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DECEMBER 07, 2014 | A FINNICHE INITIATIVE
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Opinion In Focus
Gold extends losses on weak global cues| 4
SAIL’s OFS: A Success| 2
Term of Week Credit Default Swap| 6
Personality Roberto Carvalho de AzevĂŞdo |11
Brand World Lechal Shoes:
Ducere Technologies|12
December, 07 | 2014 | Volume 24
SAIL’s OFS: A Success
Gold extend losses on weak Global Cues
Credit Default Swap
The Final Placement Week for the batch of 2013-2015 began in the first week of December. The campus saw some high profile corporates and esteemed companies visiting. With more than half the batch placed, the placement scenario looks good and hope for remaining students is on high as many important companies are lined up for the following week. Club FinNiche appreciates the work done by Placement Committee and congratulates all placed students. Club FinNiche releases its weekly magazine FinXpress with the In Focus talking about the ‘SAIL’s OFS: A success’. The Opinion gives an overview of ‘Gold extend losses on weak Global Cues’. The term of the week describes “Credit Default Swap", a swap designed to transfer credit exposure of fixed income between parties. Do have a look at the market section, Brand world which brings to you about Lechal Shoes by Ducere Technologies and Personality of the week, Roberto Azevedo. 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! Roberto Azevedo
Lechal Shoes by Ducere
Regards The Editorial Team Club FinNiche
Technologies
Disclaimer: FinXpress takes no responsibility for the opinions expressed in the magazine.
- By
Gayatri Pandit
With the fiscal deficit target set at 4.1% of the gross domestic product, Modi Government’s first
disinvestment
move
has
garnered
Rs.1,715 crore way above the expected Rs.1,500 crore. The positive sentiments raised SAIL divestment raised Rs. 1,715 Crore
because of the Modi government led retail and non-retail investors specifically stateowned to invest money in PSUs, which in turn
made
the
1st
step
of
divestment
First disinvestment to have
successful. Eyeing for Rs. 58,425 Crore, the
retail investor quota
government divestment drive has got a kick start with steel giant SAIL’s share been
SAIL OFS oversubscribed by
subscribed 2.08 times. This over subscription
more than two times
has set off Rs. 1,715 crore for exchequers.
Figure 1: Disinvestment line-up in 2014-15 Considering the long set target of bridging gap of fiscal deficit, the cabinet had in July
in SAIL offering. 2.06 crore which was
2012 approved a 10.82% stake sale in SAIL.
earmarked for retail investor were subscribed
Accordingly, the first stone was put in March
2.66 times, however general category shares
2013 where 5.82% stake was divested from
had been subscribed 2.01 times. About 10% of
SAIL. This year the rest 5% stake sale in SAIL
the offered shared were reserved for retail
and its oversubscription in short time has
investors, who can buy shares upto Rs. 2
given government a boost to cover up its
lakhs, while about 25% were reserved for
fiscal deficit.
mutual fund and insurance companies.
The government has lined up a host of PSUs
The Center has raised Rs. 1,715 crore by
for divestment. Figure 1 will give a detail
selling 20.65 crore shares, representing 5% of
picture
equity of SAIL at an approximate price of Rs.
of
targeted
government
stake
disinvestment.
83.5 per share. Almost 55% has been invested by five leading financial institutions, which
The oversubscribed Rs. 1,715 crore offer for
includes Life Insurance Corporation that
sale (OFS) issue is the first to have a retail
invested around Rs. 700 crore. As per the last
investor
divestments of Hindustan Copper in July 2013
quota.
The
bid
showed
retail
investors - those investing up to Rs. 2 lakh-
and
SAIL
in
March
2013,
state-owned
issue was subscribed nearly 3 times. Retail
institutions had subscribed more than 50% of
investor has got a discount of 5% to bid price
which LIC being the major contributor.
Following is list of contributors in SAIL
market which was up by 15% since Modi
divestment:
government assumed power. About 59 state -owned companies showed a decline during
Participants in disinvestment
Amount
LIC
Rs.950 Cr approx. Rs. 700 Cr
SBI
Rs. 150 Cr
GIC
Rs. 50 Cr
Oriental Insurance
Rs. 35 Cr
United India Assurance
Rs. 15 Cr
Major PSUs
Domestic Private
Rs. 100 Cr
ICICI bank FII
that season, which was juxtapose to other
sectoral indices which were up by 10 to 50%. Most of market experts assume that this decline is due to no visible management reforms, in fact about 17 PSUs are without chairman including CIL, PFC and NHPC. So, the current challenge is to get these industries out of bureaucratic hands. In addition, considering the divestment target apart from PSUs, government has
Rs. 165 Cr
planned to raise Rs. 6,500 crore from part-
Other Non-retail investor
Rs. 337.5 Cr
slae of its stake in Specified Undertaking of
Retail
Rs. 172.5 Cr
Unit Trust of India (Suuti) in Axis Bank, Larsen & Toubro, and ITC; and Rs 15,000
The disinvestment had seen a limited
crore from sale of its residual stake in
participation by FII. Out of other foreign
Hindustan Zinc and Bharat Aluminium
players, global hedge fund player such as
Company (Balco). About Rs 5,500 crore,
Seganti Capital had an investment of Rs. 100
from sale of 10% each in Hindustan
crore and Geosphere Capital has investment
Aeronautics and Rashtriya Ispat Nigam, is
of around Rs. 30 crore. Vanguard purchased
expected to be raised.
shares worth of Rs. 30 crore. Though the issue is oversubscribed the market lacks the
The tax authorities have raised 9.77lakh-
participation from major marquee investors.
crore this fiscal year. So, it is imperative to meet
PSU stocks were underperforming in bull
the
target
from
disinvestment,
spectrum-sale and special dividends.
- By
Shikha Sharma
Due to a weakening trend overseas, Gold prices plunged by Rs 345 to Rs. 26,050 per ten grams at the bullion market at national capital.
selling in line with a weakening global cues where gold plummeted to the lowest level in a week, mainly pulled down gold prices. Gold may see further fall in its prices in coming days and is likely to touch 25,500mark as supplies started picking up after the RBI move. Strengthening dollar against other currencies also reduced the appeal of bullion as an alternative asset .
Weakening trend overseas
Federal Reserve move closer to increase the interest rates
Gold in Singapore, which normally sets price trend on the domestic front, fell by one per cent to $1,185.82 an ounce . Silver fell by 2.1% to $16.16 an ounce, the biggest since November 14. Gold reclaimed psychologically significant $1,200 an ounce following heavy short– covering rally fuelled by a downgrade of Japan’s sovereign debt rating.
US added the largest numbers of jobs
Bullion traders attributed fall in the gold prices to a weakening global trend after the US added the largest numbers of jobs in almost three years, raising concern that the Federal reserve will move closer to increase the interest rates. This global trend increased supplies in domestic spot market after the Reserve Bank eased import curbs. Besides, fall in demand from jewellers and retailers at prevailing levels on expectations of further drop in precious metal prices in coming days dampened the trading sentiments. Market analyst said stockists
According to the market men the weak trend in overseas markets where the precious metal retreated from five-week high on outlook for stronger dollar mainly weighed on gold prices at futures trade here.
Silver also plunged by Rs. 450 to Rs. 36,750 per kg on reduced off take by coin makers and industrial users. Silver plummeted to the lowest level since 2009 as the dollar escalated. Further, the rise in supplies supported by RBI easing curbs on import of the precious metal by scrapping 80:20 scheme also put pressure on gold prices. Globally, gold in New York dropped by 1.4 per cent to $1,190.40 an ounce and silver by 1.9 per cent to $16.25 an ounce. In Delhi, gold
of 99.9 and 99.5 per cent purity tumbled by Rs 195 each to Rs 26,675 and Rs 26,475 per 10 grams, respectively. Sovereign, however, remained steady at Rs 23,700 per piece of 8
grams in restricted buying. Silver remained under selling pressure and Gold prices plunged to Rs.
shed another Rs 200 at Rs 36,700 per kg.
26,050 per ten grams
Although, weekly-based delivery traded higher by Rs 200 to Rs 36,700 per kg on
Silver plunged to Rs. 36,700
increased buying by speculators.
per kg
Extreme Gold of 99.9% and 99.5% purity plunged by Rs. 200
bullish
overseas
sentiment
following a sharp recovery in precious
domestic players a shot in the arm,
metals worldwide trade on the back of
triggering frantic buying activity, a bullion
fading
trader commented.
commodity
volatility
gave
the
- By
A swap is used to shift the credit exposure of fixed income products between parties. A credit default swap is also referred to as a credit derivative contract, where the purchaser of the swap makes periodic payments till the maturity date of a contract. Speculation Credit
default
investors
to
swaps
allow
speculate
on
changes in CDS spreads of single names or of market indices such as the North American CDX index or the
Arihant Jain
Credit Default Swap Explained with an Example A credit default swap is an agreement between two parties that works like a side bet on a football game. Swap sellers promise swap buyers a big payment if a company’s bonds or loans default. In return for the promise they get quarterly payments. Neither needs to hold the underlying debt when entering into a swap. There are 3 parties involved, Widgets R Us Corp., Credit default swap seller and credit default swap buyer.
European iTraxx index.
Role of I Party: Widgets R Us Corp. Borrows money from banks or issues bonds to finance operations.
Hedging Credit default swaps are often used to manage the risk of default that arises from holding debt. A bank, for example, may hedge its risk that a borrower may default on a loan by entering into a CDS contract as the buyer of protection.
Arbitrage Capital Structure Arbitrage is an example of an arbitrage strategy
that
transactions. relies
on
utilizes
CDS
This technique
the
fact
that
a
In a credit default swap, two counterparties exchange the risk of default connected with a loan for periodic income payments spread through the life of the loan. If the borrowing party (the issuer) does default, the insuring party agrees to pay the lender (bondholder) the par value in addition to lost interest. The bondholder (lender) strive for protection against the risk that the issuing company (borrower) might default. The insuring party hedges that the issuing company will not default, and will ultimately profit from the income payments without having to compensate the bondholder for the par value and remaining interest.
company's stock price and its CDS spread should exhibit negative correlation.
Credit default swaps are used by investors for speculation, hedging and arbitrage.
Role of II Party: Credit Default Swap Seller Promises to pay swap buyer a set amount if Widgets R Us defaults, often $10million. Receives annual payments from swap buyer in return for “insurance” Can include banks, insurance companies, hedge funds or others Role of III Party: Credit Default Swap Buyer Promises quarterly payments to swap seller Receives promise of large pay-out, if bond defaults Can include banks, insurance companies, hedge funds or others If widget’s financial fortunes turn sour, the swap becomes more valuable. A swap holder can resell it & get high returns.
INDIAN MARKETS BSE became the first Asian Stock Exchange to reach Rs 100 lakh crore market capitalization last friday. This week the Indian markets were range bound and the market ended in red. Small caps saw the year highs on Friday. RBI’s announcement of unchanged rates (repo rate—8%, CRR– 4% and overnight repo at 0.25%) was one of the reason for less volatility in the market. On an overall note, the week saw most days end flat on trading. The manufacturing PMI for Nov came at 53.3 highest level in 21 months. Core sector growth
Open
High
Low
Close
SENSEX
28413.01
28822.37
28217.50
28458.10
NIFTY
8605.10
8626.95
8504.65
8538.30
in October 2014 came in at four month high of 6.3%.
BSE SENSEX Gold prices fell by Rs 195 this
week as a reason to strong jobs
data from
US,
luring
customers to invest in Gold.
CNX NIFTY
COMMODITIES Commodity
Unit
Rs / Unit
% Change
Gold
10 grams
26357.00
-1.06
Silver
1 kg
36699.00
-1.55
Crude Oil
1 bbl
4120.00
-0.39
US labor data reported an addition of 320,000 employees in November much stronger than the prediction.
EXCHANGE RATES
China finally surpasses USA to become
the
worlds
largest
economy. China $17.6 trillion
INR/ 1 USD
61.86
INR /1 EURO
76.01
INR/ 100 JAPAN YEN
50.92
INR / 1 POUND STERLING
96.39
and USA $17.4 trillion
INTERNATIONAL MARKETS Open
High
Low
Close
NYSE Comp
10933.11
10996.87
10864.08
10970.29
NASDAQ
4777.47
4788.98
4724.62
4780.75
S&P 500
2063.25
2079.00
2048.25
2076.45
FTSE 100
6647.00
6753.50
6637.30
6742.84
CAC
4354.19
4427.74
4310.69
4419.48
DAX
9915.74
10093.03
9835.42
10087.12
NIKKEI 225
17475.00
17922.29
17474.27
17920.45
SSE 50
2691.00
2978.03
2665.69
2938.78
Hang Seng
23678.00
24215.00
23267.00
24002.64
India's $275 million SAIL stake sale boosts divestment prospects India's ambitious programme this fiscal year to sell off government stakes in companies got a boost on Friday, as an offer to sell 5 percent in a steelmaker to raise $275 million saw investors bidding for twice the number of shares on sale. The strong response from investors to the sale of shares in Steel Authority of India Ltd (SAIL) could improve prospects for other divestments, including a stock offering in Coal India Ltd, the world's largest coal miner. Still, Prime Minister Narendra Modi seems likely to miss a target to raise $9.5 billion from divestments in the fiscal year ending in March, as resistance from staff unions and investor worries about some company-specific issues delay the process. India's forex reserves up $1.43bn for week ended Nov 28 India's foreign exchange reserves grew by $1.43 billion to $316.31 billion for the week ended Nov 28, Reserve Bank of India (RBI) data showed. The reserves had fallen by $672.4 million to $314.87 billion in the week ended Nov 21. According to the RBI's weekly statistical supplement, foreign currency assets, the biggest component of the forex reserves, rose $1.42 billion at $290.82 billion in the week under review. The foreign currency assets had declined $664.3 million at $289.39 billion in the previous week (Nov 21). India’s reserve position with the International Monetary Fund (IMF) was up $2.5 million to $1.52 billion. The value of gold reserves which was static since Oct 3 at $20.01 billion and had declined by 275 million at $19.73 billion for the week ended Oct 31, stayed the same in the week ended Nov 21. Reverse Auction For Captive Coal Blocks The government has decided to use the reverse auction method to award captive coal blocks to private power producers in cases where tariffs cannot be changed, according to a senior official. These companies include those that have power purchase agreements with utilities and entities that set up power plants through tariff-based bidding. In reverse auctions, the authority sets a ceiling price and bidders have to bid lower than that. The lowest bidder wins the auction. The official said the government has decided to use state run Coal India's prices as ceiling. In this case, the quality of coal from a coal block will be ascertained. The ceiling for this block's coal will be set as the notified price of similar quality of Coal India's produce.
Voltas topples LG to be the No. 1 in AC business The Tatas-owned Voltas has taken the top slot in the Indian airconditioner (AC) market, overtaking Korean white goods giant LG that has dominated the business for over a decade. Latest data from market research firm GfK Nielsen Retail Audit showed that Voltas had a shade over 20% of the pie in September, based on sales at multi-brand and exclusive brand outlets. This was marginally ahead of LG's market share of 19.9%. This is perhaps the first time in recent years Voltas has taken the pole position across the AC segment. However, for the first half of the financial year (April-September 2014-15), LG continues to lead with a share of 20.5%. Voltas follows with a share of 18.9%. Samsung, the other big player in the AC market, is a distant third. A $400-bn plan with fair returns will ensure 24X7 power: Piyush Goyal
A massive overhaul of the power sector is underway with the Government planning to bring in a series of amendments to the Electricity Act 2003 across all segments of the power value chain within the current session of Parliament. “I am looking at a billion-tonne coal production, 100 GW of solar power capacity and investments of about $50 billion in the transmission and distribution segment in the next five years,� said Piyush Goyal, Minister of State, Independent Charge for Power, Coal and New & Renewable Energy while addressing the CII National Council Meeting, organized in the capital recently. In a bid to boost renewable energy which is targeted to be 15 per cent of the energy mix by 2020, the Government is set to impose stringent penalties on errant discoms who fail to meet Renewable Purchase Obligations.. Morgan Stanley Slashes Brent Price Forecasts Morgan Stanley on Friday slashed its Brent price forecasts, citing oversupply and inaction by the Organization of the Petroleum Exporting Countries in curbing production. The investment bank cut its average 2015 Brent base case outlook by $28 to $70 per barrel and for 2016, by $14 to $88 a barrel. The bank expected over-supply to peak in the second half of next year. US crude oil closed on Friday at its lowest since July 2009, as Brent averaged below $70 a barrel in the week for the first time since 2010, as strong US employment data did little to lift the oil market's bearish mood.
he acted as a Chief Litigator in many disputes at WTO and served on its Dispute Settlement panels.
3rd October, 1957
He acted as a Vice Minister of Technical and Economic Affairs at Foreign Ministry of Brasilia. He also was the Chief Negotiator at Doha Round and representative of Brazil at MERCOSUR Negotiations.
University of Brasilia Rio– Branco Institute
He was appointed as Brazil’s Ambassador to Geneva in the United Nations’ international organizations and Permanent Representative to the WTO in 2008.
Doha Round and MERCOSUR
Negotiations (2001-2005) Bali Package (2013-14)
Roberto Azevedo is the 6th Director– General of World Trade Organization (WTO). He is currently heading this organization with effect from 1st September 2013 for a span of 4 years.
Azevedo is considered as an “insider’s candidate” being preferred by developing economies as he belongs to a developing economy.
A Brazilian Diplomat, he was elected to succeed Pascal Lamy. He is a graduate in Electrical Engineering from the University of Brasilia and International Relations at Rio Branco Institute.
Under his leadership, WTO agreed to the Bali Package which is a Trade Agreement resulting from the Ninth Ministerial Conference of the WTO in Bali, Indonesia. It aims to lower global trade barriers and is the only agreement till date which is approved by all WTO members.
Career He had his first Diplomat posting in 1988 to Washington. He then served in Brazilian Embassy for various countries. After that he was assigned to the Permanent Mission of Brazil in Switzerland in 1997. During his tenure as the head of the Brazilian Foreign Ministry’s Dispute Settlement Unit,
Besides World Trade Organization (WTO), Ambassador Roberto Carvalho de Azevedo also represents Brazil at various other economic organizations like World Intellectual Property Organization (WIPO), United Nations Conference for Trade and Development (UNCTAD) and International Telecommunications Union (ITU).
- By
A
Bluetooth-enabled
Yojana Ranasaria
smart
shoe developed by Ducere Technologies, India
Lechal came into being for a noble cause — to help the visually challenged navigate with Google maps through the use of
haptics
and digital
mapping. And although it has
Lechal Shoes is the Bluetooth–enabled smart shoe developed by Ducere Technologies, India. Indians are the first to get access to what can be the next-best-thing in the wearable technology that is the smartwear.
since become more inclusive, to include those who are not visually challenged — Lechal's original priority.
intention
remains
Ducere Technology plans to sell it at $100 a pair. It works as a smartphone app is synced with the shoe. The app uses Google maps and vibrates to assist users to tell when and where to go to reach their destination on time. It is convenient as one just needs to type in the app the destination one wants to go and keep the phone in their pockets as the buzz and vibration of the shoe will lead the way and help the person find its destination. Ducere Technologies Pvt. Ltd. was started by two engineers who had studied and worked at the U.S. They started their operations in 2011 in the city of Secunderabad, Telangana. Ducere had initially developed these shoes with the name “Lechal” which in Hindi means “take me along”– to help the blind who rely on walking sticks. But while testing the shoes, the company realized its potential for the people who could see as well. For
example joggers, mountain bikers or even tourists can plug in their destinations and not have to stop to check their phones as they move because the buzzing and vibrating in their shoes will let them know when and where to turn. They facilitate by removing the need to use a map, look at a screen or ask someone for directions. Apart from that, they also tell you the number of steps one ahs walked, biked or run, fitness level, calories burnt etc. Additionally, they are able to tract activities, set custom fitness targets, workout sessions, motivates by playing audio-visual and also transfers all data to your smartphone. It is better than any other available gadget of similar features. How it works The sensors are in the insoles of the shoe and is charged with lithium polymer batteries that respond to gestures. A shoe tap notes a landmark and a snap of the fingers tell us charger’s power status through audio enabled feedback. These sensors are integrated by syncing it with mobile applications.