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NOVEMBER 02, 2014 | A FINNICHE INITIATIVE
Do write to us at: finniche.imt@gmail.com
Bumper Week for Markets: Is the streak going to last? | 2
Black Humour | 4
Factoring | 6
Lloyd Blankfein |11 Windows 10 - Microsoft’s latest offering | 12
November, 2 | 2014 | Volume 19
Bumper Week for Markets: Is the Streak going to last?
Black Humour
Factoring
Club FinNiche is all set to host its trademark event Riscon’14 on 8th and 9th November, 2014. The first round of the event, an online quiz has been successfully held and 24 teams have been shortlisted for the next round, a case study analysis. The further shortlisted teams will present the case before judges on campus during the event weekend. We also have esteemed speakers, Dr Sudipto Mundle, member of Fourteenth Finance Commission and Shri Deepak Singhal, Regional Director RBI gracing us with their presence. FinNiche launches yet another edition of FinXpress with the In Focus talking about the ‘Bumper week for Markets: Is the streak going to last?’ which analyses the market growth, its reason and further implications. The Opinion gives an overview of ‘Black Humour’. The term of the week describes “Factoring", method of financing by selling bills receivables on discount to raise capital. Do have a look at the market section, Tech world which brings to you Windows 10, Microsoft’s latest offering and Personality of the week, Lloyd Blankfein, Chairman Goldman Sachs.
Lloyd Blankfein
Hope everyone likes the revamped version of magazine. Club FinNiche welcomes any comments, suggestions or criticism regarding the magazine. Please do write to us and share your ideas. Happy Reading!
Windows 10: Microsoft’s
Latest Offering
Regards The Editorial Team Club FinNiche
Disclaimer: FinXpress takes no responsibility for the opinions expressed in the magazine.
- By Arihant Jain
Bumper Week for Markets: Is the streak going to last?
Increase
of
holdings
of
government bonds by 80 trillion Yen
Reduced growth forecast for Japan to 0.5% from 1%
Yen fell off by 2.3% to US Dollar
Nikkei closed with an increase of 4.8%. All Asian markets closed at a record high
For the week ended October 31, Indian markets gained nearly four per cent to hit fresh record highs. The BSE-Sensex closed with a weekly increase of 1,015 points at 27,865 and NSE– Nifty closed with a weekly increase of 308 points at 8,322. Shrugging off the concerns of a possible shanking in global liquidity following the US Federal Reserve’s decision to end its third round of quantitative easing, fresh stimulus package from the Japanese Central Bank and government’s move to relax FDI norms in the construction sector has boosted investors’ sentiments. But is this streak going to last? Bank of Japan surprises with fresh stimulus The Bank of Japan surprised markets on Friday, announcing a huge stimulus programme for the fragile economy that's struggled to shake off the impact of the nationwide sales tax hike (from 5% to 8%) that took effect in April. The Bank of Japan said it will increase holdings of government bonds by ¥80 trillion and boost exchange-traded fund purchases to 3 trillion yen, in a bid to ward off the threat of deflation. Expectations that Japan's $1.1 trillion public pension fund would boost its equity holdings gave a further boost to the market. The central bank was previously pushing money into the system at a rate of ¥60-70 trillion a year. In another bold move, it also halved its growth forecast for the current fiscal year, to 0.5% in the year to March 2015 from 1% three months earlier. The central bank pledged to increase the purchases of exchange-traded funds and real estate investment trusts, extend the duration
of its portfolio of Japanese government bonds, and increase the pace at which it expands its monetary base. The move by Japan’s central bank buoyed international markets and sent the yen to a near-seven-year low against the dollar. Yen fell 2.3 per cent to 112 against US Dollar, the weakest since January 2008. Asian stock markets all closed higher, led by Japan’s Nikkei 225 index which was up 4.8%. This sharp decline in Yen has sparked off a rally in many of the Japanese companies operating out of India. Some of the Japanese companies listed on the Indian markets such as Maruti Suzuki, Ricoh, Honda Siel Power, Hitachi Home Appliances, Sharp India and Lumax Industries gained between 1 per cent and 7 per cent on Friday. Analysts reckoned that some of these companies will benefit from the lower cost of sourcing of raw materials from the parent company as well as a lower royalty outgo.
Government relaxes norms of FDI in construction
Minimum built up area reduced from 50,000 sq.m. to 20,000 sq.m.
Capital
investment
reduced
from $5mn to $10m
100% FDI in development of townships, housing and built up infrastructure, subject to conditions lock-in
and a three year
Real estate and construction companies’ shares rallied on October, 30th after the government announced the relaxation of norms for foreign direct investment in the sector. Centre has reduced the minimum built up area and capital requirement besides facilitating easier exit. It is expected that this move may help Prime Minister Narendra Modi deliver on his promise to create 100 "smart cities" in India by 2020. Moreover it will also boost the affordable housing projects across the country. Previously, the government allowed 100 percent foreign direct investment in real estate development but with strict riders, including a lock-in period of three years during which the investment cannot be repatriated. Under the new rules, the minimum built area for projects in which foreign investment is allowed will be reduced to 20,000 square metres from 50,000. The minimum capital investment by foreign companies has been cut to $5 million from $10 million. Moreover the investor will be allowed to expatriate the investment on completion of the project or three years after the final investment is made Between April 2000 and August 2014, construction development including townships, housing and built -up infrastructure in the country received FDI worth $23.75 billion or 10 per cent of the total FDI attracted by India during the period. But in the August report of current fiscal year, the sector’s share in the total FDI slipped from 5% in the previous year to under 3%.
moreover, its share has been consistently falling over the last six years since 2009-10, when the FDI share stood at over 20%.
The BSE Realty index rose 3.4% on Thursday in its biggest jump in one-and-a-half months. Among individual stocks, Unitech, HDIL, DLF gained nearly 4.9% to 8.4%.
The Road Ahead While the stimulus increase by Bank of Japan immediately sent stocks higher, some are unsure of the implications of a weak Yen for the rest of the world. Experts believed that Indian economy is not generally benefited from increase in stimulus in foreign economies but it may result in offsetting of potential normalisation of US interest rates in 2015.
Moreover, though FDI reforms in construction is a positive for the entire industry, not all companies are likely to benefit from it as the governments’ move is to encourage smaller projects and affordable housing to public. Hence, easing of FDI norms may only benefit those companies which are into smaller projects. Thus these reforms may please the stock markets for now, the long term effect is still uncertain.
- By Gayatri Pandit
Not
signing
Competent
Authority Agreement
Selective
disclosure
black money list
of
While looking at the performance of the “Aache din aane wale hai” Modi Government, it has become important to focus on the phenomenon of black money instead of chasing chimeras or politically motivated witch-hunts. With the extent of findings of Assocham and SIT, it is necessary to unearth the black money, provided restoring confidence of investors and more specifically restoring Indian confidence in India. The government of India on Oct 29, 2014 handed over the details 627 accounts which are held by Indians in HSBC Geneva bank to Supreme Court. The Apex court has asked the Special investigation team (SIT) to take action on it. Though the investigation is being conducted by tax officials but have to report to SIT. With more things need to be uncovered by November end, finance ministry looking for confidentiality clause in tax treaties and the Indo-US signing of Foreign account tax compliance act by December end, it seems this time the internal affairs of India has meddled with its international commitments.
treaties, India has deferred signing a pact on this i.e. the multilateral Competent Authority Agreement (CAA) at a meeting of the Organization for Economic Co-operation and Development (OECD) on global tax requirement. This is because of the fear of the clause if SIT asks for complete disclosure of the black money list. In addition, CAA requires signatories to maintain confidentiality of information till charges are framed against an evader. As the world is moving towards the age of “automatic exchange information”, any huge deposit in any country would alert others. In addition, US have a strict law on withholding tax on such cases which may hamper the benefits of Indian exporters and their developments. Other 65 nations at G20 summit have signed this agreement, however India cannot guarantee on the confidentiality of shared data.
As said, a single deed diminishes the value of 100 golden deeds. The same is seemed to have happened with Modi Government. The issue of repatriation of black money have hit the credibility of the Modi Government which has over shadowed the previous deeds of Prime Minister Narendra Modi. Amid the confusion of the extent to which the data related to 627 accounts held in HSBC It is obvious; with election rhetoric is smoothly Geneva can be shared by government due to rendered in government policies, public confidentiality clauses in international tax naming and shaming would also follow.
While the UPA had gone with the full disclosure, NDA has tried to restrict the disclosure, suggesting it would be unfair to disclose names against whom no case can be made. Even the two established lawyers, Ram Jethmalani and Dr Subramanian
Finance ministry to look at confidentiality of SIT report on November end
Indo-US signing Foreign Account Tax Compliance
Considering the RBI’s need of buying $30-35 billion to maintain eight month import cover by March 2016, it seems repatriation of black money will serve the purpose. As per a study, unaccounted money can shore up forex kitty by $35 billion. Thus, if an estimate of $200 billion is considered, and if even half of this is unearthed and taxed at 30-35%, this could add three to four months of current import cover to foreign exchange reserves, when the imports cover is currently running at 8.3 months low.
Act
Repatriation
of
Black
money to fill forex kitty
Swamy, appealed to the government to take strict measures and reveal the complete list. Nonetheless, Finance Minister Arun Jaitley turned a blind eye. This led to Supreme Court slamming the decisions of government on selective disclosure. Recently, the government has resolved to bring all agencies and offices involved in the pursuit of black money under a unified command in order to streamline the process of soliciting information from other governments. But failure to sign the CAA pact has questioned BJP’s election promise.
The most important thing for every economy to grow is the increase in the investment from people in country and people overseas. When we look at the Assocham report, 21 schemes have failed in the last 25 years to bring back unaccounted funds into the mainstream. This may cause foreign investors losing confidence in the economy leading to withdrawal of investments and thus hampering the pace of the growth of economy. Thus, the solution lies in making India worth investing in, a country where Indians choose to retain money instead of sending them abroad. Punitive campaigns may catch the small fry but the big fish- who make and unmake policy- will buy their way out until Modi can restore Indian confidence in India.
- By Yojana Ranasaria
Factoring
is
a
method
of
financing in which a business person
sells
its
bills
receivables to a third party on a discount with an aim to raise capital.
A
factor
is
intermediary account
a
that
financial
purchases
receivables
from
company at a nominal fee. A factor acts as a funding source and
aids
collecting consumers.
the
company
payments
in
from
Factoring is a method of financing in which a business person sells its bills receivables to a third party on a discount with an aim to raise capital. It is the most conventional form of cash management tool used by mostly all companies. They are generally used by companies which have longer receivable cycle like the manufacturing units (clothing etc. ) where cash is locked in for a longer period of time. It is basically used for managing working capital requirement. In factoring, the client (businessman) makes a sale, completes delivery of the product and generates a sale invoice. Factoring works when goods are sold for credit. The factor takes the responsibility of collection of the amount from debtor on the company’s behalf at a charge. The factor pays almost eighty percent of the amount just after entering into the arrangement and pays the balance after the debtor pays. Factoring is not a loan, it is also not an obligation. Factoring can simply be considered a sale of asset. Also, factoring provides a short term solution and generally businesses go for factoring for receivables that are up to max of 2-3 years Factor: A factor is a financial intermediary that purchases account receivables from company at a nominal fee. A factor acts as a funding source and aids the company in collecting payments from consumers. Company can also focus on key issues once they have vested the responsibility of
collection on the factor and it also gets locked in cash available thus reducing the amount of working capital required by companies. For example, a factor agrees to buy account receivables worth Rs. 10 lacs from XYZ Processing Ltd. representing outstanding amount from ABC Holdings. The factor may discount the invoice at a relevant rate (say 5%) and will advance Rs. 7 lac to the client (XYZ) immediately and the balance of Rs 2.5 lacs once the payment is received from the debtor i.e. ABC Holdings. The factors charges (fees and commission) amounts to a total of 50 thousand. As a result a factor is interested more in the credit worthiness of the debtor rather than the client as it is the debtor from which the factor needs to collect money from.
MARKETS The stock market finished the month of October with a broad rally that sent the S&P 500 higher by 1.2%. The S&P 500 slipped below its 100-day moving average (1962) and settled lower by 0.2% but Equities rallied on Tuesday with the S&P 500 climbing 1.2%. The stock market began the last week of October on a cautious note. The benchmark index extended its October advance to 2.3% and ended at a fresh record high, while the Nasdaq Composite (+1.4%) outperformed to end October with a 3.1% gain. The benchmark BSE Sensex showed an increase of 1.90% and the CNX Nifty increased by 1.87%.
Open
High
Low
Close
SENSEX
27,439.06
27,894.32
27,438.28
27,865.83
NIFTY
8,200.8
8,330.75
8,198.05
8,322.20
BSE SENSEX
CNX NIFTY
COMMODITIES Commodity
Unit
Rs / Unit
% Change
Gold
10 grams
26,135
-1.76
Silver
1 kg
35,797
-2.12
Crude Oil
1 bbl
4931
-1.71
EXCHANGE RATES INR/ 1 USD
61.4080
INR /1 EURO
77.1899
INR/ 100 JAPAN YEN
55.28
INR / 1 POUND STERLING
98.0624
INTERNATIONAL MARKETS Open
High
Low
Close
NYSE Comp
10,772.93
10,846.09
10,772.93
10,845.00
NASDAQ
4,639.45
4,641.51
4,616.58
4,630.74
S&P 500
2,001.2
2,018.19
2,001.2
2,018.05
FTSE 100
6,463.6
6,553.4
6,463.6
6,546.47
CAC
4,213.47
4,246.93
4,181.96
4,233.09
DAX
9,283.4
9,339.33
9,217
9,326.87
NIKKEI 225
15,817.14
16,533.91
15,817.14
16,413.76
SSE 50
1,572.88
1,665.46
1,556.54
1,657.29
Hang Seng
23,913.69
24,046.40
23,850.70
29,998.06
Government set to overhaul gold import scheme With the gold imports on rise, government is set to modify the current 80:20 scheme according to which out of every 100 kg of gold imported 20 kg has to be exported. Sources suggest that this scheme is being grossly misused. Gold imports in September were $3.75 billion at least $1 billion more than previous months and in October also imports were at higher levels. Government sources say that this scheme was introduces to ensure that gold imports do not become a burden on economy but it is not working to the favor. According to officials it is difficult to decipher the fake jewellery with the instruments like caratometer etc. Even smuggling has become rampant as gold availability was scarce. Hence, experts are considering various options such as fixing import quota and allowing just banks to import.
Nokia suspends work at India facility Operations at Nokia’s Sriperumber factory, once the company’s largest facility, will come to a halt. This will be the first company in India to suspend operations since NDA came to power at the centre. It has been in working since past 9 years. This suspension was the result of terminating the transitional services agreement for this facility by Microsoft. Initially this factory was to be transferred to Microsoft which had acquired Nokia’s devices. However it was left out of the deal when Income Tax slapped a 21000 crore tax notice against the company and had frozen it. Sources say that factors compelling this move were poor planning by Nokia, the end of tax holiday, lack of support from the government here and support of Vietnamese government.
Failure to Ink tax pact with US may hurt India Delhi has to sign Foreign Account Tax Complaince Act before Dec 31, but must fist seek the SC’s nod over confidentiality clause. SC is going to hear the black money case on Dec 3 before which government cannot do anything. SC has asked government to seek opinion from SIT if it can sign treaties with confidentiality clauses.
Stock jumps on short sellers fears Short sellers, in fear of falling into bearish traps, ended up pushing India’s stock indices to record high last Thursday. Traders believed that Nifty would end low on Thursday—when the October futures and options expired– were caught unaware when the fresh gush of FII took place and raised the stock prices. Dalal street participant expected the market to weaken after the Fed’s assurance to keep the rates near zero for a considerable time because of optimistic job market. Usually when the rupee weakens market also goes down but this trend was reversed on Thursday
India faces stock-out in iPhone 6 supply Apple’s new flagship iPhone 6 is facing a stock-out in India with the US firm diverting its supply to markets like China where there is unprecedented demand.and to build stocks for black Friday shopping on November 28. As a result several large retailers and Apple exclusive stores have stopped booking for iPhone 6 and iPhone 6 plus.
Drug war: Novartis, Cipla in patent fight Cipla, India’s fifth largest drug maker, has asked the government to revoke five patents held by foreign innovator firm, Novartis on respiratory drugs Onbrez and launched its generic version of indacaterol at one fifth of its price. The domestic drugmaker asked the department of Industrial policy & promotion to cancel the patents on the ground that swiss company is not making it locally and also it imports just 54000 units of this drug annually, depriving 99.9% of country’s population who need the drug.
Black money Lid’s off, 3 big names revealed The government discloses the names of the three entities in supreme court in the black money case. Gove says that the names are revealed after following due process by law in the case and more names will be revealed once prosecutions has been launched after investigations are complete. Three names that government has disclosed include Pradip Burman of Dabur, bullion trader Pankaj Lodhiya and Goa miner Timblo. First hearing in SC against them will be held on December 3.
Goldman's commodities trading arm, J. Aron & Co., as a precious metals salesman in its London office. He has served as Chairman and Chief Executive Officer of Goldman Sachs since 2006. He earned a total of $54.4 million in 2006 as one of the highest paid executives on Wall Street. His bonus reflected the performance of Goldman Sachs, which reported record net earnings of $9.5 billion. The compensation included a cash bonus of $27.3 million, with the rest paid in stock and options. While CEO of Goldman Sachs Group in 2007, Blankfein earned a total compensation of $53,965,418.
13 Aug, 1946
Brown University Yale University (Ph. D)
Vice chair, Federal Reserve Chair, Federal Reserve San
Francisco
Lloyd Blankfein was born in the Bronx borough of New York City, to a Jewish family, and reared in the Linden Houses. He received primary and secondary education in the public schools of the New York City Department of Education, and was the valedictorian at Thomas Jefferson High School in 1971. He attended Harvard College, where he lived in Winthrop House, and earned his B.A. in 1975.In 1978, Blankfein received a J.D. degree from Harvard Law School . Before joining Goldman, Blankfein worked for Proskauer Rose and then Donovan, Leisure, Newton & Irvine. In 1981, he joined
He contributes mostly to Democratic party candidates and donated $4,600 to Democratic Party candidate Hillary Rodham Clinton in 2007. He self-identifies as a Democrat. With regard to his personal political views, Blankfein has described himself as "a registered Democrat, and a Rockefeller Republican conservative on fiscal issues and more liberal on social issues".
He has been a spokesman for the Human Rights Campaign and the Gala Chairman of the Rockefeller family's Asia Society, based in New York. Additionally, he serves on the board of the Robin Hood Foundation, a charitable organization, whose goal is to alleviate poverty in New York, and he serves on the Board of Overseers of Weill Cornell Medical College.
- By
Abhinay Gandotra
The past year has not been good for Microsoft. It all started with shutting down of its research center in Silicon valley, stopping production of few Nokia product lines after acquiring them and introducing XBOX One seven months later after Sony’s PS4. But change is inevitable and Microsoft’s latest offering Windows 10 is gearing up to turnaround Microsoft’s fortunes once again.
reason which made Windows so popular. This time though it will have an extra functionality, there will a new customizable space for apps and live tiles. Just like desktop apps, apps from the Windows store will now open in same format. The apps will be more user friendly and can be resized and moved around.
Apart from this Windows 10 will have the functionality of new quadrant layout with four apps on the same screen simultaneously. In addition to this there would be a new task view button. This button will be on the task bar and will enable the user to switch between different open files and will also give quick access to any desktops user The whole strategy behind launching creates. There would be a functionality of Windows 8 was to introduce Windows touch multiple windows and finding files will app library to make Windows a strong become faster and easier with Windows 10. competitor to Android and iOS operating systems. Moving forward, Microsoft will not So Windows 10 in short will be a mixture of drop this strategy in Windows 10 but it will go good old functionalities with a modified and for a hybrid app approach. customized approach along with numerous new functionalities. The launch date is Windows is coming back with its familiar expected to be mid 2015 and the countdown “Start Menu” which was one of the many starts now…. Windows 8 its predecessor lost a lot of ground because of deviating from its proven and popular desktop environment. Clubbing the new environment with competitive touch experience made it feel like using two different operating system on the same screen.