The IBS Times; 208th Issue, October 2018 by The IBS Times

Team IBS Times Ishaan Sengupta (Editor in Chief) Aarushi Jandrotia (Managing Editor) Nishika Tatiya (Associate Editor) Sambhav Jain (Associate Editor) Aishwarya Siram Amit Shovan Mandal Ayush Thalia Kartik Grover Â Noel Mathew Tanay Sood Achintya Saraswat Akanshi Bhargava Anisha Jose Bidisha De Chandrayee Mukherjee Samudrala Jagadish Kartik Bhardwaj Krishma Mohanan Narayan Tripathi Rahul Kumar GS Revathi Menon Samriddhi Bhatnagar Simran Abhichandani Supriya Panse Designed By : Sambhav Jain Ishaan Sengupta

Technology and Finance Go Hand in Hand! A new wave of services is emerging in the industries pertaining to finance. To drive these new innovative products and pretences, strong use of business analytics, machine learning and artificial intelligence are on the ramparts. This issue focuses on the latest developments in the world since our last one. It will take a trip through current affairs, performance of organizations, new technologies in a broader financial market including financial services like Insurance, avenues like Commodities and the participants in a securities market. We try to provide a basic outlook of how the world around us is shaping into. A perfect mix of news and commentary is what can be found in the pages to come. While you do check this issue out, we also recommend that you go through our website which is updated quite frequently. The URL for the same is www.finstreetibshyd.wordpress.com. We wish to see our readership flourish as it has been for a while now. We hope to grow with your support. Please write to us and become of part of these discussions. Email id : editor.ibstimes@gmail.com Ishaan Sengupta Editor-In-Chief,POC Team IBS Times, Finstreet

Contents 5 NPAs, ICICI Bank, Dena Bank Controversies and their effects on Nifty Indices 9 Nothing Less Than 100: Maruti Suzukiâ&#x20AC;&#x2122;s New Days With Nexa 12

Jack Ma: From Rags To Riches

16 Commodities Market: The Future Trade Market 19 Why Was Investor Sentiment So Bullish Between August and September 22 The Use of Artificial Intelligence in Trading 25 Should Women Consider Health Insurance Plan with Maternity Benefits? 30 Artificial Intelligence: A New Buzz Word In Banking 33 U.S. Vs China And Turkey: Worlds Biggest Trade War 36 Stock Market 101: Participants 39 LIC â&#x20AC;&#x201C;IDBI Deal: In-Depth Analysis 41 India vs. China: Trade Deficit At a Glance 44 Market Watch: Cross Currency Plays A Role

NPAs, ICICI Bank, Dena Bank Controversies and their effects on Nifty Indices - Krishma Mohanan INTRODUCTION S&P CNX Nifty is a stock index in India. S&P CNX Nifty, which is owned and managed by India Index Services and Products ltd (IISL), is India’s first company to focus upon a stock Index as a core product. The CNX stands for the Credit Rating Services of India Ltd (CRISIL) and the NSE. These two agencies partnered and formed the Indian Index services Ltd (IISL) which is a company whose primary function is to monitor and manage the Nifty 50 Index. Nifty consist of 50 stocks which represents 12 industry sectors. The constituents of the index change periodically, depending on liquidity, availability of floating stock, turnover and volume of transactions. NIFTY Bank Bank nifty gives an idea of the performance of banking sector in Indian capital market. The 12 most liquid banking stocks are taken in consideration .It provides investor’s and market intermediaries a benchmark that captures the capital market performance of the Indian banking sector. The lot size of each bank nifty future contract is 30units and the contract value is determined by ‘X’ lot price with the bank nifty index value. The 12 banks under nifty are;

HDFC, ICICI bank, Axis bank, Kotak Mahindra, SBI, Indusland, Yes bank, Bank of Baroda, Federal Bank, PNB, Canara Bank, Bank of India. Factors Affecting the trade of Bank Nifty: Interest rate decision is the key factor for nifty bank. Trade balance, Money supply, Wholesale price Index, Consumer price Index and Government policies, Employees provident fund decisions, few upcountry data like US fed rate, Japanese Interest rate, Chinese, Euro and Britain play a major role in Index moves. NPA’s play biggest catalyst for the bank stocks, Loan distribution and deposits. Nifty bank consist of the Nifty Private sector banks and Nifty Public sector banks NIFTY PUBLIC SECTOR BANKS Nifty public sector bank index captures the performance of the PSU banks. The index comprises of the 11 companies listed on the national stock exchange. Nifty PSU is computed using free float market capitalisation methods wherein in the level of index reflects the free float market value of all stocks in the index relative to particular market capitalisation value. PSU Banks are Allahabad bank, Andhra bank, Bank of Baroda, Bank of India, Canara Bank, IDBI bank, Oriental Bank, PNB bank, SBI bank, Syndicate bank,5

Union bank. Nifty PSU bank index is used for various purposes such as benchmarking fund portfolios, launching of index funds, ETFs and structured portfolios.

Methodology

Periodic capped market free float

No of constituents

Launch date

January 05,2016

Base date

April 01,2005

Base value

1000

Methodology

Free float market capitalisation

No. of constituents

Calculation frequency

Online daily

Launch date

August 30,2007

rebalancing

Semi-annually

Base date

January 01,2004

Base value

1000

Calculation frequency

Online daily

Index rebalancing

Semi-Annually

Retur n%

ICICI bank and NPA ICICI bank, India’s largest private sector lender, it reported its first ever loss of ₹120cr for the June quarter of 2018.The losses has emerged as a result of the allegations that has emerged against ICICI and the increased NPA’s.

QTD

YTD

1year

5 year

Since incep tion

14.14

-13.9

14.41

6.17

8.27

Nifty Private Bank Nifty private bank is designed to reflect the performance of the banks from the private sector. The nifty bank consist of 10 stocks and is based on free float market capitalisation method. At the time of rebalancing of shares/change in index constituents/change in the investible weight factor (IWFs), the weightage of the index is capped at 25%. Private sector banks are ICICI bank, Axis bank, Yes bank, Kotak bank, Federal bank, Induslnd bank, South bank, IDFC bank, RBL bank, HDFC bank.

1.What the allegation is all about? Allegations have emerged against Chanda Kochhar, the MD & CEO of bank in having interest and making gain in loans sanctioned to Videocon Industries. ICICI bank was a part of ₹40000cr extended to Videocon by a consortium of 20 banks. The allegations came to light after a shareholder named Deepak Gupta, wrote to the finance minister and all investigating agencies, accusing the Kochhar of wrongful gains from the loans that were sanctioned to the Videocon industries in 2012. According to the letter, ICICI bank extended loans around ₹3250 to various private companies belonging to Videocon industries. ICICI bank also extended offshore funding amounting to₹660 cr to Videocon Group company based in Cayman Islands.

2.What was the bank’s and Kochhar stance on the allegations? When the allegations first surfaced in the media, ICICI bank board initially asserted full confidence in MD and CEO. The board termed allegations ‘malicious and unfounded rumours’, they even added that the decision to lend to Videocon was taken on a consortium level. However, things took a U-turn on 30th May when the board announced its decision to conduct an independent inquiry into the allegations. Additionally, on 18th June the bank send Kochhar on indefinite leave till the conclusion of the inquiry. The board asserted that the inquiry would be headed by independent and credible outsider. 3. What the authorities have done so far? As the allegations centered around ICICI bank and Chanda Kochhar surfaced in March, the CBI and the Income tax department made an inquiry into the matters. The security exchange board of India (SEBI) sought clarification from Chanda Kochhar bank regarding the conflict of interest allegations and later issued a show-cause notice to her for her non-adherence to listing norms. 4. What were the effects on the share of ICICI due to the allegations? After the allegations came to light ICICI bank shares tanked by 7%, wiping of ₹11,353cr from its market capitalisation on BSE. The stock on NSE fell 7% to ₹258. This fall in the prices of the ICICI was the steepest fall since August 2015. Even Videocon’s share fell 4.97% to ₹12.42.

Dena Bank Dena banks net loss widened to ₹7.21 billion for the first quarter ending on (April-June) of the fiscal year FY19 on account of a sharp rise in the provisions for bad loans. The public sector bank had registered a net loss of ₹1.32billion in Q1 FY18. Reserve Bank of India initiated prompt corrective action against lender Dena Bank in view of high non-performing loans, restricting the bank from giving fresh credit and new hiring. PCA (Prompt corrective Action) has 3 risk threshold levels; 1. Breach of capital 2. Asset quality 3. Profitability levels The banks NPA’S rose to ₹158.66 billion, up from ₹129.94 billion a year ago. The provisioning coverage for bad assets in the June quarter also increased to ₹12.44 billion, from 2.34billion set aside in the same period from 2017-2018. The bank’s asset quality worsened with Gross NPA’s hitting high of 22.4% of the gross advances as on 31st March 2018, from 16.27% as of end March 2017. What were effects of PCA on shares of Dena Bank? The shares of the Dena bank closed at 5.96% lower at 17.35 levels on BSE. The shares reached an all-time low.

CONCLUSION Traders cut bet on the bank nifty to the lowest in five months as a result of the concerns over the asset quality woes to dent their earning in the current financial year. The bank nifty has gained 28.5% since the beginning of this year. This is as a result of other banks performing well. In the PSU banking space, investors may be reducing exposure as these banks have run sharply in the last seven-eight months, with some banks even giving 100% return. Despite all these allegations and the NPAâ&#x20AC;&#x2122;s Nifty showed an all time closing high of 11450 points on August 08, 2018.

Nothing Less Than 100: Maruti Suzuki’s New Days With Nexa -Rahul Kumar GS Maruti Suzuki one of the oldest automobile manufacturing companies in India started off as a Government Company in the name Maruti Udyog limited in the year 1981. Its primary target was to provide people with a common man's car at an affordable price. For this venture, Maruti tied up with Suzuki a Japanese automobile giant and came up with its well-flourished model Maruti 800. In later years the company came up with India’s first multi-utility vehicle (MUV) Maruti Omni, Zen, Alto and lot of other models which built its strong network and brand image among the people. Maruti created an air such that when a person thinks of buying a car Maruti was the company being considered. Maruti entered the industry with a hatchback car but soon it diversified into MUV, Sedan and other segments understanding the need to cater to different strata of the society to keep the major chunk of the market with the company. They also started providing their Gypsy’s to Indian Military which was also a strategic move which kept giving them a stable source of sales. Maruti has always strived to be the first in class while providing products to customers. Maruti was the first automobile

company to provide insurance and loan under a single umbrella. to reduce customers running behind these amenities to get their cars on the road. This could look like a small feature but it had a great impact on the market and now every company follows the same by providing all the needed services along the new car for customer’s convenience. By this time Maruti has become the market leader in the domestic car market. But while venturing all this glory they had made a name for themselves as a common man's brand. This name had helped them till now but had started to backfire when they tried to enter the premium segment. Maruti during the year 2011 tried to enter into the premium car segment introducing Suzuki Kizashi India’s first sports luxury sedan which was priced around 16 to 18Lakh.But was not able to gather the usual response from the market which the Maruti cars got when they launched a new car. They understood that the taste of the customers is changing and they wanted nothing less than premium not only in the car but they wanted a whole premium experience while buying a car which Maruti was not able to provide at that moment. The elite groups of customers were reluctant to even consider Maruti 9

while buying a premium car. Addressing these issues and as a strategy to increase their market share by selling 2 million vehicles by 2020 Maruti came up with the idea of NEXA in 2015. Nexa would play as the bridge covering the distance between Maruti and its premium range of customers giving them whatever they lacked in providing their elite group of customers. Nexa came with a lot of surprises and goodies for its customer â&#x20AC;&#x2122;s. Maruti have now introduced relationship managers who took the customers through the entire process of buying the car and also assisted them through the service part. These relationship managers were specially trained and groomed by Dale Carnegie (corporate training firm). Under Nexa, Maruti gave advanced technology and premium experience hand in hand to attract customers. For the first time, they have come up with mobile based applications for their customers and they had other loyalty programs such as providing credit cards by tying up with other firms to keep the customer connected to them without thinking about another company. They wanted to target the rest of the market who did not currently own a car from Maruti and Nexa was able to contribute a total of 10% of the total sales of Maruti cars in the domestic market in that year. When Nexa completed its first year in the market they had a good response and in that 51% of the people who were buying a car from Nexa were not Maruti customers earlier. Under Nexa, Maruti provided mainly to three segments which were premium sedan (Ciaz), hatchback

(Baleno and Ignis) and SUV(S- Cross). With the backing of Nexa, Maruti has acquired 7 positions among the top 10 cars in the year 2017. Baleno and Ciaz have been the torchbearers of Nexa giving a tough competition to all its competitors in the industry. While taking figures according to March 2017 Baleno has sold 16,426 units making it most sold premium compact hatchback ever and growing at the rate of 163.40 %.Previous year Baleno had just sold 6,236 units. And it is the second most selling car under Maruti after Alto 800. This shows the acceptance of the car between the people and the growing need for premium vehicles in the market .It is also a sign showing that Maruti had taken the right step at the right point in time. If this action had not been taken Maruti could have witnessed a major loss in its market share and losing its control over the industry. Currently, Maruti has established a monopoly in the market by securing all the 7 positions among the top 10 selling cars. That is there is a 70% chance that whenever a person is buying a new car it could be a Maruti. A new Baleno later came up with sports 10

Model. which was entirely targeted for customers solely looking at performance in their vehicle. Currently Ciaz is undergoing a facelift and the new model will be launched in August 2018. It seems everything is going smoothly, but Maruti has sensed again a change in the automobile environment. As people are becoming more aware and responsible towards the air pollution causing hazardous effects to the environment and has started preferring environment-friendly vehicles. Ciaz had earlier launched a hybrid model but the stress is more on electric vehicles. The government of India also has been completely supporting the idea of electric vehicles by suggesting that every new car coming out by 2030 should be an electric one. Companies like Tesla have already shown that there is a huge market for electric vehicles. Considering all these developments Maruti has tied up with Toyota in a deal by virtue of which Maruti will be providing its high selling Vitara breeza and Baleno through Toyota dealerships while in exchange Toyota will be giving its premium sedan Corolla to be sold through Maruti . This deal can be seen as a strategic tieup which Maruti is doing to get collaboration in the electric vehicle technology from Toyota so that they could produce electric vehicles in a costeffective manner so that they wonâ&#x20AC;&#x2122;t lose their market share and dominance in the domestic car segment.

Jack Ma – From Rags To Riches - Kartik Bhardwaj Jack Ma, the founder and executive chairman of Alibaba which is a social media and e-commerce giant in China. He was born in 1964 in Hangzhou during China’s Cultural Revolution and was named as Ma Yun, during which his family was excruciated because of his grandparents, who were the members of the Nationalist Party at that time. All throughout Ma's life, from childhood to his multibillion-dollar global e-commerce technology giant, he has failed many times, rejected and even called crazy. Ma’s father was his most persistent detractors and he warned Ma about his “dangerous” ideas. Ma’s education was very peculiar. He failed a key primary school test two times, failed the middle school test three times, and failed the college entrance exam two times where he scored 1 out of 120 points on the math portion. After graduating from college, he applied to 30 different jobs and was subsequently rejected by all of them. Ma was the only one out of five applicants to the police force who were rejected and the only person of 24 applicants for becoming a KFC manager to get rejected. He even applied for Harvard ten times and got rejected every time.

Unlike many idolized college drop-outs who turned out to become successful entrepreneurs, such as Mark Zuckerberg, Bill Gates or Steve Jobs, Jack Ma earned his MBA from Cheung Kong University while building Alibaba in the early 2000s. Ma is fond of academics. He was an English teacher himself at a University, and he talks about teaching again someday in the future. Ma gained most of his knowledge by experimenting, observing and questioning the status quo. As an amateur, he taught himself English and refined it by becoming an unofficial tour guide to foreign tourists. Through those tourists, pen pal relationships he inculcated English from them. Ma’s struggle in implementing his vision Ma had no experience with computers or coding, but he was captivated by the internet when he used it for the first time during a trip to the US in 1995. He had recently started a translation business and made the trip to help a Chinese firm recover a payment. Ma's first online search was "beer" but he was surprised to find that no Chinese beers turned up in the results. It was then that he decided to establish an internet company for China. 12

Ma, with his friends launched a site about Chinese products online. He named it as “Chinapage,” which listed Chinese businesses and their products. Although Ma received inquiries from around the globe, the interest was meagre for which Chinapage struggled. For better funding, Ma partnered with a government body and gave away majority of control of Chinapage. Unfortunately, this brought along rigid bureaucracy, smothering Ma’s control and ability to execute his vision for the company. Eventually, Ma departed the company. “Today is a bad day, tomorrow will be worse, but day after tomorrow, there will be sunshine.” After the Chinapage fiasco, Ma took up a government job, working at the Ministry of Foreign Trade and Economic Cooperation in the end of the 1990s. During this period Ma encountered Jerry Yang, a co-founder of Yahoo. The two became friends, and Jerry eventually secured a Yahoo investment of about $1 billion in Alibaba in 2005. During the early days of the Alibaba, Ma tried to raise funds in Silicon Valley. He was unsuccessful and received a lot of criticism for his business model at that time. By late 1999, Ma succeeded in alluring Goldman Sachs and SoftBank to invest $5 million and $20 Million in Alibaba, respectively. In 2003, Ma and his team launched an online auction site by the name “Taobao.com.” Taobao charged zero commission, aiming to compete with the multinational e-commerce giant eBay,

which already had the biggest chunk of share of the Chinese online auction market. Persistent to win against eBay, Taobao kept to be a commission-free marketplace for millions of online traders, putting the novice under tremendous financial pressure. To stay buoyant while maintaining the platform's commission-free policy, Ma and his team began offering peripheral value added support services for a small fee. With this, Taobao gradually gained traction in the Chinese market, and eBay subsequently withdrew from China. Ma reflected on this challenging period later on and I quote “if eBay are the sharks in the ocean, we are the crocodiles in the Yangtze River.” Taobao was the first successful subsidiary of Alibaba, with many additional offshoots that followed in subsequent years.

Hits taken by Alibaba during their emergenceAs the dotcom boom came to an end after 2000, Alibaba faced serious challenges due to its aggressive expansion into International markets. Jack Ma miraculously reorganized the company's operations, including the closing of many international branches and concentrating on strengthening Alibaba's position in the Chinese market. 13

Therefore, Ma ended up expanding the services of Alibaba and reengaging its international expansion strategy. Alibaba and Yahoo SymbiosisAfter Ma and Alibaba reorganized their operations and made their mark by successfully overtaking eBay in the Chinese market. Also with the help of Jerry Yang, Ma successfully convinced Yahoo to invest $1 billion in exchange for a 40% stake in Alibaba in 2005. Besides securing crucial funds necessary to help Alibaba execute its international growth strategy, that investment gained Alibaba a valuation of $2.5 billion in just six years. The gamble paid off for Yahoo as well as the American internet company earned about $10 billion during Alibaba’s IPO. About the offshootsAlibaba has three primary business companies and they are as follows: Alibaba.com is the original front business. It generates its revenues by charging commission on the transactions that takes place between the customers and the Chinese storefronts present on the site. It also makes money by charging the sellers a subscription fees to maintain the storefront on the website.

marketplace aiming at the growing middle class. Features high end products and charges its merchants on a yearly basis. There are also various small business Alibaba has invested which are • • • •

Alipay(an only digital wallet) Alibaba cloud computing A film business A football team and some mutual funds that the company has invested in.

This tells us that Alibaba is not dependent on just one business but has various diverse business lines and streams for generating revenue. Perseverance paid offIn 2013, Ma stepped down from his post as CEO of Alibaba, although he retained his position as executive Chairman. The company went public on September 19, 2014. The IPO earned $150 billion, the largest offering for a U.S. listed company in the history of the NYSE (New York Stock Exchange). Immediately after this, Ma became the richest man in China, with a net worth of about $25 billion. At that time, Alibaba spent a reported $49.7 million on a Gulfstream G550 (business jet aircraft), mostly for Ma's use.

Taobao is company’s largest business which provides consumer to consumer marketplace similar to eBay.com. It still does not charge any commission on transactions made on the site, rather it makes its money by selling ads on the website and by charging sellers to be in the higher priority list on the site to be in notice of the customers.

In 2016, the site recorded nearly $18 billion in sales in 24 hours.

Tmall.com is a subsidiary of Taobao which provides business to consumer

Jack Ma sits on the global board of The Nature Conservancy. He spoke during a

By November of 2017, Alibaba’s market cap was more than $486 billion, making it one of the 10 largest companies in the world. It grooves on 550 million active monthly users across its various platforms.

of the Clinton Global Initiative and has been instrumental in funding a 27,000acre nature reserve in China. Also recently there have been rumours that Jack Ma is thinking of coming down from his throne. According to him its time that he invests his energy and fortune in something that he loves which is education. He will remain to be the member of the companyâ&#x20AC;&#x2122;s board of directors to guide them. From- Gathering 17 of his friends in his apartment and convincing them to invest in his vision for an online marketplace he called "Alibaba". To- Becoming the richest man in Asia with the net worth of about $46.6 billion is what we call â&#x20AC;&#x153;RAGS TO RICHESâ&#x20AC;?.

Commodities Market â&#x20AC;&#x201C; The Future Trade Market - Revathi Menon The commodity market plays an important role in this rising era of trade exchange and global market. In the global market, the commodity market has evolved in the years and national commodity exchanges have made a big headway since its establishment . It has been noticed that the investors are very keen in investing in this industry. The economic survey of 2018 has come up with a fact that for every 10 dollar barrel increase, the price of oil reduces its growth by 0.2-0.3 percentage. The survey also brings out the fact that in the year 2019 there will be a growth of 77.5% in the economic growth of the country as the crude oil prices are increasing at a fast pace. There are a lot of commodities that can be invested in this market. A place where commodities can be traded virtually or physically bought and sold in the market place is what is referred as commodity market. Currently there is about 50 major commodity markets globally facilitating trade in about 100 primary commodities. The hard and soft commodities are the major classifications of a commodity. Hard commodities are basically the natural resources mined or extracted such as gold, rubber, on the

other hand we have soft commodities which is into agricultural products and livestock such as corn, wheat coffee, and sugar. Even though there are a lot of commodities available the investor must know the right commodity to invest in in order to takeaway profits and for this a deeper analysis of the market is very necessary. Commodities are invested in various ways that is the investor can either purchase shares in companies that deals with commodities or directly invest in mutual funds, index funds or exchange traded funds that mainly focuses on commodities related companies. Commodity exchange is a body that rules and regulates the procedures for trading in commodities using standardized commodity contracts. The two important trading exchange markets in India are Commodity exchange Of India (MCX) and National Commodities and Derivatives Exchange Limited. All activities and transactions undertaken by the MCX is monitored by experienced as well as qualified professionals and it is the worldâ&#x20AC;&#x2122;s largest exchange in silver , the second largest in gold natural gas and copper and the third largest in crude oil 16

futures. NCDEX is the only institution sponsored by the national level institutions and itâ&#x20AC;&#x2122;s a public limited company as on April23, 2003 under the companies Act, 1956. The investor can choose the type of fund he wants to invest depending on his need and feasibility The variety of fund types are commodity funds that has direct holdings in commodities, commodity funds that holds futures and this type of derivative instrument helps the investors to purchase futures contracts in a way to achieve objective. No investor has the desire to take the delivery of corns, oil or any other commodity they are only interested in the profit from price changes in such a case future is very beneficial . Future is an agreement where in sale and purchase of an underlying commodity takes place at a predetermined date and price. Future contracts gives more flexibility and it allows to hedge risk and to protect the physical position and helps the speculators to take a position based on the market expectations. Investors who invest in in companies that are into fields like energy, mining, oil drilling and agricultural businesses are referred to as natural resource funds. Some investors invest in a combination of actual commodities and future commodities. Apart from this, there is a no of investment strategies that an investor can invest and it includes active management and passive management. Commodities are also connected with the supply and demand as in, the price of stock rises when there is an increase in demand of

the commodities. Commodity is often affected by inflation, that is, when the price level of commodity rises the value of currency becomes less valuable. Precious metals like gold, silver, palladium etc. has done well during inflation period. Commodities related to agriculture and food often tend to be a poor hedge against inflation .An investor would always prefer commodities which minimizes the risk, maximizes return and less correlated. Commodity price risk is an important element in the market place that can directly affect the financial results of both who produces and use commodities. When the price of steel rises, the cost of producing cars also increases accordingly. Suppose a farmer plants less of one crop in a particular year as the prices are low, he will miss the potential on profitable crop when the prices rise next year. This is the basic idea behind commodity risk and this has to be considered while investing in any commodity. Regulatory changes, seasonal variations, weather, technology and market conditions are some of the factors which can adversely affect the prices of the commodities. The latest report as per the SMC global securities reveals that crude oil with its price being 4600rs can reach near 4680rs on Multi Commodity Exchange, Natural gas may also boost and take support near Rs.202 with the resistance being nearly Rs.207. Base metals like copper is also likely to show an increase from Rs.418 to Rs.428.World oil demand is to grow by17

1043 million barrels per day in 2019 and down from 1.64 million barrels per day in 2018 as per the Organization of Petroleum Exporting Countries (OPEC) report. The major reason behind lower growth is because of the trade and disputes between the United States China and the emerging market turmoil. But, apart from this considering the oil industry as a whole the oil demand is likely to remain healthy in the market.

The MCX along with the Forward Mission Commission has conducted many workshops and programs for the upbringing of farmers, and other market participants. The main intention behind this was to teach them in hedging risk thus increasing the profits. In order to diversify the portfolio and the investment in this market the policy makers should focus on making the environment more market friendly as well as enabling banks and other mutual funds to invest in commodity markets can largely help in development of this market.

Agricultural commodities like turmeric is expected to see a down fall from the range of Rs7050 to Rs7200. Shares in commodity cotton is likely to witness correction to Rs23,550 in the international market. Base metals like copper is likely to see an increase from 418 to 428 in the market ,followed by zinc from 172 to 177, followed by lead from 144 to 149 and aluminum can go even higher to rate of 147 being 143 its support level on MCX. India is country where there is potential in untapped market and MCX has been taking various initiatives to develop markets with help of innovation, educating and researching, and focusing on spreading awareness on the modern techniques as well as mechanisms that facilitate easy trade exchange in the market.

Besides changing market trends, innovation technology advancement and other challenges the market remains constant and witness growth at a reduced rate. In this scenario, do you think that the Indian commodity future market will scale global heights?

Investors must have a clear idea about the price fluctuations before they invest in anything.

Why Was Investor Sentiment So Bullish Between August And September? - Samudrala Jagadish Stock market is entirely run on beliefs and events. Say if any analyst prefers to buy some particular share of a company there may be a valid reason or according to his analysis the company share value may increase so he tells us to buy . Every investor or shareholderâ&#x20AC;&#x2122;s would be thinking that his share value has to be increased to get more profit which is known as profit maximization .

Example: If there is a company called HUL listed in BSE, which just released the earnings and if the investor sentiment is bullish, the earnings report is really good and the float is highly shorted and the shares could potentially surge and cause a short squeeze if the sentiment is bearish any news that is not good could send shares of HUL company lower meaningfully.

Historically, the India SENSEX stock market index reached all time high of 38024.37 in august of 2018 and record low was late in the year 1979 . Factors of Investor : 1) Sentiment for an investor is changeable : There would be a lot of predictions before the elections and after the elections. And even currency too impacts a lot in the stock market. 2) Importance of investors sentiment : There are self- fulfilling prophecies in the stock market. If investors are bullish then enough people will buy the stock and stock price will go up. If investors are bearish and most of the people sell the stock and the price will go down.

3) Reflection of politics : If a politician who stands for an higher position , promises to improve particular sector such as roads, power and engineering and if he wins the election and the investorâ&#x20AC;&#x2122;s sentiment who invested on that particular sector would be bullish as he would be getting more profit . 19

The same happened in 2014 most stocks that were considered to be the part of the Modi trade had their best performance and outperformed in the initial days but after the twelve weeks leading up to the election results, but that did not produce any eye-catching performance thereafter it may be due to some reasons . It might have become come as a surprise to many investors that healthcare has been the best performing sector since election results were declared on 16 May . SENSEX BREAKS RECORDS: One cannot say whether the worst is behind us or not as the worst is nothing but the sentiments of the people , how they react and the market has a high volatility. As mentioned in the above if there is any kind of negative trigger all the investors across may sell the shares . But in reality one investor will look at his portfolio and scripts and earnings, the promises that companies carry when they do capacity expansions and acquisitions, do new product launches and improve cash flows. It is a good time to be selectively adding on to the promising stories, particularly in midcap and small caps. For example between July 2018 to august 2018 , paper stocks on an average are up between 30% and 50% and that is quite a meaningful jump when it comes to commodity stocks. Having already it is said that the factors such as promises of price increase in paper, the consumption patterns, the value-added patterns, the fact that paper companies have started exporting to China for the first time, that 60 days of their inventory is at the minimal level, is now booked. If you see a meaningful decline of 10-15%, it may be a good time to add on those. In a current decline it is blind buy to paper stocks .

India’s benchmark Bombay Stock Exchange SENSEX has continued to break records since Prime Minister Narendra Modi delivered his keynote speech, at the plenary session of the World Economic Forum, in Davos on January 23, 2018 . The 30-share exchange broke its record to reach 38,061 before settling just below the 38,000 mark . The Sensex hit at 38,012, marking the first time ever it has reached this level . Stocks primarly related to banking , IT , capital goods , oil and gas were given a boost . Even with changes in the policies such as goods and service tax nationwide India’s economy is picking up and growth prospects look bright . As one of the world’s fastest-growing economies— accounting for about 15 percent of global growth—India’s economy has helped to lift millions out of poverty apart from trade . Over 1,700 stocks trade below their 200-DMA in 2018 vs 1,300 in 2008, will history repeat itself ? The 200-day daily moving average (DMA) is considered one of the most important indicators by traders and char20

chartists to determine the long term trend of a stock or an index. As mentioned above as Sensex rallied above 37800 as on august , 2018 and along with it nifty hit a fresh record above 11,400 for the first time . Benchmark indices but be hitting record high but not every stocks could go up only a handful of stocks are trading above 200- day daily moving average this has the similar situation to 2008 . So we can suggest that as long as stocks trade above their 200-DMA the overall trend is considered bullish , while it is exactly the opposite when it is considered opposite .

-ket and are showing large divergence. Historically, when markets have made tops in the US and India . A similar situation is being experienced currently with a handful of stocks trading above their 200-DMA. There is a higher probability the markets will react like 2008 eventually the reasons would be Micros are pushing the market to new highs whereas the macros such as the increase in interest rates, rising inflation, depreciating currency and widening current account deficit are leading to greater fear in the Indian economy. The market needs a trigger before it starts its downward journey and when that will occur only time will tell.

Only 1720 stocks were trading below 200 DMA and 160 stocks were trading above their crucial long term average in 2018 , whereas in 2008 a record high 1300 stocks were trading below their 200-DMA while only 583 stocks were trading above their crucial long term average . So we can confidently conclude that one more multi-quarter leg on the upside is pending in this bull market which can take the indices initially beyond 12,200 levels. The stocks that are trading below the 200DMA are heading towards the key longterm moving average. The same divergence existed in the market towards 2008-end. The benchmark index bottomed in October 2008, whereas the broader market continued to correct till early 2009 . The difference between 2008 and 2018, however, is in the degree of occurrence. The correction in 2008 was a much larger piece in the entire puzzle as compared to the current one The conditions do look similar to 2008 as large caps have been experiencing a euphoric rally, while the midcaps and small caps have lagged the broader mar21

The Use of Artificial Intelligence In Trading - Achintya Saraswat There is a game called DOTA-2, it is quite famous, it is a strategy type game. In the game each player play with a hero, and the hero has special powers, there are many other things such as inventories, weapons etc. Hence there are many possibilities and complexities that are attached to the game, where players have to generally play for years to even qualify for a tournament of the game.

‘Artificial Intelligence’ and ‘Machine Learning’ are the things which people hear about every now and then. These technologies are used to automate any human work. AI and ML are particular is a set of software which learns about something step by step, by judging the variation in its pattern, moreover because it happens in a computer thus it can handle a huge about of data(Big Data) and have great computational power(Speed).

-bject which requires a lot of calculation and trend anticipation, thus it makes absolutely sense to juxtapose them. Mahi de Silva, founder and CEO of ‘Botworx.ai.’ a leading AI tool providers said that, “Stocks, bonds and futures trading are heavily automated and the algorithms behind trade execution and optimization have yielded billions of dollars for a few companies that invested early in machine learning in the '90s and early 2000s,”. The crux of the matter is, that there are two conditions for a trader to take advantage in stock markets, one when stock is overpriced and second when it is underpriced. The window a trader gets sell an overpriced stock and buy an underpriced stock, before stock reaches its correct value is the key to success. AI and ML are the tools by which we can hedge the risk and get the most output during this window, much better than a human can.

Moreover finance is quantitative su-

According to a Bloomberg report, J.P

Now ‘OpenAI’ is another platform which is provides an opportunity to use AI as an Open Source, they developed a program to play DOTA-2, which would learn to play the game by itself. Within few days of learning the program contested with a one-on-one battle with world champion of DOTA-2 and it defeated him.

Morgan Chase & Co. began testing LOXM, in 2017 and has plans roll it out in the US and some parts of Asia, for equity trading with the AI system. According to the head of the research at JPMC, it executes the clients orders for the bank as soon as possible and in the best possible price, it works well in both simulated as well as with actual trading. It uses years of trading data from the history and then anticipates the future pertaining to it. Nevertheless there are few shortcomings to it as well, researchers are bothered about the fact that the program right now is only suitable for particular type of market and for very specific time. It still can’t replace a human trading professional as a whole. On the other hand other big company, Goldman Sachs, is adding automation to the process for initial public offerings as well. According to Forbes, some other companies, use AI for hedge funding to manage their portfolio. They use it to model and predict fundamentals of companies, compare it with social media content from Twitter, Facebook etc, and other relevant data points and make market predictions to identify trading recommendations. AI is also helping in the behavioral analysis of traders, looking at the history of traders, these programs can identify trader traits. For example, does the trader hesitate to take a call when the market is shifting? Is he overaggressive in certain situations? This plays a key role in identifying traits and take corrective actions. The AI and deep learning tools are becoming increasingly efficient as all the big players in the industry are already poring lots of money into research already.

More AI functionality has decreased the number of employees, those who will be remaining will be trained to handle highlevel, complex customer-centric problems manually, while the rest fall to automation. This technology is shifting from the big-shot companies to individuals now, as now there are many institutes which have seen its potential and are already into teaching AI. As, Georgia Tech on Coursera teaches you how to use AI to trade stocks, the same course is also available on Udacity(online education) termed as ‘Machine Learning for Trading’. Many institutes in India are also providing MBA courses with keeping AI and ML in their mind, one such example is Great Lakes Institute of Management, Chennai.

There’s no doubting the fact that AI is the next big thing. Companies must keep evolving and adopt AI to avoid the risk of being left behind in the race. AI and its related technologies are still at a budding stage, nevertheless they hold a huge potential for the trading industry. The nascent steps that companies are taking are proofs of concept, and AI is gradually moving towards mainstream. The industry will continue to evolve these models and improve them to operate successfully in various business cycles.

The important thing is that AI is driven by data and data quality, which can significantly impact outcomes. Also, if the data has biases, naturally the predictions from AI will also carry over the same biases, and in some cases even exaggerate those. This calls for data scientists with deep mathematical and business domain knowledge to model these decision-making platforms. AI will surely have a significant role to play in the future of trading. Probably, advanced versions of trading platforms would create and augment themselves. Who knows, some day they might even give insights into the complex variables that have eluded human economists since ages. There is a possibility that AI takes over us? Is this going to happen sometime in future? Of course yes! Future A.I. will be aware, far more intelligent and not to mention quicker than humans. This would be like horse carts vs. automobiles at the turn of 19th century, only in this case, itâ&#x20AC;&#x2122;s not automobiles but directly rockets.

Should Women Consider Health Insurance Plan with Maternity Benefits? - Simran Abhichandani & - Anisha Jose Pregnancy and birth are a very significant phase in the life of a woman. The 9 months of pregnancy, as well as labor and delivery, must be given a proper care in order to embrace parenthood with not many difficulties. The importance of healthcare throughout pregnancy is inevitable for a safe delivery and these healthcare services cost a huge sum of money, pinching the pockets of each family. The costs involved in the same stretches approximately from Rs. 50000 to Rs. 5 Lakh. Also, looking at the whopping statistics of the MMR i.e. Maternal Mortality Rate (deaths per 100000 live births in India) in the year 2011-2013, which was 167. Infections and diseases compounded by chronic hunger and lack of access to affordable pre-birth health care services due to their high cost contributed to the death of a huge number of mothers during delivery. This number was reduced by 22% in 2014-16 to 130 deaths per 100000 live births. This was the result of constant efforts made by our Government through its JSY (Janani Suraksha Yojana) program, which increased the number of institutional deliveries, both in public and private hospitals. As per the statistics, almost 80% of our women are now giving

births in hospitals. The out-of-pocket (OOP) expenditure incurred for maternity check-ups and delivery are less in the public healthcare system as many incentives are provided by the Government like free drugs and diagnostics, etc. But corruption, apathy and poor quality of services in the public health care system made people hesitant in accepting services and they moved to private hospitals where the cost is very high. The OOP expenditure in private sector hospitals is 9 times higher than that of the public sector and this made births a burden to all families. Mr. Ashish Mehrotra, MD and CEO, Max Bupa Health Insurance said, â&#x20AC;&#x153;Couples planning to start a family need to be well prepared to deal with childbirth and maternity related expenses such as regular diagnostic tests, medicines, hospitalization etc. Bearing these may turn out to be an expensive affair for many families.â&#x20AC;? India, being a developing country gets affected by such hefty costs. This scenario brings up the necessity of Health Insurances which can cover up these hiking expenses. The health insurance plans which includes maternity as a feature, generally takes care about delivery and newborn charges for a mother and infant. Many companies like Max Bupa, Religare, Appollo Munich, 25

Royal Sundaram, Star Health, etc. are now providing health insurance policies that takes care about the maternity charges. Key Points Related to Maternity Insurance: Maternity insurance provides cover for maternity-related expenses. According to latest reports, the average age of women becoming mothers has risen to 32 to 33 years in India. There is a view that women who have their first child in their early 30s are more likely to have complicated pregnancies. Several women are, therefore, increasingly opting for health insurance plans which offer maternity expenses as well. Typically, maternity insurance plans come with high premiums and long waiting periods. So, one must be very careful while selecting a policy. The following are the key points to be considered while purchasing a policy: Definition of maternity expenses: The term ‘maternity expenses’ is defined in the circular of standardized definitions issued by IRDAI in 2013. The following are included in maternity expenses: Expenses incurred in maternity related hospitalization: pre-hospitalization expenses are covered up to 30 days and post-hospitalization expenses are covered up to 60 days Delivery including pre and post- natal expenses: expenses related to both caesarian and normal deliveries and post-delivery complications Hospitalization costs: room charges, nurse and surgeon charges, medical practitioner fees and emergency ambulance charges. New born baby cover (Day 1-90)

Waiting period and sub-limits: Most maternity health insurance policies have a waiting period of 2 to 4 years and one will be eligible to claim the policy only after this period. This period may extent even to 6 years for certain policies. Thus, it is essential to purchase the policy as early as possible. A policy named JOY from Religare Health insurances is an exception, where the waiting period is only 9 months. Exclusions: Specific exclusions and capping limits are applicable to maternity health insurances. Few are listed below: The benefit limit for normal delivery have a capping between ₹15000 to ₹30000 and for caesarian delivery the capping is ₹25000 to ₹50000. Age of insurer for the policy is capped at 45 years Termination of pregnancy within 12 months from the date of conception is not covered. Medical expenses on ectopic pregnancy are not covered in the benefits. High Premium: A health insurance policy with maternity benefit is expensive as it is considered a high-risk product owing to almost 100% claim ratio as opposed to other insurance policies. So, one should do a cost-benefit analysis before buying a policy. LEADING INSURANCE COMPANIES THAT PROVIDE MATERNITY BENEFITS AND THEIR PLANS: 1. Max Bupa’s Heartbeat Family Floater: • Heartbeat has three variants: Silver, Gold & Platinum with the following benefits Silver: Complimentary health check-ups every two years, Maternity cover upto two children upto 30,000 Gold: 26

Accommodation in single private room and complimentary health check-ups every year Platinum: No additional maternity benefits, however the insured can avail treatment from abroad except from US and Canada. • Maternity cover for upto 2 deliveries, cover for newborn starts with birth Organ transplant costs covered upto Sum Insured, emergency evacuation and hospitalization and evacuation abroad (as per terms and conditions) and vaccination cover for newborn. 2. Religare’s JOY Tomorrow: • The plan covers pre and post natal maternity expenses. • Only 24 months waiting period for maternity related claims. • Cashless treatments. • Premium of approximately Rs. 30,000 on a sum assured of Rs. 3 lakhs to Rs. 5 lakhs. 3. Apollo Munich’s Easy Health Young Family: • Pre and post maternity expenses covered • Cover for the new born baby from day 1 to day 90. • However, maternity expenses need to be SPECIFIED. Otherwise, it doesn’t cover expenses relating to pregnancy. 4. Royal Sundaram’s Lifeline Elite: • Maternity Benefit cover for up to 2 deliveries if both husband and wife are covered under the same family floater policy. • New Born Baby Cover (day 1 to day 90) • Vaccination for New Born in first year. 5. Star Health’s Wedding Gift:

• This maternity cover offered by Star Health offers coverage for maximum up to two deliveries. • This plan provides coverage for normal as well as caesarean delivery including pre and post-natal expenses, and any post-delivery complication cover for the mother post child birth. • There is a waiting period of 3 years and the policy also provides coverage for new born expenses. The maximum health insurance cover is Rs 10 lakh. THE WORKING WOMEN’s EDGE OF GROUP HEALTH INSURANCE PLANS OVER INDIVIDUAL PLANS. Group Health Insurance plans are policies purchased by an employer and offered to eligible employees of the company. So, the following are the additional benefits that working women get under the group health insurance policies provided by their employers, which are not present in the individual plans: 1. No waiting period for coverage of pregnancy. 2. Pre-existing hypertension or diabetes. 3. Hypertension due to pregnancy and gestational diabetes. 4. Age related complications in delivery. 5. Miscarriages - 2nd or 3rd semester. 6. Caesarean delivery. 7. New born covered for a period of 90 days. Many employee-centric organizations even provide benefits like flexible working hours, paid vacations and free pick and drop services as well. DRAWBACKS: Maternity expenses in any health insurance plan are only an add on rider 27

and thus have an upper limit or cap to it, up to which the person can be insured. This means that they have a limited coverage, of approximately Rs. 15000 to Rs. 50000. Very few plans have high coverages relating to maternity. Further, adding on this benefit to the policy results into high premiums. For example, the premium of a normal health plan for a 35year-old female is Rs. 3000 to Rs. 4000 per year, the inclusion of maternity insurance element hikes the premium to Rs. 8000 to Rs. 9000. CLOSING COMMENT: Maternity health insurance policies are of course a helping hand for the couples who are planning for a family. It helps them to meet the skyrocketing costs of various maternity treatments. Even though these policies may not cover the whole maternity expenses, they can reduce the out of pocket expenses spent on maternity by the families, which can improve the net disposable income of people. Also, one must be careful while purchasing a policy. They must take the waiting period, the premium paid, etc. into consideration for purchasing a suitable scheme.

Artificial Intelligence: A New Buzz Word In Banking - Supriya Panse

“Banking is necessary. Banks are not.”Bill Gates Today, technological advancement can be seen in almost every sector of Industry. Banking Industry is also in the line of the same. “Fintech” which stands for financial technology is a new buzzword today. Fintech includes any technological innovation in the Financial Sector. If we have a look at the current banking sector at a large than Fintech has completely revolutionized the same. According to the 2018 “Global Retail Banking Report” from The Economist Intelligence Unit and Temenos, global banking organizations are focusing on advanced technologies, customer experience and security of data in their efforts to keep pace with consumer expectations. Thus, today banking is not just lending money and accepting deposits.

technology keeps on evolving, it has also evolved in the same way. It is not just restricted to online payments, digital banking services, fundraising, new loaning algorithms, etc. The major component of Fintech is Artificial Intelligence (A.I), which is emerging as an important customer service tool.

The banking industry is one of the first industries to accept Artificial Intelligence (A.I). According to the one survey conducted on Fintech innovation, A.I is considered above all other tools like blockchain, digital banking,cryptocurrency, institutional tools, etc. (Table 1).

Today the scope of the banking industry has become much wider. The focus of using such technologies is not just helping the bank employees while working but the focus is to provide customer satisfaction by maintaining a good customer relationship. This new trend has given birth to Fintech, but as 30

Artificial Intelligence helps banks to understand the insights of human behavior and also to help employees in the back office. Right now the use of Artificial Intelligence is confined to chatbots, IPA (Intelligent Process Automation) and similar interactive tools. A chatbot is a computer program or an artificial intelligence which conducts a conversation via auditory or textual methods. These chatbots are currently used in banks to assist the customers like a clerk. The next thing is IPA; it is a set of new technologies that combine fundamental process redesign with robotic process automation and machine learning. IPA mimics activities carried out by humans and, over time, learns to do them even better. There is also a new process of Robotic Process Automation or RPA, which is used to create a virtual workforce which can help banks to eliminate human interventions. But this is not actual Artificial Intelligence. A. I is still in the nascent stage, not only in India but in other countries also. The main reason for the growth of A.I is because of the following reasons: 1.Increasing Security: - Normal security systems like Anti-Virus are not up to the mark. Artificial

Intelligence along with machine learning is used to improve security. 2.Reducing Processing time: - Artificial Intelligence not only keeps all information safe but also reduces processing time to its half. 3.Fraud detection: - A.I can be used to validate and check human errors and frauds.

4.Access and stores a large set of data and calculate risks thereby. 5.Customer Satisfaction is the must requirement criterion in the current banking scenario as competition is at its peak. 6.For making easy Back office processing work. 7.Bot advisors can be used for managing the wealth of all individuals. 8.AI techniques such as deep learning can be used at ATMs to detect and prevent frauds/crimes. Thus, using A.I today is not an option anymore. All the banks are required to implement the same to compete with each other and also to provide the best services. But, experts say that currently, the use of A.I is just a peripheral. Kalpana B. partner and head Robotics and Cognitive Automation, KPMG in India, does not think banks in India are making use of A.I. In other countries A.I is already taking a major part in the banking industry, some of these instances are as follows: 31

•JP Morgan Chase has developed a proprietary ML algorithm called Contract Intelligence or Coin. It is now used to analyze the documentation and extract the important information from it. •Wells Fargo has established a new A.I Enterprise Solutions team to provide excellent service to corporate banking customers. •Bank of America has launched a virtual assistant named “ERICA” which can advice 45 million customers at one point of time. •Japan’s central bank is promoting “J Coin” which is a digital currency based on blockchain technology. •The Mizuho group of Japan is using a robot that can assist customers who visit branches with queries about asset management and other services. •Oman Arab Bank introduces robotic process system.

very wide in its scope and India is just using 20%-30% of it. There are “n” numbers of challenges ahead and to be competitive it is very necessary to move with the trend. Future of Artificial Intelligence, as technology keeps on updating, A.I would also be getting continuous up gradation with new technologies coming into the picture. The prediction is that the next stage of digitization and automation will be the process of “cognification”. It is described as the combination of IoT (Internet of things) and A.I. Not only had this it even expected that in future A.I may replace humans at lower level working operations. In future, a new post for Artificial Intelligence Officer might be getting into the picture.

Thus India as a developing country is new to the Artificial Intelligence and it is not still fully developed in our country, but still, A.I’s presence could not be ignored. State Bank of India has conducted a Hackathon “Code for the bank” to encourage developers to build A.I and blockchain technology in the banking sector. HDFC Bank & ICICI Bank has already introduced chatbots for customer service. “Mitra” & “Candi” robots were used by Canara bank. ICICI Lombard’s Myra has replaced human agents to respond to customers on their queries. Thus, for India, it is a long way to go. Artificial Intelligence is 32

U.S. Vs China And Turkey: Worlds Biggest Trade War - Samriddhi Batnagar The recent trade war between US, China and Turkey may become one of the biggest trade offs in the world. The biggest economies in the world are locking horns by imposing tariff barriers on each other, which in turn is impacting the global market. The row of tariff imposition by the United States president, Mr. Donald Trump and his administration started by tariffs on steel and aluminium against many countries. China, one of the biggest rivals of United States was also in the list of the countries to be hit with these impositions. On 6th July 2018, Donald trump’s administration imposed sweeping tariffs on $34 billion worth of Chinese goods. The US is expected to impose more tariffs of an additional $16 billion worth of Chinese goods which might be increased to $500 billion later. This was a move made to make Chinese products more expensive for American consumers and businesses to consume. Expensive Chinese products leads to consumption of other domestically produced goods to increase country’s input and output of revenue and China in turn loses revenue on such goods. US, an ally of turkey for some 66 years, also doubled its tariffs on Turkish steel and aluminium, raising 50% and 20%

respectively, causing a free fall of the Turkish lira. The 2 countries have been in a riff over the extent of Turkish involvement in the Iraq war. The enormous reason! The president of United States, Donald trump has always been aggressive to support domestically produced goods and hence has accused China of using “unfair trade practises” to gain advantage in US domestic markets, including lenient intellectual property laws. According to the US census bureau, America bought total valued goods worth $376 billion of Chinese goods than domestically produced goods. New US trade barriers are designed to penalize China due to forced acquisition of technology in the United States by Chinese companies which are state-owned in exchange for access to market. It is also speculated that US is also targeting high tech Chinese goods to put economic pressure on Beijing’s “Made in China 2025”, the Chinese initiative to transform the country into an advanced manufacturing powerhouse. Also the involvement of Turkey and its neighbour, Syria has brought about the changes in the increased imposition of US taxes on Turkish imported goods. 33

United States imposed tariffs up to 25% on Turkish imports such as steel and aluminium, which in turn has influenced the downfall of Turkish lira. This huge impact was induced by the collapse in the alliance of Turkey and United States, as Donald Trump has launched an alleconomic war against Turkey.

(Source: www.census.gov/foreign-trade) What do the tariffs cover? The imposition of the first steps of tariffs by US includes around 818 products worth $34 billion. The includes products like steel, aluminium, solar panels, nuclear reactors, boats, semiconductors, flat screen televisions, washing machines, aircraft parts, some medical devices automobile imports and many more industrial and agricultural machines. The goods marked for tariffs will have to face 25% border tax when they are imported into the country. Further, a total of 284 accounting to $16 billion worth of more products will be facing a border tax when the tariffs imposed are increased further. United States is also a major exporter of iron and steel, machinery, aircrafts and electrical machinery to Turkey. Turkey is the 33rd largest importer to the United States and includes imports such as carpets and textile coverings, stone,

plaster, cement, vehicles. All of these products will be facing the increased tariff barriers. Boost to the economy? The United States, vigorously Donald Trump, aims to levy such tariffs to induce increase in the prices of Chinese goods and heavy Turkish metals which will make domestically produced goods cheaper in comparison. This was done to help the economy to protect the local/domestic firms from competition, which in turn helps to save jobs which might otherwise go overseas. In turn of events, these tariffs raise prices and reduces availability of goods and services for the US businesses and consumers. These high tariffs focus more on agricultural, industrial and textiles which affects several categories of goods in the country. Such trade barriers induce negative economic consequences, since there are a lot of restrictions on free trade and reduces economic benefits for the economy. In any economy, openness to trade and investments contributes to the growth of the economy, apropos to which the US economy might witness slow growth in the economy and barely contributes to reduced trade deficit. China also has retaliated with imposition of 25% tariffs on $34billion worth of US goods which include mostly agricultural products, which has resulted in the loss of jobs for 67000 farmers, accounting to loss of 6.7% of net income earned from agricultural sector.

(Source: US Census Bureau as on December 2017) The fall in Turkish lira. Due to the escalating diplomatic rivalry, imposed sanctions and rising trade barriers by United States, the Turkish lira saw a loss of 40% in its value against the dollar. It stood at 7.2 lira against the dollar which is heavily influence by international investors sentiments which poses a threat to the emerging markets, those of which might severe the alliance of United States with the developing economies in fear of the same retaliation.

access and investments into the country. Although the Trump administration aims to promote domestically produced goods and decrease influence of foreign goods, this step might lead to fall in the economic growth due to restricted trade practises in the country, retaliatory imposition levied by China and Turkey, causes a stir in the agricultural sector as many farmers have lost their jobs due to cut in output and agricultural exports. Although there is still optimism in the market, as history has shown tariffs mostly fail to achieve their objectives, the United States of America might have just entered itself into one of the downfalls for the growth of the economy as well as itâ&#x20AC;&#x2122;s alliance with other economies.

Conclusion The establishment of free trade is critical towards progressive economic integration in the global world. The lead-in of the worldâ&#x20AC;&#x2122;s biggest economy towards increasing trade barriers and increased tariffs leads to all the economies like Canada, Mexico, China; taking a defensive stance towards exchange of trade with the United States. The reduction in trade with the United States leads to openness in trade with other countries, for instance China has been able to enhance relations with Europe to increase businesses, market 35

Stock Markets 101Participants - Chandrayee Mukherjee “Whether you are working at Mc Donald’s or working at Wall Street, Education is the primary key to empower our financial future”......as we navigate through our financial future we can able to come across different investment ideas and hence stock markets is one of them..Stocks are basically the equity investments and if you buy any share of company’s stocks you are literally an owner to the company..Stock markets or the equity markets are the places of aggregation of buyers and sellers of stocks facilitating easy buying of stocks which may also include stocks trading in the market to those which are traded privately. The major participants of stock market can be either from small individual stock investors to larger trade investors based from anywhere else in the world, includes bank, insurance companies ,pension funds and hedge funds. Here we can discuss about different institutions and intermediaries who are basically the participants. Firstly mention may be made of National Stock Exchange which is India’s premier stock exchange providing a platform for secondary markets, comprising of 4 basic segments:1.WHOLESALE DEBT MARKET-it provides the platform for debt securities

including state and central government securities, Tbills, Psu bonds,Corporate debentures, certificate of deposits etc. 2.CAPITAL MARKET SEGMENT-this segment offers a fully automated screen based trading system also known as NEAT(NATIONAL EXCHANGE FOR AUTOMATED TRADING).Various securities like equity shares and warrants are traded here. 3.FUTURES AND OPTIONS(F&O) SEGMENT-this includes trading in derivatives instruments like index futures and index options, also stock futures and stock options. 4.CURRENCY DERIVATIVE SEGMENTwith the launch of Currency Futures Trading in USA and India(USD-INR),this segment has commenced its operations. NSE has cultivated through the ecosystem of human investments. The Stock Exchange as regulated by SEBI, appoints the stockbrokers who deals in trading of stocks within the stipulated terms and conditions of SEBI. Once the trades are executed, their clearing and settlement operations are handled by NSCCL(NATIONAL SECURITIES CLEARING CORPORATION) responsible for clearing and settlement of trades executed at NSE. It provides financial settlement guarantee along with managing risk 36

through an effective margining system. They are regulated by SEBI. Apart from them there are also underwriters, depository and mutual funds and foreign institutional investors etc whose functions are mentioned below. 1.Under writers- they are regulated by SEBI. The success of any public issue depends on the market prevalent sentiment, and the company expects that the expected funds will be mobilised..this certainty is brought by them to bring an agreed amount as a part of their issue. 2.Registrars and Transfer Agents-they are regulated by SEBI. They keeps the records of shareholders and share holding of the company. They are responsible for allotting shares to applicants on the basis of their allotment formulae finalised between the company, merchant banker and stock exchange. The RTA also assists the company in dividend payments, rights issue and bond issues. 3.Depository-Although the company issues securities as a part of their resource mobilisation exercise, the investor has not given any certificate, thus to have a depository account means where all the investments will be credited, and at the time of selling the portfolio, the corresponding investments are reduced. NSDL (national securities depositories ltd) and CDSL (central depository services ltd) are the two promoted institutions. They have made electronic transfer of securities possible. 4.Mutual funds- they are regulated by SEBI.They are basically vehicles to mobilise funds from investors, the funds are invested with the scheme guidelines for the benefit of the investors. 5.Venture Capital and Private Equity funds- the resource requirements to

mobilize money to the public at large is met up by private equity and venture capital funds. The Venture Capital funds invest at a very early stage and prepare to take risk of venture failing. Private equity funds tend to invest at a later stage after the business has demonstrated some progress by their business models.They are regulate by SEBI, but foreign VC are regulated by RBI. 6.Foreign institutional investors-(FII)-they are organisations who invests their own funds or pools money from the investors to invest in equity, debt, government securities, commodities etc. They are institutional investors from or registered in a country outside the one they are currently investing. Their investments enjoy full capital account convertibility. 7.Insurance Companies-they are regulated by IRDA(insurance regulatory and development authority),they are taken to cover the life of an individual, they invest the money available with them in primary and secondary markets, becoming a source of long term funds in capital markets. 8.Pension Funds-They used to provide a regular stream of income during their retirement years, the new pension scheme are regulated by PFRDA. They are actually source of long term funds for the capital market. The NPS provides regular contributions by individuals or employers of individuals towards a pension plan, the contributions are accumulated during earning years, and during retirement, the accumulations are used to buy annuity from insurance companies. Hence these are the roles of some institutions and intermediaries and their 37

roles and regulators in the stock market ,now coming to the concept of investment banking there are some investment banks who are the major players in the market, the largest of one being Goldman Sachs, Morgan Stanley, JP Morgan Chase, Bank of America, Deutsche Bank. They assits with pricing financial instruments, it buys the companyâ&#x20AC;&#x2122;s share directly when the company is holding an IPO, acting as an intermediary. Acting on behalf of the company appearing public, the investment bsnks will sell the shares into public market creating immediate liquidity. The good qualities to become investment banker is the Chartered Financial Analyst having MBA degree. Talking about famous investment bankers mention may be made of some important personalities:1.John Stumpf-CEO at Wells Fargo. 2.Jefrey Gundlach- CEO at Doubleline Capital. 3.Sergio Emmoti_ CEO at UBS. 4.Larry Fink - CEO of BlackRock... Infact among the Indians there are personalities like 1.Amit Mimani (CEO at Big Deal Acquistions) 2.Niraj Karia (Senior VP Kotak Mahindra Capital) 3.Madhur Deora (MD,Citigroup Global) etc.. Hence with their experiences investment banking, we can able to have a guideline regarding our financial future...thus to make money out of investments is survey is going to be a cakewalk. 38

LIC – IDBI Deal: In Depth Analysis - Akanshi Bhargava LIC: A saviour to the bleak future of IDBI Mergers and Acquisitions are trending in the Indian banking sector. The State Bank of India has merged with its five associate banks to become a global giant. Life Insurance Corporation of India is planning to acquire the debt-ridden IDBI. Industrial Development Bank of India (IDBI) has a debt trap due to the faulty lending policies which has led to the accumulation of Non-Performing Assets (NPAs). In the year 2004 the government has set up Stressed Assets Stabilisation Fund (SASF) to acquire the assets of IDBI as well as to recover the Net Loan Outstanding (NLO). Initially 636 nonperforming assets of IDBI which had a net loan outstanding of Rs 9,004 Crore were transferred to SASF . The government injected the same amount to SASF through government securities redeemable after 20 years. However government securities of Rs 4,515 Crore were only redeemed in the year 2015-16. This was due to various defiencies in managing the SASF. The steel sector companies like Malavika Steep Ltd were the major defaulters. In 21 settled cases the settlement amount was lowered by 587 Crore compared to the Net Loan Outstanding of 1447 Crore. In 36 out of 39 unresolved cases an amount of Rs 150 Crore was recovered as

against the NLO of 1,889 Crore. The central bank of India , Reserve Bank had put IDBI under prompt corrective action which restricts a bank to give loans rather cut down its expenses to return to its earlier profitable state . The Bank has breached two thresholds : that is high Non-performing assets and negative return on assets (RoA). It has warned the public sector banks against the dependence of the banks on the insurer’s funds in times of crisis. The financial crunch faced by IDBI can be solved in a number of ways: • To merge the bank in some other Public Sector Bank. Probably the only PSU that has the capital and bandwidth to merge is State Bank of India • Privatise the bank , for which it has to face agitation from bank workers and with 30% non-performing assets the bank has to sell it at a lower price. • Acquisition by the largest insurance company. Merging with State Bank of India may or may not have been explored. Due to IDBI’s high non-performing assets it may have got challenging for any public sector bank to merge in with the bank. Since the general election is round the corner privatisation of banks is not a favourable option. Hence acquisition of bank by an insurance company turns out to be a 39

better option. Through this action the government will pump in money into the bank. Of late Life Insurance Corporation Of India (LIC) , the largest state-owned insurance company in India has decided to acquire IDBI by being a majority stake holder. The Insurance Regulatory and Development Authority of India(IRDAI) gave approval to Life Insurance Corporation to invest in IDBI due to the declining financial position of the bank even though the insurers are not allowed to put in more than 15% of their funds in one company. The LIC holder will take further permission from SEBI and RBI. LIC earlier which had a stake of 7.98% in the bank would now buy 43% more hence having a share of 51% in the bank. LIC is likely to put 10000 crore -13000 crore rupees in the bank which is running bad loans of 55,600 crore rupees. This move has seen agitation from LIC unions who do not support this decision based on the past performance of the investments made by the insurance company in 22 public sector banks earlier. They find this to be a forcible bank recapitalisation of which LIC is being made a part. Over the last two years attempts have been made by the government to sell the equity yet no private investor has shown his interest in the Bank. This shows the low investor confidence in the bank. According to Section 35 of the insurance Act a life insurer cannot acquire or control a noninsurance industry signifying that the management control , voting rights will not be in the hands of the LIC. Bringing a change in the working culture of the bank would be challenging. Since LIC is not a listed company , it need not provide any explanation of this move of supporting a bank in immense crisis. Even though the

monetary impact of this deal is negligent considering the funds held by LIC which is estimated to be Rs23 trillion, it is ultimately the funds of the policymakers that is at stake. The gloomy side of the story is that the bankâ&#x20AC;&#x2122;s major lending is to the corporate sector which does not show any signs of recovery. If these nonperforming assets do not recover then there might be a disruption in the dividends paid to the policyholders of LIC. The government of India claims this acquisition to be a good investment opportunity. LIC has submitted a proposal to safeguard the policyholders fund regarding the same. They further expect the deal to provide business synergies despite the stressed assets that the bank is holding. LIC will get about 2,000 branches through which it can sell its products, while the bank would get massive funds of LIC. The bank would also get accounts of about 22 crore policy holders and the inflow of funds. This investment will increase the bankâ&#x20AC;&#x2122;s revenues as the banks can benefit from bancassurance tie-up with LIC. If this acquisition turns out to be successful then LIC will make multibagger profit. Hoping this acquisition turns out to be a successful deal between both the parties as it would lead to the macroeconomic growth of the economy.

India vs China : Trade Deficit At a Glance - Narayan Tripathi

INTRODUCTION: India and China are the two countries which have the largest population in the world. So, whenever there is a discussion regarding trade, these are the two markets every country or company eye on and want to enter the market with the total of around 2.7 billion and counting population. This huge population have huge demands. There can only be two ways to meet these demands. One depends on the countryâ&#x20AC;&#x2122;s capabilities to produce and meet the demand. Another way is importing the goods and services from other countries, around the globe for example India and China import crude oil from the countries like Saudi Arabia, Iran, Iraq and many other countries. The way India and China import products in the same way they also export for example India is known for exporting Diamonds, Refined petroleum and many others and in the same way China is known for exporting the re-engineered products in the international markets in the lesser prices with almost same specifications. So, when they import the goods and services the outflow of currency takes place. In the similar fashion when they export products the inflow of the foreign currency takes place. When the imports are more than the exports to meet the demands of the

people in the country, it is called the trade deficit. The trade deficit can also be called as the indicator of a growing economy as the buying power of people in the country is increasing with the time. Sometimes it also helps in regulating the inflation as supply increases due to foreign imports and it helps in establishing the balance between demand and supply. TRADE DEFICIT IMPACT ON GDP: Trade deficit or balance of trade is one of the key components of measuring the GDP of the country. GDP increases when the total value of goods and services produced or generated by the local produces or service provider is more than the foreign producers or service provider. So, this leads to the conclusion that the rise in trade deficit or balance of trade impact the GDP negatively. INDIA AND CHINA TRADE DEFICIT: When we talk about the trade deficit, China is one country with which India have the highest all-time trade deficit. Chinaâ&#x20AC;&#x2122;s firm presence in the Indian market can be identified just by looking at the trade deficit between India and China which is around $51 billion. The Chinese leadership is known for putting barriers and not keeping up with the promises if analysed correctly. The Indian 41

government is trying hard to convince the Chinese government to look after the growing trade deficit and allow the sectors like pharmaceuticals companies to enter in the Chinese market.

Comparative study on countries with whom India and China have the trade deficit. India

China

USD 59.5 Billion

Taiwan

USD 110.9 Billion

Switzerla nd

USD 19.4 Billion

South Korea

USD 74.7 Billion

Saudi Arabia

USD 15.8 Billion

Austral ia

USD 53.1 Billion

Iraq

USD 14 Switzer Billion land

USD 29.8 Billion

South Korea

USD 11.7 Billion

Japan

USD 28.1 Billion

Source: http://www.worldstopexports.com The above table indicates that these are the list of countries with whom India and China have the maximum competitive disadvantage because of the cash flow deficiencies. This also indicates that the countries need to device a countryspecific strategies to strengthen their overall position in international trade.

US- CHINA TRADE WAR SAGA: Much talked about incident, other day the US levy a 25 percent tariff on more than 1300 Chinese goods and China responded in a similar fashion by levying additional duty 106 American products. As per the analysts they are expecting the negotiation deal but if do not happen in the short run then the countries like India are going to be benefited from this incident a lot. These countries will be the next best alternative in terms of supplies for the desired product or services for both the US and China. But in the long run, this news is not good at all from the Indiaâ&#x20AC;&#x2122;s point of view. This war will have the indirect impact on India as well because the inflation in the US will increase and it is well known that impact in US market, impact on everyone. Letâ&#x20AC;&#x2122;s hope that this trade war will not have bigger impacts and it will be there for the short run only. CONCLUSION: Trade deficit, when co-related to the GDP creates a load of confusion because the measure is in such a way. GDP on one side measures what the consumer has spent and this is the one way to look at the growth of the country. There can be others as well for example productive capital investment, how efficiently economy produces goods and also whether the standard of living is increasing or not which are not taken into consideration while posting the GDP. Trade deficit will always be there because the countries are not blessed with everything which is of use for example India and China lack the crude oil as a resource and for that , they heavily rely on the Arab countries. Another reason is now the world is very inter-dependent and importing and exporting is not difficult

because the technology has advanced so much. The primary goal of any government is to fulfil the needs of people in the country even if do not available within the boundaries of the country. Sometimes natural and sometimes artificial needs and demands will force to import more, what country donâ&#x20AC;&#x2122;t have with them to meet the rising demands. So, in some or other way if the country is growing and pacing well with time, there will be a trade deficit.

Market Watch: CrossCurrency Plays A Role - Bidisha De Despite the growing Geopolitical tensions and tensions due to the Trade War, Q1FY19 showed promising results as S&P BSE Sensex and Nifty 50 hit records to mark 37,000 and 11,179 respectively.

Factors that boosted these Indices: The DIIs played a major role in boosting the indices by maintaining the Net Sales of equities at Rs.8664crore, Rs.15,054crore and Rs.14146crore in April, May and June respectively. Adding to these, this time the large caps took the lead showing a return of 10 percent in one year while the small and mid caps showed -1 and 0.8 percent returns in a year respectively. However, maintaining the volatile nature of the Indian Market, situations have been changing everyday. Letâ&#x20AC;&#x2122;s take a look on how the different sectors performed in the Q1 and how the Indian

Market is responding to fall in the Turkish Lira. IT Sector: Being one of the major sectors in the haveIndian Market, the IT sector showed an exceptional growth due to their strong performance in digital offerings. Tata Consultancy Services (TCS) announced their first quarter(Q1) earnings on 10th July, 2018, announcing an increase in their Net Profit by 24 percent on a YoY basis. However, the second largest software service provider Infosys announced a fall in their Net Profit by 2.1 per cent on Quarterto-Quarter basis. Banking Sector: With tightening of policy rates by the Reserve Bank of India (RBI), the banking sector seems to be taking time to revive. However, RBI claimed a credit growth of the system by 12.3 percent in the first two months of FY19 compared to 9.8 percent in Q4FY18. Indiaâ&#x20AC;&#x2122;s largest Public Sector Bank SBI (State Bank of India) reported a Net Loss of Rs. 4,876 crore for the June Quarter. The bank blamed the rise on its provision for bad loans by more than 70 per cent on YoY basis. 44

At the same time, Chennai based Indian Bank reported a Net Profit of Rs. 209.31 crore for Q1 this year. Their Net Profit has dropped by 44 per cent compared to last year’s quarter. The Gross NPA increased from Rs. 9653 crore at the same quarter last year to Rs. 11,827 crore. The GNPA of IDBI Bank also rose from 27.9 per cent in the preceding quarter to 30.7 per cent in the first quarter of 2019. The GNPA (Gross Non-Performing Assets) for this sector increased from Rs.8.79 lakh crore in the last quarter to Rs.10.16 lakh crore in this quarter. Crude Oil: With the growing Geopolitical tension between the USA and Iran, crude oil price managed to reach the level of about $80 per barrel. India and China being two of the biggest importers of crude oil had to make a decision on whether support the decision of the US Government or to ignore it. While China chose to snub the US Government, India aimed to cut down crude oil import, specially from Iran, India seems to be focusing on domestic oil and gas production. In the meantime, Reliance Industries Ltd. (RIL) reported a rise in their Net Profit by 1.4 per cent in the quarter ending in June. Oil India Ltd. (OIL) reported an increase in their Net Profit from Rs.450.24 crore Q1 last year to Rs.703.22 crore Q1 this year. Oil and Natural Gas Corporation (ONGC) also reported a rise in its Net Profit by 58 per cent in the Q1 of 2019 on YoY basis. To boost up this sector, the Government has allowed ONGC and OIL to be relieved from paying royalty and cess tax on the 28 exploration blocks that were awarded to them prior to NELP (Pre-New

Exploration implementation.

Licensing

Policy)

Aviation Industry: The rise in Aviation Turbine Fuel(ATF) prices, slowing down in capacity addition, rising labour costs and some other similar factors has been creating pressure on the Indian Aviation Industry. The pressure was seen in the first quarter report of the market leader Indigo itself. Their Net Profit viewed a drop from Rs.811.1 crore to Rs.28 crore in just a year. Similar effect was seen in the Q1 report of SpiceJet. They reported a loss of Rs.38.1 crore from a profit of Rs.175.2 crore, i.e., a drop by 122 per cent. On the other hand, Jet Airways have been delaying their Q1 result announcement, making it obvious for the investors to be prepared for a huge loss. Iron & Steel Industry: Despite being the third largest steel producer after China and Japan, Indian Steel industry faces challenges from the high steel production and transportation cost. Nifty Metal will be facing challenges until certain factors this industry are dependent on will be taken care of. Despite the challenges, there have been a rise in profit of JSW Steel Ltd. from Rs.626 crore to Rs.2,366 crore in Q1. Similarly, one of the world’s largest steel producers, Tata Steel recorded a profit of Rs.1,934 crore compared to last year’s Rs.921.1 crore. Steel Authority of India Ltd.(SAIL) also announced a Net Profit of Rs.540.43

crore in the first quarter. India targets to produce 300MT Steel by the year 2030. Healthcare & Pharmaceuticals: Like the IT industry, this industry showed promising results in the Q1 of 2019. India’s largest drug maker, Sun Pharmaceutical Industries Ltd. reported a Profit of Rs.983 crore in Q1 2019. A year back it faced a loss of Rs.425 crore. However, Aurobindo Pharma saw a drop in Profit by 12 per cent from Rs.518 crore to Rs.455 crore in a year. Effect of Lira fall on Indian Economy: Now focusing on the most talked about currency these days, the Turkish Lira. With poor economic management by the Turkish President Recep Tayyip Erdogan, and the worsening relationship between Turkey and the USA, the Turkish currency Lira saw a massive fall in its value. This free fall of the Lira value, besides having a tremendous impact on the life of Turkish people also managed to take a toll on the other currencies, including the Indian rupee. Within Asia, the Indian Rupee faced the hardest hit as its value fell to Rs.70 per USD. India being an emerging market , the cross-currency played its role.

Industries that depends largely on Foreign Investments will also be affected. This is because, once the Rupee value shrinks, the investors get lesser Dollars in return. Despite its negative effect on certain sectors, some sectors will be using this situation to their advantage. This specially includes IT sector and Pharma Companies. As these are export based sectors, they’ll be earning more money for their exports. Conclusion: Second Quarter of 2019 seems to be facing a challenging situation by the ongoing Trade War ,the fall in Rupees and the upcoming 2019 Election. Hence, investors in the stock market needs to do a detailed analysis both on the past growth rate of the stock he is interested in and also on external factors that might play a role.

However, this entire situation puts the blame on “External Factors” according to the Finance Ministry of India. No matter what the factors are, this situation will have an impact on the Indian Stock Market. Specially on the sectors that depends on imported raw materials, like the Oil Industry.

FINANCIAL TRIVIA

“While social media might be a go-to destination for people in their 20s and 30s, the stock market isn’t. It’s been a decade since the Great Recession, and even though the demographic wasn’t hurt personally, millennials are still scared of the stock market hence the rise of cryptocurrencies”, says Chavie Lieber, Vox