1st OCT 2007

Volume 1, Issue 3

Wealth Incorporation Presents

CHAANAKYA
..Tracking the Economy
Issue Attractions

National Headlines International Headline Corporate Interview Quiz Special column Student Editorial Pearls of Wisdom

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There are Only Three Colors, 10 Digits and 7 Notes. It is what we do with these is Important- Ruth Ross

National Headlines

Indias total foreign debt rose by 22.6% to $155 billion in 2006-07, as companies went overseas to borrow on account of cheaper credit. HDFC announced a special interest rate of 10.50% for customers availing home loans at floating rate of interest. This is 75 basis points lower than the regular rates. The National Hydroelectric Power Corporation (NHPC) signed three memoranda of agreement with the Power Finance Corporation for Line of Credit aggregating to Rs 3000 crore for project financing in Himachal Pradesh, West Bengal & Jammu-Kashmir. The Department of Revenue has withdrawn the 4% special CVD (countervailing duty), on VAT paid imports. Exchangeable Bonds (EBs) will have to face withholding tax on the interest payments to the bond holders. EBs , a much awaited financial instrument, are an innovative tool that will allow corporate to raise foreign funds against their holding in group companies

Inflation 4.12% , IIP 7.8 % 15 days Movements

International Headlines

Diversified manufacturer Emerson Electric agreed to buy a Motorola unit that serves the telecommunications, medical and defense industries for $350 million in cash. Euro zone inflation rebounded in September above the European Central Bank's target for the first time in a year but market turmoil depressed economic sentiment, making another ECB interest rate rise less likely Japan set to privatize mammoth postal system Goldman Sachs has abandoned its bullish view on the global economy. It has become bullish on the U. S., Japanese and the European economies China has unveiled a series of measures to tighten property lending in its latest attempt to cool the country's overheating real estate market and curb mortgage lending risks Germanys unemployment improves during the month of September

The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective Warren Buffett

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Corporate Interview
An Interview with Mr. Syed Musheer, Deputy Manager FuturesFirst. Chaanakya: The crude oil prices are almost touching $ 80 per barrel, but in India petrol prices are constant. What will be the short term impact on PSUs oil companies? Mr. Syed: Oil has been trading above $75 since long. The PSUs have been making loses. Since, Oil is mainly traded in dollars, oil companies are also losing due to the depreciation in dollar value. And due the government regulations the prices hike of petrol and diesel is not being transferred to the final consumer. So, they are being compensated by issuing Petroleum Bonds. Chaanakya: The turnover of Commodity futures dipped 27% in Sep07 for the first time in 2007. What are the reasons? Mr. Syed: It is noticed that when there is very high volatility then the volume of trade is low due to the high risk associated with it. In the month of September volatility was at an all time high over the past 5 years. Hence, the turnover would have fallen. And, the US sub prime is also another reason which would have led to the fall in turnover as the credit markets were cautious. In the long run the market is Bullish. Chaanakya: Metal prices in particular Gold and Silver are on a surge due to the upcoming festival season. What do you comment? Mr. Syed: India is the largest consumer of Gold and Silver and one month before Diwali the price of the Gold and Silver are expected to rise. But there is always a direct relationship between the prices of Gold and Silver and Petroleum Prices. It is always noticed that when the prices of oil rises then the prices of Gold and Silver are bound to rise as Oil is the main input for mining of Gold and Silver. Hence, this rise in prices of Gold and Silver is also the effect of rise in prices of Oil. Chaanakya: Of late MCX and NCDEX are playing a proactive role in development of commodity markets in India. Are they comparable to the likes of CBOT and CBT? Mr. Syed: CBOT and CBT have merged now and the volume of trade is highest in the world. In terms of turnover it will take time for MCX and NCDEX to compete with CBOT and CBT. Our commodities markets are not fully mature and it will take a minimum of 5 more years for it to make any mark globally. Chaanakya: Do you think the interference of the government is a hindrance for the development of Commodities market? This is with reference to its interference in the wheat futures market. Mr. Syed: It has its pros and cons. In the present day we dont have a strong regulatory body which can monitor the commodities market like the SEBI for stock market. Hence, there is a need for the government interference to protect the poor and the needy. But once the markets mature, the government will automatically stop from interfering. Chaanakya: Any suggestions for students who want to take up trading as a career? Mr. Syed: One should have the ability to withstand stress and handle their temper. One should not be stubborn, should be a smart risk taker, decent amount of intelligence and high amount of discipline. It involves 90% attitude and 10% intelligence. There is no special skill that one needs to learn before taking up this career. It is all about risk taking ability, discipline, intelligence and passion for the job

Quiz
1. The First Finance Minister of Pakistan Ghulam Mohammed was the co-founder of which Indian company? After his moving to Pakistan and Indian attaining independence the company changed its name 2. Name the bank founded by Mr. G.D Birla, after the historic "Quit India" movement in 1942. 3. Which is Indias first PSU? 4. Name Indias first film producing company to go public that was set up by a Chartered Accountant? 5. Which organization was the first pressure group ever formed in the country that claimed to represent the whole of Indian Business in the early 1920s? (Answers will be published in the next issue) Answers to the previous issue 1. LIC's `Jeevan Bharti'. The policy offers a critical illness benefit that covers female illnesses 2. Zavata Inc

3. Corporate governance 4. Air Deccan and Apollo Hospital 5. Canara Bank and oriental bank of commerce

Columbus did not seek a new route to the Indies in response to a majority directive. . Milton Friedman

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Major Macro waves and their Indicators By Mathew

Macro wave Inflationary tiger Indicators Consumer Price Index Producer Price Index Employment Cost Index The Jobs report Consumer confidence Personal income and credit Retail sales

Did you Know?

US Airways makes $10 million each year from ads on tray tables and napkins in their a irplan es. L ow-fa re carrier AirTran charges companies as much as $50,000 a month to advertise on napkins

Recessionary bear

Did you Know? God of economic growth and the business cycle GDP Car and truck sales Capacity utilization Housing starts and construction spending S&P's DRI forecasting Productivity and cost Treasury budget report Merchandise trade balance Import and export prices

Archangel of productivity Budget deficit dragon Trade deficit trap

If you are a single income family with two children in Slovakia, sub s id i es th e government provides actually makes your net income tax (-5.3%) of your income. In Denmark, the same family would pay 25.4%

Did you Know?

Only three companies have reach ed th e coveted No. 1 spot on Fortune 500 since 1954: GM, Exxon Mobil and Wal-Mart.

Impact of fed rate cut in India By Aishwarya Wiswanath

In light of the recent Federal Reserve rate cut, experts believe that India too will come under the influence of the interest rate cut of 50 basis points to 4.75%. Their opinion can be summarized as below: Overall effect will be positive for emerging equity market due to increase in foreign institutional flows - Liquidity concerns that emerged due to sub-prime crisis will get offset India to be among the out performers in the emerging markets - Lower dependency on exports Domestic consumption growth remains intact (more so backed by good monsoon) - High real interest rates - RBI is in good position to counter any adverse developments with contained inflation Rupee to strengthen following dollar weakness - Positive for FII in view of higher dollar return Negative for export oriented sectors Fed action more aggressive than the expectation highlights risk of US slowdown which will adversely affect global demand - Commodities likely to see correction on the base of demand slowdown Experts continue to recommend overweight on domestic consumption and infrastructure related plays and underweight on export oriented plays. Their top picks are ITC, SBI, PNB, Bharti, L&T and DLF among large caps. Experts are : Positive for sectors such as: Telecom, FMCG Industrials/Infrastructure, Financial services, Real estate,

Stock Ratnas
RELIANCE INDS, BSE-500325 , NSE RELIANCE CMP- Rs.2058 TARGET PRICE- Rs.2298 OPTO CIRCUITS, BSE-532391, NSE-OPTOCIRCUI CMP- Rs.512.65 TARGET PRICE- Rs.555 HT MEDIA , BSE-532662, NSE HTMEDIA CMP- Rs.215 TARGET PRICE- Rs.250 KALPATARU POWER, BSE-522287, NSE-KALPATPOWR CMP- Rs.1497.5 TARGET PRICE- Rs.1788 (CMP Current Market Price)

Negative for sectors such as: IT, Textiles, Auto components, Metals Neutral for sectors such as: Health care, Consumer discretionary, Cement

Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it. . Warren Buffet

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Tag Lines:
Now Its

You Are Flying - Cathay Pacific

Your World, Take Control - AMX

Building Networks For People - D-Link

Oh

What a Feeling - Toyota

a. Reserve Bank of Australia b. Ford Equity Research c. Luxembourg Stock Exchange d. Australian Stock Exchange e. Allianz Investment Banking f. Scotia Bank g. US Security and Exchange Commission h. Royal Bank of Scotland i. DCB j. Think Equity Research

Pearls Of Wisdom
Sanil Antony (sanilpantony@gmail.com) Analyst , D E Shaw Job description:

D E Shaw specific: Aptitude in derivatives, general awareness financial market activities is very important. of

Interview: Analysis with financial research team. Corporate action, financial The stress is on accounting theory, knowledge of reports, Mergers and Acquisitions, dividend policy, country specific companys financial reports, derivatives, Financial micro & macro study. management and SAPM (Security analysis and portfolio management). General guidelines Depending on company specific marketing and financial products Another key area of focus during interview is summer knowledge is important. Pure finance company looks for financial internship. concepts, summer internship projects, as well as past academic background.

Buzz Word
Assimilation - The absorption of the stock by the public from a new company. Baby Bells - A common nickname given to the US regional telephone companies that were formed from the break up of AT&T in 1984, which was done to create more competition within the industry. Churning - A period of heavy trading with few sustained price trends and little movement in stock market indices. Contagion - The likelihood of significant economic change in one country spreading to other country. This can refer to either economic booms or economic crises.

Management Mantras
Don't let your entrepreneurial spirit get killed by the emergence of a business giant in your vicinity. You can always be smarter, faster, wiser, and more appreciated than a slow changing, and often less popular business bully Success is the one thing you work for after having defined it yourself. Obtaining it will depend on your own input, the choices you make, and the degree to which you want to stretch yourself

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