Finsight
The Fortnightly Newsletter Issue: April 1, 2012
Sources:
Mint The Economic Times The Economist MoneyControl.com Financial Express Business Standard BusinessLine Investopedia.com
4-6 7-8 9 9 10
F I N S I G H T
disclosed in the announcement though market sources peg the deal at over Rs500 crore. The acquisition, which is subject to regulatory approvals, is routed through the subsidiary, L&T Finance. This is the second acquisition by the company in the mutual fund space. It had earlier acquired DBS Chola to enter the mutual fund arena in 2010. With this acquisition, Larsen & Toubro is set to become the 13th largest mutual fund in India. Fidelity set up base in India in 2004 and manages $212 billion over Rs10 lakh crore worth of assets under management (AUM) globally. Foreign direct investment norms for Indians relaxed The Reserve Bank of India (RBI) announced a slew of revisions aimed at liberalizing the norms for direct investment abroad by Indian residents. These include liberalization in regulations on qualification shares, professional services rendered and Esop (employee stock option plan) schemes.
and Exchange Board of India (Sebi) has said in a notification. SEBI said exchanges should ensure that all algorithmic orders, software driven automated order execution engines, are routed through broker servers located in India and have appropriate risk-control mechanism emanating from algorithmic orders and trades.
He was a co-founder and executive director of Partners In Health, a nonprofit health care organization working for poor. He has also worked s director of WHO's HIV/AIDS department. Obama said, "It's time for a development professional to lead the world's largest development agency while nominating him.
The fund, which will have a six-year lifespan like previous funds, will have a sub-tranche for Asia investments, said Managing Director Ong Tek Khoan. About one-third of the Asian tranche is likely to be invested in China, with the balance split equally between India and Southeast Asia, he added. SBI and Societe Generale form custodial service joint venture State Bank of India, the largest lender of India took a major step for its future growth by rolling out its custodial service operations in the country. SBI has formed a joint venture with France
Markets
Key benchmark indices snapped five-week losing streak and eked out small gains in the week ended Friday, 30 March 2012. A rally on Friday, 30 March 2012, triggered by comments from Finance Minister Pranab Mukherjee that holders of participatory notes, or P-notes, will have no tax liability in India on the investments they make in the local equity market, helped market recover losses suffered earlier during the week. The market fell in three out of five trading sessions in the week ended 30 March 2012. Volatility was high as traders rolled over positions in the futures & options (F&O) segment from March 2012 series to April 2012. The BSE Sensex gained 42.46 points or 0.24% to 17,404.20 in the week ended Friday, 30 March 2012. The S&P CNX Nifty rose 17.35 points or 0.32% to 5,295.55. The previous week ending on Friday, 23 March 2012 also saw Sensex fell by 0.6% and S&P CNX Nifty 0.74% to end at 5278 due to uninspiring budgetary proposals and weak global markets. Currencies:The rupee NIFTY suffered the worst fall in four months, shedding 3.68 percent in March, hammered by investor jitters over the impact of high global oil prices on an economy still licking the the wounds of a fierce inflation battle that has crimped growth and widened deficits. The rupee ended at 50.87/88 to the dollar and 67.89 against Euro.CLSA has maintained its rupee target to be 55/$ for 2012. Key Highlights: A new set of tax norms, the General AntiAvoidance Rules ( GAAR) comes into effect from next week (April 1, 2012. Under this, the income tax department will have the power to deny individuals and entities the benefits of any tax avoidance treaty that may presently exist.
Pranab Mukherjee said on 30thMarch that
the government doesn't intend to levy any tax on the holders of Participatory Notes (P-Notes). A lack of clarity on taxation of P-notes has contributed to the recent volatility in the domestic share market. PNotes are instruments issued by registered foreign institutional investors to overseas investors, who wish to invest in the Indian stock markets without
registering themselves with SEBI. The UPA government appeared to stave off a fresh crisis on 22 March 2012 after the national auditor played down suggestions of a Rs 10.67-lakh crore revenue loss to the exchequer due to faulty allocation of coal mining blocks. A leaked draft report of the CAG alleged that by not auctioning mines allotted to private and state-run firms, the government may have engendered revenue losses of truly epic proportions dwarfing all previous scams. But the Prime Minister's Office sprang into action and released a letter from the auditor saying the information was half-baked and misleading.
Markets continued...
Key Highlights: Reserve Bank of India (RBI) stepped in on Friday to buy up to Rs.10,000 crore ($1.95 billion) of bonds through open market operations on Friday 30th March in order to boost liquidity in the Banking system. A Reuters poll conducted over the past week showed investors still expect the Sensex to end the year at 19,500 points, for a gain of 26 percent for calendar 2012, but concerns about the government's finances and its political stability remain prominent risks. RIL has reorganised its finance operations under two different chief financial officers for the first time in its 37-year-old history. According to reports, V Srikanth, who joined RIL from Citibank as deputy chief financial officer (CFO) in August 2010, has been elevated as CFO, placing him on an equal footing with the incumbent Alok Agarwal. RIL has also divided responsibilities between the two finance heads, reports suggest. The yield on the benchmark 10-year Government bonds climbed on Wed 28th March after the Centre said that it will borrow 65% money from the market in the first half of FY13. The Union Government plans to raise Rs. 3.7 trillion through bond sales during AprilSeptember 2012. Commodities: MCX Gold June initially moved sharply higher but found very strong Resistance at 28880 levels. Later prices fell sharply towards 28501 levels and finally closed marginally
SENSEX
lower from the previous weeks closing levels. Spot gold has fallen below the 200-day
simple moving average again and formed a death cross, a technical sell sign, for the second time in less than four months MCX Silver May found strong resistance at 57949 levels and closed at 56801 levels. MCX Crude April found resistance at 5510 levels. Later prices fell sharply breaking both the support levels, and finally closed at 5273. Global Markets: World equity markets end the quarter with double-digit gains, as reports showing the U.S. economy and consumer sentiment still on the road to recovery helped buoy prices. The Dow and the S&P 500 closed out their best first quarter since 1998 and the Nasdaq had its best first-quarter performance since 1991, largely on the back of improving domestic economic data. Dow Jones closed at 13212 and NASDAQ at 3091levels on week ending March 30th. Spain presented a budget projected to save more than 27 billion euros in 2012 through spending cuts and revenue increases, while euro zone finance ministers agreed to raise their financial firewall to contain the region's debt crisis. Spain's budget and the rescue fund move were largely expected by markets, and a spike in the euro against the dollar faded to a more modest rise.
Knowledge Section
Asset-backed security (ABS) A debt
instrument that is collateralized by specific financial assets that generate the cash flow used to service the debt instrument. Asset-backed securities are normally marketable that is, transferable to third parties in market transactions.
Collateralized debt obligation (CDO) A
special purpose entity set up to own a pool of securities or loans, divide the pool's cash flows into tranches based on risk, and sell investors bonds that represent an interest in a particular tranche. The securities may be mortgage-backed securities or other similar securities. The tranches are designed to redistribute the risk of default. "Senior" tranches are considered the safest. Interest and principal payments are generally made in order of seniority, so that junior tranches offer higher coupon payments to compensate for additional default risk. Credit default swap (CDS) In effect, an
insurance contract. The buyer of t h e s wa p m a k e s p e r i o d i c payments to the seller of the swap in return for protection against a possible "credit event" affecting the value of a specified asset. The seller agrees to buy the specified asset from the buyer at par in the event of a credit default. The asset is typically some type of security, such as a corporate bond, CDO, or mortgage-backed security. Neither the buyer nor the seller typically owns the security i.e., credit default swaps are derivatives. Special purpose vehicle (SPV) A legal entity (usually a limited liability company) created to fulfill a narrow or temporary objective. The SPV typically holds a portfolio of assets such as mortgage-backed securities or other debt obligations. The SPV exists to hold the assets and issue a new set of claims on the assets, making the sponsor of the SPV remote from its activities.
finesse@sjmsom.in
The first few right entries will get their name featured in the next issue of Finsight. So hit the quiz fast & get yourself visible.
Campus Buzz
Mr. S. Gurumurthy a leading economist, columnist and adviser who is known to have played a key role in resolving the disputes between various corporates in India has honored IIT Bombay with his presence and an enlightening lecture on Indian Economy on 15th of March. Another eminent personality in the field of finance, Prof R Vaidyanathan, professor Finance at IIM Banglore visited the campus on 22nd March and delivered a lecture on Emerging Trends in Global Markets and Implications for India. Drawing from his rich experience in various roles in Indian regulatory bodies and corporate sector, he talked about the shifting of power from west towards the emerging economies.
His talk on Indian Economy - A Reflection of our Ethos, our Principles has highlighted the links between economics and cultural aspects of nations. He explained how Indian psyche has been dominated by western view of Indian nation and urged students to think from a different standpoint. He stressed on the concept of family in Indian culture and how it has been strength of our economy for decades. The talk gave a lot of takeaways and a fresh perspective on Indian economy for students.
He gave excellent insights on the future drivers of Indias growth. According to him the unorganized sector is the real driving force of Indian economy. He also hailed the common Indian housewife for the savings she does and explained how it will be the key source of financing for future infrastructure and capacity building in India.
Our Team: Aditya Gaddam Ashwani Kr. Dixit Archish Gupta Atul Ranjan Abhinav Sharma Aniket Patankar Kashyap Rastogi