Chaanakya 3_23

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vol 3.23

ISSUE

nO - 61

MAR 01

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3

6

10

11

13

14

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Investors check

Tax Haven

Alumni Speak

Budget Buzzwords

Budget Highlights

Commodity Market

Did You Know

Repo

Reverse Repo

Call rate

Ination (as on 13 Feb)

Forex Reserve (as on 19th Feb)91day T-Bill

IIP (as on 12th Feb)

6.90 GS 2019

4.75%

3.25%

2.10-3.35%

8.56%

$ 279.1 billion4.1334%

16.8 %

7.9330-7.9973%

1

45

45.4

45.8

46.2

46.6

47

1-Feb 4-Feb 8-Feb 11-Feb

Rs/$

Rs/$

15000

15200

15400

15600

15800

16000


Gold(per 10 gram)

Gold(per 10 gram)

68

70

72

74

76

78


Oil(per bbl)

Oil(per bbl)

23000000

26000000

29000000

32000000

35000000

4600

4800

5000

5200

5400


future rates

open interest

4,500.00

4,700.00

4,900.00

5,100.00

15000

15500

16000

16500

17000


sensex nifty

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international news

national news

British oil major BP in talks for $1.2-b Canadian oil sands deal.

Norways Yara agreed on Monday to buy Terra Industries for $4.1 billion to create

a world leading fertiliser producer.

US President Barack Obama announced more than $8 billion in loan guarantees

to build the rst US nuclear power plant in the country.

INTERNET telephony rm Skype made its rst major leap into cellphones striking

a deal with the largest US mobile carrier Verizon Wireless.

Schlumberger will buy Smith International in an all-stock transaction for $45.84 a

Smith share.

The Union budget 2010 has been announced with a Rs 2.71 a litre and Rs 2.55a litre hike in petrol and diesel prices respectively.

The Finance Ministry has made a provision for Rs.35000 cr net revenue for the

3G auction which is scheduled to be held on April 9.

Government to raise funds worth Rs.40000 cr by issuing shares of PSUs.

Reliance Capital partners has acquired 1.71% stake in cinema chain operator

Fame India through open market purchases.

The IPO of the state run United Bank of India got a big response by getting issued

33.3 times.

After ICICI, HDFC and Union Bank also increased the deposit rates of selected

tenure deposits up to 50 basis points.

Essar group to sell its telecom tower business to American Tower Corporation for

2000cr.

Indian Rail Finance Corporation to raise Rs. 9100 cr through issue of bond.

Mercedes Benz rolled out Indias costliest Limousine S-guard for a price tag

of 6 crores.

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The Banking Act of 1933 popularly known as the Glass Steagall Act introduced bank-ing reforms in the United States. The act was mainly designed to control speculation

activities. The act came to be known as Glass Steagall Act after its legislative Found-ers Carter Glass and Henry B. Steagall.

Brief Overview:

Glass-Steagall Act consists of two separate laws. These bills were introduced in thesenate by Democratic Senator Carter Glass of Lynchburg, Virginia, a former Secre-tary of the Treasury, and Democratic Congressman Henry B. Steagall of Alabama,Chairman of the House Committee on Banking and Currency.

The rst Glass Steagall Act of 1932 was enactedto stop deation and also gave powers to theFederal Reserve to rediscount several assetssuch as government bonds as well as commer-cial papers. The second Glass-Steagall Act of1933 was enacted largely due to the collapseof the American commercial banking system in1933. It introduced the separation of the banksbased on their businesses namely commercial

and investment banking and it also introducedthe Federal Deposit Insurance Corporation forinsuring bank deposits.

The Banking Act of 1933 limited competition withdeposit insurance, interest rate regulation, and entry barriers which made bankssimilar in the eyes of the ordinary depositor. This pre-empted the tendency to pushup deposit rates to attract depositors that would require risky lending and investmentto match returns with costs. The regulatory framework went even further to curb riskypractices in the banking industry. Restrictions were imposed on investments that

banks or their afliates could make, limiting their activities to provision of loans andpurchases of government securities. There was a ban on banks underwriting securi-ties and serving as insurance underwriters or agents, besides limits on outstandingexposure to a single borrower and lending to sensitive sectors like real estate. Theact implicitly regulated the non-bank nancial sectors as well as their operations de-pend much upon the principal depository institutions namely the banks.

History:

Republican president Herbert Hoover lost re-election in November 1932 to Dem-ocratic governor Franklin D Roosevelt of New York. The administration changedhands only until 1933 and hence the Hoover administration and Roosevelt adminis-tration did not coordinate actions to stop the run on banks afliated with the Henry

Glass steaGall aCt

3

By Nivedita Tiwary, I MBA

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A man is usually more careful of his money than of his principles.

~Oliver Wendell Holmes

rities and collateralised debt obligations and establish structured investment vehiclesthat bought those securities. The sub-prime loans were only 5% of all mortgages inthe year before the repeal but by 2008 it approached around 30% which contrib-uted to the subprime crises and recession in 2008.This statistics shows clearly howthe appetite for risk taking increased due to the repeal of the act. Moreover due tocomplex and opaque instruments like credit default swaps all these bad loans weredistributed amongst multitude of nancial institutions without anybody knowing the

actual amount of risk they had on their books

Current Relevance and implication:

The economic downturn is over andpartially stalled but to prevent suchthings to happen in future strict andstringent measures or regulations isthe need of the hour. It denitely calls

for reinforcing partly acts like the Glass-Steagall Act which set up a regulatoryframework and limits nancial innova-tion and proliferation.

This kind of regulation makesnancial institutions more stable bykeeping their ability to take risks low,if they could bring down the economywith their failure.

A simple example would be the reaction of the US government to crisis atLehman Brothers and Citi Group. Government could let Lehman Brothers collapsewithout much effect on broader nancial system.

Lehman Brothers took some particularly bad risks and went bankrupt dueto their greed. The same mistakes were committed by investment banking divisionsof all the big banks like Citi Corp and Bank of America and ideally they should havebeen allowed to bear the consequence of their greed. But there was one major differ-ence in that these banks were also deposit taking commercial banks.

These banks had become too big to fall. If government would have allowedthem to fall, they would have brought down the whole economy and savings of mostof the population with them.

If the commercial and investment banking were separated as was done bythe Glass-Steagall act, none of these banks could have become too big to fall andthere would not have been this obscene glut of risk taking for short term prots andbonuses.

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Cg D th t Hv rckBy Nithya Prakash, I MBA

Closing Down the Tax Haven Racket

Lucy Komisar of the Tax Justice Network-USA (taxjustice-usa.org) spoke atthe Conference on Taming the Giant Corporation about Closing Down the Tax Ha-ven Racket. Her words were so compelling that the rest of this column is devoted toexcerpts from her presentation:

The tax haven racket is the biggest scam inthe world. Its run by the international bankswith the cooperation of the worlds nancialpowers for the benet of corporations and

the mega-rich. Most Americans, includingprogressive activist Americans, dont knowwhat Im going to tell you. And thats part ofthe problem.

Tax havens, also known as offshore nan-cial centers, are places that operate secretbank accounts and shell companies thathide the names of real owners from tax au-thorities and law enforcement. They use nominees, front men. Sometimes offshoreincorporation companies set up the shells. Sometimes the banks do it. Often some-one will use a shell company in one jurisdiction that owns a shell in another jurisdic-tion that owns a bank account in a third. Thats called layering. No one can follow thepaper trial.

Offshore is where most of the worlds drug money is laundered, estimated at up to$500 billion a year, more than the total income of the worlds poorest 20 percent.Perhaps another $500 billion comes from fraud and corruption.Those gures t with[International Monetary Fund] numbers that as much as $1.5 trillion of illicit money is

laundered annually, equal to two to ve percent of global economic output.

Wall Street wants this money. The markets would hurt, even shrivel without thatcash. Thats why Robert Rubin as Treasury Secretary had a policy, as Joseph Stiglitztold me, not to do anything that would stop the free ow of money into the US. Hewas not interested in stopping money laundering because the laundered funds end-ed up in Wall [Street], maybe in Goldman Sachs where he had worked, or Citibank,where he would work.

Attempts to nd laundered funds are usually dismal failures. According to Interpol,

$3 billion in dirty money has been seized in 20 years of struggle against money laun-dering -- about the amount laundered in three days.

The other major purpose of offshore is for tax evasion, estimated to reach another

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$500 billion a year.Thats how corporations and the rich have opted out of the taxsystem.They have sophisticated mechanisms. Theres transfer pricing. A companysets up a trading company offshore, sells its widgets there for under market price,the trading company sells it for market price, the prots are offshore, not where theyreally were generated.

Two American professors, using customs data, examined the impact of over-in-

voiced imports and under-invoiced exports for 2001. Would you buy plastic bucketsfrom the Czech Republic for $973 each, tissues from China at $1874 a pound, a cot-ton dishtowel from Pakistan for $154, and tweezers from Japan at $4,896 each!U.S. companies, at least on paper, were getting very little for their exported prod-ucts. If you were in business, would you sell bus and truck tires to Britain for $11.74each, color video monitors to Pakistan for $21.90, and prefabricated buildings toTrinidad for $1.20 a unit.

Comparing all claimed ex-

port and import prices toreal world prices, the profes-sors gured the 2001 U.S.tax loss at $53.1 billion.Ora company sets up subsid-iaries in tax havens to ownlogos or intellectual prop-erty. Like Microsoft does inIreland, transferring softwarethat was made in America, that beneted by work done by Americans, to Ireland

so Microsoft can pay taxes there (at 11%) instead of here (at 35%). Why is Irelandgetting the benet of American-created software? Its legal. We need to change thelaw.

When logos are offshore, the company pays royalties to use the logo and deductsthe amount as expenses. But the payments are not taxed or are taxed minimally off-shore where they are moved. When Cheney ran Halliburton, it increased its offshoresubsidiaries from 9 to at least 44.

Half of world trade is between various parts of the same corporations. Experts be-lieve that as much as half the worlds capital ows through offshore centers. Thetotals held offshore include 31 percent of the net prots of U.S. multinationals.The whole collection of tax scams is why between 1989 and 1995, of US and multi-national corporations operating in the United States, with assets of at least $250 mil-lion or sales of at least $50 million, nearly two-thirds paid no U.S. income tax.

In 1996-2000, Goodyears prots were $442 million, but it paid no taxes and got a$23-million rebate. Colgate-Palmolive made $1.6 billion and got back $21 million.Other companies that got rebates in 1998 included Texaco, Chevron, PepsiCo, Pz-

er, J.P. Morgan, MCI Worldcom, General Motors, Phillips Petroleum and NorthropGrumman. Microsoft reported $12.3 billion U.S income in 1999 and paid zero federaltaxes. (In two recent years, Microsoft paid only 1.8 percent on $21.9 billion pretaxU.S. prots.)

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During the 1950s, U.S. corporations accounted for 28 percent of federal revenues.Now, corporations represent just 11 percent.Those unpaid taxes can buy a lot ofpoliticians and power. When Nixon needed money to pay the Watergate burglars, hegot it from some corporate offshore bank accounts.

The system has given the big banks and corporations and the super-rich mountains

of hidden cash they use to control our political systems.The offshore system mustbe dismantled.So why isnt the progressive movement doing something about this?This is a case where some people in Congress are ahead of the activists. There area handful of Democrats like Senators Levin (MI), Dorgan (ND) and Conrad (ND),like Rep. Doggett (TX), who are speaking out and introducing legislation. But thereis no movement behind them. And while Obama has signed onto the Levin Stop TaxHaven Abuse Act, Clinton, Biden and Dodd have not.

As concluded: Lets get the country to tell the corporations that the taxes they are

dodging is our money.

BUZZ worDs

Cherry Picking

1. The act of investors choosing investments that have performed well within anotherportfolio in anticipation that the trend will continue.

2. Relating to bankruptcy proceedings whereby the courts uphold contracts favorable to

bankrupt companies, but annul those that are unfavorable.

Bo Derek

A slang term used to describe a perfect stock or investment. In the 1979 hit movie 10,

actress Bo Derek portrayed the perfect woman, or the perfect 10.

Bubble

1. An economic cycle characterized by rapid expansion followed by a contraction.

2. A surge in equity prices, often more than warranted by the fundamentals and usually in

a particular sector, followed by a drastic drop in prices as a massive selloff occurs.

3. A theory that security prices rise above their true value and will continue to do so until

prices go into freefall and the bubble bursts.

Blotter

A record of trades and the details of the trades made over a period of time (usually one

trading day). The details of a trade will include such things as the time, price, order size

and a specication of whether it was a buy or sell order. The blotter is usually created

through a trading software program that records the trades made through a data feed.

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YES, stimulus exit strategy is good for Indian

economy:

I think this is just the right time for the govern-

ment to rollback its stimulus strategy. The justi-

cation is as follows. Corporate prots are in the

grip of a strong momentum. Sectors that have

delivered stand-out growth recently are automo-

biles, commercial vehicles, consumer goods that

are all direct or indirect beneciaries of the gov-

ernments stimulus. There is no denying that the

withdrawal of the stimulus will have an impact,however, the impact will not be all that signi-

cant. When a patient recovers from an illness,

you obviously have to take him off medication.

I believe that the economy has recovered in a

very signicant manner and that the government

is not going to withdraw the stimulus suddenly,

it will be gradual and sector-specic. If you look

at the size of the stimulus package in India, it

amounts to just 2.7 per cent of the GDP, in China

the number is 7 per cent. We are likely to man-age (as per the recent RBI forecast) a 7.5 per

cent growth with a 2.7 per cent stimulus, while

China has managed a 10 per cent growth with a 7

per cent stimulus.

On the demand side, there has been a massive

boost to consumption due to a shift in terms of

trade in agriculture. For the rst time in decades,

farmers are beneting from rising product prices.

That is why we recorded 9 per cent growth in

2004-08. The global nancial crisis interrupted

that trend. We need to worry only if interest rates

or material prices rise to exceptional levels, as

in 2008. Material prices are still 30-40 per cent

lower than those levels. Interest rates are now

recovering from a low too.

Whenever there is a stress on the business, they

cut down on costs and signicantly improve their

productivity. When the economy turns around,

therefore, they reap the twin benets of produc-tivity gains and volume growth. If you look back

at the Sensex earnings for ten years, in every

block of three years there has been a sustain-

NO, stimulus exit strategy is not good for

Indian economy:

I would like to point out that this is not the right

time to withdraw the stimulus package by the

government because of the following factors:

1. The economy, according to advance esti-

mates for 2009-10, is expanding at 7.2 per cent,

recovering from a slowdown in growth to 6.7

per cent in 2008-09. The growth rate, however,

is still much below the average of 8.6 per centclocked in the four years before the downturn.

Therefore, the stimulus must not be abandoned

prematurely.

2. Credit off take has been very poor as

compared to the previous three years. From 30%

growth it has come down to almost 12-15%. It

even went to single digits and has now picked

up. It is the stimulus package which has stimu-

lated this growth and the situation could deterio-rate if withdrawn.

3. IIP gures of 16.8% growth may look

amazingly high, but the fact is that this is due to

base ef-

fect. The

growth

in IIP

over the

quarters

is possi-

bly in the

region of

7-9% and

not amazing double digits.

4. Specic industries which have driven the

IIP like automobiles or consumer durables may

be the impact of pent up demand because the

demand for these sectors had come down 12-15

months back. A similar situation occurred whenexcise duty was raised in 1986 car sales tanked

almost overnight.

Enoch Paul , II MBA

is stimUlUs exit strateGy GooD for inDian eConomy or not

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Mohit Mathai, II MBA

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able spurt in earnings. And whenever earnings

come out of a stressful period, they grow with a

vengeance. In the latest December quarter, the

1,572 companies (excluding oil and gas, bank-

ing) delivered a prot growth of 42 per cent on

a revenue growth of 12 per cent. That clearly

shows the extent of buoyancy. There is also the

advantage of a stable government at the Centre

after a span of ten years .That should facilitate

both growth and an economic reform-oriented

Budget. Therefore, we have every right to be-

lieve that we are set for a strong spurt in earnings

over 2011 and 2012.

If you have experienced an earthquake, every

tremor may have you running for cover! That is

what is happening now. However, if you look at

fundamentals, no matter what macro-indicator

you look at today (except ination), it points toan improvement whether it is tax collections,

IIP numbers, export data, or FDI ows. Thus I

believe that this is the right time to rollback the

stimulus packages by the government, but in

phases.

5. Commodity prices globally are begin-

ning to tighten, so there maybe rise in com-

modity prices like iron ore or variety of inputs

simultaneously the oil prices may in fact go up.

So the excise duty rising passed on to the con-

sumer maybe coupled with commodity and oil

price rises then it becomes a major problem as

all these costs are passed on to the customer and

may pull down the demand for the products.

6. Demand from overseas markets contin-

ues to be subdued as economic recovery in the

US and Europe is still feeble. If the government

pulls back the interest subvention, it will be

disastrous for the industry.

7. Some experts say ours is a W shaped

economic recovery not a V shaped economic

recovery, so the stimulus should not be rolledback completely unless the economy stabilizes.

au spk

Name - Tarun

Batch - 1994 1996

Own company Inspiration Consultancy

Ques - Sir what is your view about Budget?Ans - Budget is very general, there is nothing done for public, increase in exciseduty, increase in fuel price.

Ques - But sir there is only 2% increase in excise duty, while the speculation werefor higher increase, and there in increase in tax slabs also.Ans - I am earning 24 lakh per annunm what is benet of that to me.

Ques- Thats good sir, in which company are you working?Ans - I have opened my own companies.

Inspiration Consultancy.

Ques- In which other companies have you worked before this initiative.

Ans Prabhudhas Liuadher, Times of India, Birla Principal

Ques - Will this tax slab increase in investment in share market?Ans - Not much as there is not much retail investment, and public dont have muchknowledge about stock market.

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Appropriation Bill:

It is presented to Parliament for its approval, so that the government can withdraw from

the Consolidated Fund the amounts required for meeting the expenditure charged onthe Consolidated Fund. No amount can be withdrawn from the Consolidated Fund tillthe Appropriation Bill is voted is enacted.

Capital Budget:

It consists of capital receipts and payments. It also incorporates transactions in thePublic Account. It has two components: Capital Receipt and Capital Expenditure.

Capital Expenditure:

It consists of payments for acquisition of assets like land, buildings, machinery, equip-ment, as also investments in shares etc, and loans and advances granted by theCentral government to state and union territory governments, government compa-nies, corporations and other parties.

Capital Receipt:

The main items of capital receipts are loans raised by the government from public

which are called market loans, borrowings by the government from the Reserve Bankof India and other parties through sale of Treasury Bills, loans received from foreigngovernments and bodies and recoveries of loans granted by the Central governmentto state and union territory governments and other parties. It also includes proceedsfrom disinvestment of government equity in public enterprises.

Central Plan:

It consists of the governments budget support to the Plan and the internal and extra

budgetary resources raised by public enterprises.Consolidated Fund: It is made up of all revenues received by the government, loansraised by it, and also its receipts from recoveries of loans granted by it. All expendi-ture of the government is incurred from the Consolidated Fund and no amount canbe withdrawn from the Fund without authorisation from Parliament.

Contingency Fund:

It is an imprest placed at the disposal of the President and is used by the govern-ment to incur all its urgent and unforeseen expenditure. Parliamentary approval for

such expenditure and for withdrawal of an equivalent amount from the ConsolidatedFund is subsequently obtained and the amount spent from the Contingency Fund isrecouped to the Fund.

BUDGet BUZZ worD

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By M.R.Ravi, II MBA - A

BUZZ worDs

12

Finance Bill:

This contains the governments proposals for levy of new taxes, modication of theexisting tax structure or continuance of the existing tax structure beyond the periodapproved by Parliament. It is submitted to Parliament along with the Budget for itsapproval.

Fiscal Defcit:

It is the difference between the revenue receipts plus certain non-debt capital re-ceipts and the total expenditure including loans (net of repayments). This indicatesthe total borrowing requirements of the government from all sources.

Monetised Defcit:

It indicates the level of support extended by the Reserve Bank of India to the govern-

ments borrowing programme.

Non-Plan Expenditure:

It includes both revenue and capital expenditure on interest payments, the entire de-fence expenditure (both revenue and capital expenditure), subsidies, postal decit,police, pensions, economic services, loans to public enterprises and loans as well asgrants to state governments, union territory governments and foreign governments.

Plan Expenditure:

It includes both revenue and capital expenditure of the government on the CentralPlan, Central assistance to state and union territory plans. It forms a sizeable propor-tion of the total expenditure of the Central government.

Revenue Budget:

It consists of the revenue receipts of the government (which is tax revenues plus oth-er revenues) and the expenditure met from these revenues. It has two components:Revenue Receipt and Revenue Expenditure.

Revenue Receipt:

It includes proceeds of taxes and other duties levied by the Centre, interest and divi-dend on investments made by the government, fees and other receipts for servicesrendered by the government.

Revenue Expenditure:

It is meant for the normal running of government departments and various services,

interest charges on debt incurred by the government and subsidies. Broadly speak-ing, expenditure which does not result in creation of assets is treated as revenue ex-penditure. All grants given to state governments and other parties are also treated asrevenue expenditure even though some of the grants may be for creation of assets.

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BUDGet HiGHliGHts

First challenge to quickly revert to GDP growth of 9%, says FM.

FM aims to implement direct tax code from April 1,2011. Endeavour to introduce GST by April 1, 2011 Government to budget Rs 25000 crore disinvestment in FY10 and Rs 35000

crore in FY11. Total expenditure in 2010-11 to increase by 8.6 per cent over 2009-10 RBI considering issuing banking licences to private companies. Non-banking

nance companies will also be considered if they meet the criteria. Fisal decit targeted at 5.5 % of GDP for 2010-11. Fiscal decit projected at 4.8 per cent and 4.1 per cent of GDP in 2011-12

and 2012-13, respectively. NREGA scheme allocation raised to Rs 41000 Crs. Personal income tax slabs changed:

Income up to Rs 1.6 lakhs nilIncome between Rs 1.6 lakhs and Rs 5 lakhs 10 per centIncome above Rs 5 up to 8 lakhs 20 percentIncome above Rs 8 lakh 30 per cent

Allocation to health Rs 22,300 Crs. Minimum Alternate Tax (MAT) to be increased from 15 per cent to 18 per cent

on book prots

Excise duty on petrol and diesel up by Re 1 per litre 25% of plan allocation for rural infrastructure. Social sector spending seen at Rs 1.38 lakh Crs. Allocation for school education up from Rs 26800 Crs to Rs 31036 Crs. Allocation for women and child development hiked by 80 per cent. Allocation to Power sector at Rs 5130 Crs. Draft food security Bill ready. Clean energy fund to be established. Allotment for renewable energy hiked by 61%. Coal regulatory authority to be set up.

Nutrient based fertiliser subsidy scheme to come into force from April 1, 2010 Road development hiked to Rs 19894 Crs. Rs 1.73 lakh Crs, which is 46% of total plan outlay, reserved for infrastructure

development. 2% loan subsidy to farmers. Spending on social sector increased to Rs 1376.7 billion, which is 37

per cent of total plan outlay Farm credit targets to be increased to Rs 3.75 lakh Crs. Farm loan payments to be extended for six months.

Interest subvention of 2% to be extended for handicrafts and SMEs. Rs 300 Crs for agricultural impetus. Rs 165 billion allocated for enhancing banks Tier-I capital to 8 per cent by

March 31, 2011. Additional Rs 1,65,000 Crs for bank re-capitalisations.

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CommoDity marKet

COMMODITY TRADING STRATEGIES

Commodity trading strategies are simply the basis for why and when one will buyand sell commodities. An investor should have some well thought out strategiesbefore he begins trading commodities. This does not mean watching the nancialnews or reading a commodity newsletter for the latest trading tips. Rather, oneshould have consistent strategies that will let him know under what circumstanceshe will buy, sell and limit losses.Most commodity trading strategies use some form of technical analysis for thetrading decisions. Most commodity trading strategies consist of either a range

trading or breakout methodology. Each type of strategy has its pros and cons, so itis up to the investors personal taste on which type of strategy might work best forhim.

Range Trading Strategy:

Range trading in commodities sim-ply means buying near the bottom ofa range (support) and selling at thetop of a range (resistance). Another

way to look at this strategy is that onemight look to buy a commodity afterit has experienced a lot of selling andbecomes oversold. Oppositely, onemight look to sell a commodity afterit has had a long rally and becomesoverbought.There are numerous indicators which measure overbought and oversold levelslike RSI, Stochastics, Momentum and Rate of Change. These strategies work well

when the market has no signicant trend. However, a trader could have a string ofbad losses when a market forms a major trend, as markets can stay overbought oroversold for long periods of time.

Trading Breakouts:

Trading breakouts in commodities means that a trader will look to buy a commod-ity as it makes new highs and sell a commodity as it makes new lows. New highsand lows can easily be spotted on a chart, as they are the peaks and troughs.Many professional traders use these techniques when they are managing large

sums of money.The philosophy for this strategy is simple a market cant continueits trend without making new highs or new lows.

Mookambiga , I MBA

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This strategy works best when commodities are trending strongly. It doesnt matterwhether the trend is up or down, as you are buying new highs and selling (shorting)new lows. The drawback of this strategy is that it performs very poorly when mar-kets dont establish strong trends.

Fundamental Trading Strategy

While trading breakouts and trading ranges usually come with specic setups forbuying and selling commodities, fundamental trading leaves much more room forinterpretation. For example, you might buy soybeans because the weather hasbeen dry during the summertime and you expect a much smaller crop. Or, you ex-pect demand to increase for crude from China, so you buy oil futures.

Changing Commodity Trading Strategies Can Be Dangerous

One of the pitfalls many commodity traders fall into is the constant changing of

trading strategies. They often spend weeks researching a particular trading methodand have good evidence that it should work. They will then start trading it with realmoney and eventually there will be some rough periods where it hits a string oflosing trades. Then, of course, the strategy is abandoned and the hunt for a newtrading strategy begins. One of the main traits of a successful commodity trader isconsistency. This means that you should keep using a trading strategy long enoughto see if it works. A recipe for disaster is dropping a strategy when it has some los-ing trades and then starts trading another one.

Trading Commodities After News Reports

News on commodities can often be a dangerous trap for novice commodity trad-ers. There are major wire services that usually produce an end of day recap on whyeach commodity market moved up or down for the day. There are also news reportson the nancial channels that give some bullet points on why a market has made alarge move. It is good to stay informed when trading, but a wrong interpretation ofthe news can lead to many losses.

If you are an inexperienced commodity trader it is a good bet that you will poorlyinterpret the news on the commodities markets. The problem is that most reportershave to supply news reports everyday and they are not commodity traders. Theyneed a fundamental reason on why a commodity is moving and it is often just aguess. Commodity reporters also ask oor traders for comments on why a marketis mov ing and they either get a comment that supports the traders positions orsometimes traders just have some fun with the reporters and make up a reason.

There are also major reports that are released periodically that have a major impacton commodities. Reports like the USDA Monthly Crop Reports are released beforethe grain markets open and they often cause large movements in corn, soybeans

and wheat. Trying to buy off the news as the market opens is often a recipe fordisaster. I prefer to wait and see how the markets react to the news before I enter aposition.

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The ABCs of ETFs

ETFs are mutual fund schemes and are similar to index funds. Just like an indexfund, ETFs also replicate a given benchmark index by investing in stocks compris-ing a particular equity index such as the S&P Nifty or the BSE Sensex. However, thecrucial difference is that ETFs are listed and traded on the stock exchanges, whileindex funds are bought and sold through fund houses. Hence, like stocks, the priceof an ETF uctuates on an intra-day basis.Further, while buying or selling ETFs, abrokerage has to be paid unlike entry and exit loads levied by regular mutual fundschemes.

The risk-return prole of ETFs

In terms of performance,ETFs usually move in linewith the benchmark index towhich the scheme pertains.Even the risk involved inETFs is directly co-relatedto the volatility of the index.As both, ETFs and index

funds replicate a selectedequity index, the risk and re-turn matrix is also similar forthe two.These traded funds gener-ally involve a passive in-vestment strategy and whencompared to actively man-aged schemes, the risk in-volved is low to medium. Hence, ETFs generate returns that are approximately equalto returns generated by the index.ETFs are adequately transparent and a exible toolETFs offer transparency as an investor will know which stocks the fund is holding.Moreover, as it replicates an index, diversication automatically sets in. the expenseratio of an ETF is usually below the mutual fund industry average.

Largest Gold ETF

SPDR Gold Shares is the largest Gold ETF in the world. Originally listed on the

New York Stock Exchange in November 2004, it now also trades on the SingaporeStock Exchange, Tokyo Stock Exchange and the Stock Exchange of Hong Kong. Theamount of gold currently held in the form of gold bars in a Trust is 1,116.25 tonnes.

echg tdd fud - etf

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Its value was been pegged at $40,332,797,729.46 when the price of gold in the U.Swas at $1,114.80/ounce (December 12, 2009)

Gold ETFs in India

Gold ETFs in India have cumulative assets of just Rs. 1169.23 Crores. They form just0.60 per cent of total equity assets in India. There are total of six Gold ETFs, the larg-

est being Gold Benchmark ETF with assets of Rs. 518.24 crore, the smallest beingSBI Gold ETF with assets of Rs. 92.28 crore. This is because Indians clearly preferholding their gold in physical form.

Conclusion

The demand for ETFs is likely to go up further as the awareness level among inves-tors and the investment advisory community improves. Besides, ETFs are a veryconvenient way to hedge, not only for institutional investors but also for small and

retail investors.

Dd yu K

International Pepper Exchange in Kochi (Kerala) is the worlds oldest andonly pepper exchange that deals with the global trade of black pepper. It is runby the India Pepper and Spice Trade Association (IPSTA) at the port city of Mat-tancherrry. International Pepper Exchange got its government clearance underthe Forward Markets Regulation Act of 1952 to start futures trade in 1957. It wasfounded by V.M. Patel, Valabhdas Mariwala and Shamji Narshi. The price at whichpepper was traded in this exchange decided the movement at the global market.Members of this exchange had to pay margins up front as guarantee for the tradedone daily and the delivery system at the end of the monthly contracts was smooth.

These norms and the emphasis on quality control had made the exchange a modelfor others and even the regulator, Forward Markets Commission (FMC), used tolook up the exchange to implement any new program. In 1996 the exchange wasput in an international division, called the International Commodity Exchange (ICE),based on a study by the United Nations Conference on Trade and Development(UNCTAD).

Bank of India opened a branch in London in 1946, the rst Indian bank to doso. This was also the rst post-WWII overseas branch of any Indian bank. This wasfollowed by Tokyo, Osaka (1950), Singapore (1951), Kenya, Uganda (1953) etc.

Bank of India, established on 7 September 1906 is a bank with headquarters inMumbai. Government-owned since nationalization in 1969, It is one of Indias lead-ing banks, with about 3140 branches including 27 branches outside India.

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2. Under which effect the government islikely to increase taxes in the future in orderto repay the money being borrowed to nancea current budget decit.4. An unsecured, short-term debt instru-ment issued by a corporation, typically for thenancing of accounts receivable, inventoriesand meeting short-term liabilities.

5. he budget that may just be enough foran individual to live on or for a company toprot from a project.6. The method in which the debt with thehighest interest rate is completely paid for,subsequent extra debt payments from thedebt repayment budget go toward the next highest interest-bearing debt.

Down

1. When rating agencies reduce their ratings on structured nancial collateralbased on ratings from another agency without rating the collateral themselves.3. A person who is able to remain stylish during times of economic hardship.

1. Gameplan Sports Pvt. Ltd. is an organisa-tion that deals with event management, spon-sorship sales etc. but has become famous bybeing the manager of a famous sports personal-ity. Identify the person.2. Tata Marcopolo buses are the result of ajoint venture between Tata Commercial VehiclesIndia and Marcopolo S. A from _______.3. Funskool , a Joint venture between ______and _____, in the toy manufacturing in India.4. Former U.S president Theodore Roosevelt

is also known for a product or an item named after him. Name it.

5. Heysley Disaster and Hillsborough disaster had made this organization in-famous all over the world. It now has George Gillett and Tom Hicks as its chair-men. It is now planning to move from Aneld to Stanley Park. It has these wordswritten in its logo You will never walk alone. What am I talking about?

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Andrea Simento Sr. Co-ordinator

Nithin Mishra Sr. Co-ordinator

Ravi M R Debate

Manesh Paul Mani Jr. Co-ordinator

Amutha Priya D News

Sonal Sankhla Student Article & Scam

Nivedita Tiwary Investors check

Dorin Jane Quiz & Did You Know

Mantri Ankit Atul Quotes & Buzz Words

Pottim Sahiti Reddy Crosswords

Vipul Jain Graph, Rates

Rajdeep Rathi Alumni SpeakBhargav K Editor And Design

Pradeep Thangavel Editing And Compiling

1. Mahendra Singh Dhoni

2. Brazil

3. Hasbro and MRF

4. Teddy Bear

5. Liverpool Football Club

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