Contributed By:
Prof. Jayanta Mitra
(Globsyn Business School)
Contributed By:
Prof. Jayanta Mitra
(Globsyn Business School)
The increasing exposure to higher-risk customers is mainly through personal loans and credit card receivables, it has said. These are unsecured in nature and now form 17% of the total outstanding retail loans in March 2007, up from 6% in 2004. Housing loans constitute over half of the total retail loans in India. Bad loans in home loan portfolio increased to 2.2% of the total loans in March 2007, from 1.8% in 2005. These are expected to increase to 2.7% in the financial year 2008-09.
Car and commercial vehicle asset segments comprise one-third of the total retail loans. Crisil estimates that gross NPAs in these segments have increased to 2.3% and 4%, respectively, as of March 2007, from 0.9% and 3.2%, respectively, in 2005. In 2008-09, these numbers are seen at 3% for car loans and 5.5% for commercial vehicles. The slowdown in recovery efforts, following the controversy over recovery methods of some players, resulted in a sharp spike in delinquencies during September-October 2007.
Contributed By:
Arjun Pal
(Knowledge Cell - Globsyn Business School)
By adopting IFRS, Indian companies can bridge the Atlantic divide, integrate and then participate in the global economy.
There will be nothing like "extraordinary income" in IFRS.
Much more non – accounting information will be included and the judgement of the management will be of paramount importance in several matters. Doing away with the schedule XIV rule for depreciation is just one of the many examples.
Contributed By:
Prof. Jayanta Mitra
(Globsyn Business School)
The Reserve Bank of India, says that its prime mandate is to contain inflation. RBI had earlier indicated that an inflation rate between 4.5% and 5% was comfortable for the Indian economy. In the last few weeks, inflation has overshot that threshold and is inching towards the double-digit mark. The wholesale price index (WPI) inflation, which was 3.8% in January, rose to7.41% by March 29. It then eased to 7.1% for the week ending April 5 but rose again to 7.33% the following week. In the near future, there is no hope that it will come down. McKinsey & Co, in a recent survey, found that 64% of the Indian executives polled, were apprehensive about the inflation going up in the next six months.
Experts believe that the Government of India (GoI) will resist raising interest rates since the interest rate differential with the U.S. is already quite large, they would not want to widen it any more. To control inflation, one of the things that the GoI is trying to do is set price ceilings and quantitative controls. However, these techniques have historically been unsuccessful not just in India, but elsewhere as well. Not only these are difficult to administer, but also these methods are outdated. Surely, there is a need to curb price rise, as the monetary policy would not be altered at this point in time because of foreign investments, etc. The government is constrained by what is called the impossible trinity of international finance (the perceived irreconcilability of the three objectives – capital freedom, exchange rate maintenance and independence of monetary policy).
The government has been negotiating with cement and steel manufacturers, (almost) forcing them to restrain prices. "It is my view that cement manufacturers and, to some extent, steel producers are behaving like a cartel," Chidambaram told Parliament in late April. Steel companies are also pointing to rising input costs. An uneasy truce has been reached with the manufacturers agreeing to maintain the current level of prices for a few more months. But the truce would collapse if companies see their profits in the red.
The government has implemented several other steps, including various export bans and import duty cuts and revision of the annual export-import policy. For example, this year, cement exports were banned and all incentives on the export of primary steel were withdrawn. The export target for 2008-09 has been revised to $200 billion – an increase of 23% over the $155 billion achieved in 2007-08. This was short of the $160 billion target for the year.
Increase in steel and cement prices results in pressure on user industries. The country’s largest two-wheeler manufacturer, Hero Honda, has hiked prices for its products. The car manufacturers are also being forced to the wall. The Tata Group's Rs. 100,000 ($2,500) Nano, the inexpensive car due to roll off the assembly lines soon, may be impossible to manufacture at such a low price.
Avik Mukherjee
Globsyn Business School
The BSE sensitive index (Sensex) touched an all-time high of 21,207 on 10th January 2008 and our FM Mr. P. Chidambaram said that the outlook was very positive for India and her GDP is all set to grow at 9% this year. The analysts were having a ball and predicted that Sensex would scale 25,000 in no time. The Governor of Reserve Bank of India (RBI), Dr. Y.V. Reddy, it was reported, was considering a cut in the interest rate to boost investment. The stock analysts were rejoicing about the decoupling theory: How the stock markets in rapidly-growing economies like India and China would be unaffected by the imminent slowdown in the U.S. India was living a dream.
The dream was short-lived and much to all’s astonishment, the Indian markets crashed. The first quarter of the calendar year 2008 was the worst since 1992. Market indices have tumbled 28% in dollar terms and some stocks have lost more than 50% of their values.
Now opinions differ widely on GDP growth in 2008-09. The Delhi-based Oxus Research & Investments is the most optimistic and maintains that 9% is still achievable. Deutsche Bank pegs it at 8.4% while UBS does it at 8.2%. In the middle ground are the Asian Development Bank (8.0%), the International Monetary Fund (7.9%, for calendar 2008) and Lehman Brothers (7.6%). HSBC, JP Morgan Chase and Morgan Stanley are among the least optimistic and estimate a growth of 7%. Meanwhile, rating agency CRISIL has made a downward revision of its estimate to 8.1% from an earlier forecast of 8.5%.
Avik Mukherjee
Globsyn Business School
Veena Vishwanathan
Globsyn Business School
The payment history category reviews how well one has met one's prior obligations on various account types. It also looks for previous problems in one's payment history such as bankruptcy, collections and delinquency.
The amount one currently owes to lenders - while this category focuses on one's current amount of debt, it also looks at the number of different accounts and the specific types of accounts that one holds. The longer one has a good credit history, the better. Also, people who apply for credit a lot probably already have financial pressures causing them to do so, so each time one applies for credit, one's score gets dinged a little.
It is important to understand that one's credit score only looks at the information contained on one's credit report and does not reflect additional information that one's lender may consider in its appraisal. For example, one's credit report does not include such things as current income and length of employment. However, because one's credit score is a key tool used by lending agencies, it is important that one maintains and improves it periodically.
Contributed by
Veena Vishwanathan
Globsyn Business School
Evaluating Managers/Past Results: As with all investments, investors should research a fund's past results. To that end, the following is a list of questions that perspective investors should ask themselves when reviewing the historical record:
This information is important because it will give the investor insight into how the portfolio manager performs under certain conditions, as well as what historically has been the trend in terms of turnover and return. For this reason, prior to buying into a fund, it makes sense to review the investment company's literature to look for information about anticipated trends in the market in the years ahead.
Size of the Fund : However, there are times when a fund can get too big. A perfect example is Fidelity's Magellan Fund. Back in 1999 the fund topped $100 billion in assets, and for the first time, it was forced to change its investment process to accommodate the large daily (money) inflows. Instead of being nimble and buying small and mid cap stocks, it shifted its focus primarily toward larger capitalization growth stocks. As a result, its performance has suffered. It makes the process of buying and selling stocks with any kind of anonymity almost impossible.
Bottom Line: Selecting a mutual fund may seem like a daunting task, but knowing one's objectives and risk tolerance is half the battle. If one follows this bit of due diligence before selecting a fund, one will increase one's chances of success.
Veena Vishwanathan
Globsyn Business School
Source: http://www.investopedia.com
Veena Vishwanathan
Wealth making in the market has more to do with discipline and the power of time to compound growth than being smart at stock picking and timing the markets just right. To help you in your quest to make wealth in our markets, the following 10 golden rules of markets that will virtually ensure reasonable, steady wealth appreciation have been suggested.
Rule No 1: Plan for tomorrow, today. Start saving for it now! Stagger your investments throughout your earning phase. Invest regularly and invest for the long term to buy in at an average price that includes both markets’ up and down ticks.
Rule No 2: Start early so that the power of compounding begins sooner; time is the magic that converts paise into rupees. In exuberant phases, when we have earned good money from our investments, most of us get greedy, and derivatives and futures provide an outlet for the expression of human greed. While such instruments often satisfy the whims of human greed, if taken to unrealistic levels, irresponsible investment in these securities can lead to financial ruin.
Rule No 3: Do not leverage, it is difficult, if not impossible, to predict short-term trends.
Buy markets, not stocks. We all know that our economy is in a secular phase of prosperity and the stock market is the best proxy for the growth of an economy. To benefit from our soaring economy, buy the market as a whole and not any single stock.
Rule No 4: Buy stocks that mirror the broader indexes, but never buy a single, or a handful of stock exposures. This means that you need to spread your risk across various market segments in the event a particular stock does not perform for reasons beyond the company’s control.
Rule No 5: Look at company earnings, not at stock prices. Stock prices may tempt or give the wrong impression of a company’s welfare. But to build real wealth in equities, you must always rely on declared profits and facts, rather than make decisions based on stock movements. We all tend to sell stocks when we have made profits and keep the ones that have not appreciated. Eventually, we end up holding a portfolio of companies that are not performing! It is only human to sell for profits and not to want to take losses.
Rule No 6: Keep the winners, sell the losers. Check constantly for stocks that are not performing and eliminate them from your portfolio if the outlook does not seem promising. This way, you will have all winners left in your portfolio to take you to your goals.
Rule No 7: Buy value and not momentum. When investing in stocks, your head should prevail over your heart. Resist the urge to get consumed by market chatter. Ignore hot tips from dealers and friends. It is advisable to do your own home work.
Rule No 8: Pick stocks with your brain, not your heart. Large-caps are the ones that have already proven themselves over longer periods of time and have the balance sheet acumen, strong cash flow and brains to manage businesses effectively according to prevailing situations and realistic opportunities available.
Rule No 9: Prefer large-cap stocks to small- and medium-caps. Investment in small and mid-cap stocks requires expertise and strong tracking abilities, that without, your portfolio will under-perform. Do not short sell a stock just because it is going up, and thus, one day it must come down. If companies are able to sustain earnings’ growth for long periods, then its stock may go up, up and up, or it can even remain high without any reason for a long period of time.
Rule No 10: Markets can remain irrationally up, or continually climb for the right reasons. Therefore, never go short. It will expose you to unnecessary risks.
Adapted from: http://economictimes.indiatimes.com
Veena Vishwanathan
Globsyn Business School
Prof. J. N. Mukhpopadhyaya |
|
Prof. Jayanta Mitra |
|
Mr. Avik Mukherjee |
|
Mr. Krishnendu Ghosh |