the year 1854 to develop a viable commercial production process of aluminium. Primary aluminium is the hot molten metal that is producedin the smelter. Secondary aluminium is the finished goods made from primary aluminium.

Company Profile:

Hindalco Industries Ltd. is regarded as one of the world's largest aluminium manufacturing company. It is a subsidiary of the Aditya Birla Group. The Company was Incorporated on 15th December,1958 at Mumbai to manufacture alumina, aluminium and aluminium fabricated items. It was named Hin-dustan Aluminum Corporation Limited.In 1989 the company was restructured and renamed Hindalco. The Company was formed by the house of Birlas in collaboration with the Kaiser Organization of U.S.A. According to the Company's agreement with Kaiser Aluminium and Chemical Corporation, the Collaborators agreed to allot to the Collaborators 4,80,000 fully paid-up equity shares of Rs 10 each. Now the company is run by one of the world's youngest billionaires, Mr. K.M. Birla. The company boasts of having an annual sales of $ 5 billion and it employs 13,675 people. Hindalco is one of the

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world's largest aluminium rolling companies and one of the biggest producers of primary aluminium in Asia. It is a metals powerhouse with a turnover of US$ 14 billion. On 11th February,2007 Hindalco Industries Ltd., entered into an agreement to acquire the Canadian company Novelis for U$6 billion, making the combined entity the world's largest rolled-aluminium producer.In the year 2007 Novelis was the world's largest producer of rolled aluminum and a major recycler of aluminum cans. On 15th May, 2007 the acquisition was completed with Novelis shareholders receiving $44.93 per outstanding share of common stock. Hindalco also acquired 75,415,536 common shares of Novelis, representing 100 percent of the issued and outstanding common shares on the same year. When Hindalco made this bid in 2007 this became the largest Indian investment in North America and the second-largest overseas investment by an Indian company (behind Tata Steel Europe's purchase of Corus two weeks earlier) to this time. In July the same year, Hindalco acquired stake of Alcan Inc.'s in the Utkal Alu-mina Project located in Orissa. In June 2000, acquisition of controlling stake in Indian Aluminium Company Limited (Indal) with 74.6 per cent equity holding was done by the company. In the year 2006, the company announced of entering into a Joint Venture partnership with ALMEX USA Inc., for the manufacture of High Strength Aluminium Alloys for applications in the aerospace, sporting goods and surface transport industries. The company is listed on 2011, Forbes Global 2000 at a position of 643.

Financial Analysis:

•The company sales has grown and reached to Rs 6,271.87 crore.

•The revenue of the company also increased by 7%

•Hindalco’s net profit grew up to Rs. 644 increasing up at 21%.

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Bouncing back again:The stock touched the market price of Rs.119.60.The stock is currently showing an upward momen-tum.

BSE : Rs.119.60

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Recommendation for the stock:

The good fundamentals of the company will help the stock to move northwards. The recommendation for the stock is “BUY” for a period of 12 months.

Call: BuyCMP: Rs. 119.60

Target Price :Rs. 140Time Period:12 months

“One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute.”

William Feather

“Security depends not so much upon how much you have, as upon how much you can do without.”

Joseph Wood Krutch

DiD You know?

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By- Vinay Goel, I MBA L

Freakonomics: Moving Away from the obvious

What is the ideal way of doing a causal research? A person who may have even a little idea about the subject will answer for an effective causal research a proper application of econometrics, theories and mathematics is required. But the authors of the famous book Freakonomics Mr Steven D. Levitt and Stephen J. Dubner are interested in solving the day to day riddles of life through different perspec-tives. The USP of their analysis is the subjects they have taken for analysis, such as:

• What do school teachers and sumo wrestlers have in common?

The answer is cheating. We all respond to some additional incentives that we get in our day to day life. The book explores how a sport being in the history for more than 2000 years and known for its purification and rituals, caught in the traps of match rigging. Everybody can assume why a kid would like to teach in his/her SATs but why would a teacher cheat, the reason lies in the pressure built upon them to get high test scores from the students by the school authorities.

• Where have all the criminals gone?

The research undermines the reasons for decline in the crime rate in New York City in the 1990s. Was it prison increase, strong economy, crack decrease or police increase? No, the analysis of the hypoth-esis formed by Mr. Steven D. Levitt says something else. It proves that legalisation of abortion in the 1970s was the primary reason for the drop in the crime rate in the 90s. Since a whole generation of unwanted children were not there to commit crime.

These and many more mysteries have been unfurled in this book which not only gives a different perspective to pursue a research but also to form solutions beyond the obvious, which may look weird but effective.

Sources:Freakonomics “A Phenomenon” by Steven D. Levitt and Stephen J. Dubner

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buzzwoRDs By- Prachi Sharda, I MBA J

Definition of 'Dow Jones BRIC 50 Index'

A market capitalization-weighted stock index containing 50 of the most liquid and largest companies operating in Brazil, Russia, India and China (BRIC nations). The index uses the Dow Jones Global Indexes as its stock universe for the four nations, which cover approximately 95% of the market capi-talization on local exchanges. Fifteen positions are targeted for each Brazil, Russia and China, while Russia's representation is targeted for five positions.

Selection for the index is based on a ranking system that looks equally at free-float market capi-talization and average daily vol-ume. The top 10 ranked stocks in each sub-index are selected, along with a customized selection of five more between the rankings of 11 and 20 (these numbers are pro-rated for Russia).

The index is reconstituted annu-ally and weightings are adjusted quarterly. No single stock can make up more than 10% of the BRIC 50 Index.

BRIC investing has become a trendy strategy, as these nations represent large, developing economies that are becoming more and more involved in the global economy. China representation is sought only in the offshore market, where H-shares and American Depositary receipts are available on different stock exchanges.

Deep Discount Bonds

Typically, a deep-discount bond will have a market price of 20% or more below its face value and is sold at a discount from par value and has a coupon rate significantly less than the prevailing rates of fixed-income securities with a similar risk profile.These bonds are perceived to be riskier than similar bonds and are thus priced accordingly.

These low-coupon bonds are typically long term and issued with call provisions. Investors are attracted to these discounted bonds because of their high return or minimal chance of being called before maturity.

cRosswoRD

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By- Reddy Sreedhar T., I MBA L

Across3. This telecom operator is set to discontinue services of prepaid customers with inactiveusage for continuous period of 60 days6. This country has been ranked 2nd biggest global arms exproter.8. A Social networking company bought another social networking site 'hi5'9. The LCD's stake of this company is set to sell to Samsung for $ 940 million.10. Apple is set to open R & D centre in this part ofAsian country.

Down1. SBI , in India recently launched 'Bank on Wheels' in this state.2. The Indian city which is set to host 'International coffee festival' in January 2010.4. This company won patent rights against 'Android' recently.5. German Premium automobile manufacturer 'Porsche' opened it's centre in this city of India7. BRICS Trade ministers in March 2012 is going to be held in this country.

team

Apoorv Jhudeley & Rajat Sikri

Editors

Zafar Iqbal Cartoon

Vaibhav NagarNews

Naveen Kulkarni Crosswords & Quotes

Sumit Kumar Gupta Graph & Rates

Amit PrakashBook and Magazine Review

T. Deekshith Ravi Chandra & Rao Pavan sridhar

Student Article

Rohit Dhannawat &Saurabh KhatorInvestors check

Amit Prakash &Chinmay Uchhrang

JethwaScam

Mandeep Kaur Commodities Market

Richa Jain & Ritu Jadhwani

Debate

Akshat Malik, Geetika Gupta &

Manan Datt Alumni Speak

Abhijeet SinghQuiz

Anubhav Jain Did You Know

Gaurav Jain Stock Watch

Madhukar DasInvestor Focus

Apurva Gupta &Pragathi P.

Buzz Words

Kumar Gaurav & Meenakshi RamnathReview Committee

Apoorv JhudeleyCreative Head & Design

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