Finance Magazine

Volume 1; Issue 1
Issue: 1 Volume: 1
BIZZ BUZZ
Firm+Company = LLP
Sections:
By Samir Nijhawan, ACA ………………………………………………….Page 7
Bancassurance … the new fragrance in the air
By Mikku Dave ……………………………………………………………..Page 9
Future economic trends and ideas for 2010
By Parnika Rawat …………………………………………………………Page 11
Global Economic Recovery: Where is it?
By Gaurangi Prasad………………………………………………………..Page13
Financial Inclusion
By Md A zaharuddin……………………………………………………….Page16
Dubai Debt Crisis
By Soumika Roy Chowdhury…………………………………………….. Page 18
Talking about investments when times are tough
By Harjot Kaur…………………………………………………………….Page20
Tally The Rally

Market review : December 2009
By Himanshu sharma……………………………………………………. Page 23
Analysis of Investment Avenues
By Puneet Malhotra……………………………………………………….Page 26
The Sun Finally Sets For Dubai
By Pankaj Ishpujani, Rahil kataria…………………………………….. ..Page 28
Mutual Fund Trading- Beginning Of New Era
By Puneet Malhotra……………………………………………………….Page 30
From the horse’s mouth

Lapasation: The Big Hurdle on Life Insurance Growth
By Sachin Sodhi………………………………………………………… .Page 31
Eyes wide open …………………………….………...Page 37

Financial Novice.……………………………………Page 39
Jargon Wagon …………………………………………….Page 43
Fin is Fun
Humor in Recession
By: Gunjan Agarwal……………………………………………………...Page 45
Volume 1; Issue 1
Message by ADG sir
Amity Business School, Amity University has always

been a front runner in bringing innovation in the field of
knowledge creation. To continue the yeoman‟s service
rendered in the field of education in the past, Amity
Business School conceptualized the idea of an e-magazine
„Finomania‟. The magazine aims to inculcate the habit of
voracious reading, writing and clinically analyzing
financial news and data in students to deal to enable
them to become future leaders.
On behalf of our magnanimous visionary, our founder President Dr. Ashok K. Chauhan,
I congratulate the students of Amity Business School who have done a brilliant work to
complete this herculean task. I express my best wishes to all the stakeholders of this
endeavor and hope they will take up this innovation to the levels of global excellence.
Dr Sanjay Srivastava
ADG and Head
Amity Business School
Amity University Uttar Pradesh
Amity Business School Page 2

Volume 1; Issue 1
Message by HOD Finance
Finance club of Amity Business School always endeavors
to find ways to enrich students in their analytically ability
and interpretations of the international environment. This
enables them to acquire required skills and to be
competitive with other best B-Schools of the country.
E-Magazine is an effort of students of ABS finance club

in the direction of enhancement of data collection,
analysis and interpretation of the available information.
I hope this great effort by the students of ABS Finance Club under the able guidance of Prof
Yogesh Mehra will go a long way in brightening the future of our students and I hope they
will find the best places in the corporate world, and this forum will provide a launching pad
for them. In their future endeavors .
I also would like to thank and appreciate the efforts made by Ms. Prachi Makker, Faculty of
Finance, ABS who has worked 24*7 for making this effort a success.
With Best Compliments
Prof. Akhil Swami
HOD, Finance

Volume 1; Issue 1
Message from ABS Finance club Chairman
With the beginning of a new decade, an optimistic ray of hope of strong

market condition is now dominantly visible. Unlike last year when fear
of world‟s worst recession was the cynosure it is recovery which has
taken the center stage this year. Conditions have improved so well that
there is hardly anyone who is predicting a „W‟ shaped recovery, though
it is true only as far as Indian context is concerned. NSE‟s and BSE‟s
decision to open market at 9 AM has only added to this euphoria.
Students of Finance Club Amity Business School have taken an equally optimistic initiative to incorporate
the technological innovation into the pedagogy of knowledge generation. This is an attempt to attain the
zenith of professional excellence by maximum utilization of resources available. The idea of e-magazine at
zero cost to hone the skills of budding managers is a novel attempt and we bring to you the first issue.
The phenomenal response shown by the students is an indicator to ensure the perpetuity of Fin-o-mania.
We endeavored to include every one‟s article but unfortunately it is not possible. It will be our constant
endeavor to provide a space to every student to show his/her writing skills and will be rewarded
accordingly.
I would like to express my thanks to our ADG Dr. Sanjay Srivastava for promoting the e-magazine as a
prime objective. My expression of thanks goes to Prof. Akhil Swami who provided us adequate support
for the cause of knowledge creation. In the end I would like to thank all the esteemed faculty members of
“Finance & accounts” and last but not the least students who put their best effort to crystallize this epochal
event into the world of reality. I would be doing injustice if a special mention is not made to Ms. Prachi
Makker Editor-in-Chief and all the team members who have labored hard to make it a success.
Yogesh Mehra
Chairman
ABS, Finance Club,

Volume 1; Issue 1
Message from Editor-in-chief
It gives me immense pleasure to introduce to you “Fin-o-mania”, a monthly e-journal

by the Finance Club at Amity Business School. In its maiden voyage, the journal will
take you through mutual funds, economic trends, new investment avenues in the
Bizz-Buzz section. You could stop over and mull over the various financial jargons
boggling your head or if you feel that you are still a beginner when it comes to bulls,
bears and stags, the financial novice section will surely delight you or you could
rejoice in the fragrance of Bancassurance, a new vista that‟s unfolding in the
financial world.
The first edition of the journal has been made possible with the efforts and unrelenting zeal of all the
finance club members. Without the mention of my editorial panel comprising of Sonia Pahwa, Mukul
Mishra, Kanika Goel, Anup Kumar, Puneet Malhotra, Gunjan Agrawal, Namrata Agrawal, Soumika Roy
Chowdhary, Mikku Dave, Md. Azaharuddin, Samir Nijhawan, Aanchal Khurana, Shubhangi Khandelwal,
Abhishek Sinha, the editorial write-up couldn‟t have been complete. On one hand, constant mentoring by
Prof. Akhil Swami and Prof. S.K. Malhotra guided us through tough times and on the other, valuable inputs
by Ms. L.K. Dhillon ,Ms. Rabiya Sood and Ms. Priyanka Ostwal paved the way to make this journal a
reality .Not to be forgotten are the blessings from Dr. Sanjay Srivastava and Dr. Sanjeev Bansal that always
came to our rescue in this endeavor.
I am sure this journal will delight you in more than one ways.
Please let me have your views about this and any other suggestions you might have. The journal is for you.
Prachi Makker
Editor-in-chief, Finomania
pmakker@amity.edu

Volume 1; Issue 1
Skim the cream of all that’s happening in the busy business world….update your BQ (Business Quotient)
…to know what’s happening on the corporate radar.
Firm+Company = LLP
By Samir Nijhawan, ACA
Ever since India has transformed from a closed economy to an open economy, “Destination India” has been
the buzzword in many western countries. With the growth of the Indian economy,….Continue reading
Bancassurance … the new fragrance in the air

By Mikku Dave
Evolution is a continuous process, be it the evolution of life-forms or civilizations or the economy. Our
financial institutions have undergone a tremendous change over the past decade, … Continue reading
Future economic trends and ideas for 2010

By Parnika Rawat
Business leaders today need critical knowledge about emerging trends. Leaders must learn to navigate real-
time change - whether that change comes from competitors, customers, technology …. Continue reading

By Gaurangi Prasad
It would be apt to draw an analogy of the much talked about crisis, with that of a powerful nuclear
explosion which produces sound sensation only at the epicenter and then quietly … Continue Reading
Financial Inclusion
By Md Azaharuddin
Before we try to understand the meaning of financial inclusion, it would be imperative to see how it is
defined. One of the most comprehensive definitions is presented here: …. Continue reading
Dubai Debt Crisis

By Soumika Roy Chowdhury
Just as the world was getting ready to gear up and leave behind the worries of the U.S. crisis it was once
again rocked by the fear of default by the emirate of Dubai. Investor confidence once again shook hard and
affected most of the stock exchanges around the world … Continue Reading
Talking about investments when times are tough

By Harjot Kaur
The time of recession is dangerous time for investors. Investments that seemed safe when everything was
going well, become doubtful in these times such as fail-safe banks like Citibank … Continue reading

Volume 1; Issue 1
FIRM + COMPANY = LLP

THE NEW FORM OF BUSINESS ENTITY
E ver since India has transformed from a closed

economy to an open economy, “Destination
India” has been the buzzword in many western
countries. With the growth of the Indian economy, the
misconduct or negligence i.e. limited liability. But
if any partner is found to have done any fraudulent
act then the liability of that partner(s) will be
unlimited.
role played by its entrepreneurs as well as its technical
and professional manpower has been acknowledged LLP is based on following three attractions:
internationally. With opportunities in abundance, Limited liability
Indian entrepreneurs/ professionals earlier had the Corporate personality
option to explore setting up a proprietary concern, Partnership flexibility
partnership firm, or a corporate entity. Amateur
professionals or venture capitalists were forced to form The rationale behind setting up LLP is to fill the
proprietary/ partnership firms on a small scale in gap between business firms such as sole
absence of capital required to start a large scale proprietorship and partnership, which are generally
corporate entity. Partnership firms were however, not unregulated, and limited liability companies, which
the first choice also because of the following reasons: are governed by the Companies Act, 1956.
Unlimited liability
Lack of perpetual clause
Some more features of LLP:
Lack of sufficient credentials in the eyes of banks/ 1. The minimum no. of partners is two. There is no
financial institutions as compared to corporate maximum limit.
entity. 2. Foreign entities can also setup their business/
profession in India in LLP form.
Enormous compliance and administrative
3. Provisions have been made for corporate actions
requirements, managerial difficulties, difficult winding
like mergers, amalgamations etc.
up procedures etc were also sometimes deterrent to the
4. From taxation point of view, LLP would be taxed
formation of the corporate entity.
in the same way a partnership firm is taxed i.e. the
To tackle with the above problems, Limited Liability share of profits would be exempted in the hands of
Partnership (LLP) concept of business was introduced the partners.
in India. The Limited Liability Partnership Act was 5. Existing partnership firm, private limited company
passed by the Rajya Sabha on October 24, 2008, the and unlisted public company can also be converted
Lok Sabha on December 12, 2008 and it received the into a LLP.
assent of the President on January 7, 2009.
Likely beneficiaries of LLP:
LLP – The concept Any two or more persons who have come together
LLP is an amalgam entity incorporating the best for carrying on a lawful business with a view to
traits of partnership firm and corporate entity. LLP, earn profit may set up an LLP. This form of entity
like a private limited company, is a body corporate will be especially beneficial to:
having a distinct legal entity separate from its
partners. It has a perpetual succession and a 1. SME‟s (Small & Medium Enterprises),
common seal. In LLP, one partner is not 2. Professional firms such as Company Secretaries,
responsible or liable for another partner‟s Chartered Accountants, and Advocates

Volume 1; Issue 1
etc, and felt in international market for professional
3. Others such as enterprise in new knowledge and services. For example: “Indian Partnership Act”
technology based fields where the corporate form limits the number of partners in a firm to twenty.
is not suited, enterprises engaged in any scientific, This prevents the growth of professional firms
technical or artistic discipline, for any activity which want to compete with large entities
relating to research production, design and operating on an international scale.
provision of services etc. The same restricts the scope of business and future
expansion plans. LLP is the solution to all these
4. SME‟s (Small & Medium Enterprises), difficulties.
5. Professional firms such as Company Secretaries,
Chartered Accountants, and Advocates etc, and Conclusion
6. Others such as enterprise in new knowledge and
technology based fields where the corporate form LLP form of business entity has been in existence
is not suited, enterprises engaged in any scientific, in other parts of the world as well and has been
technical or artistic discipline, for any activity very successful in USA and UK. And now after
relating to research production, design and being introduced in India, LLP may become a
provision of services etc. boon for the manufacturing and the service sector
of the country. It will make the Indian service
sector globally competitive. The LLP model has
Boon for the Sectors: the potential to effectively act as an engine of
Manufacturing Sector: growth for the economic development of the
The manufacturing sector is dominated by SMEs, country.
which constitutes 95% of the industrial units in India.
Over 90% of these SMEs are proprietorships, around
2.5% are partnerships and less that 2% are companies.
The reasons for less presence of corporate form of
entity in this sector are (i) less flexibility with regard to
laws, and (ii) high compliance cost. Due to this, the
public favors the proprietorship form of business as it
takes care of the above two problems. But for this
gain, the sector is losing the credit facility given by the
bankers.
LLP could be a better business structure for the
manufacturing sector as it enjoys the dual advantage of
less compliance and at the same time higher access to Written By:
credits in the market. Samir Nijhawan, ACA
MBA Class of 2011
Service Sector: Amity Business School
From the customer‟s perspective, LLP would Email id: samir.nijhawan@gmail.com
provide a single-window shop to all people
wanting to avail professional services. From the For more details on LLP, log on to
professional‟s perspective, LLP can provide a www.llp.gov.in and www.llponline.in
platform to conduct the profession efficiently that References: www.llp.gov.in,
would in turn increase the capability to compete www.indianmba.com, and C.A. Journal,
with global firms and thereby make the presence

Volume 1; Issue 1
BANCASSURANCE
The new Fragrance in the air
E
volution is a continuous process, be it the evolution through the sale of insurance products. Life insurance
of life-forms or civilizations or the economy. Our premium represents 55% of the world insurance
financial institutions have undergone a tremendous premium and as life insurance is basically a saving
change over the past decade, especially the banks. market, so it is a great measure to increase deposits of
Successful innovation is crucial to the competitive edge of banks.
all businesses. But it is particularly important for banking
and financial institutions. Innovation is a key driver of
growth that surprises and delights the customer with new,
Indian Scenario
differentiated and relevant benefits.
The financial liberalization and financial innovations
One such paradigm shift in our banking sector is – have drawn the worlds of banking and insurance closer,
Bancassurance. Bancassurance is defined as a distribution de-segmenting the financial industry. Ever since
strategy that involves selling insurance products via a espousing of financial reforms following the
banking sales network. The method involves various recommendations of First Narasimham Committee,
combinations of both banking and insurance activities. present-day banks have become far more diversified.
Therefore, their entering into insurance business is
In Europe and U.S., bancassurance evolved when both the justified as „insurance‟ is another financial product
banking and insurance industries were in a relatively mature required by the bank customers. recommendations of
stage of development. Thus we can say that this concept First Narasimham Committee, present-day banks have
developed out of a need to find ways to protect, grow, and become far more diversified. Therefore, their entering
diversify income streams. into insurance business is justified as „insurance‟ is
another financial product required by the bank
customers. By international standards, India scores very
poorly in terms of „insurance penetration ratio‟ (defined
as ratio of insurance premium to GDP), a key indicator
of the spread of insurance coverage. Thus, on one hand
we have a very low insurance penetration and low
insurance density and on the other hand we have a
widely stretched and well established banking network
infrastructure. In such a contrasting situation, the best
strategy is to assimilate the two systems by way of
„bancassurance strategy‟ and reap the benefits of
synergy.
Life insurance companies require immense distribution

strength and tremendous manpower to reach out to such
The prime objective of bancassurance is – retaining a huge customer base. This distribution will undergo a
customers by providing a full range of financial products sea change as various insurance companies are
themselves rather than losing out to other institutions proposing to bring insurance products into the lives of
offering broader product combinations. the common man by making them available at the most
basic financial point, the local bank branch, through
Whether it is the bank or the insurance company, the Bancassurance. In our country, where the population is
advantage is that less time is spent trying to attract new above a billion and there is lack of social security
customers. It helps in freeing up the resources, avoiding
schemes, the poor penetration ratio indicates that a vast
duplication, and optimizing the established relationships. majority of population still remains outside the reach of
An important reason for considering Bancassurance by
the insurance, especially in rural and semi-urban areas.
Banks is increased Return on Assets (ROA). One of the This clearly suggests the presence of vast potential for
best ways to increase ROA is to build fee income tapping the insurance market particularly by widening
Volume 1; Issue 1
the distribution channels. Advantageous Position
Marketing to both existing customers (for retention and
cross selling) and non-customers (for acquisition and
awareness) is a big strength of our banks. Their
proficiency in using technology and access to multiple
communications channels has resulted in improvements
in customer service, which we as customers have
experienced in recent years. Also, Indian banks have
the advantage of lower cost per sales made possible by
their sizable & loyal customer base. Established banks
have significant brand awareness which is
advantageous in penetrating their customer base and
As far as banking sector‟s infrastructure is concerned, only markets for above-average market share.
a few countries could match with India for having largest
banking network in terms of bank branches spreading Another important aspect which needs consideration is
that middle-income consumers get little attention from
almost throughout the length and breadth of the country.
most life insurance agents, but they comprise the bulk
We have as many as 284 scheduled banks. Nearly 70% of
of banks‟ customers. Thus through capitalizing on this
the branches are located in rural and semi urban areas and
the remaining are in urban and metropolitan areas. channel, insurance companies/insurers can capture this
underserved market.
Further, with herculean efforts the net NPA ratio of Indian
Bancassurance, no doubt is the new fragrance in the air,
banking sector declined sharply from as high as 15.7 % to
around 1.20 per cent by 2006. Although this was a still, persistent endeavor in search for new technology,
significant achievement, diversification (such as new products/ services/ avenues, shall always be
bancassurance) promises greater scope for further inevitable for the growth as well as sustainability of the
enhancement in earnings with no threat of increase in banking system.
NPAs. With Money as the Power,
In the present scenario, the banking sector whether public and Consumer as the King,
or private and foreign or domestic, increased reliance on the through Innovations & Adoptions,
non-fund based business activities has become inevitable.
Therefore, banks are compelled to innovate and adopt stable Banking Systems are metamorphosing.
alternate sources of earnings in the form of nontraditional Sieving pearls
and fee based sources of incomes. This is reflected in the
sharp increase of proportion of non-interest income to total from the wide plethora,
income in recent years. envisaging the dawn
of the new economic era.
Written By:
Mikku Dave
MBA Class of 2010
Email: mikkudave@yahoo.com

Volume 1; Issue 1
Future economic trends and ideas: 2010
B
usiness leaders today need critical economic trend first. The economic trend of 2009
knowledge about emerging trends. were like
Leaders must learn to navigate real-time
investment through big government, lower direct
change - whether that change comes from competitors,
taxes, lower priced consumer goods, cost cutting,
customers, technology or global economic factors.
deflation, unemployment and restructuring
Developing an ability to anticipate the future in the
face of uncertainty, disruptions and chaos is essential One of the major and interesting future trends
to come back to the track which was shadowed and which are likely to arise could be of increasing
came as a hurdle to the fast moving pace of demand of eco-friendly products and services
economies. Reviving the old one and adopting the new which would cause shift from disposable
one would help in avoiding another market meltdown consumerist culture to sustainable eco friendly one.
like Dubai crisis. Thus it would be a challenge for the organizations
to prepare themselves for this kind of shift.
Understanding of future trends and preparing the
Another trend which I would like to emphasize is
organization with calculated risk would help them in
of urbanization. Depending on the study more
grabbing new opportunities specially by reviving the
than half the world's population will live in
dormant merger & acquisition market. Organizations
cities. By 2050, 70% of the world will live in
should follow the pathway of basics by emphasizing
cities, and of those, 3.3 billion will live in Asian
the consumer‟s requirement and putting them first. As
cities.
consumers are focusing on saving , investing and
managing money wisely , hence organizations and Key questions that must be integrated into future
banks need to change their strategies provide them business strategy are:
with easy solutions. The need of the hour is to
How will changing customer demographics
understand the impact of future economic trends by
affect business strategy?
organizations on themselves, their customers and their
What are the top technologies and business
businesses and then plan and prepare for the path they
processes that will shape competitive
want to follow.
advantage?
For anticipating future trend and avoiding another How will future economic trends affect
crisis it is important to understand the current markets?
What new opportunities does science offer?
Volume 1; Issue 1
What role will globalization and trade play in could be a stepping stone in both technological and
the future? human evolution. One of the major forces of
The world is in the midst of a major demographic globalization in India has been the growth of
transition. Different countries and regions, however, outsourced IT and business processing outsourcing
are at varying stages of this demographic transition. services. Thus it is important for the organizations to
Not only is population growth slowing, but the age find out the impact of accelerating technology on the
structure of the population is changing. trend to toward globalization, whether it would
speed up globalization or change things in
The technological changes and business processes
unexpected ways involving risks.
would help companies to utilize fixed assets more
efficiently and minimizing the risk of turbulence in the Thus it is important to understand which future
market. In the coming future trend technology will be trends will have an impact on you, your organization
major enabling force in the business. The integration and your marketplace which will determine your
of business and technology will help the firms to future success.
change the current scenario and transform the
commerce.
Whether short term or long term trend, the flow from

one price to another is what creates profits or losses.
There are four major factors which I would like to
mention that cause both short term and long term
fluctuations and create the trends. These are
governments, international transactions, speculation
and expectation, and supply and demand. These Written BY:
factors are all linked as expected future conditions
PARNIKA RAWAT
shape current decisions and those current decisions
MBA Class of 2010
shape current trends. Government affects trends
mainly through monetary and fiscal policy. These Email: rawat.parnika@gmail.com
policies affect international transactions which in turn References:
affect economic strength.
www.financialbreathing.com/tag/future-
Technological innovation is already becoming economic-trends by Joel
accelerated since the advent of the internet. According http://ezinearticles.com/?Eight-Economic-

Trends-of-2009
to some such as futurists, the internet

Volume 1; Issue 1

I
t would be apt to draw an analogy of the The above quote speaks volumes about how complex
much talked about crisis, with that of a an intertwining, the economies world over, have
powerful nuclear explosion which produces undergone. Today, one may read about plethora of
sound sensation only at the epicenter and then quietly numbers citing growth in production, profits rising
begins to scale miles, turning to ashes all and sundry every quarter boosting public sentiments, pleasant
and even before any human mind can predict the GDP predictions and stories of banks ready to lend
remotest clue of impending death, it is wiped off the again but it isn‟t long when the positive note soon
face of the earth. Such was the magnitude, degree of ends in a clout of disappointment with reports of
penetration and oblivious character of the recent uncertainty regarding interest rates, currency
economic crisis. Countries, in order to figure out the strength, market correction, inflation, deflation,
damage, quoted from official government data to unemployment rate, another lot of banks on the verge
provide evidence of how the drama unfolded in the of bankruptcy, the very recent Dubai crisis and so on.
streets, factories, business houses and fields across As a result a general state of confusion only gets
the planet and the governments worldwide began consolidated at the end of the day. The economies
stimulating battered economies with rescue measures have managed to reach an interim improvement due
but the fact was, it was still very ugly. to either their own merit (strong government
regulation, thriving on domestic needs than exports)
Now, with the first shoots of recovery mushrooming or simply put did not exist prominently on the global
up around the world, every single soul alive is interlinkage map even before the crisis hence
desperate to know the answer to one question – Is the affected but only a bit. Incontrovertibly, unless the
world really out of recession?? Or is the recovery real situation revives in US, it is always premature to
or merely a mirage?? claim a permanent state of normalcy by any country
“The federal government is sending each of us a whatsoever.
$600 rebate.
To remove any of the misgivings regarding optimism
If we spend that money at Wal-Mart, the money will prevailing due to government spending or enhanced
go to China support in some form or the other, it must be noted
If we spend it on gasoline it will go to the Arabs that since the stimulus packages have already
imposed a significant fiscal burden, the new central
If we purchase a computer it will go to India
government would need to eschew undue populism,
If we purchase fruit and vegetables it will go to failing which high fiscal deficits could again restrict
Mexico, Honduras and Guatemala the growth of countries like India as was the case in
If we purchase a good car it will go to Japan the mid to late 1990s.To determine whether an
If we purchase something useless it will go to economy is a survivor or still a struggler in the „post
Taiwan........whoops, sorry............................... recessionary ‟times, a mere government‟s GDP
and none of it will help the American economy. statistics don‟t suffice. In order to award a country
with the certificate of „back on growth trajectory‟,
The only way to keep that money here at home is to
buy beer and cigarettes, since these are the only
products still produced in the USA.”
Volume 1; Issue 1
scores of parameters need to be satiated and justified possibility of a W-shaped recovery and thereby a
like expansion of manufacturing activity, growth in second wave of crisis seems real.
consumer spending (including the fact whether the In US, government stimulus spending and improved
customer rebound is driven largely by tax breaks and consumer spending (largely buoyed by the cash-for-
government programs or self motivated) , improved clunkers programme) as well as a slight improvement
home sales, numbers relating to unemployment in housing prices finally pushed GDP into positive
benefits claims, consumer sentiment, performance of territory for the first time in four quarters. Growth in
stock market, index of leading economic indicators the world's largest economy only fractionally exceeds
like building permits, supplier deliveries and economists' estimates. There is still widespread
manufacturing orders, non-performing assets of concern that the figures are artificially supported and
banks, housing stability, corporate debt, market dependent on government spending, and that there is
volatility, interest rates, inflation, mortgage unlikely to be any improvement in unemployment
delinquencies, employment growth, US figures for months to come. The consumer in fact,
private demand in general, is not ready yet to pick up
Treasury yield curve and of course $US index against
the growth baton from the government.
major world currencies. Unless the above listed
fundamentals are at their right place in the right For Canada, the recession is put to a close on paper
proportion, situation will continue to be sticky. but in the real world things are different. The
governor of Bank of Canada has predicted
Is the recession over? accelerated growth. The economy continues to shed
jobs with unemployment rate of 8.6 percent-highest
The numbers say it all. The British economy
contracted by 0.8 percent in the second quarter of the in 11 years.
year as against France and Germany which have
recovered already from under the grab from South Africa has been a victim of the crisis not
recession. Some 220,000 people lost their jobs in this because of the cause of it but the effect i.e. its
period as also the unemployment is at its highest banking sector by and large stayed away from the sub
level since 1995.Irrational exuberance still prime mortgage mess but Africa‟s largest economy
characterizes the Brit economy where every serious has been hit by the economic slowdown. Sluggish
analyst says that people who play casino with demand for the country‟s leading exports including
pension funds and the housing market have learnt platinum and cars has brought it recessionary times in
nothing from the past which indicates that the crisis 17 years. Unemployment rate is inching up even at
might still have not reached its lowest point. 23.6 percent at present. The government is working
hard to lessen the woes but the time frame for the
However, Russia‟s nightmare is far from being over same is likely to be counted in decades rather than
and is one of the worst affected countries of the quarters.
world. The government expects the economy to Brazil is not yet back on the path of growth but at
shrink by 8.5 percent this year and the unemployment least recession is crawling back. The country was
rate to rise up to 18 percent. Real wages and retail hardest hit in the industrial sector which was more
sales remain woefully low and sinking. Bank lending exposed to the international economies. However,
has not recovered as in other countries and the catering to the growing middle class is bringing about
expected bad loans, as expected by private bankers, is
as high as 30 percent. In fact according to the
eminent economist Nouriel Roubini, Russia faces the betterment in the health of the domestic industries
and hence economy.

Volume 1; Issue 1
In India, all signs indicate that recession is over and
the economy is performing well ahead of Hong
Kong, Japan and Singapore. GDP forecasts have
exceeded the forecasts and analysts predict that India
may even surpass China next year in terms of growth.
As far as Japan is concerned,
although there has been recovery in various
dimensions, yet a lot of painful remnants are still
visible. Downward pressure on prices remains thus Written By:
doubt of deflation continues to persist.
Unemployment continues to be high and wages still Gaurangi Prasad
falling, industrial output still 23% lower than last
year thereby predicting only „moderate‟ recovery for MBA, Class of 2010
Japan.
Dubai disaster was an icing on the Amity Business School
cake in an already chaotic financial world. Global
markets, which have yet to come out of the financial Email:gaurangiprasad@gmail.com
crisis that savaged many an economy, reacted sharply
and sank like a rock. Analysts now wonder whether
they are witnessing the beginning of the biggest References
sovereign default. The Dubai government requested
the creditors of Dubai World (one of three 1. Global Financial Stability Report GFSR Market
conglomerates that are backed by the emirate with a Update
$60 billion liability), to agree to a 'standstill' on 2. http://www.imf.org/External/Pubs/FT/fmu/eng/200
repayments until May 30 2010 and set the world into 9/01s/index.htm
much dreaded uncertainty once again. 3. http://www.imf.org/external/pubs/ft/weo/2009/01
/pdf/c1.pdf
And the winner is……China which has 4. Long Depression: Frederick P. Miller & Agnes F.
all the economic indicators on the rise and strong Vandome
financial rebound so much so that its currency has
even threatened to substitute dollar as the
international currency. However the growth will
sustain itself only in the face of increased domestic
consumption and innovation rather than preset trend
of dependence upon manufacturing exports.

Volume 1; Issue 1
Financial Inclusion
B
efore we try to understand the meaning objective. Therefore there is exactly no scope of any
of financial inclusion, it would be paradox but clear profit orientation. Bankers says that
imperative to see how it is defined. poor are un-bankable.
One of the most comprehensive definitions is
presented here: Talking from the supply side first some of the drives
which keep FI at bay are:
The process of ensuring access to financial services
Persons are un-bankable in the
and timely and adequate credit where needed by
evaluation/perception of bankers, the loan amount is
vulnerable groups such as the weaker sections and
too small to invite attention of the bankers, distances
low income groups at an affordable cost.
are too long for servicing and supporting the
-Rangarajan Committee 2008, “Committee on
accounts and expanding branch network is not
Financial Inclusion in India”
feasible and viable, high transaction costs
particularly in dealing with a large number of small
Talking in simple terms financial inclusion is
accounts, lack of collateral security, adverse security
ensuring a closer relationship between poor and
situation prevailing in some parts of rural India,
organized financial system.
human resources related constraints both in terms of
As we can see financial inclusion (denoted by FI
inadequacy of manpower and lack of proper
hereon) talks of credit, insurance, savings account etc
orientation/expertise etc.
and people stripped off of these facilities. Banking
and other financial services gives an opportunity of Now let us try to evaluate why FI has not been a
leverage i.e. to multiply earnings by the way of using popular activity in rural India. This despite of some
larger units with the help of borrowings. This aides to measures taken by apex authority of bankers like:
one of the biggest problem of our country – non-
Lead Bank Scheme (LBS), Regional Rural Banks, Self
uniform distribution of income. The rich are getting
Help Groups (SHGs), Micro-Finance Institutions
richer and poor are getting poorer. A corporate
(MFIs), Business Facilitator/Business Correspondent
defaulter is riding a limousine and poor have no
Models, No Frills accounts, Relaxation in KYC
option to look for.
norms, Financial Inclusion Fund (FIF), IT enabled
But banks are also running on the funds of stake
Banking etc.
holders for whom wealth maximization is the prime

Volume 1; Issue 1
Some of the demand side factors which have worked Credit is a Human Right
well as constraints to keep financial exclusion - Nobel Laureate Professor Muhammad Yunus
prevalent in India are:
High transaction costs at the client level due to
expenses such as travel costs, wage losses, incidental
expenses, documentation, lack of awareness, non-
availability of ideal products, easy availability of
timely and doorstep services from money
lenders/informal sources, prior experience of
rejection by/indifference of the formal banking
system.
After having understood some of the intricacies of Written By:
complexity involved in ensuring facilities of Md Azaharuddin

organized finance to poor we now try to find out
MBA, Class of 2010
what is on the other side of hedge. When Muhammad
Yunus initiated the concept of micro credit with Amity Business School
Grameen Bank he had just one thing in his mind Email: mail2azaharuddin@gmail.com
“poor always pay back”. By getting acknowledged by
Nobel Society for his efforts to prove that poor are as References:
much bankable as anyone else, he has been able Dr. D. Subbarao, Governor, Reserve Bank of India at
ignite the minds of bankers to look for newer the Bankers‟ Club in Kolkata on December 9, 2009
segments of society. In the times of slowdown rural The annual report on the working of the Reserve Bank
of India 2008-09
India turned out to be the most uncorrelated section
Dr. K.C.Chakrabarty, Deputy Governor, Reserve
of the society and gave Corporate an avenue which is
Bank of India, „Clarity Through Debate‟ August 10th,
profitable even at worse time. These are some of the 2009, Chennai.
instances which substantiate the fact that rural India Janmejaya Sinha and Arvind Subramanian, The
with its growing aspiration of better life style Next Billion Consumers, Road Map for Expanding
Financial Inclusion in India, Boston Consulting Group
supplemented with growing income, are actually rich
proposition for banks unlike thought otherwise.

Volume 1; Issue 1
Dubai Debt Crisis

J
ust as the world was getting ready to gear up wanted to go for a major corporate restructuring. This
and leave behind the worries of the U.S. created fear waves among all investors as they feared
crisis it was once again rocked by the fear of that a new financial crisis was starting all over again.
default by the emirate of Dubai. Investor confidence As soon as the announcement was made, major stock
once again shook hard and affected most of the stock exchanges around the world tumbled badly as
exchanges around the world. But the question here is investors were initially not aware which banks were
what has actually happened to shake the core of the involved and susceptible to damage. Fear was that
not-so-strong reviving global economy. the default of $59 billion would affect the U.S.
markets through exposure of the international banks.
The epicenter of this brewing storm is Dubai World, The day the announcement was first made, the Dow
the umbrella conglomerate of most of the state Jones industrial average lost about 155 points and oil
controlled companies of Dubai. The panic began on prices fell about 7%.
November 25, 2009 when the investment arm of the
emirate demanded a standstill on its loan payments But later on Dubai declared to restructure only $26
due this December. The corporation has built many billion of its debts which included $3.5 billion worth
properties, palm-shaped islands in the emirate at the Nakheel bonds.
time when there was a property bubble in the United
European banks face maximum exposure in case of
States thinking that investor demand would never
default. London-based lenders HSBC
reduce and the company would always ride on the
Holdings and Standard Chartered could face losses of
waves. But unfortunately the U.S. bubble burst and
the repercussions were felt throughout the world $611 million and $177 million respectively,
wiping out demand from the real estate market just as according to early estimates from analysts
the sand is wiped out by the sea. As a result the state at Goldman Sachs. South Korea‟s estimated exposure
is left with a large number of unfinished is $88 million. Citigroup Inc. of U.S. had an
constructions, ready-to-use properties with nobody to estimated exposure of $1.9 billion to the United
rent or buy these. Arab Emirates as of 2008, according to a JPMorgan
research note.
In the U.S. a number of office buildings and hotels

are owned by Dubai World, including the Mandarin
Oriental hotel in New York, according to the data of
Real Capital Analytics.
The emirate, presently, has outstanding loans of $80

billion out of which Dubai World owes $59 billion.
The corporate had asked for a standstill on the
repayment of these loans till May 31, 2010 as it

Volume 1; Issue 1
But the United States real estate market is not likely worldwide. This hiccup should be seen as a correction
to be affected because the proportion of the in the lending tendencies of various investors. The
acquisitions by the Gulf conglomerate is not investors need to take a more long-term look at the
sufficient to cause any ripple effects but the banking investment perspectives before leaping in with funds
system is surely to go under the scanner as the fear of and other credit facilities.
possible default will make banks scale back lending
which, in turn, will lower the speed of global
recovery.
Abu Dhabi‟s $ 10 billion bailout has given a bit of

relief to the world.
The effect of this impending crisis will be limited in

the case of India because apart from a few banks like
Bank of Baroda, the Indian banking system is
relatively insulated. Remittance flows from Dubai,
which account for about 10 per cent of overall Written By:
remittances, could see a slowdown in the short term.
Soumika Roy Chowdhury
Capital flows may see a mild reversal turning the
equity and currency markets volatile but corporate MBA Class of 2010
exposure to Dubai appears to be limited to a handful of
realty and infrastructure companies. Employment of
Indian workers employed in the Gulf may be Email: Soumika_gr8@yahoo.co.in
negatively affected. Also exports may be hurt as UAE
is the hub of India‟s major exports of gems and
REFERENCES:
jewellery, petroleum products, metals, machinery and
basmati rice. But the impact will be limited as Dubai is http://www.breakingtravelnews.com/news/article/d
majorly the transshipment hub of Indian products to be ubai-debt-crisis-over/
exported to other countries. However, Indian exporters
http://www.arabianbusiness.com/574684-dubai-
have to become more cautious in the time to come. debt-news-latest
They have to stop conducting trade under the open
account system and make more investigations http://www.latimes.com/business/la-fi-markets28-
regarding the banks required to make the payments. 2009nov28,0,3567649.story
http://www.dailymail.co.uk/news/article-
The present turmoil in the Gulf territory is not a new 1231320/Dubai-debt-crisis-Fears-second-economic-
crisis but aftershocks of the not yet contained global crash-global-stock-markets-tumble.html
financial crisis. It is a direct result of aligning the
emirate‟s real estate, tourism and travel development http://www.businessweek.com/investor/content/no
v2009/pi20091127_711022.htm
measures to the boom in the US markets. The present
crisis will be contained successfully by the banks http://www.qatarliving.com/node/347573
without much damage to the global economy except
for shaking up the basic confidence of the investors

Volume 1; Issue 1
TALKING ABOUT INVESTMENTS WHEN TIMES ARE TOUGH

from „non-discretionary‟ products or services,
T
he time of recession is dangerous time for
investors. Investments that seemed safe including, for example food, power and health.
when everything was going well, become 2. Increase the bond component, to take
advantage of capital gains generated by falling
doubtful in these times such as fail-safe banks like
interest rates, whilst also generating a steady
Citibank or Bank of America which were considered income. Bonds should be predominantly credit-
„too large to fail‟. Falling tides also expose previously risk free like government bonds with some
hidden wrongdoing such as Satyam fiasco. higher yielding corporate bonds. The cash
component should be increased as well.
Investors everywhere are suffering a reverse-tsunami
and all signs indicate that the tide will go on falling for
many months. They know that it is unlikely to increase Traditional Alternative Assets:
their wealth. Their priority is just to survive!
The obvious symptom of the recession is the fall in
Traditional Mainline Assets: property prices. Since they started dropping in
early 2007, real estate values worldwide have
Over the long term and in normal times equities give collapsed. In the worst hot spots like Spain and
the best overall return. However, high returns from Dubai, falling property prices have had huge
equities reflect the fact that they are most risky of the negative impact on their domestic economies.
traditional asset classes, followed by bonds and then Prices have dropped about 20% globally and most
cash. experts believe they have a further 12% or so to
fall.
Recognizing this, the „golden rule‟ in asset allocation
for private investors is that the cash bonds component This is hardly the time to invest in property but,
of their portfolio should be the same percentage as when it comes, the recovery may be stronger and
their age, with the balance in equities. So, a 35 year quicker than expected. Also in the recovery
old investor may hold < 65% of their portfolio in situation it‟s better to invest in infrastructure
equities with 25% in bonds and 10% in cash/fixed companies and pharmaceutical companies.
deposits. The theory is that younger investors can Investors can also invest in mutual funds if they
recover any losses in equities, from their future don‟t want to go for an investment in equity shares
business profits or salaries. In comparison, a retiree of directly.
65 should hold no more than 35% in equities, with
perhaps 20% in bonds and 35% in cash. Currencies:
However, as we continue to sink deeper into the worst At this primary level of recovery, asset allocation
economic environment for over 100 years, these are involves making the right choice between
not normal times. The advice for the coming year currencies. A handsome gain in individual stocks
would be: can easily produce a loss, if the currency in which
these investments are denominated falls relative to
1.Reduce the equities component of the „golden the investor‟s base currency. The reverse is also
rule‟ by about half and concentrate this reduced true.
amount in „defensive stocks‟ that generate cash

Volume 1; Issue 1
For example, an Indian investor suffering an apparent loss 6% on his Japanese equity investment in the
three month between November and January would, in fact, have made a profit. This is because the Yen
appreciated significantly against most other currencies during this period. However, some risk-averse
investors keep their assets in bank deposits but still manage to make well above average returns simply by
moving funds between different currencies.
Conclusion:
Thus, to summarize the key to successful investing is diversification and asset allocation. Investors are
recommended to diversify their holdings in their domestic market and to allocate at least 20% to 30% of
their assets to a spread of investments outside their home base.
Written By:
Harjot Kaur
MBA Class of 2011,
Email: harjotk16@gmail.com

Volume 1; Issue 1
“It’s a jungle out there !” as someone rightly said…and all you feel is that the bulls, bears and stags are
better off in the zoo…this section gives you more than one reason to domesticate them….!!!
Articles in this section:
Market review : Dec 2009

By Himanshu sharma
The stock market last month was direction less as one cannot easily predict the market direction due to the bad
news coming from global economies like Dubai world delayed debt payment of $59 billion and a strong
support from Indian macroeconomic factor 2nd quarter growth at 7.9 % which surprised... Continue Reading

By Puneet malhotra
2008 was the most dramatic year for those who invested in stock market, gold, real estate, mutual fund and
commodities. Global recession, job losses, failure of the investment banks, high and low crude oil prices led
to the fall of the Indian stock market of more than 50 percent from its high in January .. Continue Reading

By Pankaj Ishpujani, Rahil kataria
„Sun never sets for Dubai‟ is the tagline of Dubai World a leading construction company in Dubai That
may not be the case now, as the Emirates sends investors into a helpless collapse when the government of
Dubai revealed that it planned to ask creditors of Dubai World,… Continue Reading
Mutual Fund Trading- Beginning Of New Era

By Puneet Malhotra
Mutual fund trading offers investors the option to buy and sell mutual fund units through stock exchanges as
they trade the shares. Both BSE and NSE, after getting the SEBI approvals for trading of mutual funds
through the existing infrastructure of stock exchanges, launched the platforms for trading Mutual
funds….Continue Reading

Volume 1; Issue 1
Market review: December 2009

2010: A New Year Gift to Investors and Season of all time High
MONTHLY INDICES CHANGE (1 Dec -31 Dec, 2009

NIFTY 5201.05 ▲79.05
SENSEX 17464.81 ▲266
CNX IT 5818.4 ▲424 On Nifty the top 5 gainers are Steel Authority of
BANK NIFTY 9029.5 ▼220.5 India and Hindalco from Metal space and rest are
CNX MIDCAP 7432.8 ▲163.8 Tata Motors, NTPC and Idea Cellular. On the
bearish side the top 5 loser are from Housing
finance, Banking, infrastructure sector.
T
he stock market last month was direction
less as one cannot easily predict the market INSTITUTIONAL INVESTMENT (Crores)
direction due to the bad news coming from FII 10233.1
global economies like Dubai world delayed MUTUAL FUND (till 10 dec, 2009) -1761.9
debt payment of $59 billion and a strong support
from Indian macroeconomic factor 2nd quarter
growth at 7.9 % which surprised the whole world. FII net investment in equity was 10233.1 Crore
The market was very bouncy as the benchmark index with total investment of $17 billion for year 2009
Nifty (a basket of 50 stocks) remains range bound and Mutual funds were the net seller of Rs 1761.9
between 4950–5200 as investors exercised the put Crore.
option for 4900-5100 and call option for 5200-5400.
The Global stock market rallied over Abu Dhabi
Nifty made yearly high of 5221 on 31st Dec and got a
grant of $10 billion support to Dubai but the
strong support at 4950-4970 and a resistance level at
Indian investors looses their confidence and
5150-5170. On 31st Dec Sensex closes at 17464.81,
selling pressure was seen on 14 as well as 15 Dec
Bank Nifty closes in red whereas the IT index was
due to the rising WPI inflation rate at 4.78% and
the best performer and closes at 5818 rising over 424
food price inflation over 19.83% for the third
points.
week of December, 2009. The Index of Industrial
Production (IIP) for the month of October came
in at 10.3% against 9.6% for September which
Top 5 Gainer on Nifty Top 5 Loser on Nifty was below expectation. The 10-year benchmark
Company % Gain Company % loss 6.90%-2019 bonds touched its all time high yield
SAIL 17.95% IDFC -8.33% at 7.58% levels on the fear of monetary
HINDALCO 12.67% PNB -7.36%
tightening by RBI in the first quarter of year
TATAMOTOR 12.52% UNITECH -7.31%
2010.
NTPC 11.97% HINDUNILVR -4.86%
IDEA 11.63% HDFCBBANK -4.84%

Volume 1; Issue 1
Top Three power stocks on Broker’s Radar for year 2010: JP HYDRO, GVK POWER &
NHPC. (As quoted by Zee Business)
Among the BSE sectoral index Information technology & Power was the outperformer rises by 8.44% and
5.94% respectively. The FMCG & Bankex were the worst performer looses around 2.82% and 2.36%
respectively.
Bombay stock exchange launched its first mutual fund distribution platform BSE STAR MF that would
help investors to buy and sell mutual funds units electronically through their stock brokers.

Volume 1; Issue 1
IPO listing biggest concern for the Govt. is rising food prices
and the market will see the next momentum after
The Cox and Kings stock was listed on the NSE the revision of monetary policy by RBI”
on 11 December, 2009 which was issued at Rs
330 per share in the IPO opened at Rs 343 & According to Montek Singh Ahluwalia the
made a yearly high of Rs. 469.70. inflation is not the concern for the Govt. but the
major concern is the rising Food and
JSW Energy was listed on 4 January, 2010, commodities prices. Though the growth is driven
issued at Rs.100 and opened at Rs. 106. Currently by the govt. increased expenditure on goods and
trading above its issue price. services, increased pay commission and low
interest rates.
Godrej Properties was listed on 5 January,
2010, issued at Rs 490 and opened at Rs. 511.
Currently trading above its issue price.
Expert comments
According to George Soros “Global economic
recovery is slated to run out of steam soon and
even worse, a double-dip recession may emerge
in 2011”
Nilesh Shah, MD & CEO of Envision Capital,

said Indian equity markets seem to be in a
consolidation phase and it is quite likely that the
markets will trade broadly between 4800 and
Written by:
5200. He said the positive view on the markets is
coming more from global macros rather than Himanshu sharma
domestic micros. MBA, Class of 2010
Narayan ramachandran, country head , morgan
Email- sharma2387@gmail.com
stanley is bullish over real estate sector for over
10 yrs. According to him every investors must
have Gold in his portfolio which act as an
insurance against inflation and dollar. He said
“India is a capital hungry nation and has a lot of
room to absorb investment over time”
Rajesh Tambe the financial expert said “It

becomes a bubble and will soon get burst, the

Volume 1; Issue 1
2
008 was the most dramatic year for those and historically they have an inverse relationship in
who invested in stock market, gold, real the international market. The confidence has gone up
estate, mutual fund and commodities. in the yellow metal because investors have lost faith
Global recession, job losses, failure of the investment in the US Dollar due to the weakening US economy.
banks, high and low crude oil prices led to the fall of
the Indian stock market of more than 50 percent from Real Estate
its high in January 2008. Year 2009 is the year of
grand recovery as the FII‟s make an inflow of Rs
82,000 crore in the Indian market.
During 2009, while many investors were busy

making money in the volatile stock market there were
also other investment options where you as an
investor can park your funds which are less volatile
then the stock market and offer good returns. Here‟s Global Recession hit the real estate hardest the sector
a brief peak of the investment options. was worse hit from Oct 2008 to Dec 2008. As the
crisis hit globally and the expectations that the Indian
Gold market will follow the same fate. But with the
forming of stable government and the timely action
of the government in providing a stimulus package to
the economy, coupled with the lowering of interest
rates put the economy back on the track. With the
recession the non-serious small time developers are
now out of the sector and developers changed their
strategy from the premium houses, where the profit
margin is high, towards the affordable homes, where
profit margin is low. Thus meeting the needs of
The yellow metal has turned out to be an attractive
Indian middle class as their dream of owning houses
option for investment. The reason for this is the
within budget getting fulfilled by excess supply and
stability factor associated despite of its volatility in
lower interest rates.
the short run. Gold posted 22.75 percent increase in
the last year and also touched its new high of Rs Crude Oil
18,300 per 10 gm. The demand for gold has
increased considerably over the past few months. Investment in oil proved to be one of the best in 2009
Many investment houses have started using it as a for the investor as it provided return of around 71%.
hedging instrument. Many investors in the world Crude oil prices were around 43$/bbl in Dec 08 and
have accepted gold as an international currency now they are hovering around the 80$/bbl mark.
without it having a direct relation with any country‟s Crude oil prices have surged to year high recently, as
economic condition. Gold and the US Dollar are the the economy is showing its first signs of recovery.
investment instruments in the international market

Volume 1; Issue 1
Crude Price(US$/bbl) December 09 December 08 YOY

WTI 74 43.3 70.8
Brent 74.7 43.7 70.8
The current increase in the prices could be attributed to a strong winter season in the US translating into strong
demand.
Debt Market
For the investors who don‟t want their hard earned money to be eroded by the fluctuations in the stock market
can invest in the Debt market.
Government Bonds Change over(bps)

G-sec Yields Current % 1 week 1 month 3 months 1 year
1 yr 4.39 -8 13 - 26
2 yr 6.1 -7 23 14 132
5 yr 7.26 1 21 19 191
Short Term Instruments

Yields current% 1 week 1 month 3 month 1 year
Treasury Bills Before
T-Bills 91 D 3.68 3.77 3.32 3.15 4.71
T-Bills 182 D - 4.34 - 3.8 -
T-Bills-364 D 4.73 - 4.49 - 4.78
Money market Change Over(bps)
Current % 1 week 1 month 3 month 1 year
Call Rate 3.28 -2 3 2 -209
Repo Rate 2.79 -91 201 -20 -231
CBLO Rate 2.08 -125 125 -36 -266
Written By :
Puneet Malhotra
MBA Class of 2010,
Amity Business School,
Email: puneetmalhotra1@gmail.com

Volume 1; Issue 1
„S
un never sets for Dubai‟ is the tagline of over banks' exposure to Dubai's growing financial
Dubai World a leading construction problems gathered pace.
company in Dubai That may not be the
case now, as the Emirates sends investors into a The FTSE 100 index of leading UK shares fell by
83.46 points leading to 5,110.67 in early trading,
helpless collapse when the government of Dubai
adding to previous day loss of 170.68 points. The
revealed that it planned to ask creditors of Dubai
FTSE bounced back, to fall by 12 points to
World, the state-owned conglomerate, for a six-
5,182.13 after more than an hour of trading but all
month Extension on its debt repayments. Dubai has
$80 billion worth of debt, with the vast majority held eyes were still on American shares as there is huge
by Dubai World, 60 billion (approx) which owns investment of American banks in this region and
Nakheel, the property developer. the market would reopen after thanksgiving
holiday.
FALLING PALM TREES
The Dow Jones industrial average began the day
Nakheel, which means (palm in Arabic) built the with a loss of more than 200 points and it ended
Palm Islands in the Gulf, and was due to repay a $4 down 154.48 points, or one and a half per cent, to
billion Islamic bond on December 14. Many believed 10,309.92.
that there would be no difficulty doing so as Dubai
The NASDAQ index fell 37.61 to end the day at
World, the Government of Dubai and Sheikh
2138.44 and the broader Standard & Poor's index
Mohammed bin Rashid Al Maktoum, Dubai‟s
of 500 stocks finished down 19.14 to 1091.49.
billionaire ruler, were assumed to be supporting the
developer. It now appears that nobody has the money In Frankfurt, the Dax index fell 1.32 per cent to
to repay or refinance the bond and so the other $56 5,540.34 while in France, the CAC lost 1 per cent
billion of Dubai World‟s liabilities are also at risk. to 3,639.66.
Government intervention in the restructuring of this A key Japanese index, the Nikkei, was 2.28 percent
commercial operation was a big concern as to how or 213.61 points lower at 9,169.63 points.
the world market would react to this Fiasco as there
is a major chunk of investment in Dubai world from The Hang Seng, a benchmark index of the Hong
across the globe, including many banks, investment Kong Stock Exchange was at 21,445.13 points,
houses, and financial institutions. 3.45 percent or 765.28 points lower.
Barclays and Royal Bank of Scotland (RBS),

SHOCKING THE GLOBAL MARKET
believed to have invested heavily in the region.
The news of the collapse of the Dubai World led to a Barclays' shares fell 3.13 per cent to 280.94p ,
negative impact on the entire world. This was evident Standard Chartered lost 4.23 per cent at £14.50 and
in the stock markets across the world as they opened HSBC fell by 3.64 to 679.9p.
on November 26, 2009.
Despite fears of exposure, it is to be noted that RBS
Shares in London declined rapidly as the market shares rose 5.53 per cent on that day to 34.8p after
opened, After steep losses in Asia, investors panic
Volume 1; Issue 1
The construction sector contributes
approximately 10 percent to Dubai‟s GDP. The
it announced it had signed an agreement to enter delay of these projects will cause a decline of
the Government's Asset Protection Scheme. Dubai‟s GDP.
IMPLICATIONS Expert comments on this issue are to stay calm as
a default of $60 billion may cause heavy losses to
Firstly, a review of data from the Bank for
many investors but cannot lead to recession in
International Settlements suggests that banks in Uk,
world market.
US, Europe and Japan are highly affected from the
crisis Due to this there will be a change in the
monetory policy of the central banks.
Extraordinary measures like increasing the interest
rates would be taken. There are concerns that if
major Western banks suffer renewed heavy losses
this will then slow the flow of their credit to other
economies that have relied on it to stimulate
growth. In the meantime it is the broader loss of
investor confidence that is having a greater global
economic and market impact.
Secondly, There have been huge falls in property

values in Dubai. A boom in property prices over
the years preceding the global crisis created asset
bubbles that exploded in the later half of 2008. Written By:
Even before this shocking announcement property
prices and rents stood as much as 60% below their Pankaj Ishpujani, Rahil kataria
pre-crisis peaks. Furthermore, there is still a huge MBA Class of 2011
oversupply problem, with 25% of Dubai's homes
lying empty, according to a recent report by Amity Business School
Colliers. This can surely lead to a further decrease
Email: pankaj_arora59@yahoo.com
in the value of property as Dubai has to overcome
its liquidity crunch. SOURCES – Times of India, Hindunet

Volume 1; Issue 1
Mutual Fund Trading- Beginning of New Era

M
utual fund trading offers investors the holdings at any point of time from a single report.
option to buy and sell mutual fund The new platform would be cost effective for the
units through stock exchanges as they customers and mutual fund companies. The mutual
trade the shares. Both BSE and NSE, after getting fund companies will save on physical transaction
the SEBI approvals for trading of mutual funds costs by using the new platform. The investors will
through the existing infrastructure of stock have to pay brokerage fees as against the transaction
exchanges, launched the platforms for trading Mutual cost levied by the distributors. The customers may
funds. National Stock Exchange launched Mutual have to pay less for transactions on the new platform.
Fund Service System on November 30 and the Moreover, mutual funds are expected to save Rs 18-
Bombay Stock Exchange launched BSE Star MF 20 per transaction in the new system. The investors
venture on December 4. Both of these platforms are are also able to save on repeated documentations for
tying more fund houses and increasing the list of transactions in mutual funds by just having the demat
funds which can be traded on their platform. This account.
platform will enable to increase participation of retail
investors and volumes as the stock exchanges have However, the investors need to pay the broker‟s fees
trading terminals spread in different parts of the as well as fees the exchange may levy. Such fees may
country and it leads than the existing distribution mitigate the advantages of abolition of an entry load.
network of the various asset management companies. The investors will also have a tax obligation to fulfill
for trading on the platform. Brokers are looking for
Mechanism of Mutual Fund Trading this as an opportunity and distributors don‟t think this
mode of transaction will increase volumes
Investor can now trade mutual fund units through any significantly.
member of the exchange who is registered as a
mutual fund adviser with the Association of Mutual Analysts expect the NSE‟s platform to boost mutual
Funds of India (AMFI). Investors need to place their fund transactions by 35-40% in 10 months.
orders for both subscription and redemption of their
units with these members. The only extra
requirement for this transaction is the demat account.
The investors can place their orders between the
trading hours i.e 9 am to 3 pm and the settlement
period is T+1 working days. Investor placing order
during a certain day will enjoy the benefit of the
same day‟s NAV.
Written By :
Pros and Cons Puneet Malhotra
MBA Class of 2010,
The new mode of transaction is quicker and smoother Amity Business School,
apart from faster this will allow investors to get a Email: puneetmalhotra1@gmail.com
clearer picture of their stocks and mutual fund

Volume 1; Issue 1
Don’t believe us…!! Hear it straight from the mouth of the people…who have …“been there”, “done
that”…!!! Get the first hand account of all that’s happening around the world.
LAPASATION:
The Big Hurdle on Life Insurance Growth
I t is an unavoidable state that life insurance is

the business depends upon law of large
numbers, mortality and morbidity factors and
trend in the economy etc in this context it is very
important for life insurance to do new business and
3. Pension policies were observed to show least
lapse rates among all the categories
4. Term assurance products showed higher rate of
lapsation with respect to both number and
premium lapsed ( 28.27% by numbers and
prosper since existing polices keep maturing and 18.95% by premium)
also results into other modes of termination such as 5. It was observed that lapse rate with respect to
death claims, surrender, result in accident or both numbers and premiums were almost similar
permanent disabilities. For example it is said that to each other.
life insurance corporation of India settles 3 claims in 6. whole life showed higher lapse rate than
the span of man‟s single breath. So it is very endowment products for with profit policies and
important to add up new policies in the business to conserve is observed with non profit policies
maintain the exercise of law of large numbers. 7. Lapse rate (by number of policies) with respect
to mode of premium payment tended to be
Erosion of numbers of polices is due to various higher with frequency of premium payment and
natural factors. To keep the numbers at a large level lower for monthly and salary deduction.
which is very important to do life insurance business 8. Lapse rate with respect to age at entry showed a
in sound and stable manner, it is very necessary to decreasing trend from the age group 18-22 to
add new polices continuously. Lapsation of policies around 60 years and lapse rate tended to increase
recognized as a great source of loss to the parties from the range below 18 to age group 18-22.
concerned- policy holder, Life Insurance Company 9. Lapsation rates with respect to numbers in
and also the employee and agent. traditional products was observed to have
decreased from 7.69% in 2004-05 to 6.59%
The attempt of this article to explain the issue of
2006-07 and premium
Lapsation hit the life insurance industry and to
Lapse rate decreased from 6.45% to 5.63% in the
suggest possible ways to control the same.
same period.
IRDA finding on lapsed policies
What is Lapsation?
1. Lapsation rates of non medical policies are
Lapsation of policy is discontinuation of premium
observed to be higher than for medicals polices.
payment by the policy holder during the period of
2. Unit linked products has lapse rate as 18.9% by
operation of the policy due to any reason other than
numbers and 10.1% by premium. These were
death of policy holders. the length of the lapse
higher than for traditional policies.
policies can be defined as the period between the

Volume 1; Issue 1
month when the last premium installment was paid Effects of the lapsation
and the month the policy was issued. In India, the
acceptance of the proposal for life insurance 1. Disturb the Bottom lines: it is the known fact
necessitates administrative process which, together that the insurer has to spend the initial years to
with agents commission and medical charges, cost procure a policy by the way of payments to
of the life insurer is almost whole of first premium intermediaries (in form of commission, incentive
and major part of second year premium. bonus to Managers, salaries of administrative
employees engaged in procuring the new
Early lapses, therefore, pose a major financial business, establishment expenses etc and it take
problem to the life insurer. It has been realized that quite a while for insurer to recover the expense.
the phenomenon is not amendable to any simple If the policy is lapse, especially after they are
statistical model due to inherent stratification in the issued, the insurer has no way to recover those
population of lapsed policies. life insurer may have expenses, such looses lead to fall in the
to adopt a uniform definition for lapsation of profitability for the insurer – this lead to fall in
insurance policies to give more leeway to the bonus rates for the policyholders. This
policyholders on premium payments. further again lead to lapsation as again some
Facts reveal that lapsation rates – in terms of people would again dissatisfy with the fall in the
number of policies – increased to 6.64% in 2006-07 profits and this vicious circle continues. There
from 5.62% in 2002-03. the lapse rate by premium fore, it is very imperative that insurer control
rose to 6.95% from 4.4% in 2002-03. the lapse rate lapsation from the very beginning.
in ULIP is 18% in terms of number of policies and
10% by premium. It is also higher as compared to 2. Lapsation hits the income of the insurance
traditional policies. Over 7, 52,000 polices of the agents by the way of loss of commission on the
life Insurance Corporation of India alone has lapsed. policies that are lapsed.
The sum insured involved in lapsed policies is in
excess of Rs 47,000 cr. Insurance regulator IRDA 3. Lapsation of the policies hampers the ability of
has recommended a uniform grace period of 30 days the companies to do proper manpower planning
for policyholders paying their premium every as company cannot accurately evaluate the staff
quarter, half yearly, or every needed to process the proposals and also for
”}paying monthly premiums. further processing and policy servicing.
When policies lapsed before enough premium 4. Such lapsation would lead the feeling that the
payments are made to cover initial expenses on company is over staffed since the total cost by
procuring the policy, and gap during early policy the way of salaries would be high( including the
years in actual expenses and expenses recovery in employess needed to process the lapsation
pricing premiums, the company has to make the this policies also). Lapsation thus in an anti-
losses from the remaining policy holders. Therefore, employee phenomenon.
the lapse rate will have effect on the financials of the 5. Leads to loss of goodwill among the policy
insurers. holders as they perceive the premium paid as
lost to or forfeited by the company- while this
may be perfectly justified by legal. Contractual
and actuarial principles it remains a cause for the
policyholders to view it as money swindled by
the company.

Volume 1; Issue 1
Reasons of Lapsation
1. Wrong selling: Most of the participants returns/others benefits must ideally only be
responded that they were not satisfied with the incidental to the aspect of sharing of risks.
product they were sold. The most common 4. Over selling: Selling the policies to the
refrain was that they were not explained the policyholders without understanding their
features, benefits and term of the plan. They also financial commitments also aggravate the
informed that the focus of the agent was only to lapsation. In some cases, it leaves one with the
finish the sale at the time of canvassing the doubt as to whether the policy was canvassed
policy. with the policy holders interest and his insurance
2. Natural market: Many participants responded needs in mind or so as to meet business targets
were from the natural market of agent and Sales or commission needs of agents or sales
mangers. They had bought the policy as an managers. Had there been need based selling of
obligation to the concerned agents or sales life insurance, the aspect of lapsation would
mangers who were their relatives, close friends have been far more controlled and minimal.
or neighbour with an idea to help them. Some of 5. Bad service: Bad services in the eyes of the
the agents or managers were now in terminated policyholders have usually involved some of the
conditions and did not contact the policyholders following matters, almost in all cases, where bad
to pay the premium to keep policies in force. services quoted as a reason of lapsation.
Some of them even midly against the company A. policy given is not meeting his/her
for having removed the development officers or expectation;
agents from its rolls and hence were against B. agents has convinced the party for one policy
paying premiums. while the insurer has offered the party
3. Forced selling: It has been observed that another policy due to underwriting
policies were sold by way of forced selling considerations by way of a counter offer;
rather than by convincing the parties about the C. lack of follow up by agents or sales manager
benefits of insurance and creating a responsible for collecting of renewal premium
felling in their mind so as to keep paying 6. Introduction of new plans: One of the main
premium during the policy contract. Worse still, reasons of the lapsation is the introduction of
some parties were comparing the returns new plans that are perceived to be better by the
projected by the policies with the returns policyholders. Perhaps aided by the idea
receivable by the banks and post office in their given by the agents or managers they prefer to
recurring deposits schemes and arguing that the take new policy and let their existing policy to
returns from insurance is unattractive. This goes lapse.
to give the felling that the agents has not been 7. Miscellaneous reasons : There are few reason
successful or had not attempted to explain the that also hit the lapsation are non receipt of
concept of life insurance in its detail to the notices, ignorance no follow up by agents,
parties since life insurance basically viewed as a change of address, malpractices by agents or
risk sharing device and the aspects of the field force, inadequate explanation of the
products- riders etc.

Volume 1; Issue 1
Trends observed in Lapse rate for the industry over the year 2002-03 to 2006-07
The total lapses and exposure during the period were as follows:
Numbers Lapses Exposed to risk Ratio
No of Policies 5.226 crore Life yrs 73.419 crore life- yrs 7.11%
Premium Rs 20,521 Crore Rs 3, 36,184 Crore 6.10%
TREND IN THE LAPSE RATE FOR THE INDUSTRY AS A WHOLE
9.00%
8.00%
7.00%
6.00% Lapsation rate-
5.00% Numbers
4.00% Lapsationrate-
3.00% premium
2.00%
1.00%
0.00%
2002- 2003- 2004- 2005- 2006-
03 04 05 06 07
From the above figure, industry lapse rate with respect to number of policies increased from 5.62% to 7.79%
and decreased slowly from 2004-05. Lapse rate with respect to premium increased from 4.40% to 6.95%
slowly increasing year by year excepting a small decrease in 2006-07. The lapse rate on premium basis is
lower because fewer policies with larger premium were discontinued.
SUGGESTION TO MINIMISE LAPSATION

Free look period: introduction of free look option by insurance regulator for policy holders. It provides
option to the policyholder to evaluate the policy taken by them. Eg to see whether its meets their needs,
requirement, outlook, financial commitment, financial outlook etc. if their needs not satified then they can
return the policy within the free look period after deducting some nominal charges. This has put a greater
responsibility on the insurers, agents and sales managers to sell need based selling alone. It helps company to
get regular premium on existing policies as product sold on need based. This also have possible effects on life
insurance business namely
Volume 1; Issue 1
The life insurance can also have a check by way of e. Premium notices should be given on emails,
free look period – the life insurer can effectively through Mobile SMS service, Tele reminders,
analyze the free look cancellation that take place in local connected area tie ups like tie up with post
his organization and take remedial measures like offices, banks, MTNL, BSES, Easy bills etc
marketing activities, policy design, policy servicing f.
aspects, market and product segmentation etc. this Easy Revival norms : It is very important to easy
should be a major solutions as far as lapsation for the revival process , which help us to reduce the
reasons are concerned. lapsation process and it will be useful to control
further lapsation and actually help in controlling the
Educate field force: Advanced education to the dues on the lapsed policies from pilling up.
agents, development officers as well as other field Normally insurance company register two types of
force of the life insurance should be taken up in a lapsation, if policy lapsed does not exceed six
big way as to adverse effects to lapsation. Lapsation months and second if policy lapsation time exceed
is the major hit on the insurer‟s profitability. The life six months. During the revival process it may also
insurer companies incur the huge cost in the initial called as Minor revival and Major revival. It is very
period and which goes waste and this is a drag on important to educate the customer about the major
the life insurance company‟s income and life funds. revival which need the entire medical test
Insurance agent is the primary underwriter in the life requirement and all the related cost has to be born
insurance process and he/she should not deal in the by the customer. Few initiatives on easy revival
business which is likely to end up as lapsed policies. norms.
So, it is imperative on the part of life insurance
company to educate the insurance agents, company a. Revival incentives: waiver of handling charges
employees and add various models to reduce and interest rate on due premium on the revival of
lapsations. As a supplement to the is point, it is also lapsed policies
important to take corrective checks and make sure b. No medical charges: high risk cover lapsed
that agents take all precautions to weed out polices also given waivers on medicals test on the
proposals that may lead to lapsed policies in future. revivals after consider their moral hazards,
financial requirements
Service standards: in this competitive insurance c. Monetary support: it will definitely help by
industry where products of all insurance companies giving then loan facility at subsidies rates to
are more or less similar to each other. Service play revive their insurance policies.
an vital role to make the real differentiation.
Following points definitely improve services
standards Apart from all, it is also important to initiate special
campaign for the revival of lapsed policies and
a. Use of information technology to reach to the educate the customer for the benefits of continuation
customer at their feasibility. of the policies.
b. Give them various options to pay their premium
like through ECS, debit cards, credit cards, online Increase sale of limited premium payment: it will be
payment etc beneficial for policy holders and insurance
c. Online updation / changes , switching of funds companies if premium payment period is limited.
and maturity and claim process etc Most of policies lapsed after 3 to 5 years as
d. Design good contacts and feedback form to customer feel burden paying every year. Another
understand the changing needs , customer point, it increases the premium size of the policy and
requirement etc customer would avoid lapsation.

Volume 1; Issue 1
Increase renewal commission and reduce FYC: It A. Lapsation also affects the bonus rate of the life
is commonly felt that agent interest on the insurance companies which ultimately
particularly policy does not extend to more than dissatisfied the existing customer.
probably the first three or four years of the issue of B. Lapsation hits agents renewal income and loose
the policy except in cases, where the polices belong their interest to work regular
to high risk cover or some other influential policy C. Lapsation forfeit the purpose of law of large
holder who further give regular business. Therefore, numbers as risk divided among policy holders
it is helpful to restructure the present commission decreased
structure of insurance agents. First year commission Few facts on lapsation and its impact on the industry
should by reduce and agent will get high incentive
on renewal premium payments. Few initiatives will 1. In 2007-08 the amount of money that lapsed
definitely reduce lapsation (policies that has zero surrender value) and came
to insurance companies was about 23,000 crore .
A. First year commission should be reduced and if we add another 15,000 crore paid as
agent should get standard commission every year commission the investor money with the
eg: every year commission should be 5% company and agents goes to 38,000 crore
B. Special incentive to agents on regular renewal eg 2. Life insurance industry have inforced policies
:Give them 10% extra bonus on renewal 31cr, 20 cr policy holders. In 2006 86 lakh
payments exceed 10 years. policies lapsed which equal to 22% of total
C. Schemes on persistency score : agents should get policies is sold in 2006-07.
various benefits like awards, in kind gifts for
maintaining persistency of above 95%
Written By:
Improve new business procreation control: it is MR. Sachin Sodhi
useful to have good control at the time of Designation : Assisstant Branch Head
introduction of new business itself to check the Company: Kotak Life Insurance Limited
incidence of lapsation. In this connection, the help Email id: kotak.sachin1@gmail.com
of planning department can perhaps be taken to have
analysis of lapsed cases data on state wise, area References
wise, income wise, sec wise, mode wise, sum
insured wise, product wise, payment mode wise, 1. Journal of insurance institute of India Dec issue
agent wise, manager wise basis etc to be able to 2004
ascertain with reasonable level of accuracy as to 2. Journal of insurance institute of India June issue
whether a particular policy is likely to be able to end 2009
up as a lapsed policy or not. This analysis will be 3. IRDA occasional paper 2008 topic “lapsation and
helpful in many ways – one it arrest the introduction its impact on life insurance industry”.
of potentially lapsed policies and it keeps the agents 4. Ernst and young insurance paper June 2009
and managers alert the quality of business they
procure.
Conclusion:
It may be concluded that the aspect of lapsation of
life insurance is a very complex and it effects on the
profitability as well as survival of Life Insurance
Company. The following points which affect the
industry due to lapsation are as discussed bellows:

Volume 1; Issue 1
Keep your eyes dilated…as this section will give you an update on the news that is making
….waves across the world wide web
 http://www.momentumstockpicks.com/article-118-stock_dilution_-
_what_it_means_to_stockholders.php
Have you ever thought what is stock dilution and how does it affect the market price of a company?
This question can be answered by this article which clears all the doubts regarding the effect of dilution
on earning per share (EPS), benefits or losses which are bear by the stockholders due to fluctuations in
stocks i.e. STOCK DILUTION. It also discusses that weather the stock dilution would be beneficial to
a stock holder or not?
 http://economictimes.indiatimes.com/news/economy/indicators/GST-may-push-cos-to-
rejig-shut-units/articleshow/5422248.cms
Ever wondered what GST is? How will it affect you...and what does it entail for the policymakers and
the corporate? This article is on the hot topic of GST and it tells us how the implementation of GST
will cause certain companies to rearrange themselves. Read on to learn more…
 http://www.thehindubusinessline.com/2010/01/08/stories/2010010850830900.htm
As we all see that corporate is recovering from inflation and slowdown but have you ever thought how
has it affected the lower middle class? Our economies will surely be able to succeed in the turmoil of
recession, as it has been doing so far but soaring wholesale price index (WPI) and rise in prices of
everyday edibles like potatoes and sugar etc is making the common man worry about his survival. The
failure of supply chain and distribution network of edibles by the government is another aspect to worry
about. What possible steps and remedies can be taken by the government for food security is discussed
below. So read it to know more about the subject.
 http://www.business-standard.com/india/news/india-2020will-we-be-like/381393/
Have you ever thought how India will look like in 2020? What would be the major topics for concern at
that time and various socio-economic factors that would effect the growth and development of it? Will
the political scenario change for good or will it become worse. What will be the changes in the thinking

Volume 1; Issue 1
of normal consumers? Read this article to know various interesting facts and figures which may not
seem real to some experts, but who knows about the future!!!! Let‟s wait for 2020 now.
 http://economictimes.indiatimes.com/opinion/columnists/t-t-ram-mohan/A-crisis-proof-
banking-sector-/articleshow/5418626.cms
While we all talk about the crisis and slowdown, everyone says that banking sector is one of the most
affected areas of the recession in India. This is one of the most debatable topic on which various
opinions have been made but here comes this article which challenges every analysts to reframe his/her
opinion about the growth of banking sector. Various facts and examples have been given from past
records which proves that banking sector has survived well and will continue to do so. Read on further
to catch some more.
 http://economictimes.indiatimes.com/opinion/columnists/swaminathan-s-a-aiyar/Fast-
growth-trickles-up-from-the-states/articleshow/5414772.cms
When we talk about the growth of India, then basically we are concentrating on the growth and
development rate of all 28 states and other union territories. The fast pace of growth of India can not be
measured by leaving or ignoring even a single state. So this article talks about all the states and their
comparative analysis of growth rates, economies, population figures etc, so as to focus on the unity and
growth statistics for India. To get more details on the topic, log on to the following link.
 http://www.rediff.com/money/2007/may/28bspec.htm
This article narrates the lecture of Mr. R Narayana Murthy, which he delivered in Stern School of
Business, New York University. He talked about the experiences of his life from which he learned
lessons. These lessons led to the incorporation and growth of Infosys, a well known IT firm, which now
has a net income of more than $800 million and a market capitalization of more than $28 billion.
Know more about the success story of INFOSYS with Mr. Narayana Murthy.
Contributed by:
Kanika Goel
MBA, Class of 2011
Email : kanikagoel09@gmail.com

Volume 1; Issue 1
Does a simple capital adequacy equation give you “surface tension”? Does finance make you feel
like…numbers and equations were better off …when left to Newton, Archimedes and all…!!! Don’t
worry….this section has been rightfully carved out for you!!!
Being an engineering student with almost nil Ordinary shareholders. Preference is as its name
knowledge of commerce, the business section of any suggests have a predilection over ordinary or
newspaper seemed almost an alien language to me. common stockholders. They get dividend at a fixed
But somehow I was always interested in the rate which doesn‟t vary or fluctuate as it does in case
BSE/NSE, stocks, Index, etc. What exactly are these, of ordinary shareholders. Also at the time of
how stocks and shares are traded in markets, what liquidation or the bankruptcy, its precedence is taken
are these markets, how does a BSE differs from a into account. That means they are paid first. Since
NSE, were just few of those numerous questions that ordinary shareholders get their dividend only after
kept bugging me over the past few years. meeting other obligations, hence they are also
referred as the owners of residue. Preference
Just then I met, some of my classmates who helped shareholder doesn‟t have voting rights in the
me understand these terms. To understand this, we company and their dividends do not vary from year
should first know what exactly stock exchange is. to year. It is based on a fixed pre-decided percentage.
It‟s an organization which provides an individual,
financial institution or a corporation facility of These were some of the basics that were
selling and purchasing of stocks. These individuals needed to be cleared before knowing what BSE or
or corporations are called shareholders. NSE is.
Now what is a stock? It‟s actually the capital or the One of my friends gave me an excellent
money raised by the corporation through the issue of example to explain a stock exchange. Let‟s say, if
shares entitling the holder or the buyer of that you need to buy a commodity were do you go.
particular share to an ownership interest in return. Obviously to the market…! Here, we draw an
Confused???Well, have you seen Guru? In the analogy where this market is the stock exchange and
movie, Abhishek Bachchan raises capital for his the buyer here is a shareholder.
company by issuing shares or part of ownership to
the general public. Now we move on to know which stock
exchanges work in India. Basically we have two
I asked my friends what is our benefit or what profit significant stock exchanges- Bombay Stock
we are getting in return? They told me in return of Exchange (BSE) and National Stock Exchange
our investments we get dividends and capital gain. (NSE) operating. I‟ll explain you each one by one.
Now we as a shareholder make capital gain or losses
by selling our shares. Here we have basically two
kinds of shareholders; Preference shareholders &
Volume 1; Issue 1
Bombay Stock Exchange (BSE) is the oldest stock
exchange in India and probably whole of Asia.
exchange under Securities Contracts (Regulation)
Listed with more than 4700 companies it is the
largest in world. Have recently read on a website that Act, 1956 in April 1993 and commenced its
in terms of market capitalization it is largest in South operations in June 1994. It is the largest stock
Asian region and 12th largest in world. Here I come exchange in India in terms of daily turnover and
across a new but a widely used term Market trading volume. NSE has a Market cap of about US$
capitalization. The equity market capitalization 1.46 trillion and is an extremely fast growing stock
exchange in terms of market capitalization.
refers basically towards the measurement of the size
of the corporation or the business. It is calculated by Talking about the NSE, Standard and Poor’s
simply multiplying share value of the public CRISIL NSE Index 50 or S&P CNX Nifty is the
company to the number of outstanding shares. Don‟t index containing 50 stocks accounting for 21 sectors
get confused with the term outstanding attached to of the economy. The function is same as that of
word share here. It means shares which are Sensex.
authorized, issued and purchased by the investors.
For the complete list of BSE-30 and NSE -50, you
So, after explaining the term Market capitalization, can anytime visit their respective websites i.e.
when my friends told me that BSE has a Market
Cap of net worth US$ 1.79 trillion !!! I could finally  www.nseindia.com
make some sense out of it !
 www.bseindia.com
Now Sensex is another important word that you
By the time my friends helped me explaining the
come across usually when studying markets. When
elementary knowledge of markets and shares, I was
asked what it is, one of my friends replied that the
now ready to understand
trend of BSE or the performance of the exchange
cannot be comfortably determined by watching the How to look into the index?
individual performance of each 4700 listed How to read them?
companies, so a group of 30 companies are selected. What all things an investor has in his/her mind
Sensex is actually Bombay Stock Exchange before buying a share?
Sensitivity Index. The performances of the stocks of
these companies representing various sectors of the Of course they explained me crude level of
market are observed. It is compiled and calculated on investments and markets but at least it gave me
a "Market Capitalization-Weighted" methodology rough idea on how to go about things.
of 30 component stocks representing large, well-
Frankly speaking, earlier indices, facts, figures etc.
established and financially sound companies across
used to scare me away but seriously friends it is
key sectors. The base year of SENSEX was taken as
easy. We‟ll now start with how to read an index.
1978-79.
Let‟s study the following index section from
Now coming onto the more recent National Stock
economics times.
Exchange (NSE). It was established as a stock

Volume 1; Issue 1
I‟ll take an example to illustrate you. Also there is a column that reads as 52 Wk H/L that
reads simply the highest value of the share in past
Let say if an individual needs to invest in a share, year i.e. Rs.381 and similarly Rs.116 as lowest.
say Birla Corporation then he or she‟ll first notice
the previous closure value of 1 share of Birla Corp And finally the PE column. The P/E ratio is a
i.e. Rs 308.40. financial instrument used to determine that how
much an investor is willing to pay for a stock relative
Now the investor determines that how the share to company‟s earnings.
prices of the company faired the last working day.
He notices that the opening value of the share on the I‟ll give you the calculation formula for it.
trading day was Rs.317. During the day it recorded
the highest value of Rs.317.75 and the lowest value P/E ratio = Current market price of the
of Rs. 304.95. share/ Earning per share (EPS)
For example in this case the Price to Earnings

At the end of the trading day, during the closure of
market it had a value of Rs.308.25. ratio of Birla Corp. is 5.0. That means
shareholders of Birla Corp. are willing to pay Rs
Also there were about 1141 different entities that 5 for every Re 1 of earning that this company
recorded an overall trade of total of 26277 volumes generates. It‟s a very important financial tool to
or number of shares during the day. compare similar sectors companies and hence
the lower the P/E value the better its return.
It is followed by the Group i.e. NSE where the
companies belong to (or are listed). Now here we come across a new term that is
Earning per Share. The portion of a company's
profit allocated to each outstanding share of

Volume 1; Issue 1
common stock. Earnings per share serve as an why a majority of people take help from financial
indicator of a company's profitability. institutions like banks and consultants to keep their
money safe.
It is calculated as
With this I come to the end of this article. I have a
Earning per Share= (Net income – Dividend on suggestion for you people. While preparing this
preferred stock)/ Average outstanding shares article I came across to a very good website which I
It is actually the measurement of guess most of you have heard of. It‟s Sharekhan.com
company‟s profit. Preference dividends are which actually deals with both the investment
subtracted from the net income as it reduces the solutions and at the same time explains the
amount of profit leftover for equity share fundamentals of investing.
holders.
At the end I still had a doubt in my mind. After

going through the previous section any one can
infer that it‟s better to invest in company whose
stock PE ratio is lower. To which my friend
replied that her father who seldom trades in
stocks does not completely rely on just the PE
ratio. It is indeed a very good indicator of
performance analysis of a company‟s stock but it
cannot be held as the only indicator. She further
explains this as; a company can anytime increase Written By:
its Net income by borrowing larger funds, hence
increasing EPS ratio and thereby reducing the Abhishek Sinha
P/E ratio. Hence, it is better advised to initially
MBA, Class of 2011
trade stocks under the supervision of an expert
who can advise on the dynamic nature of the Amity Business School
market and stock, determine the trends set in
them and finally help you invest in it. This is Email_id: abhisheksinha87@gmail.com

Volume 1; Issue 1
You feel that “Green Shoe Option” is the latest discount scheme by Jimmy Choo…. Are you backward in
“forwards” and clueless in “options”? Does an SPV sound like an SUV to you? This wagon will carry you
away from your finightmare…and make Finance as simple as a shopping excursion!!
Arbitrageur
Investors who seek to exploit differences in interest rates, exchange rates and share prices between different
markets. A high-risk, high-reward business for professionals with millions to play with.
Blue Chip
A term to describe a very large, well established, internationally recognized firm with stable earnings, such as a
company listed on the FSTE 100 index of the UK's largest firms
Credit scoring
A test of an individual's financial status. Points are awarded on the basis of factors that include income, home
ownership, debts and repayment history.
Derivative
A term that covers specialist financial markets such as those in options and futures
Endowment
An insurance policy that pays out a lump sum at the end of a set period or on death, whichever comes first.
Forex
The exchange rates is also known as the foreign-exchange rate, forex rate or FX rate. It is the rates between two
currencies that specifies how much one currency is worth in terms of the other.
Gearing
Borrowing, expressed as the relationship between total borrowing and the value of ordinary shares. A company
that has borrowed a lot of money is said to be highly geared.
Hedged
A means of protection or defense against financial loss. i.e. a hedge against inflation or currency swings.
Generally a securities transaction that reduces the risk on an existing investment position.
Mezzanine finance
Specialist, high-risk finance that is neither equity nor debt. Usually used in buyouts.
Net Asset Value
This is the value of a company or investment trust minus any liabilities. For example, the NAV of a company is
its asset value less liabilities

Volume 1; Issue 1
Overdraft
If more money is withdrawn from your current account than you have put in, you will go overdrawn. You can
ask the bank if they can arrange to lend you some money for a short time. This is known as an authorised
overdraft.
Penny shares
Shares with a very low price. A favourite of investment tip sheets, but few people make money because few
shares trade hands and brokers can often move prices against private investors.
Quantitative easing
The printing of new money by a country's central bank in order to increase the supply of money.
Historically, quantitative easing has been used by the Bank of Japan to fight deflation in the early 2000s.
Return on Equity
A company's net profits divided by shareholders funds, expressed as a percentage, which gives a clearer insight
into the profitability of a company and makes comparison between companies easier. However it does not take
the company's debt into account.
Surrender value
What you get if you surrender an investment-linked life assurance scheme early. It is likely to be a poor deal for
you because most policies telescope 25 years' worth of charges into the first few to pay commission so
surrendering in the first few years means you may get back less than you paid in.
Tax Code
This code tells your employer how much tax-free pay to give you during each pay period. Your tax code is
worked out from your tax allowances and other tax adjustments.
Umbrella fund
A form of unit tust registered offshore that has many sub funds for various categories of investment: Japan, US,
Smaller Companies etc. Switching between these sub funds is often free, so avoiding the initial charges that
investors would otherwise pay.
Contributed by:-
Aman Saxena
MBA, CLASS OF 2011
Reference:
www.thisismoney.co.uk
www.money-zone.net

Volume 1; Issue 1
When the only thing you find funny in Finance are your “marks”….then we feel there is still some more scope
for the laughter riot left !!! Read on further to know more
Humor in Recession
RECESSION , CREDIT CRUNCH, ECONOMIC 10. A director decided to award a prize of $1000 for
SLOWDOWN ….We all have heard a lot of these the best idea for saving the company money
terms lately .But there is a lighter side to these and I during the recession. It was won by a young
executive who suggested reducing the prize
am glad to share it .
money to $100.
1. The US has made a new weapon that destroys 11. "Goodyear" is now re-branded as "Badyear".
people but keeps the building standing,. Its called Perhaps even the "Good Day Biscuits" are now
the stock market. "Bad Day Biscuits"...!
2. Do you have any idea how cheap stocks are?? 12. The problem with investment bank balance sheet
Wall Street is now being called Wal Mart Street is that on the left side nothing's right and on the
right side nothing's left.
3. Bush was asked about the credit crunch. He said it
13. What worries me most about the credit crunch, is
was his favourite candy bar.
that if one of my cheques is returned stamped
4. M/S "Ali Baba and the Forty Thieves" are now 'insufficient funds'... I won't know whether that refers
(being re-branded as) "Ali Baba and the Thirty to mine or the bank's... !
Thieves"... because of ten lay-offs!
5. "Batman and Robin" are now "Batman and
Pedro". Batman fired Robin and hired Pedro
because Pedro was willing to work twice the
hours at the same rate!
6. Iron man is now "air-pooling" with Superman to
save fuel costs!
7. "Dow Jones" is re-branded as "Down Jones".

8. The credit crunch is getting bad isn't it? I mean, I
let my brother borrow $10 a couple of weeks
back, it turns out I'm now America's third biggest
lender.
9. In Japan, the "Sumo Bank" has gone belly up.

Volume 1; Issue 1
NEW STOCK MARKET TERMS PROFIT -- An archaic word no longer in use.
CEO -- Chief Embezzlement Officer.
CFO -- Corporate Fraud Officer.
BULL MARKET -- A random market movement

causing an investor to mistake himself for a financial
genius.
BEAR MARKET -- A 6 to 18 month period when the

kids get no allowance, the wife gets no jewellery.
VALUE INVESTING -- The art of buying low and

selling lower.
P/E RATIO -- The percentage of investors wetting

their pants as the market keeps crashing.
BROKER -- What my broker has made me.
STANDARD & POOR -- Your life in a nutshell.
STOCK ANALYST -- Idiot who just downgraded

your stock.
STOCK SPLIT -- When your ex-wife and her lawyer

split your assets equally between themselves...
FINANCIAL PLANNER -- A guy whose phone has

been disconnected.
MARKET CORRECTION -- The day after you buy

stocks. Contributed By:
CASH FLOW-- The movement your money makes as Gunjan Agarwal

it disappears down the toilet. MBA Class of 2010
Email: Piscean.gunjan@gmail.com
INSTITUTIONAL INVESTOR -- Past year investor
who's now locked up in a nuthouse.

Volume 1; Issue 1
Cartoon Section

Volume 1; Issue 1
CREDITS
Chairman – Mr. Yogesh Mehra
Chief Mentor- Prof. Akhil Swami
Editor-in-Chief - Ms. Prachi Makker
Faculty Coordinator- Ms. Rabiya Sood
Editorial Board
Sonia Pahwa
Mukul Mishra
Kanika Goel
Anup Kumar
Puneet Malhotra
Gunjan Agrawal
Namrata Agrawal
Soumika Roy Chowdhury
Mikku Dave
Md. Azaharuddin
Samir Nijhawan, ACA
Aanchal Khurana
Shubhangi Khandelwal
Abhishek Sinha
Conceptualized and designed by - Anup Kumar, Puneet Malhotra and Gunjan Agrawal
ABS Finance Club – absfinanceclub@googlegroups.com
Please send all your comments and suggestions regarding the article to absfinancemagazine@googlegroups.com

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Volume 1; Issue 1

Tally The Rally

From the horse’s mouth

Eyes wide open …………………………….………...Page 37

Amity Business School, Amity University has always

ADG and Head

Amity Business School

Amity University Uttar Pradesh

Amity Business School Page 2

E-Magazine is an effort of students of ABS finance club

With Best Compliments

Prof. Akhil Swami

Amity Business School

Amity University Uttar Pradesh

Amity Business School Page 3

With the beginning of a new decade, an optimistic ray of hope of strong

ABS, Finance Club,

Amity Business School

Amity Business School Page 4

It gives me immense pleasure to introduce to you “Fin-o-mania”, a monthly e-journal

Amity Business School Page 5

Bancassurance … the new fragrance in the air

Future economic trends and ideas for 2010

Global Economic Recovery: Where is it?

Dubai Debt Crisis

Talking about investments when times are tough

Amity Business School Page 6

FIRM + COMPANY = LLP

E ver since India has transformed from a closed

Amity Business School Page 7

Amity Business School Page 8

Life insurance companies require immense distribution

Amity Business School Page 10

Future economic trends and ideas: 2010

Whether short term or long term trend, the flow from

accelerated since the advent of the internet. According http://ezinearticles.com/?Eight-Economic-

Amity Business School Page 12

Global Economic Recovery: Where is it?

Amity Business School Page 14

Amity Business School Page 15

Amity Business School Page 16

After having understood some of the intricacies of Written By:

complexity involved in ensuring facilities of Md Azaharuddin

Amity Business School Page 17

Dubai Debt Crisis

In the U.S. a number of office buildings and hotels

The emirate, presently, has outstanding loans of $80

Amity Business School Page 18

Abu Dhabi‟s $ 10 billion bailout has given a bit of

The effect of this impending crisis will be limited in

Amity Business School Page 19

TALKING ABOUT INVESTMENTS WHEN TIMES ARE TOUGH

Amity Business School Page 20

MBA Class of 2011,

Amity Business School

Amity Business School Page 21

Market review : Dec 2009

Analysis of Investment Avenues

The Sun Finally Sets For Dubai

Mutual Fund Trading- Beginning Of New Era

Amity Business School Page 22

Market review: December 2009

MONTHLY INDICES CHANGE (1 Dec -31 Dec, 2009