IIFT InFINeeti December 2011 by Zigu MBA

THE F INA NCE MAGAZ I N E OF I I FT

DE CE MBE R 2011

GOLD - A SAFE HAVEN FOR INVESTORS T he question O f C hina

AGAIN ?

financial

I nclusion

RBI’s M one t a r y Ti ghte n i n g - A Sn e a k Pe e k

INFINEETI | DECEMBER 2011

Te am I n F INe eti

INFINEETI | DECEMBER 2011

Fro m th e Edito r ’s D es k

CO NTENTS

HEll O Fr i e nd s , E D I TO R - I N - C H I E F S ou mya J yoti S en

We a r e p l e a s e d t o p r e s e n t t o y o u t h e D e c e m b e r 2011 e d i ti o n o f I nFI N e e ti . Th e f i nanc i al w o r l d

E D I TO R I A L B O A R D R ohi t K hatta r Pi y u s h M ar wah a R i te s h G u pta S ou rav D utta

has undergone many changes since the last issue .

On the global front, S&P downgraded the U.S long-term debt rating to AA+ with a negative

outloo k . Th e c r i s i s i n E u r o p e c o nti nu e s to l o o m large . The most recent attempt to salvage the crisis

»» p.4

»» p.11

saw the European leaders divided on the issue of tighter fiscal integration within the EU. Closer to

home , Moody ’s downgrade d S tate Bank of India’s DESIGN Te am I nFIN e et i

cred it r ati ng c i ti ng “ mo d e s t ” c ap i tal and w e a kening as s e t q u ali ty o f th e c o u ntr y ’s lar g e s t c o mmerci al bank .

FEEDBACK/QUERIES i n fi ne e ti @i i f t. ac. in i n fi ne e ti @gmail. co m

The mo nth o f N o ve m be r s aw m any e ve nts a t IIF T

including QuoVadis ,IIF T ’s annual man¬agement fes tiv al and th e N ati o nal Tr ad e Sy m p o s i um .

Published monthly by students of Indian I nstitute of Foreign Tr a d e , N e w D e l h i a n d Kolk ata

This i s s u e p r o vi d e s f as c i nati ng r e ad i ng s o n go l d and h o w i t h as e m e r g e d as o ne o f th e s af e s t a n d most liquid assets for investors in the present

financ i al s c e nar i o , th e r o le th at banki ng c o u l d

play i n f i nan¬c i al i nc lu s i o n , C h i na’s c u r r e n c y

policy, RBI’s monetary policy and a profound ALL R IG H TS RESER VED

view o f th e tr ad e - o f f be twe e n g r o wth and i n fl a tion i n I nd i a .

Hope y o u h ave a g o o d r e ad . He r e ’s wi s h i n g y o u a Mer r y Ch r i s tm as and a ve r y Hap p y N e w Ye a r ! !

Re ga r ds ,

Te am I nFIN e e t i

4 MONEY & POLICY 12 BULLION WATCH A n a n a l y s i s o f R B I ’s monetary policy and its impact on the economy. The ar ticle is an insight on the big 3 of economics - inflation, u n e m p l o y m e n t and growth rate. (By Deepak Agar wal, M a n i s h M a n h a r)

8 ECONOMICS The dilemma of growth and inflation tradeoff is explored in further detail with a reference to past a n d p re s e nt s i t u at i o n . (B y Vi ks i t Aro ra)

10 AROUND THE GLOBE

We explore the Chinese currency and its va l u at i o n s a g a i n s t t h e do l l a r a n d t h e i mp a c t s on their economy. (B y J. R a h u l)

As we face an economic slump how is the ma r ke t fo r t h e wo r l d ’s favo u r i te me t a l. Is t h e gold market glittering. An insight into gold as a n i nve s to r ’s p a ra di s e. (By Prince Sethia, Si dh a r t h N a n da)

14 BANKING Fi n a n c i a l i n c l u s i o n a s a p o l i c y, i s i t r e a l l y bank ing for all?We analyze financial inclusion policy and the problems associalted with it. Can RBI succeed in implementing t h i s p o l i c y ? (B y R i te s h G u p t a)

17 MARKET WATCH Are financial markets in distress? We present a view on the global equity markets and their performances

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ove r t h e l a s t ye a r a n d analyze the scenario o f t he I nd i an m ar k e t s. (B y Pi y us h M ar waha)

20 FUN WITH FIN Te s t y o u r f i n a n c e knowledge with an intriguing set of questions. (B y J. R ahul)

REGULARS 17

Market Watch

Monthly Chronicles

Fun with Fin

INFINEETI | DECEMBER 2011

MONE Y A ND P OL I C Y

MO NE Y AND PO L IC Y

R BI’s M o n eta r y Po l i c y :I mpa c t on I n d i an Eco n o my B y D eepa k Agar wal and M anish M anhar ( The aut hor s are s t u de nt s of IIM-B)

ccording to the RBI Governor the new policy has been formulated on the basis of 3 factors

1. The ever increasing commodity prices 2. Fluctuations in the rate of Inflation 3.

Expectations

demand

reduction

Market Reaction to the Recent Rate Hikes 1. The benchmark 7.80 percent, 2021, bond yield rose by 2 basis points to 8.35 percent after the policy announcement.

1. C o r e I n f l a t i o n Inflationary pressures in India were initially triggered by a supply shock from poor monsoons in 2009, which led to a rise in food prices. Rising oil and commodity prices too exerted pressure on inflation. Thi s warranted monetary ti ghtenin g , w h ich the RBI initiated through a 25 basis points hi k e i n Marc h 2010,ended wi th WP I in f la tion at 9.73% despite twelve rate since Marc h 2010.

2. The main share index was down 0.4 percent and reacted little to policy measures. 3. The benchmark 5-year swap rate remained broadly unchanged at 7.72 percent after fa l l i ng sh a r p l y b efor e the policy announc e ment, the 1-year swap rate too held its ground at 7.99 percent, dealers said. After having a look at the market sentiments let us analyse the current scenario and the reasons behind the same.

D il e mma o f R BI T h e RB I a t t h e most can contr ol only 2 v ari ab l es o f t h e “ i m p ossible tr inity” . RB I’s reac ti on s t o t h e se var iables ar e pr ovided bel ow:

O f l ate, i nfl ati on has bec ome gen e ra lize d , wi th ri s i ng c ore i nfl ati on and upwa rd p re s sure on wages. Against this backdrop, there i s hardl y any doubt that the R B I w ill c onti nue to rai s e rates . The RBI ch o se t h e tactic of increasing rates in baby steps with a sharper 50 basis points rate hike in repo and rev ers e repo rates . Outlook: There appears to be no respite from high inflation. Besides the supply-side the demand-side pressures have also exacerbated sharply.Inflation will remain high in 2011-12 and outs i de RBI's c omf o rt zo n e ,

re f le ct in g st ro n g p e rsist e n ce . U p sid e risks persist from higher commodity, food and metal prices. Therefore, we expect average in f la t io n in 20 11- 12 t o b e in t h e ra n g e o f 7 . 5 - 8 . 0 %.

2. Inter est Rates The Reserve Bank of India (RBI) hiked the repo r a t e b y 5 0 b a s i s p o i n t s ( b p s ) t o 8 .5 % o n 24 t h o c t o b e r ,201 1 . W i t h a c h a n g e i n t h e o p e r a t i n g procedure, the reverse repo rate would be fixed at 100 bps below the repo rate and the marginal standing facility (MSF) rate at 100 bps above it.

F utur e P r ojection On e o f t h e b ig g e st risks t o I n d ia is t h a t t h e co u n t ry is n o t co mp le t e ly re lia n t o n it s o w n energy output and hence have to import more than 70 percent of crude oil from GCC countries and other OPEC members. It’s expected that the global economic recove ry w o u ld n o t st a ll b u t t h e p a ce w ill co me down most importantly when the United S t a t e s h a s st e p p e d u p it s e f f o rt s t o b rin g down the fiscal deficit to 4.1 percent by 2014. Nevertheless, the real economic o u t p u t co u ld re ma in u n d e r p re ssu re d u e t o the effect of increasing government debt. India’s stock of money for the last three f isca l ye a rs, w h ich re ve rb e ra t e d a b o ve 20 p e r ce n t is n o w f a llin g b a ck t o 15 p e r ce n t , and it shows that RBI’s actions in policy ra t e a re w o rkin g , w h ich m e a n s t h a t mo n et a ry p o licy h a s a e f f e ct o n t h e co re in f la t io n p ro b le m a n d w o u ld imp a ct t h e d e m a n d side but it is not sustainable as the govern me n t ’s b o rro w in g p la n s a re o n t ra ck.

5 Lower money supply has side effects too as it will increase the cost of credit further, and it will reduce the access to credit. Moreover, t h e st o ck m a rke t s co u l d n o t f u n c t i o n p r o perly in this environment since the economic activity declines, which will event u a lly re d u ce t h e va l u e o f p e o p l e ’s r e t i r e ment savings. However, the RBI has only o n e ch o ice - t ig h t m o n e t a r y p o l i c y t o t a m e in f la t io n b y g ivin g u p t h e I n d i a ’s a m b i t i o n s o f d o u b le d ig it e co n o m i c g r o w t h .

3. Economic Growth Rate and Unemployment GD P g ro w t h slo w e d t o 6 . 9 5 p e r c e n t i n t h e se co n d q u a rt e r o f 2 0 1 1 -1 2. For 2010-11 as a whole, gross domestic p ro d u ct (GD P ) g re w b y 8 . 5 p e r c e n t f r o m 8.0 per cent a year earlier due to better performance of agriculture, construction and financial services. However, the current q u a rt e r h a s b e e n t h e w e a k e s t i n t h e l a s t 2 ye a rs. GD P g ro w t h is e x p e c t e d t o m o d e r a t e in 20 11- 12 t o 7 - 7 . 5 % d u e t o h i g h i n f l a t i o n a n d risin g in t e re st ra t e s . Together they are expected to pull down investment and consumption growth. A g ricu lt u re , in sp it e o f a n o r m a l m o n s o o n , w ill d e clin e d u e t o a h i g h b a s e .

Cur r ent S cena rio I n d ia is cu rre n t ly st ru g g l i n g f r o m a n i n f l a tionary spiral due to which central bank has t a ke n a n a n t i- in f la t io n a r y s t a n c e w h i c h h a s hit domestic growth. All major indicators are hinting towards inflation from all directions.

INFINEETI | DECEMBER 2011

MO NE Y A ND P OL I C Y inflation which currently stands at 9.36% in o c to b e r , a l m o st double the toler able l i mi t. Inflation is still outside the comfort zone d e s pi t e t h e r a t e hike by RB I in the l at 18 months. RBI has even advised banks to come up with better risk management capab i l i ti e si a s t h e r e might be deter ior at i on i n a s s e t q u a l i t y d ue to high inter est r ates . Raising key rates again and again, inflation remains at an uncomfortable level. Wholesale price based food inflation was at 1 1 . 4 3 % i n Oct o ber . It is incr easing des pi te having a high base of 22.93% last year which translates into an overall increase o f 3 2 % i n t w o year s, thus showing a v ery g ri m p i ct u r e .

Monetary Po l i c y o f I n d i a G ov er n m e n t ’ s decision of incr easing di es el prices by Rs 3 has added more inflationary fire. This increment is justifiable in the light t h a t i n t e r n a t i o n a l cr ude pr ices have s tay ed above $100 since last June. Experts say t h i s i n cr e m e n t i n fuel pr ice is going to add 6 0 to 70 b a si s points to headline inflati on. Non-food manufacturing inflation was at 8 .5 % - w a y a b o ve the medium ter m tr e nd of 4 %. T h i s i s a cause of concer n becau s e of i ts no n - vo l a t i l e natur e and it clear ly s hows that from suppliers and producers the costs a re b e i n g f i n a l l y passed down the chai n.

Policy Makers on the Scenario 1. RBI Polic y I n i ts m i d - q u a r t e r ly monetar y policy rev i ew RBI has clearly mentioned its anti-inflationary

MO NE Y AND PO L IC Y basis points in next one or two months due to recent increment in fuel prices. RBI has c l earl y s tated that s l owdown i n s h o rt t e rm i n unav oi dabl e s i nc e headl i ne i nf la t io n is s ti l l outs i de the c omfortabl e z one . RBI has i ndi c ated that the i nter-l i n ka g e o f Indi an ec onomy wi th i nternati ona l m a cro ec onomi c c hanges pos es ri s k s . S o ve re ig n debt risks are still looming and growth i s moderati ng i n due to fi s c al c o n so lid ation stance of many countries. Still high commodity prices in international market and oi l pri c es wi l l be refl ec ted i n in f la t io n numbers i n emergi ng mark et ec on o mie s. Lead indicators such as GDP numbers, IIP numbers are al l i ndi c ati ng to a s lo w d o w n in the near term. IIP number also tells a different story; new base of 2004-05 reveals growth of above 8% in both halves duri ng thi s y ear whi l e as per the o ld b a se it showed a deceleration of 5.5% from 10% in the second half from the first half. So a doubt s omewhere c reeps i n as to w h e t h e r al l thes e number games are due t o d if f e rent bas es . The effec ts of monetary ac ti ons t a ke n b y RBI are showing some impact. Recent data for the month of J une has s h o w n t h a t one of the interest rate sensitive areasAutomobiles, has shown decline in the growth rate. All the 11 major manufacturers hav e s hown dec l i ne i n s al e of 4 % d u e t o increase in interest ratesiii as well as high fuel pri c es . If i nternati onal mark e t p rice s of c ommodi ti es eas ed up, i t woul d g ive a rel i ef to Indi an fi rms i v . So, on 17 th of J une when RBI i n cre a se d

co n t ro l in f la t io n . Th e y sh o u ld h a ve w a it e d for their earlier moves to show some results before going ahead with this increment. This forecast of below normal monsoon will further fuel expectations and will nullify the e f f e ct o f in cre a se in in t e re st ra t e s in t e n d in g t o cu rb d e m a n d sid e in f la t io n . S o , t h e R B I h a s a t w o f o ld ch a lle n g e b e f o re it- maintaining its stance of anti-inflation a s w e ll a s ke e p in g t h e g ro w t h p a ce smo o t h in t h e w h o le sce n a rio o f ch a n g e s in w o rld e co n o m y.

2. Government Outlook of the P olicy Th e f in a n ce min ist e r h a s sa id t h a t a t ig h t monetary policy over an extended period could impact the country’s economic momentum – ending up by moderating growth rate. D u e t o t h e ra t e h ike s t h e in ve st me n t d e ci sions might be postponed – affect is already visible in the Real Estate and Auto Industry. The government experts are of the view t h a t R B I sh o u ld w a it f o r so me mo re g lo b a l d a t a b e f o re t a kin g a n y f u rt h e r d e cisio n s o n t h e sa me .

Views on expenditur e

Government

Th e ce n t ra l b a n k’s a b ilit y t o co n t ro l in f lat io n a n d in f la t io n a ry e xp e ct a t io n s is in f lu enced by the stance of the fiscal policy. E xce ssive g o ve rn me n t e xp e n d it u re u se d t o p ro p u p co n su mp t io n d e m a n d , ra t h e r t h a n investment (creating productive assets), ru n s t h e risk o f risin g d e ma n d b e yo n d t h e p o t e n t i a l o f t h e e c o n o m y , t h u s e n c o u r a ging inflation. While government expenditure

7 growth has slowed down in recent quarters, the fiscal stimulus that had been undertaken during 2008-09 and 2009-10 when private consumption demand (which accounts for close t o 6 0 p e r ce n t o f ag g re ga t e d em a n d) le d t o a sh a rp in cre a s e i n n o m i n a l i n c o m e , t h e re b y risin g t h e risk t o i n f l a t i o n , a s c o n sumption demand outpaced supply potent ia l, e sp e cia lly in a g r i c u l t u r e . F i s c a l s t i m u lu s f o cu se d o n in ve s t m e n t t r e n d s t o r a i s e the supply potential of the economy, thereby e xe rt in g d o w n w a rd p re s s u r e o n i n f l a t i o n .

T he F inal Gyaan Th e mo n e t a ry p o licy i m p a c t s i n f l a t i o n w i t h a lag, which could be as long as a year. So the tightening that was initiated since M a rch 20 10 is like ly t o c o m e i n t o e f f e c t i n t h e cu rre n t f isca l. Also the inflation-reducing effect of interest rate hikes also depends on the fiscal stance. This implies that the fiscal deficit should be kept under control to complement the RBI’s d e m a n d - mo d e ra t in g a c t i o n s . Lastly the behaviour of commodity prices a n d f o o d in f la t io n (co n t i n g e n t o n m o n s o o n patterns) will be critical in shaping the inflat io n t ra je ct o ry. And fortunately or unfortunately, none of these factors can be controlled by monet a ry t ig h t e n in g .

INFINEETI | DECEMBER 2011

E CO NO M ICS

ECO NO MICS

I n fl at i o n a n d Grow th tra de - o ff B y Vi ksi t Aro ra ( The aut hor is a st ud ent of IIFT )

nfation is the rate at which the level of prices for goods and services are rising hence impacting the purchasing power of the people which is falling. G e n e r a l l y a d e v eloping countr y tr ies to ma i nt a i n i n f l a t i o n r ate at ar ound 5- 6%. High inflation discourage investment and long term economic growth where as low inflation can also cause problems for the ec on o m y. I t i n d i cates a slowdown in the ec on o m y w i t h pr oblems such as une m ployment, lower output and lower cons u m e r co n f i d e n ce.

growth rate of -5.1 percent in October, signi fi c antl y l ower than what was rec o rd e d in the c orres pondi ng peri od l as t y e a r. I t is a hamperi ng s ec tors s uc h as s erv i c e se ct o r. But hi k i ng i nteres t rates i s unabl e t o cu rb inflation. So there is no evidence to link the inflation with interest rate but there is lot to l i nk the growth rate wi th the s ame p o licy.

T o c o n t r o l i n f l a t ion the centr al bank ti ght en s th e m o n e t a ry policy by incr easin g the i n t e re st r a t e . But an incr ease in the i nterest rate curtails the investment and employment leading to slump in growth. There are tw o v i e w s r e g a r ding the gr owth and i nfl a tion trade-off. One view says that higher interest rate is desirable because it helps to c o n t ro l i n f l a t i o n and second view says that l o w e r i n t e r e st r a te leads to better gr owth. Seeing the practical side, higher interes t r a t e s ca n l ead to unemployment, s o a pe rs o n w o u l d p refer a low paying job wi th hi gh i n f l a t i o n r ather than no job.

The same link is evident in history also. GDP growth in India after averaging at above 7% for three consecutive years, 1994 to 1996, c ol l aps ed to an av e ra g e o f 5.1% rate over the next six years, 1997 to 2002. The mi rac l e growth rate st a rt e d from 2003 onwards. This take-off in Indian growth rate was because of a large 450 basis point decline in nominal and real interest rates during 1999 to 2003 and the tak e down i n growth took pl ac e be ca u se o f a large increase in RBI’s monetary tightning in the mid-1990s. In March 1994, when Dr.Rangarajan was the governor of RBI, WPI inflation moved to double digits. In res pons e, RBI i nc reas ed the c as h re se rve ratio by 1 percentage point to 15%, and as a res ul t s i ngl e di gi t WPI i nfl a t io n w a s reac hed to 5 %.

RBI has increased interest rate 13 times s i nc e M a r ch 20 1 0. It has affected Indi a’s growth in many ways. The index of Industrial production (IIP) - a key indicator of the r o b u st n e ss o f i ndustr ial gr owth r ecor d ed a

We should learn from history. But there is burden on learning especially when it means that policy recommendations can affec t the c ours e of an ec onomy a n d millions of jobs are dependent on the right RBI

policy. Inflation and lack of growth also hurts t h e p o o r t h e m o st . I t is n o b o d y’s ca se t h a t high inflation should be allowed to persist a n d it is e ve ryb o d y’s ca se t h a t t h e in st ru ments used to reduce inflation be approp ria t e i. e . t h e p o licy sh o u ld b e e f f e ct ive in a ch ie vin g it s g o a ls. Even only right policies cannot help. We need a b o o st f ro m su p p ly sid e a lso . Th e co mp onent of inflation that has pushed the WPI maximum has been t he f ood prices. S o con trolling food inflation is the first step towards curbing the inflation in our country. There is n e e d t o ch e ck t h e su st a in a b ilit y o f t h e a g ricu lt u ra l se ct o r a s I n d ia is p rima rily d e p e nd e n t o n a g ricu lt u re . Fo llo w in g a re t h e so me measures which can be taken to curtail food in f la t io n ke e p in g t h e in t e re st ra t e a t b a y:

E nhancing the P r oductivity of F ar ms Indian agriculture still heavily depends on t h e mo n so o n , b a d mo n so o n s la st ye a r h a s crippled the agriculture output growth and h a s re su lt e d in rise in f o o d p rice s. C h a sin g the monsoon each year is unfeasible. So im p ro vin g t h e p ro d u ct ivit y o f o u r f a rm s w ill g ive a b e t t e r yie ld a n d t h u s lo w e r t h e p rice s o f t h e f o o d . A st u d y p re d ict s t h a t t h e re is 6 % in cre a se in w a t e r co n su m p t io n b y a g riculture sector by 2025. So the big quest io n is h o w t o yie ld b e t t e r w it h le ss u sa g e o f w a t e r o r re so u rce in g e n e ra l? Firstly, practice of effective use of resources like water, energy etc. Predominantly Indian agriculture system uses food irrigation which consumes three times more water than it

9 use of treadle pump is best for smaller plots. They are cost ef f icient and consume less energy and water.Secondly, investment in R & D in t h e a g ricu l t u r e s e c t o r s h o u l d b e in cre a se d a n d m a d e m o r e e f f e c t i v e .

Improving the Public Distr ibution System (PDS) 17.8 MT of wheat are lying with Food Corp of India (FCI) in open plinths but prices have escalated despite the huge buffer stock. A fresh estimate from the ministry of food processing says a whopping Rs 58,000 crore (Rs 580 billion) worth o f a g ricu lt u re f o o d i t e m s g e t w a s t e d i n t h e co u n t ry e ve ry ye a r. S o I n d i a s e e m s t o b e a largest producer of food products but n o t t h e la rg e st su p p l i e r . T h e r e h a s t o b e a complete revamp in the current supply chain system. First, procurement should be done without intermediaries & with complete transparency. Second, Logistics & W a re h o u sin g in w h ic h t h e s y s t e m c a l l s f o r h u g e in ve st me n t sh o u l d b e l o o k e d i n t o . It is an opportunity for policymakers to rise to this challenge and bring out comprehensive reforms agenda for agriculture, some w h a t a kin t o t h e in d u s t r i a l r e f o r m p a c k a g e o f 19 9 1, t o e n su re l o n g -t e r m f o o d s e c u rit y t o it s p e o p le a t a f f o r d a b l e p r i c e s a n d in a sustainable manner. Increasing the in t e re st ra t e w ill n o t h e l p i n c u r b i n g i n f l a tion, rather it will affect the growth of India negatively. There is need to implement the right policy and to reform agriculture sector t o cu rb t h e in f la t io n .

INFINEETI | DECEMBER 2011

AR O U ND T H E GLOB E

AR O UND THE GLO B E

Th e Q u esti o n o f Ch i n a B y J.R a h u l ( Th e aut hor is a st ud ent of IIFT )

hina’s reluctance to allow its currency to appreciate vis-à-vis the dollar is an issue which has been talked about among t h e h i g h e st e ch e l o n s o f p o w e r. H e n ce , I t is imperative to look at this stand-off by examining some key issues which highlights the raison d’etre for China’s resistance to the incessant pressure piled on by the U.S and other developed and developing countries.

Exasperation sums up the US mindset so far as China’s stance towards pegging of the renmi nbi

(RMB ) is co n cer n ed.

makes it safe from the machinations of the forces of demand and supply. The US, obviously, does not want such a thing, as because of the undervaluation of the RMB (as the case currently is), US is getting less for its own ends. Unfortunately, according to some respected economists, an appreciation of the renminbi against the dollar would be disastrous for the US, as it would mean a decline of the dollar’s status. So, in effect, the US is itself in a quandary, as to whether to pressurize China into opening up its currency or to allow the status quo to prevail.

What is Happening in China?

China is not at all too elated by its huge The Backdrop reserves.The problem it faces, interestingly, is to increase the domestic consumpAt the outset, it is quite staggering to note tion. Increasing trade surplus implies China’s the forex reserves of China which stands at exports are far more than its imports. But the 3.2 trillion dollars. Keeping such huge hoards catch lies in the fact that the cost of the factors of dollars is something most countries would of production, namely, land, labor, and other prefer, in normal times, as the USD, for all f a c t o r s s u c h a s e n v i r o n m e n t , a r e a r t i f i c i a l l y the troubles it has gone through is still the l o w . T h i s s i t u a t i o n h a s g r a d u a l l y w o r s e n e d , currency of choice . with the suicides of 12 employees of Foxconn, a major supplier for Apple. As the wages start What the U.S. Really Wants? i n c r e a s i n g , t h e c o s t o f p r o d u c t i o n w i l l r i s e , and will erode the advantage Chinese prodExasperation sums up the US mindset as far ucts enjoy in the world market. as China’s stance towards pegging of the renminbi (RMB) is concerned. By doing such RMB Internationalization a thing, China has not allowed any scope for fluctuations in its currency, which in turn C h i n a ’ s d r e a m o f m a k i n g t h e r e n m i n b i a

universal currency is echoed in its attempt to start offshoring of its currency. Recently, the central banks of many countries have started keeping reserves of RMB. In the long term, China is hopeful of making renminbi one of the major currencies to rival the US dollar and the euro. Behind this is the motive to reduce its forex reserves, whose management is proving a tough nut to crack for the Chinese authorities. As things stand, most importers of Chinese goods prefer to pay in dollars, instead of the R MB, w hi ch i s addi ng t o t he al ready bl oat ed stockpile of dollars back home. There have been signs, though, that the RMB’s internationalization is doing well. As compared to a trade volume of 500 billion renminbi in 2010, the first four months alone of this fiscal year saw 530 billion renminbi being transacted.

Why is China so Wary? The pegging makes Chinese exports cheap for the rest of the world, thus providing them with a tremendous competitive edge. But China is totally aware of the murky world of financial markets. The major reason why it is wary of U.S’s pressure tactics is Japan’s downfall during the Asian Financial Crisis of 1997. The US had employed similar tactics to force Japan to allow the yen to be free of the US dollar. As it later became evident, Japan suffered the most during the crisis. Another reason for China’s reluctance to remove the pegging is its belief that such tactics helped her grow at a great pace even during the recent global financial crises. The US believes that, being a capitalist economy, China must allow its currency to be open to the fluctuations of the market demand and supply, an argument China has turned a

11 deaf ear to.The argument that China presents is really appalling, and doesn’t present a good picture for the US in particular, and the world at large.

The Road Ahead Despite severe pressure, China has somehow managed to keep its currency largely intact from the market shenanigans. However, some senior officials in China have stressed the importance of reducing its forex reserves, and have advised the Government to expand its portfolio. That would ease the pressure on their reserves, and lead to redistribution of resources. The recent wage hikes have gone some way in reducing the loss of productivity, and has shored the domestic consumption. How the US would view these changes in the future is anybody’s guess. Everyone knows that the world economy is a function of the political scenarios prevailing across every nation. In such an atmosphere, China is a real aberration, because its political situation and corresponding economic conditions are something which many classical economists wouldn’t have envisaged. It is, hence, mesmerizing to see China’s resurgence on the world stage. It remains to be seen how China shoulders its responsibilities, now that it has become kind of a Messiah for the troubled economies of Europe. Also, it should expect more intense pressure in the coming days from the remaining economies to shed its bull-headedness, and come out in the open, and claim its right of being a superpower in a rightful manner, instead of resorting to what can best be described as cross arm-twisting.

INFINEETI | DECEMBER 2011

BULLIO N WATC H

B UL L IO N WATCH

I s G old a n I nvesto r ’s p aradise? B y Pr i n ce S eth i a a n d Sid d har t h Nand a( The aut hor s are s tu dents o f I I F T )

a t s o f f t o t h e little yellow metal whi c h has managed to outshine the millions of other investment options available today. W i th g l o b a l e co nomy downsizing and i nfl ation rising, unemployment reaching the maximum level, and stock markets putting all their efforts to terrorise the investors, gold appears to be the “The Silver Lining” to th e mi l l i o n s o f i nvestor s ar ound the worl d, be it in the form of bullion, gold certificates, mining-shares, derivatives, ETFs or even j e w e l l e r y.

As i t i s c l earl y v i s i bl e from the c ha rt , t h e re has been a considerable increase in the prices of gold ov er the l as t 15 y ears (fro m 19 9 6 2011). Last 2 years have shown an increase of more t han 100%! Suc h t rend s f u e l mo re demand for gold, which, combined with limited produc tion and sup ply, drive prices ev en hi gher i n a k i nd of c y c l e.

G o l d h a s e m e r g ed as one of the most l i qui d and stable assets for investment purposes. If

Source: Wikipedia

had invested $10,000 in January 2001, your 37.81 ounces of the precious metal would have been worth more than $69,000 by S e p t e m b e r 1, 201 1 .

It also helps in diversifying an investor’s portfolio as it usually tends to progress opposite the s toc k mark et. Tradi ti onal opti o n s, su ch as bonds , propert y and hedge f un d s o f t e n fail to handle the market panic, and may sell off with equities in times of uncertainty. Port f ol i os c ons i s t i ng of gol d may le ve ra g e thi s unc ertai nty and woul d be abl e t o w it h s tand c atas trophi c ec onomi c s i tuat io n s . Gold also enjoys a tax-free life in countries such as UK, where gold coins like Sovereigns and Britannias are viewed as currency and so are exempted from VAT.

Plus,since the increase in value of gold h a s n o t b e e n d e rive d b y w o rk, it is n o t a n in co me , t h u s t h e re is n o in co me t a x e it h e r. Silver and other precious metals and do not e n jo y t h e sa m e lu xu ry. Gold enjoys psychological appeal. 4000 years after its discovery, it is still perceived a s o n e o f t h e m o st p re cio u s m e t a ls . Th is means that even during times of crisis, market failures and government defaults, gold is likely to retain its value unlike other investment options. This makes gold one of the safest collaterals for the financers t o co u n t u p o n , e n a b lin g t h e m t o le n d m o n e y w it h o u t m u ch h e sit a t io n . A lso it is n o t t ie d t o a n y issu e r’s lia b ilit y u n like b o n d s, b u t is e n t ire ly t h e in ve st o r’s a sse t . Gold is perceived as”The World’s Frightened Bunny”. Whenever the economy signals signs depression and downturn, the demand for gold has increased. During crisis, people f e a r t h a t t h e ir in ve st me n t o p t io n s w o u ld b e negatively influenced and would not provide t h e m w it h n e ce ssa ry f u n d s h e n ce t h e y se e gold as an asset which will always buy bread. When Lehman Brothers declared b a n kru p t cy in S e p t e mb e r 2 0 0 8 , t h e p rice s o f Go ld ro se b y 27 % f ro m $ 7 28 p e r o u n ce t o $ 9 2 2 in a m a t t e r o f t h re e d a ys. Go ld is a lso u se d t o p ro t e ct t h e e co n o my from rising inflation by controlling the country’s currency against fluctuating dollar. It is in ve rse ly re la t e d w it h d o lla r, i. e . w h e n t h e d o lla r w e a ke n s, t h e p rice o f g o ld w ill rise . Many currency traders treat gold as the 4th global currency, after Dollar, Yen and Euro. The European demand for gold comes mainly

13 f ro m Ge rm a n a n d S w i s s i n v e s t o r s b e c a u s e of concerns over public debt in the Euro zo n e a n d t h e p o t e n t i a l i n f l a t i o n a r y i m p a c t o f t h e E u ro p e a n C e n t r a l B a n k ' s a n n o u n c ement of the $1 trillion rescue package to purchase Euro zone government bonds to a d d re ss t h e Gre e k d e b t c r i s i s . Although gold is a great hedge in these risky t im e , t h e p ro b le m i s t h a t i t i s j u s t – a h e d g e – a n d so w h e n t i m e s a r e g o o d f o r t h e e co n o my, in ve st m e n t s i n g o l d c a n t a k e a d o w n h ill p a t h . Go ld i s t o d a y v i e w e d a s a safety-net against political and economic u n ce rt a in t ie s, a n d it s d e m a n d i s h i g h t o d a y only in such circumstances. But when world economy turns stable, gold prices languish, as it happened in the 1980s to 1990s. This is w h y it h a s b e e n s u g g e s t e d t h a t “ i n v e st o rs sh o u ld h o ld n o m o r e t h a n 1 5 % o f t h e i r assets in gold, and they should buy only when the price dips because the price of t h e m e t a l is h ist o rica l l y h i g h . ” Go ld h a s t h e a d va n t a g e o f b e i n g t h e m o s t easily comprehensible investment to the average investor, Considering that its value is se t o n a n o p e n m a r k e t . A s M a r k e t w a t c h noted, “Gold is what a real bull market looks like ”. U n d e r su ch circ u m s t a n c e s , t h e f u t u r e o f g o ld se e ms q u it e ‘g o l d e n ’ i n d e e d . L o n g live t h e kin g o f a l l i n v e s t m e n t s !

INFINEETI | DECEMBER 2011

BA NK ING

B ANK ING

Financial Inclusion - Banking for All B y R i tesh Gu pta( The aut hor is a St ud ent of IIFT )

n October 3rd 2011, Kerala became the f i r st I n d i a n state to become finan c i al l y i n c l u si ve w h i ch meant that ever y fami l y i n the state has at least one bank account. T h i s b e co m e s m or e impor tant when we s ee th a t t h e g o ve r n ment and the RB I ar e try i ng very hard to provide financial services to ev eryo n e f o r t h e past few year s.

W hat is Fin a n c i a l I n c l u s i o n ? According to the report by Rangarajan c o m m i t t e e o n f i n ancial Inclusion,

Financial inclusion may be defined as the p ro ce ss o f e n sur ing access t o f in anc i al services and timely and adequate credit where needed by vulnerable groups such as w ea k e r se ct i o n s and low income gr oups at an a f f o r d a b l e co st.â&#x20AC;? The financial services include savings, l o a n s, i n su r a n ce , cr edit, payments etc. The fi na n ci a l syst e m has to pr ovide its fu nc ti on to those with low incomes, poor background et c . B y p r o vi d i n g these ser vices, the ai m i s to help them come out of poverty. It is a key determinant for sustainable and inclusive growth, which is essential for building an equitable society. It is important as it provides the poor to bring their savings into the financial system. It gives them the option to re m i t m o n e y t o their families in vill ages . It i s essent i al t o extend banking services to

the rural hi nterl and at the earl i es t, so a s t o integrate those regions with the growing Indi a.

Importance Inclusion

Financial

In a c ountry where the per c api ta in co me is onl y Rs . 1.7 5 l ac s and 7 0% of pe o p le live i n rural areas , there i s a need for p e o p le t o save money especially under the current economic scenario when the prices are very s teep. Prov i di ng fi nanc i al s erv i c es t o e ve ry citizen becomes more important. It will provide the citizens with various facilities i nc l udi ng:

which keeps pulling it back. Some of the problems which are hampering the progress a re : Fin a n cia l e xclu sio n : Fin a n cia l se rvice s a re used only by a section of the population. There is demand for these services but it h a s n o t b e e n p ro vid e d a s m u ch a s it sh o u ld h a ve b e e n . P e o p le livin g in t h e ru ra l a re a s o r t h o se w h o live in t h e p la ce s w it h h a rsh clim a t ic co n d it io n s a re t h o se w h o g e n e ra lly face the issues with banking services. These lead them to rely on informal sector for their financing which is usually at exorbitant ra t e s. Th e se le a d t o a vicio u s cycle . First , high cost of finance implies that a poor person has to earn much more than someone who has access to lower cost finance. Second, the major portion of the earnings is paid to the moneylender and the person can n e ve r co m e o u t o f t h e p o ve rt y.

2. Core bank i ng s ol uti ons at Vi l l ag e L e ve l: Now, mobi l e rev ol uti on has reac h e d u p t o the villages. With financial inclusion movement, banks can provide ATM services and e-bank i ng s erv i c es at the v i l l a g e le ve l.

with

Non-price barriers: Access to formal financial services requires documents of proof regarding personsâ&#x20AC;&#x2122; identity, income etc. Generally the poor people do not have these documents and thus are excluded from these services. High distance between the bank a n d re sid e n ce , p o o r in f r a s t r u c t u r e e t c a l s o p ro ve t o b e a h in d ra n c e . Behavioural aspects: Difficulty in understanding language, various documents and conditions that come with financial services etc. also prove to be a major d e t e rre n t f o r t h e p e o p l e .

S teps taken by RBI

U se o f R e g io n a l la n g u a g e : T h e B a n k s a r e re q u ire d t o p ro vid e a l l t h e m a t e r i a l r e l a t e d t o o p e n in g a cco u n t s, d i s c l o s u r e s e t c i n t h e re g io n a l la n g u a g e s.

Financial

The RBI and the gov ernment are t ryin g t o p ro v i d e f i n a n c i a l s e r v i c e s t o e v e r y c i t i z e n for a l ong ti me but there has bee n issu e s

living in rural areas do not utilize the financial services as they find these services costly. Hence, even if financial services are available, the high costs deter them from a cce ss.

N o f rill a cco u n t s: R B I h a s a s k e d b a n k s t o o f f e r sa vin g s a cco u n t w h i c h a l l o w s p e o p l e to open an account without any or negligible b a la n ce . Th e a cco u n t i s w i t h o u t a n y o t h e r facilities leading to lower costs for the bank a n d t h e in d ivid u a l. Th e n u m b e r o f n o -f r i l l s account has increased in public sector banks f ro m a b o u t 0 . 4 millio n t o 6 m i l l i o n b e t w e e n Ma rch 20 0 6 a n d Ma rc h 2 0 0 7 .

1. Micro credit during emergency: At the ti me of emergenc y , bank c an prov id e m icro credit which can only be possible if bank us es fi nanc i al i nc l us i on prac ti c al l y .

Problems Inclusion

H ig h co st : I t h a s b e e n se e n t h a t t h e p o o r

S im p le K Y C N o rms: To e n s u r e t h a t p e r s o n s belonging to low income groups do not f ace

INFINEETI | DECEMBER 2011

BA NK ING di ff i c u l t y i n o p e ning the bank account s , the KYC procedure for opening accounts has be e n si m p l i f i e d . Other rural intermediaries: Banks were permitted in January 2006, to use other rural organisations like Nongovernmental organizations, self-help groups, microfinance institutions etc for furthering the c a u s e o f f i n a n cial inclusion.

How to Improve the Inclusion P r oc es s Simplify procedures: People are reluctant to go t o b a n ks as they ar e not clear of the di r e c t i o n s, p r o ce sses etc. A lso poor p eopl e av oi d b a n ks b e cause of complicated forms , procedures etc. Simpler structures will lead to h i g h e r f o o t f a l ls to the banks. Inste ad of calling it a saving account, separate account c o u l d b e o p e n e d called education acc ount, v e h i c l e a cco u n t etc to enable a per son to k n o w t h e p u r p o s e of the saving. B ro a d e r a p p r o a ch is r equir ed: T he foc us of policies has been so far on two things- one, to help people open more bank accounts an d t w o , p r o vi ding cr edit. T he fir st mak es people have a sense of belonging to the formal financial system and also gives them an identity. The second helps them get some fi na n ci a l ca p i t a l and enables them to c arry on some business activities to manage their livelihoods. However, poor people also need to invest their savings into financial products that get them higher returns than returns on savings account and fixed deposits. They also need other financial facilities like insurance, pension plans etc. to manage

MARK E T WATCH ri s k s and ol d-age. Fi nanc i al i nc l us i on s houl d be i n syn c w it h other sectors: Financial inclusion alone will not be enough. The reforms in financial sector have taken centre stage in Indian pol i c y w i t h s ubs t ant i al medi a c ove ra g e o f the s ame. It i s true that ac c es s t o f in a n ce is important but there is also a need to help people to earn money so that they can uti l i z e the s erv i c es . Henc e i t i s im p o rt a n t that the fi nanc i al reforms be i n s yn c w it h whatever reform is being made for the growth of the i ndus try .

Global Indices- 2011

B y Pi yush M ar waha( The Author i s a St u d e nt o f I I F T )

t has been one of the most uncertain years for the global stock markets. The uncertainty in financial markets and global slowdown h a s a d d e d o n t o t h e p re ssu re f a ce d b y t h e world indices. The Indian markets have been

Th e ma jo r co n ce rn s i n t h e w o r l d m a r k e t s is the EU zone uncertainty.To add to these there have been setbacks like US debt ceiling concerns. In case of Indian markets, the uncertainty in growth rate, fluct uations

one of the most impacted markets. The BSE SENSEX currently at 16213.46 and NSE nifty index currently at 4866.70(as on 9/12/11) declined by 15.7% and 15.6% respectively over the past year with a 52 week high of over 20000 and 6181 respectively. These numbers seem a little more disappointing when compared to the global indices like S&P 500 and nasdaqthat increased marginally by 1.8% and 1.15% over the year. The Asian markets have been among the weakest with Shanghai composite index and NIKKEI each losing around 17%the past year. The European markets have taken a hit as well with the UK based FTSE showing so m e re sist a n ce b y lo sin g o n ly 4 . 8 0 %w it h CAC and DAX shedding 16.62% and 13.41% re sp e ct ive ly.

in the rupee and political concerns have further added to the pressure on the markets and have prevented them from recovering. The near future too seems b e a rish f o r t h e w o rl d m a r k e t s a s n o n e o f t h e se co n ce rn s se e m t o f a d e o f f s o o n . I t is a w a t ch o u t a n d e v a l u a t e p h a s e f o r t h e entire financial markets. In the Indian perspective, the markets ,though have shown isolated sessions of rally, are b e a rish in g e n e ra l w i t h S e n s e x r e s i s t a n c e level appearing at around 14500-15000 le ve ls a n d 4 7 0 0 se e m i n g t o b e a s t r o n g re sist a n ce le ve l f o r n i f t y f o l l o w e d b y o n e a t a ro u n d 4 5 5 0 le ve l s . g i n g r o w t h o f t h e industry resulting in more employment opportunities to the people. which will st re n g t h e n t h e ir f in a n c i a l p o s i t i o n .

Conclusion Providing financial services to all will foster the culture of savings providing them benefit i n t he f ut ure.I t wi l l al s o be a gre a t b o o st for the ec onomy as the bank s wi ll b e a b le to lend out more money to the industry resulting in growth of the industry resulting in more employment opportunities to the people. which will strengthen their financial pos i ti on.

INFINEETI | DECEMBER 2011

R EG U LA R S

REGUL ARS

Monthly Chronicle

B y R o hit K hat t ar (Auth o r is a s tudent o f IIF T )

S m a ll - s av i ngs to yield more

he government has increased intere st r a t e s on deposit schemes offered by post offices, like savings account, Monthly Income Scheme and Public Provident Fund. While post office savings accounts ( POSA) will fetch 4 per cent interest, up from 3.5 per cent, the Monthly Income Scheme (MIS) and the Public P ro vi d e n t F u n d ( P P F ) will ear n an i nter est of 8.2 per cent and 8.6 per cent r e s p e ct i ve l y. The annual investment ceiling in PPF savings has been increased to Rs one lakh fro m t h e p r e sent limit of Rs 70,000, but it would be costlier to obtain loans from the savings under as lending rate has been

Mahind ra Sa tya m Q2 net up 10 -fol d

M ahindra Sat yam posted a 10-fold growth in profit-after-tax to Rs 238 crore the second quarter of the 2011-12 financial year. The company's profit-af ter-tax stood at Rs 23.31 crore in the July-September quar ter of the 2010-11 fiscal.On a quart e r - o n - q u a r t e r b a s i s, M a h i n d r a S a t y a m ' s p rofit-af ter-t ax was up 5. 77 p er ce nt fro m Rs 225 c rore in Q1, FY ' 12.

The company's consolidated revenues surged by 27.01 per cent during the quar ter under review to Rs 1,578 crore f ro m R s 1 , 2 4 2 . 4 c ro re i n t h e co r re s p o n d i n g p e r i o d a ye a r a g o. O n a Q - o - Q b a s i s, Q 2 revenues were up 10. 04 p er ce nt fro m Rs 1,433.93 crore in the first quar ter of the 2011-12 financ ial year.

d o u b l e d t o t w o per cent.

Co ca- Co l a to invest $ 2 b il l i o n i n Indi a Coca-Cola Co.’s subsidiary in India says it plans to invest $2 b i l l i o n i n t h e co u n t r y o ve r t h e n e xt f i v e y e a r s a s t h e b e v e r a g e m a k e r t r i e s t o make a bigger push in the k ey emergi ng mark et. Coca-Cola India said that it plans to use the money to build up its infrastructure, develop i ts ma n u f a ct u r i ng abilities, invest in c ons umer mark eti ng and ex pand di s tri buti o n .

F i n a n ce m i n i s t r y s t i l l i n t a l ks w i t h RB I o n ra i s i n g F I I d e b t ca p

I ndia’s finance ministr y is still in talks with the central bank about raising foreign instit u t i o n a l i nve s t me nt ( FII) l i mi t i n g ove r nme nt de b t. The government has not finalised the timeframe for raising the limit nor has t h e a m o u n t o f i n c re a s e i n t h e l i m i t b e e n finalised. Currently, the limit stands at $10 b i l l i o n . I n d i a’s m o s t t r a d e d n e w 1 0 - y e a r bond rose 1 basis point to 8.94 percent after t h e fi n a n ce mi n i s t r y s o u rce s co mme nt s. The Reserve Bank of India Governor Subbarao had said in late October any decision on the matter needed to take into account external sector viability i s s u e s, b e s i de s t h e g ove r n me nt ’s b o r rowi n g n e e ds.

Ru p e e i n f re e fa l l

Th e r u p e e s u f fe re d t h e wo r s t f a l l i n 1 6 y e a r s i n N o v e m b e r, plunging near ly 7 percent and h i t t i n g a re c o rd l o w, a s p e r s i s t e n t d o l l a r demand from impor ters and por tfolio outfl ows du e to g l o b a l r i s k ave r s i o n p o u n de d t h e l o c a l u n i t. The rupee continues to face fur ther depre ciation threats on the back of a gaping current account deficit and slowing growth. Th e p a r t i a l l y co nve r t i b l e r u p e e c l o s e d a t 5 2 . 2 0 / 2 1 p e r d o l l a r o n 3 0 t h N o v e m b e r. The rupee is already the worst-per for ming

A s i a n c u r r e n c y, w e a k e n i n g b y m o r e t h a n 1 3 p e rce nt fro m i t s s tro nge s t p o i nt i n late Ju l y. I t i s dow n n e a r l y 1 4 . 3 7 p e rce nt s o f ar i n t h e c a l e n da r ye a r.

Ca b i n e t a p p roves FDI in M ult iB ra n d re t a i l

The cabinet has faced down opposition f ro m w i t h i n a n d o u t s i d e t o a l l o w fo re i g n re t a i l e r s to ow n a 5 1 % s t ak e i n t he m ult i b r a n d r e t a i l s e c t o r, p a v i n g t h e w a y f o r g l o b a l gro u p s s u c h a s Wa l m a r t, Ca r re fo u r a n d Te s co to o p e n s u p e r m a r k e t s i n I n d i a . It also allowed 100% FDI in single -brand re t a i l, a de c i s i o n t h at wi ll e nco urage co mp a n i e s s u c h a s S w e d e n’s h o m e w a r e f i r m Ikea and clothing retailers Gap and H&M to s e t u p s h o p. U nt i l n ow, fo re i gn fi r m s we re allowe d 5 1 % in single -brand retail, while being allowed t o o w n 1 0 0 % o f b a c k- e n d c a s h - a n d - c a r r y operations that ser ve wholesalers. The d e c i s i o n to a l l ow fo re i gn m a j o r i t y i nve s tment in multibrand retail, besides being t h e p a n a c e a t o t h e g o v e r n m e n t ’s i m a g e problem, will allow cashstrapped Indian re t a i l e r s to t a p s o u rce s o f c ap i t al and ove r t h e me di u m to l o n g te r m gi ve aut ho r i t i e s a we a p o n a g a i n s t i n fl at i o n. R a j J a i n , h e a d o f B h a r t i - Wa l m a r t I n d i a s a i d : “ We a r e w i l l i n g a n d a b l e t o i n v e s t in backend infrastructure that will help re du ce wa s t a g e o f fa r m p ro d uce, i m p rove t h e l i ve l i h o o d o f f a r m e r s, l owe r p r i ce s o f p ro du c t s a n d e a s e s u pp ly- s i d e i nf lat i o n.”

INFINEETI | DECEMBER 2011

R EG U LA R S

INFINEETI | DECEMBER 2011

Fun With Fin B y J.R A HUL ( Th e aut hor is a st ud ent of IIFT )

1 ) A r i r a n g , K i mchi, P anda, Maple and Uri das hi are al l ty pes of what? 2) With which well known economist would one associate the following line about a place w h e r e h e w o r ked: “ Y ou soon lear n t o mumbl e wi th great i nc oherenc e”? 3 ) Wh i ch t yp e of money, also the name of a huge brand, l i teral l y means , “ le t it b e done”, in Latin? 4 ) Wh a t cl a i m to fame does A lain Bi l l i et hav e, as far as l ogos are c onc erned? 5 ) Wh i ch w a s the fir st A mer ican carmak er s i nc e Ford Motor Corp. to l aunc h an I P O? 6 ) A n e a sy o n e : which hedge fund, whi c h s pec tac ul arl y fai l ed wi thi n a few y ea rs o f it s i nc ep t i o n , h a d two Nobel Laur eates on i ts board? 7 ) Wh i ch r o g u e tr ader was dir ected to repay the enti re s um of $6.7 bi l l i on, the a mo u n t w h i c h h e h a d c aused his fir m to lose? 8) Which Indian firm’s divisions include Naturelle, Jaquline and Weikfield International? 9 ) W h a t cl a i m to fame does Monte d ei Pas c hi di Si ena hav e i n the worl d of fi n a n ce ? 10) Connec t the following pic tures with a well k nown phrase, related to a famous event i n t h e wo r l d o f f i n a n ce a n d bu si n es s, in whic h t hese p eop le were involved.

Answe r s w i l l b e ava i l a bl e w i th th e n ex t i s s u e