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Term of Week

In Focus

Opinion

Personality

Tech World Arbitrage| 6

The Future of Cloud

Computing|12

Vinod

Khosla |11

December factory

growth at two year high

as orders surge| 4

JANUARY 04, 2015 | A FINNICHE INITIATIVE

An Alarming

Week for Oil| 2

Disclaimer: FinXpress takes no responsibility for the opinions expressed in the magazine.

2015 has arrived, a fresh start for IMTians to make this year eventful and attain greater

heights. First years are busy bidding farewell to their peers leaving campus on exchange

program where as second years have entered their final term and may be the last term of

education and freedom before entering the corporate world.

Club FinNiche releases its weekly magazine FinXpress, the first of 2015 with the In Focus

talking about the ‘An alarming week for oil’. The Opinion gives an overview of

‘December factory growth at two year high as orders surge’. The term of the week describes ‘Arbitrage’. Do have a look at the market section, Tech world which brings to you about ‘The future of Cloud Computing’ and Personality of the week, Vinod Khosla.

Club FinNiche welcomes any comments, suggestions or criticism regarding the

magazine. Please do write to us and share your ideas.

Happy Reading!

Regards

The Editorial Team

Club FinNiche

January, 04 | 2015 | Volume 28

An alarming week for oil

December factory growth at

two year high as orders

surge

Arbitrage

Vinod Khosla

The Future of Cloud

Computing

Retail prices of petrol and

diesel are not declining at the

same pace as the plummeting

price of crude. Consumers are

paying 8.32 per cent less for

diesel and 11.31 per cent less

for petrol than on June 1.

But, on macro level, the fall of

more than USD 50 can

potentially boost growth by up

to 0.5 percentage points in the

current financial year

- By Arihant Jain

Global Oil prices have fallen sharply over the

last couple of months and it has lead to

significant revenue shortfall for many oil

exporting nations. While it was trading to

above USD 110 per barrel 6 months ago, it has

halved since to around USD 55 per barrel.

Reasons for Fall

In the last few years, oil prices have been

bouncing over USD 100 per barrel because of

soaring oil consumption in countries such as

China and due to conflicts in key oil

producing nations such as Libya, production

was not able to meet the demand. Thus the oil

prices spiked. It prompted many US and

Canadian companies to drill oil at new places

to make sure they take advantage of this

surge. It paved way for the fall in oil prices:

1. Increase in output from US shale

producers.

2. Weak demand in many countries in

Europe and Asia due to insipid economic

growth.

Thus, fear of global oversupply and reduction

in demand sent Brent, the international oil

market, down almost 50 per cent last year, the

second-biggest annual loss since trading in

futures contracts started in the 1980s.

Petrol prices are set to fall to

below £1 a litre by the end of

this month for the first time in

six years, analysts have

suggested.

Analysts have predicted that

the world price of oil will

continuing falling, with experts

at bank Morgan Stanley

suggesting that prices could

even drop below $35 a barrel,

but others have warned that

prices are expected to rise

again at the end of the year.

In such a situation. OPEC, world’s largest oil

cartel generally reacts by raising prices or

limiting the production of oil but in the

meeting held in November, they decided not

to do so. Many OPEC countries such as Iran,

Saudi Arabia needs oil prices to be high so as

to balance their budgets but they didn’t

wanted to let go of their market share and

they hoped that lower prices would help

throttle the US oil bloom. This though was

unexpected, led to the free fall of oil prices.

It is evident from the graph above, that

eventually oil supply exceeded the oil

demand leading the sharp fall in oil prices.

Impact on manufacturers

On one hand, a steep decline in the cost of oil

leads to lower expenses. But on the other,

business may suffer because of lower

spending by oil and chemical companies on

big-ticket items like computers and new

machinery.

Though lower raw materials prices is a

blessing as it opens up margins for

manufacturers but for the specific industries

like the chemical industry or petroleum and

coal products, they’re getting hit directly.

Impact on Countries

Countries such as China, India and Japan,

who are the highest net importers of crude oil

have now access to cheap energy source. A

large portion of population in these countries

spend a significant portion of their income on

gas, as much as 30% in case of India. China,

being the world’s largest net importer of oil,

saves about USD 2 billion annually for every

dollar drop in the oil prices. Though most of

the Asian countries benefit from this drop,

one exception is Singapore. According to

Bloomberg, Singapore ranks second in the

world for reliance on crude and thus depends

heavily on export of oil.

With oil revenues making 45 percent of

government budget, Russia one of the worst

affected countries in the world. Economists

now estimate that Russia's GDP will shrink at

least 4.5 percent in 2015 if oil stayed at $60 per

barrel. The plunging price of oil has also

caused the ruble's value to collapse — which

is leading to panic inside Russia and a rise in

inflation, as imports become drastically more

expensive. So far, Russia's central bank has

been struggling to deal with this crisis. On

December 15, the country suddenly hiked

interest rates from 10.5 percent to 17

percent in an attempt to stop people from

selling off rubles.

Other countries struggling with this price

drop include Iran, Venezuela, Saudi Arabia

and to some extent, the United States.

Source: http://www.iea.org/

December factory growth at two

year high as orders surge

- By Shikha Sharma

Indian merchandise makers finished 2014 in a

higher apparatus, with business conditions

enhancing at the fastest pace in two years in

December. Quickened development of the

assembling segment was reflected by quicker

extensions in yield, new business and foreign

orders, said HSBC.

The headline HSBC India manufacturing

Purchasing Managers' Index (PMI) moved to

a two-year high of 54.5 in December, up from

53.3 in the earlier month. Business conditions

enhanced at a speedier pace in every one of

the three business sector gatherings amid the

month, with the most keen extension seen in

customer products.

Yield in the Indian manufacturing sector

climbed in accordance with the headline

index in December, with development getting

to the speediest in two years. As per various

study members, the most recent climb

underway was underpinned by stronger

request books.

Shopper merchandise were the best

performing of the expansive areas checked.

Most recent information reflected reports of

enhancing request in December, as new

requests expanded for the fourteenth

sequential month. Additionally, the rate of

development was checked general and the

speediest since the end of 2012. Also, Indian

manufacturing companies enrolled a further

climb in new fare business in December. New

work from abroad stretched at the speediest

pace since April 2011.

The rate of extension quickened to the most

checked in the current 14-month grouping of

development. Accordingly, the pace of

preproduction stock developing picked to the

most honed in more than two years. Besides,

supplies of completed products held by

Indian producers rose at the speediest rate

since the overview started in April 2005.

Then, diverged from proceeded with

development of generation and approaching

new work, staffing levels in India's

assembling economy declined in December.

That emulated two progressive months of

slight employment creation, in spite of the

fact that the pace of withdrawal was

fragmentary generally speaking. Work

misfortunes were clear in two of the three

reviewed sub-segments, with the special case

being moderate products.

Indian markets surged the

most , led by banking stocks,

which gained on expectations

of reforms in the sector

HSBC Purchasing Managers’

Index (PMI) showed

manufacturing activity in India

had picked up in December

2014

The index rose to a two-year

high of 54.5 points in

December, compared with a 21

-month high of 53.3 the

previous month

At last, higher costs paid for metals,

chemicals and gadgets set upward weight on

info costs in December. That said, the rate of

expense expansion facilitated to the slowest

in more than five-and-a-half years and was

well underneath the long-run arrangement

normal. Weaker expense weights were

reflected by a generally stifled climb in

offering costs amid the month.

Remarking on the India Manufacturing PMI

overview, Pranjul Bhandari, boss India

economist at HSBC said, 'Manufacturing

activity force quickened to a two-year high in

December, drove by a sound increment in

new requests from both at home and from

abroad. A precarious climb in new requests

from the customer area more than balance a

lull in new request development from

venture merchandise. In our perspective, an

ascent in the recent is basic for a genuine pick

-up in monetary development. In accordance

with falling item costs throughout the last

few months, info value expansion was

unassuming, and this pattern was

additionally reflected in yield costs. With the

disinflationary pattern making progress, the

RBI is required to discover space for some

rate cuts in 2015.'

The central bank has stayed immovably

hesitant notwithstanding proceeded with

interest from industry for a cut in the policy

rate. At the same time while keeping up the

norm on the rate in its past bi-month to

month monetary policy audit a month ago, it

had said it may cut rates — even in the

middle of surveys — if the circumstances

warranted so. Reflective of further

development of yield and new requests,

information purchasing among Indian

products makers expanded in December. The

rate of extension quickened to the most

checked in the current 14 month succession of

development.

Along these lines, the pace of preproduction

inventory building picked to the most honed

in more than two years. Besides, loads of

completed merchandise held by Indian

manufacturers rose at the quickest rate since

the overview started in April 2.

Arbitrage means simultaneous

purchase and sell of any

security, currency, stock or

asset in the respective market

with an objective of earning

profit from the price difference.

Arbitrage can only occur when

there is a price difference.

Arbitrage basically means simultaneous

purchase and sale of any security, any stock,

any asset or any currency in order to earn a

profit from a price difference without any

risk.

A stock is traded in multiple stock exchanges

and the quoted price may be different on each

stock exchange. Here arbitrage takes place to

take the advantage of this price disparity.

Initially, arbitrage used to occur only in

currency market, but today it applies to

commodity, futures and stock market as well.

For Example, Share of SAIL is trading at BSE

at Rs. 80 and the same is trading at NSE at Rs.

82. Then one can sell the stock on the NSE and

simultaneously buy from the BSE. This

transaction will lead to profit without any

risk.

Arbitrage also takes place in case of mergers.

In some cases, arbitrageurs purchase shares of

companies that are the targets of purchase

offers in an expectation of price difference

between the trading price and actual price

after merger.

Only large institutional investors and hedge

funds can indulge into the activities of

arbitrage. Because they are able trade large

block of shares and invest millions. On the

other hand, individual investors typically

don’t have large sums of money to take the

advantages of arbitrage opportunities and

they end up taking the advantage of smaller

arbitrage opportunities.

Arbitrage helps in keeping the price of the

securities across various markets more or less

same and it removes the price difference and

equalizes the price in various markets after a

certain number of transactions.

Types of Arbitrage

Merger Arbitrage

Municipal Bond Arbitrage

Convertible Bond Arbitrage

Regulatory Arbitrage

Statistical Arbitrage

- By Priti Sureka

Survey showed manufacturing

activity expanded at its fastest

pace in two years in December

boosted sentiment of the

market.

“India needs reforms in

banking sector, more

autonomy for state banks”.

INDIAN MARKETS

The major international markets were closed for most of the week for Christmas. The

volumes traded in the week were not high. The Benchmark BSE index ended higher at

1.38 percent and broader NSE index ended at 1.35 percent higher, hitting highest levels

in three weeks as banking stocks surged on expectations from industry meet underway.

Indian shares are expected to trade range bound in the week ahead.

BSE SENSEX

CNX NIFTY

Open High Low Close

SENSEX 27479.87 27937.20 27091.38 27887.90

NIFTY 8214.70 8410.60 8214.70 8395.45

COMMODITIES

EXCHANGE RATES

INTERNATIONAL MARKETS

Open High Low Close

NYSE Comp 10985.00 11007.82 10770.00 10830.92

NASDAQ 4315.00 4320.75 4201.00 4216.90

S&P 500 2086.00 2088.75 2038.75 2047.75

FTSE 100 6653.50 6655.30 6508.80 6547.80

CAC 4309.80 4319.80 4222.80 4252.29

DAX 9915.00 9929.50 9689.00 9764.73

NIKKEI 225 17914.00 17914.55 17450.77 17450.77

SSE 50 3157.00 3239.16 3128.40 3233.96

Hang Seng 23831.00 23931.00 23423.00 23857.82

Commodity Unit Rs / Unit % Change

Gold 10 grams 26730.00 0.11

Silver 1 kg 36235.00 0.17

Crude Oil 1 bbl 3391.00 -0.27

INR/ 1 USD 63.285

INR /1 EURO 75.91

INR/ 100 JAPAN YEN 52.49

INR / 1 POUND STERLING 96.94

Construction spending fell 0.3

percent in November, while the

pace of growth in US

manufacturing sector slipped to

six month low in December.

S&P 500 closed the year with a

double digit gains for the third

consecutive year.

India needs reforms in banking sector, more autonomy for state banks - Arun Jaitley

India needs to "conceive" several reforms in the banking sector, Finance Minister Arun Jaitley

told reporters on Saturday on the sidelines of a two-day banking retreat. Jaitley added that

there is a need to give greater autonomy to banks and that non-performing loans in some

cases was "unacceptable". India's state-run banks recorded the highest level of stressed loans

at 12.9 percent of their total advances in September last year, while the same ratio for private

sector banks was at 4.4 percent, according to central bank data. India's top bankers have

gathered in Pune to discuss long-pending reforms vital to improving the health of ailing

public sector banks in Asia's third-largest economy.

December factory growth at two-year high as orders surge - PMI

Indian manufacturing activity expanded at its fastest pace in two years in December as new

orders flooded in and factories kept price increases to a minimum, a business survey showed

on Friday. Strong new business reinforces Finance Minister Arun Jaitley's view that the

economy will grow "much better" in 2015/16, while weaker inflation gives the Reserve Bank

of India (RBI) more room to cut interest rates as expected this year. The HSBC Manufacturing

Purchasing Managers' Index (PMI), compiled by Markit, rose to 54.5 in December from 53.3,

its highest since end-2012 and its 14th straight month above the 50-mark that separates

growth from contraction. The survey also showed input prices slumped to a near six-year

low as oil prices tumbled.

Micromax plans upto $500 million IPO

Micromax Informatics, India's second-largest smartphone maker, plans to raise as much as

$500 million through a stock market listing in its financial year beginning in April, the

Economic Times newspaper reported on Saturday. Micromax, which entered the Indian

handset market in 2008 with cheap large-screen phones, will sell a minority stake in its initial

public offering of shares, the newspaper said, citing unnamed bankers and a company

executive. The company has shortlisted Morgan Stanley and Goldman Sachs to manage the

offering, the report said, adding that Micromax expects a valuation of 14 times its operating

profit.

annual consumer price inflation

fell to 4.38 percent below the 8

percent which the RBI had

hoped to achieve by the end of

the year and the lowest since

the government started

releasing it in 2012.

The private equity activity grew

47.3 percent to touch $10.9

billion in 2014, mainly due to

436 duels fuelled by online

services like e-commerce firms.

Digital connectivity should become as much a right as access to school: Modi

Prime Minister Narendra Modi on Saturday called for greater academic autonomy, focus on

research, and need to nurture future generations of scientists. Mr. Modi was talking at the

inaugural function of the 102nd Indian Science Congress at Mumbai University. The need of

the hour for a sustainable and prosperous country is to put science and technology at the top

of our national priority, Mr. Modi said. "Digital connectivity should become as much a basic

right as access to school," he said, adding that India Inc. needed to fund more research

through various initiatives including Corporate Social Responsibility.

West Bengal to woo investors at summit

Projecting itself as an ideal investment destination, the Government of West Bengal is

organising Bengal Global Business Summit — Bengal Leads 2015 — on January 7 and 8 to

attract investment from foreign and domestic companies. Union Finance Minister Arun

Jaitley and Union Minister of Road Transport and Highways Nitin Gadkari are expected to

attend. The State is seeking investment in sectors such as urban infrastructure and housing,

IT software and hardware, food processing, horticulture and floriculture, MSME and textiles,

health care, education and skills development, manufacturing, energy and infrastructure,

hospitality and tourism and business of entertainment and financial services.

Indonesia search and rescue chief says four large parts of AirAsia jet found

Indonesia search and rescue teams hunting for the wreck of an AirAsia passenger jet have

located four large objects in the Java Sea, agency chief Fransiskus Bambang Soelistyo told

reporters on Saturday. The Indonesia AirAsia Airbus A320-200 plunged into the Java Sea on

Sunday while en route from Indonesia's second-biggest city Surabaya to Singapore with 162

people on board.

After graduating with a bachelor’s degree in

electrical engineering from IIT, Delhi, Vinod

failed to start a soymilk company to service

the many people in India who did not have

refrigerators. Instead, he came to the U.S. to

further his academic studies and received a

master’s degree in biomedical engineering

from Carnegie Mellon University. Eventually,

his startup dreams led him to Silicon Valley,

where he received a master’s degree in

business administration from the Stanford

University Graduate School of Business.

Career

Vinod started the standards-based Sun

Microsystems in 1982 to build workstations

for software developers. As the founding

CEO of Sun, he pioneered open systems and

commercial RISC processors. In 2004, driven

by the need for flexibility to accommodate

four teenaged children, the desire to be more

experimental and to fund sometimes

imprudent “science experiments,” Vinod

formed Khosla Ventures to focus on both for

profit and social impact investments.

Vinod Khosla along with Srikanth

Nadhamuni set up Khosla Labs in 2012 as an

innovation lab to focus on solving large scale

problems driven by technology and

entrepreneurial zeal. The team has attracted a

set of highly experienced entrepreneurs and

professionals who have created successful

businesses in India and in the Silicon Valley,

with deep product development and

implementation experience.

Goal

His goals remain the same: work and learn

from fun and knowledgeable entrepreneurs,

build impactful companies by leveraging

innovation and spend time with a

partnership that makes a difference.

In News

In September 2014 a judge ruled that Khosla

must let the public access his private beach

near Half Moon Bay in California. Khosla’s

attorneys fought to change Mallach’s

tentative judgment. On 5th December, 14, San

Mateo County Superior Court Judge Barbara

Mallach issued her final ruling in this matter,

rejecting venture capitalist Vinod Khosla’s

latest argument that he shouldn’t have to

open the gate on a private road leading to the

coast.

28th January, 1955

IIT Delhi

Carnegie Mellon University

Stanford Graduate School of

Business

$1.68 Billion

United States

Cloud Computing is a type of

computing that relies on

sharing network devices rather

than relying on personal

devices to handle application.

Amazon Web Services, the

pioneer for public cloud

infrastructure will launch C4

cloud computing instances

soon

Cloud Computing is a type of computing that

relies on sharing network devices rather than

relying on personal devices to handle

application. It is a type of Internet-based

computing where cloud is used as a metaphor

for Internet. Different services such as

storage, applications and servers are shared

with the organization’s computer and devices

through the Internet.

Megatrends that will dominate Cloud

Computing in the next decade:

1. Cloud computing as an innovative driver

of the future:

New computing platforms are coming up

and all the services are being integrated.

Efficiency, scale and cost are the major

drivers to the development of such new

platforms.

2. Mobility:

The biggest driver of growth is mobility.

What benefit it has is it makes convenient for

people who need to handle multiple devices

at the same time. For businesses, we see a

huge potential as it can be an enabler with

data sharing and storage. It helps in

integrating the information systems of an

organization. It will help developing work

platforms like Work From Home.

3. Social Networking entering the

enterprise space:

With social media becoming all the more

relevant in business space, be it messaging,

document sharing, collaborative workspaces

etc. , Cloud computing is to see an upward

trend in the coming decade

4. Analytics: Big Data:

Analytics: using data to greater effect is the

area where businesses can look forward to the

cloud as it will help them get business at the

right time and at the right place.

- By Yojana Ranasaria