A glimpse of the Forex Market

Introduction

The foreign exchange market, also known as "forex", is the largest financial market in the world. Make a guess of how large this market is? It has $4 trillion daily average trade volume which is more than twice the GDP of India. The forex market is an Over the Counter market with no physical location or exchange like BSE, NSE or NYSE. It runs electronically between banks over a 24-hour period. The reasons for trading in forex market can be one or all among speculation, hedging or arbitrage. Whether you are a large corporate giant planning to import machinery or a student planning to go abroad for studies or the finance minister, forex market has left no one untouched. The high volume, liquidity and leverage has attracted investors to use different ways of trading in forex market like spot, futures, options, and exchange-traded funds (or ETFs).

Some of the advantages of trading in forex market are:

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Finatix Newsletter - September 2012

Definition Zone

Collateralized debt obligation

Collateralized debt obligations (CDOs) are a type of structured asset-backed security (ABS) with multiple "tranches" that are issued by special purpose entities and collateralized by debt obligations including bonds and loans. Each tranche offers a varying degree of risk and return so as to meet investor demand.  

Read more:  http://www.investopedia.com/terms/c/cdo.asp#axzz27FxL9IXw

The best of Economics, Finance and Politics

How FDI in multi-brand retail will open up opportunities for real estate sector

Economic Times, September 22, 2012

The recent decision of the government to allow foreign direct investment (FDI) in the multi-brand retail sector will help the real estate sector in the country. This will in turn increase the demand for commercial space in the market. At the same time, as the demand for office space will continue to be strong, fresh jobs creation in the country will also see a strong growth. The requirement of residential space increases five times that of the commercial space used. Therefore, if the demand for the commercial space remains strong, it will also continue to give a fillip to the residential real estate.

Source: http://economictimes.indiatimes.com/markets/real-estate/policy/how-fdi-in-multi-brand-retail-will-open-up-opportunities-for-real-estate-sector/articleshow/16504821.cms

BPCL plans Rs 45,000-cr investment for capacity expansion

 Business Line, India September 22, 2012

Public sector Bharat Petroleum Corporation Ltd plans to invest about Rs 45,000 crore in the next four to five years to expand its refinery capacity and upstream operations. In the next four to five years, our company is going to change completely with BPCL emerging as a major player in the exploration and production field.

The company is riding high on its discovery in Mozambique and plans to monetise the gas finds by proposing to set up two LNG plant of 5 mtpa capacity each.

Also on the anvil is its Integrated Refinery Expansion Project that envisages increasing the Kochi refinery capacity from 9.5 mtpa to 15.5 mtpa and diversification into the petrochemical sector to manufacture niche products.

Source: http://www.thehindubusinessline.com/companies/article3926641.ece

SBI cuts benchmark lending rate by 25 bps

Economic Times, September 22 , 2012

The country's biggest lender, State Bank of India ( BSE 4.30 %)  said on Saturday it has cut its benchmark prime lending rate, the interest rate that commercial banks normally charge, by 25 basis points to 14.50 percent per annum with effect from Sept. 27.

Earlier this week, the bank cut its base rate by 25 basis points to 9.75 percent.

Indian central bank on Monday cut the cash reserve ratio, the share of deposits banks must keep with it, by 25 basis points to 4.5 percent. 

Source: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/sbi-cuts-benchmark-lending-rate-by-25-bps/articleshow/16503478.cmsh

News at Glance

• Anti-Kudankulam stir reaches Tuticorin port
• PM for building climate that attract investments
• Duty on non-subsidized LPG waived
• Volkswagen drops appeal in 'GTi' dispute with Suzuki
• No roaming charges likely from next year         

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Finatix Newsletter - September 2012

Definition Zone

Dodd-Frank Financial Regulatory Reform Bill

It is a piece of legislation that increased government oversight of trading in complex financial instruments such as derivatives. The Dodd-Frank Financial Regulatory Reform Bill was named after Senator Christopher J. Dodd and U.S. Representative Barney Frank. It restricts the types of proprietary trading activities that financial institutions will be allowed to practice. The Dodd-Frank Financial Regulatory Reform Bill was passed with the intent of preventing the collapse of major financial institutions such as Lehman Brothers from happening again.

Read more:  http://www.investopedia.com/terms/d/dodd-frank-financial-regulatory-reform-bill.asp#axzz26dCR3uIE

The best of Economics, Finance and Politics

Sebi implements measures to revive MF industry

Money Control, September 13, 2012

Market regulator Sebi today announced implementation of a number of steps for the benefit of mutual fund industry, including an additional levy on investors for catering to smaller cities and availing the services of a whole new class of persons as distributors. Among the measures are:

·         MFs can charge up to 30 percentage points of additional TER (Total Expense Ratio)

·         MFs are allowed to charge service tax on investment and advisory fees to the scheme

·         Allowed cash transactions of up to Rs 20,000 per investor in a mutual fund every year.

·         For harmonizing the applicability of NAV across schemes, in respect of purchase of units of MF schemes, the closing NAV of the day on which the funds are available for utilization shall be applicable for application amount equal to or more than two lakh, irrespective of the time of receipt of such application.

Source: http://www.moneycontrol.com/news/mf-news/sebi-implements-measures-to-revive-mf-industry_757554.html

Batting for $100-billion BPO industry: India links free trade agreement with EU to data-secure tag

Economic Times, India September 10, 2012

India has said that its ambitious free trade agreement with the European Union can be sealed only when the 27-member union recognizes it as a data-secure destination, which is vital for attracting sophisticated outsourcing business, pegged to be $100 billion outsourcing industry.

India is among countries not considered data secure by the EU which obstructs flow of sensitive data, such as intellectual property or patient information for telemedicine, to India under data protection laws in the EU.

The EU law mandates that European countries doing outsourcing business with countries that are not certified as data secure have to follow stringent contractual obligations which increases operating costs and affects competitiveness.

Although India had initially rejected the EU's demand of carrying out a study on India's data security laws to ensure that all sensitive information of potential clients would be safe against theft and misuse, it finally relented.

Infosys acquired Switzerland based firm Lodestone

Business Line, India September 6, 2012

Infosys, one of the largest software companies of India, acquired Switzerland based global management consultancy firm Lodestone on 10 September 2012 with an enterprise value of $350 million.  

It is the largest acquisition by Infosys till date. By the end of October Lodestone will operate as a subsidiary named ‘Infosys Lodestone’ in Europe.

Lodestone is a key player in the SAP domain and has in-depth experience of transformational change.
Lodestone is headquartered in Zurich, and the key role of the company is to advise international companies on strategy and process optimization, and to provide business transformation solutions enabled by SAP's enterprise solutions. Lodestone currently employs about 850 employees, most of whom are SAP professionals.

Source: http://www.thehindubusinessline.com/industry-and-economy/info-tech/article3882245.ece?homepage=true

India, Myanmar and Thailand decided to implement Trilateral Connectivity Project by 2016

India, Myanmar and Thailand on 10 September 2012 reviewed the eagerly awaited trilateral connectivity project and decided to make all efforts to implement this by 2016.  This was done at the meeting of the India-Myanmar-Thailand Joint Task Force, which met in New Delhi.

It was also agreed during the meeting that steps be initiated to address issues related to harmonization of customs and immigration procedures at border check-posts to enable seamless movement of goods and people to realize the full potential of the trilateral highway.

News at Glance

·         Proposal for 51 percent FDI in multi-brand retail and 49 percent in Aviation passed

·         Rashtriya Aarogya Nidhi Scheme was launched in Arunachal Pradesh

·         The Islamabad Women’s Chamber of Commerce and Industry and the PHDCCI signed MoU

·         NIIT and Microsoft came together for Cloud Training

·         EGoM cut down the loan interest rate to 7 percent in the drought affected areas

Know your Recruiter: Royal Bank of Scotland

The Royal Bank of Scotland plc is one of the retail banking subsidiaries of the The Royal Bank of Scotland Group plc, and together with NatWest and Ulster Bank, provides branch banking facilities throughout the British Isles.

The Royal Bank of Scotland has around 700 branches, mainly in Scotland though there are branches in many larger towns and cities throughout England and Wales.

Other facts you should know

- It's 84% owned by the UK Government.
- It's one of 3 Scottish banks that issue their own banknotes. It is the only bank still to issue £1 notes.
- It owns Coutts, which is a prestigious bank the Queen uses.
- It also owns the Churchill insurance brand.

Key Business Services:

·          Finance and insurance

·          Consumer Banking

·          Corporate Banking

Strong balance sheet metrics

·          Customer deposits £435bn

·          Group loan to deposit ratio: 104% (92% in Core divisions)

·          Liquidity portfolio: £156bn

·          Group Core tier 1 capital ratio: 11.1%

·          Total funded assets £929bn.

Try and analyze it!!!

Sunday Reads

RBS launches forced stock market sale of Direct Line

Read More: http://www.thenews.com.pk/Todays-News-3-132140-RBS-launches-forced-stock-market-sale-of-Direct-Line

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Finatix Newsletter- September 2012

Definition Zone

Rebate Barrier Option: Options contracts give the holder the right, but not the obligation, to buy or sell a financial asset at an agreed-upon price at, or before, a certain specified date in the future. A rebate barrier option is a knock-out option that provides a refund in the event the knock-out occurs. Since the rebate diminishes the option writer's profits, this type of exotic option is not common.

Source: http://www.investopedia.com/terms/r/rebatebarrieroption.asp#ixzz268E7qmS8

The best of Economics, Finance and Politics

Government Raises Borrow Limit against FCNR for NRIs

Economic Times, India September 5, 2012

Non-resident Indians will be able to borrow more against their foreign currency deposits in the country, a facility the government hopes will encourage them to park more funds in India helping the country to build foreign exchanges reserves.

At present, NRI can take a loan of maximum 1 crore rupees against Foreign Currency Non-Resident, or FCNR (B), deposit, popular non taxable deposits which have seen a net outflow in the recent months. The new limit will be decided in consultation with RBI.

On 2nd September, SBI introduced four new currencies – Swiss Franc, New Zealand dollar, Swedish Krona and Danish Krone – in its basket of currencies for FCNR deposits and also increased the interest rate by 8 basis points to 3.87% on deposits of 5 year maturity.

The finance ministry is of the view that higher loan limit will make these deposits attractive to NRIs, as they will be able to use such borrowed funds for investments while their deposits earn interest not available to their home countries. But RBI is apprehensive that such money will flow specially into sensitive sectors which may create artificial sectoral bubbles. 

SEBI plans to Relax FIIs Collateral Norms

Business Line, India September 6, 2012

In an effort to revive market sentiments, SEBI is planning to relax the collateral requirement for Foreign institutional Investors (FIIs). At present, FIIs are asked to give full collateral in cash for derivatives as well as the cash segment. Now, the SEBI may allow them to submit domestic instruments, such as approved securities, bank guarantees, fixed deposits, government bonds and mutual funds, as collateral.

Such a move is also expected to help improve forex inflow. This is important as the current account deficit in 2011-12 touched a record 4.2 per cent.

Partnership in between Alstom Grid and Toshiba Corp

The two corporate giants Alstom Grid and Toshiba Corp entered into partnership for their smart grid business by signing a Memorandum of Understanding on 6 September 2012. The goal of the collaboration is to secure the supply of energy by identifying different types of electricity management solutions. This partnership will help in ensuring consistency in outcome and support of the supplied energy. Both the organizations are expecting to develop systems that support the integration of renewable energy for bringing down the cost of energy production.

Alstrom and Toshiba, both are looking forward for extending the business in the global market. Alstrom Grid is a 125 years old company and placed among the three global players of electrical transmission. Whereas, Toshiba Corp is a renowned Japanese electronics company engaged in development of electrical products, internet based services and solutions and more in the domain.

SEBI allowed Partial Flexibility in IDRs for Investors

India’s market regulator Security and Exchange Board of India (SEBI) on 28 August 2012 allowed partial flexibility in the conversion of Indian Depository Receipts (IDRs) into equity shares by investors. The SEBI move is aimed at retaining domestic liquidity beside, it is also expected to attract foreign entities to enroll their IDRs on India stock exchanges.

In another circular released by the RBI, the central bank put an overall cap of 5 billion dollar for raising of capital through IDRs by foreign companies in Indian markets. The RBI measure will help Indian investors to convert their depository receipts into equity shares of the issuer company and vice versa.

News at Glance

FIIs Invest about 11k cr in August, highest in 6 months

PSBs Need 90k cr rupees to meet Basel-III Norms-Subbarao

Plan panel to cut annual GDP Growth Target to 8.2% from 9% envisaged earlier

OECD slashes G7 growth forecasts on Europe Outlook

India ranked to be 59th in the report released by World Economic Forum

Know your Recruiter: Bajaj Capital

India's foremost Investment Advisors & Financial Planners. It offers advice on Mutual Funds, Insurance, Bonds, Fixed Deposits, Tax Saving, NRI services and distributes wide range of investment products. Bajaj capital has got 45 years of experience as Investment Advisors and Financial Planners with countrywide network of over 200 branches. It belongs to the category of ‘SEBI-Approved Category I Merchant Bankers’.

Key Business Services:

·         Investment Planning

·         Insurance Planning

·         Tax Planning

·         Portfolio Tracker

·         Cash Flow Planning

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Is greater money supply better for economy?

Germany, 1923: Workers were paid twice a day, and the housewife would stand at the factory gate and rush with wheelbarrows full of million mark notes to buy anything at all for money. Production fell, as people became more interested in speculating than in real production or in working wages. Germans began to use foreign currencies or to barter in commodities. The once-proud mark collapsed. Rudolf Havenstein, the head of the Reichsbank-the German Central Bank made clear that the bank would meet its responsibilities by increasing higher denominations of notes and keeping its printing presses open all night to fill the demand. In July 1914, 1$ = 4 marks and by November 1923 mark value had spiralled down to 1$ = 4.2 trillion marks.

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Finatix Newsletter - September 2012

Definition Zone

LIBOR: An interest rate at which banks can borrow funds, in marketable size, from other banks in the London interbank market. It is fixed on a daily basis by the British Bankers' Association. The LIBOR is derived from a filtered average of the world's most creditworthy banks' interbank deposit rates for larger loans with maturities between overnight and one full year.
Source: http://www.investopedia.com/terms/l/libor.asp#axzz25Eki3C5d

The best of Economics, Finance and Politics

SEBI weighs plan to start exchange for Corporate Bonds, fixed income derivatives

Business Line, India August 27, 2012

Securities and Exchange Board of India (SEBI) is considering a proposal for setting up a dedicated exchange for corporate bonds and fixed income derivatives, which will exclusively cater to large institutional clients like banks, mutual funds, insurance companies and primary dealers. Currently, corporate bonds and interest rate derivatives are transacted primarily in the OTC (Over the counter) market.

The exchange is proposed to set up by ICAP India, a subsidiary of the world’s largest inter-dealer broker ICAP plc, and its application is currently being processed by the SEBI. As per the plan, the firm’s 200 clients would be offered membership in the proposed exchange.

The proposal is in sync with Dodd Franck Act of US and European Commission draft favoring regulation and transparency for OTC derivatives. Also G-20 countries, of which India is a signatory, had said in 2009 that all standardized OTC derivatives be traded in exchange system by the end of 2012 and where possible centrally cleared.

Japan’s Dentsu Acquires Indie Agency Taproot at estimated deal of 140 crore

The Economic times, India August 29, 2012

Japanese advertising behemoth Dentsu has acquired 51% stake in Taproot, the most creative among Indian advertising agencies. With several of the most popular recent campaigns like ‘Har ek friend zaroori hota hai’ and ‘joh tera hai vo mera hai’ for Airtel and ‘Change the Game ’ for Pepsi under its belt, the five year old agency has seen meteoric rise.

Taproot was founded by Agnello Dias and Santosh Padhi in 2008. Dentsu will get Creative firepower, while taproot gets national network, superior execution ability, integrated communication and of course the money. Taproot won’t be rebranded. Although Dentsu is a majority owner, management control of the agency will rest with Dias and Padhi.

India-Indonesia Signed Double Taxation Avoidance Agreement (DTAA)

India and Indonesia signed an agreement to avoid double taxation and prevent fiscal evasion with respect to taxes on income on 27 July 2012.

The agreement was signed by Indonesian Foreign Affairs Minister Dr. R. M. Marty Natalegawa and his Indian counterpart S.M Krishna at the Hyderabad House in New Delhi. Apart from the agreement, both sides also signed the agreed minutes of the fourth Joint Commission Meeting between India and Indonesia.

Highlights of the Meet

•    Both the countries, reviewed the entire state of bilateral relationship including trade and commerce.

•    Two nations have also agreed to strengthen the bilateral relationship into a strategic partnership

Both countries share a warm relationship on account of the solid foundation of historical and cultural ties. Both countries are also hopeful of achieving the trade target of 25 billion US Dollars by 2015

Annual Supplementary Foreign policy 2012-13 provides interest subsidy support to exporters

Infoline.com

Government has come forward for rescue of exporters by extending some promotion schemes and providing incentives to tap new markets with the aim to increase exports by 20% during 2012-13. Policy underlines 7 point agenda to assist country’s export in the current shaking environment.

Highlights of FTA-

• Government aiming 20% export growth in 2012-13
•  2% interest subsidy scheme extended  till march 2013
•  Incentives for exports from north eastern states
• Seven new market added to Focus market scheme
• 13 shows abroad to promote Brand India
• Incentives for promoting investment in labor intensive sectors

http://www.indiainfoline.com/Markets/News/Highlights-of-Annual-Supplement-to-Foreign-Trade-Policy/5433673245

News at Glance

Basel III to be effective from Jan 2013

IMF Lowers India Growth projection to 6.1 per cent for 2012

Moody’s maintain India’s Rating Outlook stable

Current Account deficit hits all time high.

India stands second in Innovation Efficiency Index

Direct Tax collection rises 47% in Q1 2012-13

Know your Recruiter: ING Group

ING is the largest banking and financial services & insurance conglomerate in the world by revenue (€55.79 billion (2011). ING is an abbreviation for International Nederland Group. ING has its client base spread in more than 45 countries.

Key Business Services of ING Group

·         Retail Banking

·         Direct Banking

·         Commercial Banking

·         Investment Banking

·         Asset Management

·         Insurance Services

Sunday Read for you:

•   SBI ties up with Japanese Bank
•   BHEL disinvestment put on hold
•        Who cares about the price of onions?
•   My dollar, my rules
•        Forex reserves up by $1.26 billion  to $ 290 billion.

Anupriya (12PGP063)
Srilakshmi Soumya Ch (12PGP097)
Finatix Member-IIM Raipur

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