15th Jan 2012 Edition

ABB20120102

The Abhyaas Business Bulletin for the MBA aspirant in you.

Effective fiscal management need of the hour says FM of India
With the fiscal deficit on the rise owing to a decrease in revenue and growth expenditure, Finance Minister, Mr. Pranab Mukherjee stated that prudent fiscal management was the need of the hour. Saying that the deficit should not be allowed to go beyond a manageable limit, he added that managing receipts and payments was the key to keeping sovereign borrowings and debts under control. He also said that there were lessons to be learnt from the current Eurozone crisis where sovereign fiscal deficits of some nations had surpassed 100% of GDP, and warned that such breach of fiscal deficit targets would have their implications. Fiscal deficit is essentially the difference between what the government spends and what it earns and is expressed as a percentage of GDP. When a government fails to match its expenses against its earnings, it tries to bridge the gap by borrowing and has to resort to deficit financing. The budgeted fiscal deficit target for the current financial year was estimated to be 4.6% of the GDP, however, since the governments extra borrowing on account of rising subsidy bills, and resources from disinvestment not coming through, the target is very much under pressure. The government is not likely to meet its disinvestment target of Rs. 40,000 crore and has already announced borrowing an additional Rs. 90,000 crore to bridge the revenue-expenditure gap. On the other hand, the subsidy bill during the current financial year is expected to increase by an additional Rs. one lakh crore. Mr. Mukherjee also discussed the need to provide better taxpayer services, making collection systems more rule-based and transparent as better services would result in more compliance and said that all efforts were being made to improve collection of taxes. Emphasizing that timely refund would increase the confidence among tax payers, he stated that refunds of Rs. 73,000 crore were already made so far this year. Which are the countries with debt to GDP ratio more than 100%? What are PIIG countries? Why are some countries able to hold up their economy with high levels of debt while others are not? Identify other ways to raise money for government apart from disinvestment, borrowings and tax collections.
www.abhyaas.in

From the Editors desk:

Hello Reader, Welcome to the Abhyaas Business Bulletin for the New Year! I hope this year brings you a lot more success, happiness, satisfaction and good luck. In this edition, we will cover the significant business happenings in India and the world in the first fortnight of 2012. The New Year brought some cheer to the common man as food inflation rates touching new lows and prices of vegetables reducing significantly. Also, the FDI in retail for single-brands and the Auto Expo held in the capital made headlines in the nation. Internationally, the mass downgrade of European countries by credit rating agency, Standard and Poors renewed fears of an impending global financial crisis, though the scenario in the U.S looking much brighter. Do read the entire bulletin thoroughly to get a heads-up into the business events occurring around the world. Try and figure out answers for the questions provided at the end of each of the news bits to better your knowledge of current affairs. The intent of the bulletin, apart from just providing you with the snippets of news is also for you to read more, and know in detail about them. All the answers to the questions would be discussed in the Abhyaas GD-PI programme which has already begun.

Index: Page 2: Stock Market and Indicators Page 3: National Business News Page 4: International Business News

(Ms. Sonal Jaiswal)

The Abhyaas Business Bulletin

15th Jan 2012 Edition

ABB20120102

Stock Markets across the World (1st January 15th January, 2012) )

Macro Indicators
Bank Rate Repo Rate Reverse Repo Rate SLR CRR Exchange Rate(with USD) Inflation(WPI) % Change 6.00% 8.50% 7.50% 24.00% 6.00% 51.43 -2.90%

Other Indicators
Crude Oil(NYMEX) Crude Oil(BRENT) Gold Price(Indian Bullion) 98.7 $/barrel 110.4 $/barrel 2739.33 INR/gm
(As on 15th Jan, 2012)

Overview
Indian stock markets started the New Year on a positive note. Sensex and Nifty advanced by 4.53% and 5.23% in the last fortnight after having dropped around 25% in the year 2011. Nikkei index barely advanced with a 0.53% increase over the fortnight but Chinas Shanghai Index performed better by advancing over 2.05% in the same period. London's FTSE 100 moved up by around 1.17% while NASDAQ has been one of the biggest gainers, registered a positive movement of 4.13% this fortnight. While stronger economic news is emanating from US in the last quarter, re-emerging concerns about Europe's debt crisis pushed the Euro to a 16-month low against the dollar.
www.abhyaas.in The Abhyaas Business Bulletin 2

15th Jan 2012 Edition

ABB20120102

100% FDI in single-brand retail notified

The government, on 10th January eliminated restrictions on Foreign Direct Investment (FDI) in the retail sector for single brand owners and notified 100% investment, increasing the cap from a previous 51%. However, foreign retailers looking at 100% ownership must necessarily source at least 30% of their goods from domestic small industries, village or cottage industries that have invested a maximum of 5 crore in their plants. This would pave the way for global fashion brands like Adidas, Armani, Gucci etc. to intensify their consumer base in India, which are currently running with Indian partners. Commerce and Industry Minister, Anand Sharma said that this initiative would provide the necessary stimulus and technical upgradation to the domestic manufacturing sector. Shortly after this was announced, shares of Indian retailers like Pantaloons and Shoppers Stop rose significantly. Why has this notification resulted in a positive market reaction? Which industry sectors would be benefited from this? How does 100% ownership help a foreign retailer in a new territory like India?

Is negative inflation a good sign for economy? Think of any other indicators where base effect would have significant impact. What is headline inflation? Is it different from WPI? Which organization determines the WPI?

Moody's upgrades India's currency rating to investment grade

U.S based credit rating agency, Moodys upgraded the country's rating of short-term foreign currency bank deposits from speculative' to investment' grade on 10th January. The Finance Ministry announced that the elevation in grade was made from NP (Not Prime) to P-3 (suggesting acceptable ability to repay short-term obligations). Domestic companies will now have an advantage in raising funds from overseas markets at better rates and consequently, the money flow in the nation is to improve. In less than a month, this is the fourth upgrade by Moodys, boosting the chances of Indian banks in raising overseas deposits at finer rates. In the past month, it upgraded short-term government bonds denominated in domestic currency from NP to P-3; increased long-term government bond denominated in domestic currency from Ba1' to Baa3' an enhancement from speculative to investment grade. Also, the long-term country ceiling on foreign currency bank deposit was upgraded from Ba1 to Baa3.
What are the different speculative and investment grades used by S&P and Moody's? How are speculative grades different from junk grades? How would this upgrade help the economy of India?

Food inflation turns negative; RBI may reduce rates

The year-end brought cheer to the junta and the policy makers as food inflation entered the negative sphere dwindling to -3.36% during the week ending December 24th, maintaining the year-end low inflation rates. Also, during the week that ended the year 2011, it still remained negative at -2.9%. The lowest rates in around 6 years are attributed in part to the decrease in the prices of edibles and in part to the base effect. Base effect, in economic parlance, is the rate of inflation in the corresponding year-ago period, which was 21% in the week ending 24th December and 19.1% in 31st December-ending week in 2010 respectively. The sharp decline according to the Wholesale Price Index (WPI) data prompted C. Rangarajan, Chairman of the Prime Ministers Economic Advisory Council to state that the RBI would reverse its monetary policy in its next review to be held on the 24th of January and would look at a countermand to accentuate the industrial growth. Also, Finance Minister, Pranab Mukherjee said that if the same rates persisted, then the headline inflation at the end of the fiscal year would be manageable.
www.abhyaas.in

11th Auto Expo held in Delhi; Indian auto sector is 7th largest
The 11th Auto expo kicked off in the capital at Pragati Maidan from 7 11 January, 2012. It saw a horde of car manufacturers unveiling their automobiles with Maruti Suzuki, the countrys biggest car manufacturer unveiling its compact sport-utility vehichle (SUV) XA Alpha and compact multi-purpose vehicle (MPV) Ertiga. Indian design studio, DC Design also revealed Avanti the first sports-car from India while Ford showed off a swank design concept of the EcoSport, and called it the urban SUV. Amid this, the Society of Indian Automobile Manufacturers (SIAM), forecasted an increase of 11-13% in the car sales for the fiscal year 2013. Which are the six large auto markets other than India? What are the other sectors in which India holds better rank in terms of market size? What is an SUV? What are the different classes of Cars and how are they classified?
3

The Abhyaas Business Bulletin

15th Jan 2012 Edition

ABB20120102

S & P downgrades France, Austria, 7 other Eurozone nations

Reigniting fears over Europe not being able to bail itself out of the financial crisis, U.S based credit rating agency, Standard & Poors downgraded by one notch the triple A rating of France and Austria, and seven other nations that include Italy and Spain on a dark Friday, the 13th. Germany, Eurozones biggest economy though, retained its AAA rating along with Netherlands, Finland and Luxembourg while Portugals debt was relegated to junk. Malta, Slovakia and Slovenia were downgraded by one notch, while Italy, Spain, Portugal and Cyprus were demoted by two notches. S & P said that the EU summit last month did not yield sufficient results of to overcome a crisis. This also comes in the wake of talks between Greek negotiators and holders of its debt breaking down over how large bondholders losses should be on 13th. If no agreement is reached, Greece will need billions of euros to aid it in making a bond repayment in March. While the mass downgrade provoked immense backlash from the political community in Europe, Frances Finance Minister, Franois Baroin tried to downplay it saying that policies of France would not be dictated by rating agencies. Also, the Chinese news agency, Xinhua said that the Global credit rating agencies have a responsibility to not amplify the current financial debt crisis. Why are few Euro countries downgraded while others are not? How does a rating agency work and gain credibility? Do you agree with Xinhua's view that rating agencies shouldn't amplify the crisis in the European economy?

Systems (US), Atmos Energy (US).

How are 'Growth Outliers' identified? Would you invest in Infosys/HDFC based on this input? What does EVA mean and who introduced it? How is it calculated? Is it similar to 'Growth Outliers' concept?

US consumer sentiment strongest since May, 2011

According to Thomson Reuters and University of Michigan index released on the 13th of January, Americans grew more optimistic about job prospects early in the year as consumer sentiment rose to the highest levels in eight months. Consumer sentiment recorded 74 which was the highest since May, 2011 after it touched 69.9 in December, 2011. More frequent mentions of rising employment and lessened income uncertainty prompted favourable buying attitudes as well, thus increasing the overall satisfaction, said Richard Curtin, Director of the survey. Should this survey be taken seriously? Are there any such surveys conducted in India and who conducts them? What are the different types of sampling used in such surveys and which is the best method?

B School Spotlight: S. P. Jain Institute of Management

S. P. Jain institute of Management & Research (SPJIMR) is an autonomous management institute in Delhi with entrepreneurial agility, personal freedom with professional accountability and corporatized culture, structure and processes. It is rated as one of the best B-schools in India and South Asia. The flagship course of SPJIMR is the Post Graduate Diploma in Management (PGDM) which is a two-year, full time, residential programme. Having 180 seats and currently running in its 27th year, it offers specializations in finance, operations, marketing and information management and boasts of a successful and well-known alumnus. Apart from PGDM, SPJIMR offers many other programmes like Post Graduate Programme in Management (PGPM), which is an eleven month, full-time, residential programme; Post Graduate Executive Management Programme spread over 4 phases over a 21-month duration etc. For more details log onto http://www.spjimr.org

Infosys, HDFC in Harvard Business Review's top 10 growth list

Bangalore-based IT services organization Infosys, and Mumbai-based banking and financial services company HDFC Bank were among the elite group of 10 companies around the globe, identified by Harvard Business Review as those ones that have consistently fared better than others around the world over a ten-year period between 1999 and 2009, growing their net incomes by 5% every year, beating volatility. 'Growth Outliers' was the name given to the elite list of 10 companies that had a market capitalization of at least $1 billion. The other companies included Yahoo Japan, ACS (Spain), Cognizant (US), Tsingtao Brewery (China), Indra Sistemas (Spain), Krka Group (Slovenia), Factsheet Research
www.abhyaas.in

For further info contact us at: info@abhyaas.in

4

The Abhyaas Business Bulletin