Niveshak July15 PDF

Niveshak
THE INVESTOR
VOLUME 8 ISSUE 7
July 2015
FROM EDITORS DESK

Niveshak
Volume VIII
ISSUE VII
July 2015
Faculty Chairman
Prof. P. Saravanan
THE TEAM
Abhishek Bansal
Bhawana Saraf
Maha Singh Gulati
Palash jain
Prakhar Nagori
Ramesh Jaiswal
Rahul Bajaj
Sandeep Sharma
Vishal Khare
All images, design and artwork

are copyright of
IIM Shillong Finance Club
Finance Club
Indian Institute of Management
Shillong
www.iims-niveshak.com
Dear Niveshaks,
Taking forward one of his marquee projects, Prime Minister Narendra Modi started
the month of July with the launch of Digital India. Digital India, which talks about
taking Internet connectivity to the masses is expected to be officially launched with
some of the key components of it such as Digital Locker, National Scholarship Portal
and e-health under which people can book online appointments to government hospitals such as AIIMS.
The Chinese economy continues to be weak witnessing sharp plunge in stock market.
The Peoples Bank of China has cut interest rates to a record low, brokerages have
committed to buy billions worth of stocks, and regulators have announced a de-facto
suspension of new IPOs. The underlying business sentiment in India during JulySeptember quarter of calendar 2015 is likely to remain subdued amid concerns of
weak factory data and potential impact of deficient monsoon. The economic weakness
in the domestic market was compounded by lower growth in China and continuing
financial woes in Europe that raised doubts about the strength of growth of the world
economy. Oil prices rebounded after settling at their lowest in months in the previous
session as worries over the demand outlook and continued oversupply weighed on
the market. U.S. Treasury long debt yields dropped to two-week lows on Thursday in
choppy trading, as investors sought a safe haven from weak U.S. corporate earnings
and slumping commodities prices.
Indias central bank said it would reserve the right to inject less funds via term repo
auctions than notified, saying ample liquidity in money markets had reduced demand for these short-term debt products.
Driven by an investment friendly government at the centre, overseas investors have
pumped in a staggering $6 billion into the Indian securities market in July - taking
their overall net inflows since beginning of 2014 to more than $26 billion. According to
analysts, the governments approval of a composite FDI structure, which will result in
further capital flowing into the system, has lifted the investors confidence and helped
revive the inflows. Besides, Greece law makers have passed the austerity laws aimed at
paving the way for a bailout by the EU, which has further boosted sentiment.
On the magazine front, the cover story gives interesting insights on the happening in
the stock markets of China. It shows how the Chinese markets reached to such highs
that a crash was inevitable. The Article of the Month raises concerns on whether the
world is going into another great recession and what reasons could be behind it. The
Fin Gyaan section explains the current Greek crisis and the Fin Sight section covers
the implementation of GST and what impact it may have on our economy. For our
FinView section, we have an interview with Mr. K. Biju George, General Manager of
IDBI Bank on debt syndication and project financing.
To end this brief note, its important that we thank you, our readers, for your constant
support and appreciation. Please continue to motivate us so that we can come out with
more insightful reads in the issues to come. Keep pouring in.
Stay Invested!
Team Niveshak
Disclaimer: The views presented are the opinion/work of the individual author and The Finance Club of IIM Shillong bears
no responsibility whatsoever.
CONTENTS
Cover Story
Niveshak Times
04 The Month That Was
Article of the month
10
14
China Stock Market Bubble
Is World Economy Going

into Great Depression?
FinGyaan
18 The Greek Debt Crisis: What
the fuss is all about!
FinLife
22 Derivatives Market
Finsight
26
Implementation of GST :
Impact on Indian Economy
FinVIEW
30
Interview With Mr. K. Biju

George ,General Manager, IDBI
Bank
CLASSROOM
33 Smart Beta
The Month That Was
NIVESHAK
The Niveshak Times

Team NIVESHAK
IIM Shillong
India, Large EMs Less Vulnerable To US
Fed Rate Hike: Fitch
Global ratings agency Fitch today said that
so-called fragile five emerging economies
including India and Brazil are showing fewer
signs of vulnerability to US Federal Reserves
rate hike. The large emerging markets (EMs) -Brazil, India, Indonesia, Turkey and South Africa
-- are exhibiting fewer signs of vulnerability to
a drop in capital inflows than some of their
smaller counterparts, Fitch said in a report.
This suggests these so-called fragile five are
not necessarily most at risk from Fed tightening,
although this will ultimately be determined
by a range of factors, some of which are less
quantifiable, Fitch Ratings said.
The ratings agency is expecting US Federal
Reserve to start raising interest rates before the
end of 2015.
Make In India: Boeing Says Its Open To
Picking Up Stake In Indian Aerospace Firm
US aircraft manufacturer Boeing is open to
picking up a stake in an Indian aerospace
company, its India head said. We are open to
it. The investment environment in India has
improved, said Pratyush Kumar, President,
Boeing India.
Kumar added however that a strategic
partnership in this space would entail a host
of regulatory approvals. He didnt elaborate on
whether Boeing is in talks with any aerospace
company in India.
A strategic partnership would considerably
expand the manufacturers role and involvement
in Indias aerospace industry, apart from
developing Narendra Modis Make in India
initiative. Boeing primarily has sourcing or
technology sharing relationships with companies
in India.
RBI, Central Bank Of Sri Lanka Ink
Currency Swap Agreement
The Reserve Bank signed a special currency
swap agreement with the Central Bank of Sri
JULY 2015
Lanka that will allow the latter to draw up to

$1.1 billion.
Under the arrangement, the Sri Lankan bank can
draw up to $1.1 billion for a maximum period of
six months.
This special arrangement is in addition to
the existing Framework on Currency Swap
Arrangement for the Saarc member countries.
The proposal to extend the additional currency
swap facility of $1.1 billion for a limited period
was decided by the government in April based
on the recommendation of RBI.
It was intended for mitigating the possible
currency volatility in the spirit of strengthening
Indias bilateral relations and economic ties with
Sri Lanka, RBI said.
Poscos $12 Billion Odisha Project On
Hold
Posco, South Koreas biggest steelmaker, has put
on hold plans to build a steel plant in India after
land acquisition and farmer protests stalled the
$12-billion project for a decade.
The project in Indias eastern state of Odisha
has been tentatively postponed, CEO Kwon Oh
Joon said. Until Indian Prime Minister Narendra
Modi offers better deals, we wont resume
and for now we will head to the west and do
more downstream work, he said, referring to
a plant the company operates in the state of
Maharashtra.
Poscos 12-million ton-a-year Odisha project,
which was the nations biggest foreign
investment, failed to take off since 2005 because
of opposition from local farmers and the failure
to secure iron ore mining leases, initially
promised for free to the company
BRICS Bank To Start Lending In Local
Currency By April: Kamath
The New Development Bank (NDB), set up by
five BRICS nations including India, will start
lending in local currency by April next year and
member countries will primarily be the focus of
NIVESHAK
credit facility, its chief and eminent banker KV

Kamath said recently.
He said a decision to open membership for other
countries will be taken in the next few months
by the banks Board of Governors.
I think we will start lending process sometimes
early first quarter next year (April). The idea is
that by April next year, we will create a state
of projects from all the member countries (for
lending), Kamath said.
He also said the NDB, with a capital of USD 100
billion, will look at various instruments of credit
to the member countries -- Brazil, Russia, India,
China and South Africa -- which require huge
resources for development.
India, US Sign Agreement To Share Info
On Tax Evasion
India and the US signed a tax information
sharing agreement under a new US law, Foreign
Account Tax Compliance Act (FATCA) that will
bolster efforts towards automatic exchange of
financial information between the two nations
about tax evaders.
The agreement will cover automatic sharing
of information on bank accounts as well as
financial products like equities, mutual funds
and insurance and is aimed at fighting the
menace of black money stashed abroad. Coming
within months of India becoming a signatory to
the OECD pact on automatic information sharing,
the governments efforts at getting names of
those with illicit wealth stashed abroad will get
a leg up.
With the agreement in palace, from September
30, banks, mutual funds, insurance, pension
and stock-broking firms will report their Indian
client details to the United States which will be
shared with authorities there
China Must Learn Lessons From Stock
Market Rout, Says Vice Finance Minister
Zhu Guangyao
China must learn lessons from its stock market
rout, the countrys vice finance minister said
on Saturday, signalling his intent to focus on
supervision and the development of new

frameworks to make it possible to weather any
future market turbulence.
Chinas stock market plunged by nearly a third
at one stage earlier this month from a midJune peak, wiping around $4 trillion from share
values as investors were spooked by speculation
that Chinas central bank was about to end its
monetary policy easing.
The slide sparked Chinas biggest rescue effort
of its equity market, with the government
launching a series of moves that included
halting flotations and banning companies and
their executives from selling shares.
Zhu Guangyao told Reuters Beijing was
considering new policies.
Google Shareholders Revel In Record
1-Day Windfall Of $65.1 Billion
Googles stock roared out to produce the biggest
shareholder windfall in US history as investors
rewarded the Internet Company for promising to
curb its spending on risky projects.
A 16 per cent surge in Googles publicly traded
stock translated into an additional $65.1 billion
in shareholder wealth, on paper at least.
That barely topped the previous record one-day
gain of $65 billion by Cisco Systems Inc. in April
2000 after the computer networking equipment
maker had suffered a steep drop in the previous
week, according to S&P Dow Jones Indices. More
recently, iPhone maker Apple Inc. posted a
$46.4 billion one-day gain in April 2012 after its
quarterly earnings wowed Wall Street.
Googles gigantic run-up came after the Mountain
View, California, company reported quarterly
earnings that topped analyst estimates for
the first time since late 2013. The companys
inability to hit the targets that steer investors
had raised doubts about Google that had caused
its stock to lag the rest of the market since the
end of 2013.
FINANCE CLUB, INDIAN INSTITUTE OF MANAGEMENT SHILLONG
The Month That Was
The Niveshak Times
Market Snapshot
28600
1,000
BSE
28400
DII
800
FII
600
28200
400
28000
200
27800
27600
-200
BSE
FII, DII Net turnover (in Rs. Crores)
Article
ofSnapshot
the
Month
Market
Cover
Story
NIVESHAK
-400
27400
-600
30-07-2015
29-07-2015
27-07-2015
24-07-2015
23-07-2015
22-07-2015
21-07-2015
20-07-2015
17-07-2015
16-07-2015
15-07-2015
14-07-2015
13-07-2015
10-07-2015
09-07-2015
08-07-2015
07-07-2015
06-07-2015
-1,000
03-07-2015
27000
02-07-2015
-800
01-07-2015
27200
Source: www.bseindia.com
www.nseindia.com
MARKET CAP (IN RS. CR)

BSE Mkt. Cap
10326686
CURRENCY RATES
INR/1USD
64.01
INR/1Euro
INR/100Jap.YEN
INR/1PoundSterling
INR/ 1 SGD
70.07
51.53
99.83
46.63
INR/1 USD
2.00%
Euro/1 USD
GBP/1 USD
JPY/1 USD
Base rate
Deposit rate
9.70%-10.00%
8.00% - 8.50%
RESERVE RATIOS
CURRENCY MOVEMENTS
2.50%
LENDING / DEPOSIT RATES
SGD/1 USD
CRR
SLR
4.00%
21.50%
POLICY RATES
Bank Rate
Repo rate
Reverse Repo rate
8.25%
7.25%
6.25%
1.50%
1.00%
24th June 2015 to 28th July 2015
0.50%
Data as on 28th July 2015

0.00%
JULY 2015
NIVESHAK
BSE
Index
Open
Close
% change
Sensex
AUTO
BANKEX
CG
CD
FMCG
Healthcare
IT
METAL
OIL&GAS
POWER
REALTY
TECK
Smallcap
MIDCAP
PSU
27665
18607
20915
17477
10545
7635
16222
10537
9177
9839
2016
1408
5940
11055
10653
7586
28115
18769
21145
18011
11028
7991
16715
10927
8523
9929
2077
1348
6142
11724
11158
7610
1.43%
0.87%
1.10%
3.06%
4.57%
4.67%
3.04%
3.70%
-7.13%
0.91%
3.05%
-4.24%
3.39%
6.05%
4.75%
0.32%
% CHANGE
% Change
TECK, 3.39%
Smallcap, 6.05%
REALTY, -4.24%
PSU, 0.32%
POWER, 3.05%
OIL&GAS, 0.91%
MIDCAP, 4.75%
METAL, -7.13%
IT, 3.70%
Healthcare, 3.04%
FMCG, 4.67%
CD, 4.57%
CG, 3.06%
BANKEX, 1.10%
AUTO, 0.87%
Sensex, 1.63%
FINANCE CLUB, INDIAN INSTITUTE Of MANAGEMENT SHILLONG
Article
Market
of Snapshot
the
Month
Cover
Story
Market Snapshot
Niveshak Investment
Fund
Done on 30/6/14
Information Technology
CONS NON DURABLE

(6.75%)
HCL Tech.
GODREJ CONSUMER
Wg:6.75%
Gain:50.62%
(12.30%)
Infosys
Wg: 3.55%
Gain : 31.84%
TCS
Wg: 4.77%
Gain : 28.01%
Wg: 3.96%
Gain : 0.67%
BANKING
(6.39%)
FMCG
(22.02%)
Britannia
Wg:6.86%
Gain:204%
Colgate
Wg:6.20%
Gain:34%
HUL
Wg:4.71%
Gain:30.73%
Wg:4.24%
Gain :8.06%
Auto
(11.33%)
Pharmaceuticals
(11.76%)
Dr Reddys
Labs
Wg:4.58%
Gain:35.51%
Lupin
Wg:7.89%
Gain : 40.92%
HDFC Bank
Wg: 6.39%
Gain : 20.47%
Chemicals
(7.12%)
Amara Raja
Batt
Wg:4.21%
Gain :22.46%
Tata Motors
Wg:7.12%
Gain : 36.37%
ITC
Asian Paints
Wg:7.12%
Gain:36.37%
MISC.
(3.79%)
MANUFACTURING
(6.15%)
Titan Company
Wg:4.12%
Gain:-9.68%
Page Industries
Wg:6.15%
Gain:31.07%
Performance Evaluation
As on 30th July2015
July Performance of Niveshak

Investment Fund
102
165
Performance of Niveshak
Investment Fund since Inception
155
101.5
145
101
100.5
135
100
125
99.5
115
99
105
98.5
95
98
Sensex
NIF
Values
Scaled to 100
Opening Portfolio Value : 10,00,000

Current Portfolio Value : 15,62,881
Change in Portfolio Value : 56.28%
Change in Sensex : 08.03%
Sensex
NIF
Risk Measures:
Standard Deviation : 12.15(Sensex 22.35)
Sharpe Ratio : 2.91(Sensex : 2.07)
Cash Remaining:271897
Comments on NIFs Performance & Way Ahead : Throughout July 2015, Sensex was seen
under swing from the 28500 levels to 27500 levels , mainly on the concern of Chinese crash,
weak Asian market cues, the P- notes adversial comments as well as the recommendation
of inclusion of MAT, however the market bounced back during the last days of the month
led mainly by the banking and auto earnings.
Inside our portfolio major events were seen in Lupin , that went on to acquire speciality and
generic businesses in US and Germany. Concerns have been seen in ITC where the cigarette
volumes could be expected to fall. Titan posted a disappointing 15 % decline in earnings.
On global front Greece and china occupied the centre stage throughout the month,
especially china with the declining index, the fall is mainly attributed to index bubble and
impulse of retail investors. We are watchful of business developments and any threat on
portfolios return would be addressed accordingly.
The portfolio did not witness any re shuffle during this month, however we are watchful of
the current fall and corrections in the prices of overvalued stocks , there earnings and the
stocks fundamentals revaluation exercise is underway and therefore reshuffles in the next
month would depend upon the momentum of the market and outcome of stock analysis
10
Article
of the
Month
Cover
Story
NIVESHAK
Is World Economy Going into Great

Depression?
Ankur Kumar
IIM Shillong
Global Scenario
A faint and fearful heart is more prone to
dreadful situation. So, this may be exactly
the case when RBI Governor Dr. Raghuram
Rajan cautioned at a London Business School
conference about the Great Depression likesituation. The reaction was so sharp that the
RBI had to publish a statement clarifying the
statement of the Governor. However the alacrity
with which his statement was critiqued upon
does reveal something about the state of the
economy, that there is something that is not
working and fearing to collapse.
The Governor, although soaked in the free-market
principles of the Chicago School, was reiterating
his often-stated position of the possible fallout
of the beggar-thy-neighbour policy adopted
by many nations. He meant to imply that the
worlds economy was behaving in the same
fashion a before the longest-lasting and deepest
financial crisis i.e. the Great Depression (192939).
JULY 2015
In 2005, Dr. Rajan, in his Jackson Hole speech,

had predicted the looming financial market
crisis, which very much came out to be true.
Although former US Treasury Secretary Lawrence
Summers said he was being Luddite. So, could
Dr. Rajan again be so right in predicating the
possible crisis? First of all what makes him say
so? Cannot he be wrong this time? We hope so.
Lets see what major factors could be the reason
behind the Governors reasoning.
The 2007 Aftermath
The world economy dipped into recession after
the financial crisis of 2007 which began with
the bursting of housing bubble. The resulting
loss caused sharp cutbacks by the consumers.
This loss of consumption combined with the
financial market chaos led to the collapse in
the business environment. This ultimately
led to the widespread unemployment in
the economy. As per the National Bureau of
Economic Research, the official arbiter of US
NIVESHAK
11
Article
of the
Month
Cover
Story
recession, the unemployment rate in December

2007 was 5.0 percent and it rose to as high as
9.5 percent in June 2009, the official time of the
end of recession (1). In 2008 and 2009, the US
labour market lost 8.4 million jobs, or 6.1% of all
payroll employment (2).
In 2008, the US economy contributed around
20% in the world economy (3). So the reduced
consumption in the US economy had a contagion
effect around the globe. In the year 2008, the
world
GDP
growth rate fell
to 1.5%, which
went to -2.07%
in 2009.
Now to revive
the
economy,
the
most
common way adopted by any central banks is
to lower the interest rate. But after the financial
crisis, even the zero-level interest rate could not
spark off the green shoots in the US economy.
This led the Fed (USA Central Bank) to take an
unconventional path: Quantitative Easing (QE).
To carry out QE, central banks create money
by buying assets, like government securities,
bonds, etc. The new money swells the banks
size thus encouraging them to lend more and
more. This in turn is supposed to hike up
investment and revive the economy.
So, to spur the stagnant US economy the Fed

embarked on QE in November 2008. Its bond
buying programme took the Feds balance sheet
from $870 billion in August 2007 to whopping
$4.7 trillion currently. Though now Fed has
slowed its bond-buying programme form $85
billion a month to $15 billion a month (4).
The Staggering Japan
Japans economy continues to be plagued by
deflation and continued recession. The reason
for continued slow
growth is manifold.
But one of the
main causes could
be that the country
continues to be
suffering from the
1989-90 crisis of
bubble economy under which land and stock
prices collapsed wiping out assets of banks. Now
banks took the charge to revive the economy.
What better than QE to spur the economy. And
the Bank of Japan (BoJ) started its QE program
in the year 2001. It failed to kick start growth
and get the prices rising. Again in April 2013,
BoJ started a massive QE program. It promised
to pump in around $1.4 trillion by buying close
to $50 billion per month. BoJ went even further
and announced in October 2014 that they would
increase the amount pushed into the system
12
Article
of the
Month
Cover
Story
NIVESHAK
from $534-$623 billion a year to $712 billion a

year (5). Even then the countrys GDP continues
to hover around near-zero percentage growth.
In
short,
Japan
continues to remain
a guzzling source of
money to the world
economy. With no
tangible
benefits,
the
country
is
taking protectionist
approach
with
its
depreciating
currency which is
making its exports
competitive.
every six month. The Greece government total

debt is around 164% of its GDP for the year 2012,
the latest data available with the World Bank.
Portugal total debt
to its GDP is 124%
while Ireland total
debt to the GDP is
121%, again for the
year 2012(11).
into being in 1999. The common currency was

floated in the year 2002. With only monetary
union, without any fiscal union, the group of
19 countries (having common currency) is in
precarious situation.
negative interest rate, but it did not help (6). In

the end they also went for QE program, again
flushing money in already flushed market.
Now here again

to make growth
engine
tick,
European Central
Bank (ECB), the
apex
financial
decision
making
The Floundering
body in the EU,
European Union
finally decided on
Economics
22nd January, 2015
to pump in $70
Characterized
by
Table 1: Percent growth in GDP
billion per month for
burgeoning debt, massive
unemployment, persistent low inflation, the at least 19 months. Though the ECB had tried
European Union (EU) Economics continues an unconventional method, before agreeing to
to act as a hanging sword. The Union came pump money, which was imposing
Today Greece, Portugal, Ireland are having high

debt on their government. Greece debt crisis has
become a half-yearly show which keeps coming
JULY 2015
The Bank Of England Spree

Marred by the dual crisis of financial market
collapse in the US and the coming EU debt crisis,
Britains economy contracted in two consecutive
years. The GDP of the UK grew by -0.33% and
NIVESHAK
13
Article
of the
Month
Cover
Story
-4.31% in the year 2008 and 2009 respectively

(7). So to take back the country on the growth
trajectory the Bank of England launched the QE
programme in March 2009. They initially decided
to pump in $82 billion over the month of three
months. This programme continued till January
2010.
Then in October 2011, Bank of England decided
to pump in another $82 billion as the country
was facing warnings of double-dip recession
and horrendous Euro-zone debt-crisis.
economy- are adopting beggar-thy-neighbour

strategies that were followed in the 1930s.
Instead the Central Bank of these countries
should take the greater and moral responsibility
of steering the world, and not only their own
economy, out of the glut of slow growth. Dr.
Rajan had the last laugh after the 2007 crisis.
But we hope he did not have the same this time.
The debate is still on whether the QE was the

best method to take the country out of recession.
The Bank has itself said that the richest 10% of
households have seen their wealth multiplying
substantially due to the QE programme .
So, The Verdict
The US, Japan, the EU and the UK has their GDP
as a percentage of worlds GDP as 22%, 5%,
24%, 2.5%(9,10) for the year 2014 respectively.
Their combined share of GDP as a percentage
of worlds GDP is 53.5%. This is more than half
of the worlds economy. These economies are
heavily pumping money in the market. Without
any substantial benefit, as depicted by the status
of the US economy which continues to remain in
doldrums even after pumping money for seven
years amounting to a whopping sum of around
$3830(12) billion, these QE measures have been
used a ploy to make the export competitive
by depreciating currency. This practice does
not give any consideration about the possible
impact on the other growing economy.
As said by Dr. Rajan, major economies of the
world- comprising more than half of the worlds
14
NIVESHAK
Cover Story
Chinas stock market

bubble
Abhishek Bansal
IIM Shillong
While the western world has been glued to the
Greece crisis, there has been a bubble bursting
in other part of the world. Some people have
already started terming it as China 1929 crash.
The Chinese stock markets have lost almost
30% value in the one of the biggest fall that
started in June which has wiped off trillions off
valuations. And this happened after a five-fold
surge in leveraged wagers had helped propel the
Shanghai Index to a more than 150% gain in the
12 months through June 12. Half the companies
listed on the two main indexes (Shanghai and
Shenzhen) were priced ludicrously at 85-times
earnings. After a 15% rebound, the shares
slipped by 8% on 27th July, its biggest drop
since 2007, indicating that the governments
efforts have been insufficient to calm down the
jittery investors.
Free Markets At Play? Or Intervention?
The desperate steps that have been taken
by the authorities will fuel fears in the mind
JULY 2015
of the investors and it is just postponing the

inevitable. The steps taken to curb-off the selloff included banning major stockholders from
selling stakes in listed companies. This move
saw trading suspensions in almost half of the
mainland stocks. The authorities have also
blocked the upcoming stock market floats to
limit the number of companies that an investor
can invest in. The suspension of IPO is a big
deal with more than four trillion yuan- worth
of floatation estimated to be in the pipeline.
This move can help to support demand for the
existing companies.
Policymakers have lowered the interest rates for
the fourth time in seven months. The Peoples
Bank of China has cut the rate on a one-year
loan by commercial banks by 0.25 percentage
points to 4.85%. The interest rate paid on a oneyear deposit was lowered by 0.25 point to 2%.
Similar rate cuts were made on Nov 22, Mar 1
and then May 11. The central bank has also cut
NIVESHAK
15
Cover Story
This is the slaughter of the middle class. Mr. Hao, financial adviser
the amount of deposits that some banks need
to hold in the reserves. However, some investors
feel that the central bank has intervened much
less by cutting the rates by 25 basis points
instead of 50 or 75 basis points. The state run
companies have also pledged to invest 120bn
yuan to provide support to the market.
How Did The Stocks Get So High?
The rise in the markets has been propelled
countrys communist party, according to

Bloomberg 90m versus 87.7m. Many of the
investors are unsophisticated (two thirds
lacking even a high school degree) in the sense
that they lack proper understanding about the
margin trading. The herd mentality can take the
market upwards or downwards. And this is what
happened when the retail investors received the
margin calls, they started selling off which sent
by increasing number of participation from

retail investors. There are more stock market
members in China than the members of the
the market downwards. The IPO market looked

too attractive as the shares often doubled in the
opening day of trading. As a result, they were
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often oversubscribed 60 to 80 times that tied up

a lot of investable cash.
The Beijing government wants companies to
raise capital through the stock markets instead
of taking loans from the state banks. It lined
up a string of IPO offerings and to create the
the stock markets. This left the Shanghai and

Shenzhen indices soaring and subscriptions
flowed into the IPOs.
Also, the government is encouraging the boom in
the markets by cutting down the interest rates
and allowing the pension funds to invest in the
cash and demand made it easier to invest by

enlarging access to margin trading. This went on
well initially. As the two alternative investment
products namely the property market and the
shadow banking financial products became
less attractive, investors could find respite in
shares. The bubble in the margin lending did ease

a little during the recovery of 18% from its trough
earlier this month. Official margin lending has
dropped to 1.44 trillion yuan ($232 billion) from
2.27 trillion yuan. However, the steep fall of over
8% on July 27 indicates that much more needs to
JULY 2015
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be done.
Parallel Drawn With Other Crisis
Although it is too early to draw the parallels
between the Chinese stock market crash with
the Wall Street crash of 1929, it is interesting
to observe the similarities between the two.
After more than a decade of frantic growth,
extraordinary wealth creation and excess,
both economies America in 1929 and China
today are at roughly same stages of economic
development. Moreover, both these booms are
in part explained by the rapid credit growth.
Borrowed money, or margin investing played
a role in both these outbreaks of speculative
excess.
In 1929 crisis, it was only in the final year that
the stock markets rose by 50%. The same is seen
in Chinas crisis in which barring the banking
sector everything else has sky rocketed. As in
the 1920s America, Chinas stock market boom
has ridden in tandem with an equally speculative
real estate bubble.
Another crisis that comes to the mind is the
Japans 1989 stock market crash which plunged
the Japans economy into a two-decade slump.
The government that time had resorted to
pumping money into the market in order to
prevent the banks from failing. As a result the
public debt skyrocketed jeopardizing the Japans
economic growth. Washington Post has termed
the Chinese bubble burst as the greatest stock
market bubble since the dotcom boom.
What Does This Mean For The Chinese

Economy ?
The stock market is at stake as the individual
investors are nervous over the future and it
will erode the consumer confidence amongst
the weakest economic growth since 1990. If the
markets continue to fall, it will impact the IPOs
and other offerings and that is bound to impact
the consumption of Chinas middle class. The
decline in consumption will jeopardise the real
economy.
The stock market crash will also have an adverse
impact on the Chinas aggregate demand for
goods and services which will further slowdown
the already sluggish economy.
With the economy expanding at a slower pace
of 7% as compared to the previous year, the
companies are going to have a hard time seeing
their top-line grow. Talking about the valuations,
they are still high. Over the past four weeks, the
analysts have reduced their earnings forecast at
Shanghai-listed companies to 10% from 13% for
the coming year. Over the long run, the asset
prices would match their underlying value. And
while that happens, it would be dangerous for
the investors to stick around the Chinese stock
market.
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The Greek Debt Crisis:

FinGyaan
FinGyaan
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What the fuss is all about!

Rohin Jacob
SIMSREE, Mumbai
Introduction
Greece, a small nation in Southern Europe has
lately been in the news for all the wrong reasons.
Greece, the birthplace of democracy and the
Olympic Games, famous for its philosophers,
leaders and scientists; known for its beautiful
beaches, olive oil, honey, wine and a major
attraction for tourists world over, has fallen upon
bad times. Greece, one among the 28 nations
in the European Union, and one among the 19
nations to have adopted the common currency
of Euro, a circa US$ 250 billion economy, with
a population of roughly 11 million has rattled
global financial markets in the last 6 months.
To give some perspective about the size of
the Greek economy, the city of Mumbai alone
contributes roughly US$ 200 billion to Indias
GDP and has a population of 17 million. So, lets
look at what has transpired till now and why
JULY 2015
such a small economy as Greece has ruffled

feathers world over.
The current Greek Turmoil
As on 1st July, 2015, the Greek Debt is close to
US$ 375 billion. For a US$ 200 billion economy,
that translates to roughly Debt-to-GDP of 190%.
For a population of 11 million the public debt
is roughly US$ 34,000 per citizen. Its interest
payments alone total around US$ 25 billion per
year. And ironically, Greece still needs more
money.
Fig. 1 shows a major portion of the Greek Debt
is with the Troika. The Troika IMF, EC and ECB
are the Senior Debt holders of the Greek Debt
as these institutions lent money to Greece as
Financial aid at a time when no other institution/
investor was willing to lend to Greece in 2010
and subsequently in 2012.
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Fig 1: Greek Creditors
History of the Greek Debt Crisis

Since a long time, the Greeks have been a
notorious customer when it comes to money.
It has defaulted on its sovereign debt 4 times
since 1800 (A Primer on Greek Crisis by Anil
Kashyap, Booth School of Business). Rampant
tax evasion partly due to ineffective tax
collection infrastructure (Greeks owed US$ 86
billion in unpaid taxes to the Greek Government
since 2009), a flourishing underground economy
which never paid taxes on never-reportedrevenues, early retirement age (57 in 2009 in
Greece, compared to 65 in Euro area), huge
pension outlays (13.5% of GDP among the
highest in Europe in 2009), an over-staffed
public sector, an increasing subsidy burden on
the Greek Economy were clear indicators that
Greece was heading towards another default.
But the major reasons for the current Greek
Debt crisis began in mid-1990s. Greece had been
spending more than it was collecting in revenues
and running huge deficits. In 2001, Greece
entered the Euro, which gave access to even
more credit, Euro being a stronger currency. So,
Greece continued to borrow rampantly without
observing the fiscal discipline required to
maintain the sanctity of a strong currency like
the Euro. The bubble burst in the fall of 2009.
In the aftermath of the global credit crisis of
2008, with global financial markets still reeling,
the newly-elected Greek Government reported
that it was constantly understating its deficit
numbers for the past few years. The deficit for
2009 was going to be 13.6% of GDP which was
4 times the EUs limit of 3%. Fitch, Moodys and
Standard & Poors immediately downgraded
credit ratings of Greece. This scared off any
potential investors and also raised the cost of
borrowing funds for Greece to repay its sovereign
Fig.2: Greek Subsidies and other transfers (as a % of expense)
debt. It became imminent by 2010 that Greece

would default. The Troika stepped in to bailout
Greece with emergency funding in 2010 and in
2012 (hence are the senior creditors to Greek
Debt) in exchange for austerity measures.
Austerity Measures
The Troika provided US$ 264 billion in emergency
funds to Greece but only if Greece were willing to
reform. The retirement age had to be increased
from 57 years to 65 years, tax collection had
to be improved, pensions had to be reduced,
subsidies and salaries had to be cut, government
jobs had to be reduced and public assets had
to be sold off. Basically, the Troika wanted to
provide liquidity required to reform Greece
so that Greece would become self-sufficient
and grow from within and pay off its debts
in the long run. Imposing austerity measures
for reforms had worked well in the past for
Germany, Poland, Czech Republic, Portugal,
Ireland and Spain; the Troika felt the same
could be emulated by Greece. Initially, Greece
did respond positively to the bailout package.
But Greece being a culturally different economy
(read lavish and extravagant) than the reformed
nations mentioned above, the stinging austerity
measures did not go down well with the Greeks
and it backfired. Greek economy contracted and
businesses suffered and closed down, people
lost jobs (25% of Greeks are unemployed, tax
collections nose-dived. Angry pensioners who
had served for over 30 years were unhappy; this
led to riots and fights. Instead of improving the
situation, austerity had worsened the situation
now there was debt and public discontent.
In January, 2015, a radical party Syriza led by
Alexis Tsipras came to power under the mandate
that he would re-negotiate terms with Greeces
creditors and will put an end to the austerity
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Fig. 3: Greece GDP and Unemployment rates in Europe
measures imposed upon the Greeks. No wonder,

the Tsipras-led Syriza came to power.
Implications of Greek Default
The referendum on 5th of July where the
Greeks voted a resounding No to any new
bailout package from its creditors and an end
to austerity measures implies that Greece is
heading towards a default (as Greece used new
loans to pay back the old ones). And if Greece
defaults, Greece will be forced to leave the
Euro, a phenomenon popularly termed Grexit.
A Grexit would cause lot of unpleasantness for
Greeks and other Foreign Institutions alike at
least in the short term.
For the Greeks they will have to revive the old
currency Greek Drachma. The Drachma would
be a highly devalued currency and in a state
of free-fall. A sovereign default would mean it
would be an untouchable for global financial
markets for some time. It would be able to
meet its domestic requirements using the newly
printed currency but servicing international
debt using a devalued currency would mean
continuous printing of the Drachma, which
would lead to hyper-inflation (remember
Zimbabwe). Besides, Greece is an importer of
goods like oil & gas which have to be paid in
dollars. A highly devalued Drachma would make
imports prohibitively expensive. This may bring
a recession in an already depressed economy.
Greeks will have to push exports in order to
sustain the domestic economy. The tourism
industry has the potential to attract lot of forex
from international tourists who would now see
Greece as an inexpensive tourist destination.
If not the Greek Drachma, there is the ancient
Barter system to fall back on.
JULY 2015
Outside Greece The Greek Debt crisis has

been a phenomenon in the making for the past
5 years now. And somehow everyone knew
at the back of their minds that Greece would
eventually default. Creditors have sold off their
bonds, trimmed exposure, created provisions
for bad debts or diversified to other assets or
in some cases simply written-off those loans
in order to buffer themselves from the Greek
Default. However, what follows after the Greek
Default is what causes heartburn. The Euro
which is a monetary union, intertwined all
European Economies with each other due to
seamless trade i.e. each European nation has
directly or indirectly lent money to Greece and if
Greece defaults, other nations may not receive
their loan payments and hence default as well.
Weaker economies like Portugal, Ireland, Italy,
Spain (the original PIIGS nations excluding
Greece) which have just recovered from their
own debt crisis may fall back into debt. And
these economies are much bigger than Greece
and the financial institutions wont be able to
buffer against these defaults. And if the PIIGS
nations default, other European countries would
default because they wont be able to pay off
its debt and this domino-effect would trigger
a global financial crisis much bigger than that
witnessed in 2008 as in this case countries
would be defaulting, not companies.
Political Implications of Grexit
The Greek default would free the Greeks from
the harsh austerity measures a tempting
proposition for many countries including the
PIIGS nations who have recovered because of
austerity. Syriza-like-minded left-wing political
parties like Podemos in Spain have promised an
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Fig. 4: Map of Black Sea
end to austerity measures by re-negotiation of

terms of debt. If more than handful economies
adopt the radical left political parties then
Europe would be divided between democratic
nations and Leftist nations. Extreme ideology
differences can disrupt peace and trade talks in
Europe and hence stymie growth.
Many Army chiefs across the globe feel that the
geopolitical risks far outweigh the economic
ones. For starters, Greece is located centrally
between Europe, North Africa and Middle-East.
Greece controls the Aegean which controls
the transit between the Black Sea and the
Mediterranean (See Fig. 5). Greece is a NATO
power and is central to imposing trade sanctions
on Russia and US interventions in the Ukraine
crisis. Whats worrying is that if Greece does
not receive funds from Europe or USA, it would
approach China and Russia who would be more
than glad to park some military arsenal in this
strategic location.
What can be done: Euro an incongruent
Union
The Euro was put in place to bring the European
economies closer, encourage trade within
borders cutting barriers and essentially to
bring peace to the continent (European nations
have been fighting wars with each other since
ancient times until the World War-II). However,
a unified monetary policy but a different fiscal
policy for each country was a fundamentally
flawed approach to unifying the continent. As
an analogy, consider the Indian Sub-continent
How would it be if India, Pakistan, Sri Lanka,
Nepal, Bhutan, Myanmar, Maldives shared a

common currency (say ) and each of these
countries were able to lend at rates which India
can lend with the same credit rating. Other
nations being smaller and weaker than India
have a higher cost of borrowed funds. Also,
having different fiscal policies (expansionary or
thrifty) for different economies may make too
much public debt unsustainable if the money
flow is not controlled well in that economy.
This is what happened in Greece as it had
access to huge credit through the Euro; and the
Greek Government had a largely expansionary
fiscal policy increasing public debt without
proportionate increase in public assets till the
time the debt became unsustainable. Being in
a common currency of Euro, the inability of
Greece to devalue its currency during this crisis
only made matters worse. The only long term
solution to prevent another such a crisis from
recurring is to either break up the Euro or to
have a single fiscal authority in Europe which
would essentially unify all European countries
into a United States of Europe i.e. either have
both a single fiscal and monetary authority or
neither.
Conclusion
Pushing Greece out of the Euro will force them
to seek solace in China and Russia which is
unacceptable to the West, whereas keeping
Greece in the Euro will destroy the Euro from
within. It is a fine line and hard decisions have
to be made. But Grenter or Grexit; repercussions
would be felt across the world.
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Derivatives Market
Palash Jain
IIM Shillong
Introduction
The Indian financial markets are witnessing a
boom run in the recent period. A lot of money
is being invested and investors confidence is
growing exponentially. Also a lot of money from
outside the country is flowing in, through FIIs.
These are the few reasons for the indexes like
SENSEX and NIFTY touching and surpassing their
all-time highs. The derivative market also had a
contribution in this bull run.
Derivative Instruments
Derivative instruments are financial products that
derive their value from an underlying financial
instrument like stocks, bonds, commodities etc.
These derivative instruments can be traded in
the stock markets through exchanges like BSE
and NSE or traded directly between two parties
like Over the Counter (OTC) derivatives. Since
they are derived from an underlying asset, their
value fluctuates with the value of the underlying
asset. The main purpose of derivative products
is to transfer the price risk from one person to
JULY 2015
another. Thus it helps in transferring the risk

from a party who wants to mitigate it to a party
who is willing to take that risk.
The derivatives market in India has been
working since the nineteenth century. However,
derivative products as an exchange traded
financial instrument was introduced in June,
2000. The derivatives market is well regulated
by Securities and Exchange Board of India (SEBI)
and NSE is the largest exchange for derivative
products in India.
Participants In The Derivative Markets
In India, there are many entities participating
in the financial markets like retail investors,
institutional investors like mutual funds, banks
and foreign investors in the form of FIIs. These
use derivative products for different purposes
like mitigating or increasing risk, speculation
etc. So based on these applications that
derivatives are put to use, these investors can
be put together in the following categories:
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Forwards
Futures
Options
Swaps
Forwards
A forward contract is a simple contract between
two parties to buy or sell a certain underlying
asset on a fixed date in the future at a fixed
price. In a forward contract, the two parties are
directly involved and there is no exchange in
between. Thus a forward contract is an over
the counter (OTC) product. Since it is an OTC
product, the contract can be directly negotiated
between the two parties.
In a forward contract, the buyer of the contract
agrees to buy a certain underlying asset
from the seller at a predetermined price on
a predetermined date in the future. Thus the
contract is about making the transaction in future
at a price determined today which is unlike
spot market where the transactions occur on
the spot. The party who agrees to buy the asset
is said to have a long position in the contract
and the party who agrees to sell the asset is
said to have a short position in the contract.
The price agreed by both parties at which the
transaction will occur is called the forward price
and the date at which the transaction will occur
is called expiry date. Since these contracts are
not traded on a public platform, they are not
regulated by government agencies because of
which they carry some amount of counterparty
risk. Counterparty risk is the risk of the other
party not fulfilling its obligations on the expiry
or the termination of the contract. Since it is a
private contract, it is difficult to estimate the
size of the forward contract market.
Table 1: Comparison - Futures and Forwards
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Hedgers
Speculators
Arbitrageurs
Hedgers are entities that look to mitigate their
risk. They are usually the people who have a
position in the spot market but are afraid that
they may incur losses. So they participate in
derivatives market to minimize or eliminate
their risk. Thus, they tend to lock their prices
to transact in the future to avoid losses in the
spot market transactions. Hedgers generally
take positions in derivatives market which are
opposite to their positions in the spot markets.
A speculator is a person who has an opinion
about the potential movement of an underlying
asset or index. This movement may be upside
or downside. Thus a speculator bets on this
opinion in derivatives market. They take a large
risk by taking positions based on their opinion
on anticipated price movement of the asset in
the future. Since it is just an opinion on which
they base their decision and the risk involved
is large, their profits or losses also tend to be
large. They generally trade for short term.
Arbitrageurs are people who tend to make profit
from pricing inefficiencies of an underlying
asset. There may be a situation where an asset
is priced differently on different platforms. So
arbitrageurs take two opposite positions in
these platforms and earn the price difference
which exists. Since there is no risk involved in
this form of trading, it is also called riskless
profit.
Types Of Derivative Products
There are many types of derivative products
that are traded all over the world. In its most
basic form, these types are:
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Futures
A futures contract is similar to a forward contract,
that is, it is a contract between two parties
to buy or sell a certain underlying asset on a
specified date in the future at a specified price.
However, there are some differences between
a forward contract and a futures contract. The
main difference between them is that forward
contract is an OTC product whereas a futures
contract is traded on an exchange. Therefore, a
futures contract is a standardized contract which
is backed by an exchange. Since it is traded on
an exchange, there is practically no counterparty
risk as even if the counterparty defaults from his
obligation, the exchange steps in to prevent the
loss.
It is very easy to enter into a futures contract.
The interested party has to just deposit what
is called initial margin to enter into a futures
contract. Initial margin is a fixed percentage of
the contract value which everyone has to pay no
matter if he/she is the buyer or the seller and
this percentage is determined by the exchange
based on the risk and volatility. After they have
entered into a futures contract, they have to
maintain a margin called maintenance margin
or variation margin. Maintenance margin is the
minimum amount to be maintained with the
exchange in spite of the price fluctuations. If the
price falls and the margin balance go below the
required level, then the exchange asks to put
in more money to make it at the required level.
This is called a margin call. This enables the
exchange to keep the mark to market feature in
the futures contract. Mark to market feature is
an arrangement where the profits and the losses
on the positions are settled each day to reduce
default risk. The current volume of futures market
is around 13 lakh contracts comprising of stock &
index futures.
Options
Options, like futures, are instruments that give
an opportunity to buy or sell an underlying
asset. An options contract gives the buyer an
option to buy or sell an underlying asset at a
predetermined price either at expiry or in some
cases before it. Options can be an OTC product
as well as an exchange traded product. There are
two types of options:
1) American Option: These can be exercised on
any day on or before the expiry day.
JULY 2015
2) European Option: These can be exercised only

on the expiry date.
Call Option
A call option gives the right to the buyer of the
option to buy the underlying asset at a specified
price. The price at which the buyer gets the right
to buy is called the strike price. Since the buyer
of the option has the right, he will exercise his
right only if the price of the asset in the spot
market is more than the strike price and he is
not obliged to exercise his right. However, if the
buyer decided to exercise his right, the seller
has the obligation to make the transaction.
When the spot price is greater than the strike
price, the option is in the money. When the spot
price is less than the strike price, the option is
out of money and when the spot price is equal
to the strike price, the option is called at the
money.
Put Option
A put option gives the right to the buyer of
the option to sell the underlying asset at a
predetermined price. The price at which the
buyer gets the right to sell is called the strike
price. Since the buyer has the right to sell, he
will exercise his right only if the price of the
asset in the spot market is less than the strike
price. If he decides to exercise his right, the
seller will have to buy the asset at the price.
When the spot price is less than the strike price
the option is in the money and when the spot
price is equal to the strike price, the option is
called at the money. When the spot price is
greater than the strike price, the option is said
to be out of the money.
There are many option strategies one can use.
Some of them are:
1) Covered Call: In this strategy, you buy in the
spot market and sell a call option
2) Protective Put: In this strategy, you buy in the
spot market and buy a put option
3) Straddle: In this strategy you buy a call and a
put option at the same strike price of the same
expiry date
4) Bull Spread: In this strategy you buy an in
the money option and sell an out of the money
option
5) Bear Spread: In this strategy you buy an out
of the money option and sell an in the money
NIVESHAK
basis of returns of an equity market index or

any other index or stock.
Credit Default Swap is like an insurance policy
in which the buyer of the swap pays a premium
and the seller of the swap agrees to compensate
the buyer for the losses in case a credit event
like bankruptcy or downgrading occurs. The
condition is that the loss must occur due to a
credit event only.
There are also hybrid derivative products where
two or more derivative products are put together
to make a single product. An example of this is
swaptions, which is a combination of swap and
options. In this the buyer has the right to enter
into a swap at a future date.
Conclusion
Derivatives market is a very lucrative and a fast
growing market. Today many people like to use
derivative instruments in various strategies to
increase their profits. But it also magnifies the
risk and if this risk is ignored, it can lead to a
financial crisis like we saw in the case of subprime crisis where people underestimated the
risk of derivative products like Collateralised
Debt Obligation (CDOs) which lead to big
corporations like Lehman Brothers filing for
bankruptcy and other corporations like AIG and
Merrill Lynch obtaining government bail-outs.
Thus people should invest in derivative markets
only after properly analysing and assessing its
risk as they may give you large profits but they
also have the capability to wipe out your entire
investment.
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option
6) Collar: In this strategy you buy the asset in
the spot market, buy a put option and sell a call
option
7) Butterfly: In this strategy you buy one in the
money option, one out of the money option and
sell two at the money options
Entering into an options contract is also very
easy. A person can buy the contract by paying
upfront an amount to enter. This amount is called
the option premium. If the person decided to
sell a contract, he will receive the premium. This
type of derivative instrument is also very risky
as positions can be magnified with the same
amount as compared to spot market which can
lead to larger gains or losses.
Swaps
A swap is an exchange of cash flows between
two people. In a swap, one party makes payment
to the second party and the second party makes
payment to the first party on a specified date.
The cash flows are calculated using a specified
formula. Swaps are not listed and are generally
traded through dealers. They are also not
regulated. There are various types of swaps:
Interest Rate Swap
Currency Swap
Equity Swap
Credit Default Swap
Interest Rate Swap is the most commonly used
swap in which one party pays on the basis of a
fixed rate and the other party pays on the basis
of a floating rate like LIBOR, EURIBOR etc. This is
used when one wants to convert their fixed rate
cash flows to a floating rate cash flow or vice
versa. The notional principal may or may not be
exchanged at the beginning.
Currency Swap is a swap in which one party
promises to make payment in one currency
and the other party promises to make payment
in another currency. Currency Swaps are often
combined with interest rate swaps. Here the
notional principal is generally exchanged as
there are different currency involved. This swap
also has an exchange rate risk, that is, risk
arising out of fluctuating exchange rates.
Equity Swap is a swap in which one party
promises to pay either on a fixed rate or floating
rate basis while the other party pays on the
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Implementation of GST
Impact on Indian Economy
Sumukh Bhardwaj & Vinit Intoliya
TAPMI, Manipal
Implementation Of GST Impact Indian

Economy
Chanakya, the architect of taxation under the
great Mauryan Empire once said Tax must
be collected from people like a honeybee
collects nectar from flowers. This way, both the
honeybee (government) and flowers (people)
will be happy and prosperous.
Taxation The Double Edged Sword
Taxation is the most effective and time
tested method for the government to collect
money for administrative purposes. But, the
overarching rules and expanding tentacles of
the government bureaucracy can create antibusiness environment, thus leading to tax
terrorism.
How To Make The Elephant Dance?
Whether it is Bharatanatyam, Salsa, belly
dancing or jazz dancing - the most important
aspect is a structured approach. The elephant
dance between tax payer and the tax receiver
is no different. The absence of a symphonic
and symbiotic relationship between dancing
partners can be disastrous. The current Indian
tax structure depends on both direct and indirect
JULY 2015
tax collections. The direct tax is collected at

source of income generation. The Direct tax base
is a meager 3% - 4% of the Indian population.
The indirect taxes are too many and prone to
leakages. Tightening regulation has only led to
harassment of citizens and increased corruption.
The draconian tax regimes of the past have scared
away private investment and antagonized the
masses. The best way to remedy the situation
is to find a new transparent and equitable tax
system. The new Goods and Services Taxes Bill,
popularly termed as GST, will hopefully be the
beginning of the end to the above mentioned
problems.
Current Tax Structure
Currently, the Indian central government
levies indirect taxes through three different
medium i.e. Central Excise duty which was
established under Central Excise Act and The
Central Excise Tariff Act, 1985 it covers taxes
on the goods which are manufactured in India
and for domestic consumption. Secondly,
custom duty which is defined under Customs
Act, 1962. It charges on import and export of
goods. It charges from 0% to 150% depending
NIVESHAK
Budget Estimates of Indirect Taxes (in Rs Crore)

YEAR
CUSTOMS EXCISE
SERVICE
2001
54822
81720
3600
2002
45193
91433
6026
2003
49350
96791
8000
2004
54250
109199
14150
2005
53182
121533
17500
2006
77066
119000
34500
2007
98770
130220
50200
2008
118930
137874
64460
2009
98000
106477
65000
2010
115000
130471
68000
2011
151700
164116
82000
2012
186694
194350
124000
2013
187308
195937
180141
Table 1: Budget Estimates of Indirect Taxes (in Rs Crore)
Problems In Current Tax Structure

In India, more and more taxes are levied on
products which is consumed by human beings
rather than on wealth of individuals. The tax
is imposed from ground level of production of
goods i.e. from raw material to semi-finished
goods and finally to finished goods used by
consumer. Due to this complex tax structure
it severely impacts the whole supply chain
network starting from raw material supplier
and ends with consumer. There are various
problems associated with the current indirect
tax structure.
- Ripple Effect Of Tax
It is one of the major concerns for Indian
government and tax authorities to curb the
cascade effect of taxes going on with the current

system. The most impacted sector because of
multiplicity of taxes is manufacturing. India is
a country where cost of labor and production
is low compare to other countries in the world
but due to multi-stage taxation final price of
goods becomes very high which takes away
the competitive advantage. There are several
incidence in our day-to-day life where there are
cascading impact of taxation on finished goods.
1) Custom duty and CVD and Cess: The person
from India went for shopping to Saudi Arabia for
Dubai Shopping Festival. He bought a 3 different
models of televisions from Dubai because it cost
him very less price compare to India. But while
getting clearance form Indian Airport, he not
only need to pay custom duty but also Counter
Veiling Duty (CVD) and certain percentage of
cess on imported goods. In this case there are
2 different taxes has been applied on the same
product along with custom duty.
2) Excise duty and VAT or Custom duty:
Suppose goods like bike tyres which has been
manufactured in Chennai so manufacturer need
to pay excise duty on production and then if
these tyres ordered has been placed from
Bangalore retailor so it need to pay sales tax
for transfer of goods between two states. Many
times we also need to pay Octroi which differs
from state to state.
3) Service tax and VAT: Many times after having
dinner at some AC restaurant, when we receive
the bill and we are quite shock that around 30%
of the bill is charged with taxes only and we
find that restaurant has charged separately for
service which they have provided and ahead of
that there is VAT applied on the consolidated
amount. This is simply scenario of tax on tax.
These multiple taxes need to be bear finally by
customer who is availing services.
- Disparity Of Tax Rates
In India, along with having multi-layer tax
problem, there is more complex problem which
is state-wise tax rates that plays very crucial role
for manufacturer because to gain maximum tax
benefits while setting up manufacturing plant
or inventory warehouse. Currently, in many
particular states there are many warehouses
and plants compare to other states. CST plays
very important role while transferring goods
from one states to another. So states which have
less CST rates on goods preferred over other as
less amount will be spend.
Finsight
Classroom
Cover
Story
on the goods which is importing or exporting.

And lastly, service tax which is implemented
on provision of services, it is currently charged
14%. On similar grounds the State government
collects revenue different tax medium like
VAT/Sales tax. Entertainment tax, State Excise
on Liquor and tobacco products, Stamp duty
collection and other taxes which differ from state
to state like Octroi, LBT, etc. The main source of
revenue collection is through Value Added Tax
(VAT). This is levied on sales of goods. If the
sales of good is happened intra-state then it is
covered under VAT law of that state and if it is
inter-state transaction then it is charged under
Central Sales Tax Act (CST). From table 1, it is
clear that Excise duty contribution is highest to
revenue collected by central government.
27
28
Article
of the
Month
Finsight
Cover
Story
NIVESHAK
- Complexity
In the past few years there is continuous effort
taken by tax officials to simplify the existing
tax structure both at state and central level.
As foreign investments are increasing and
more business opportunities are opening, the
tax system is getting more fractured out. The
latest tussle between the American behemoth,
Amazon India falls into a regulatory soup with
Karnataka tax authorities which believe that
Amazon Fulfillment model is flouting taxation
norm. Hence Karnataka tax officials cancel
several merchants license and revoke certain
electronic goods to be sold by the company.
Another stand-off was held between Kerala State
authorities and several e-tailers companies.
Kerala tax officials believe that firms are selling
products to localities and so company need to
pay regional taxes. In all the above scenarios
the issue is not related to tax evasion but to get
more clarity of the law on who is liable to pay
for the tax whether the companies or seller.
One Nation, One Policy
The proposed model of GST consists of dual
structure. It is basically made
up of two components i.e.
Central GST (CGST) and State GST
(SGST). The proposed structure
will be replace existing excise
duty, custom duty, service
tax and all types of cesses
at central level and at state
level the different taxes which
has merged with SGST are
VAT, CST, purchase tax, Octroi,
entertainment tax, luxury tax
and taxes related to lottery and gambling. There is
third components associated with this structure
which deals all the transaction between interstates which is called as Inter-state GST (IGST).
The entire supply chain network which occurs
from manufacturer to consumer at both Centre
and state level and for all taxpayers will have
concurrent jurisdiction.
Benefits Of GST
Currently, in India there are self-contradicting
laws which is required to be change to create
more business friendly and investment
opportunities. GST will help to bring different
taxation under single umbrella and provide
streamline and simplify tax regimes in India.
Once GST implemented, the whole economy
will be boosted by 1-2%, the corporates will get
more tax clarity, the manufacturers will able to
JULY 2015
increase production at lower cost and finally

consumer which will not be heavily tax burden.
- Availability Of Extra Cash
The whole tax collection for all CGST and SGST
will be done at point of sale (POS). Once tax
is collected government will collect taxes from
retailers and distributors on quarterly basis. So
the money which is collected for tax purposes
can be used for flow of day-to-day activities and
carry out operations efficiently.
- Incentivize Each Sectors
Once the implementation of GST done, all
the sectors like manufacturing, retail, IT,
Infrastructure, Banking, Hospitality, e-commerce
etc. will have greater advantage. The most
benefits will be gained by manufacturing sector
as it is highest taxed sectors. So charging only
one tax instead of having several other taxation
like custom, excise, sales etc. will motivate all
the manufacturers in the country. The whole
tax credit for inter-state transaction will help to
decrease the procurement cost. Also it will allow
manufacturer to open inventory warehouse or
manufacturing plant in any parts of India as
there is no state specific rate. And
very important is removal of Octroi
or entry tax levied by different
states which was big burden for
companies as they lost majority
of time during transportation by
doing negotiation at Toll post. The
entertainment industry will be
more benefited as there is removal
of entertainment tax, service tax
and VAT so whenever went to watch
any movies or any restaurants it
will be free from different taxes.
- Increasing Exports And Imports
There is no GST on export. So it will motivate
all the manufacturer to produce at lower cost
and export it. Also with the removal of counter
veiling duty (CVD) which is levied along with
custom duty so it will encourage manufacturer
as goods will be available at comparatively
lower cost.
- Common Benefits To Common Men
As there is removal of all excise duty, VAT,
CST and service tax, hence there will be no
cascade of taxation and finally the tax paid by
consumers on the end goods will lower. We take
small example suppose tyre manufacture in
Chennai and from that it went to retailer who is
also from same state and retailor finally sold to
2008
Direct
Indirect
3338.5
2696.4
Direct
Indirect
441.32
2786.7
2009
2010
Central Government
3774.87
4459.94
2438.31
3431.78
State Government
473.87
627.25
3158.63
3981.70
2011
2012
2013
4939.4
3912.3
5658.35
4678.27
6681.09
5629.61
846.92
4802.7
931.48
5729.18
1055.57
6553.57
Table 3: Contribution of taxes to revenues of Central and State Government
end customer. From the given example it is very

much clear that once GST is implemented it is
helpful to both retailor and consumer and it is
because there is removal of excise duty at the
first step itself which lowers the cost.
Without
GST (Rs)
Manufacturer to Retailor
Production cost
10000
Profit Margin
1000
Selling Price
11000
Excise Duty @ 10%
1100
Total Price
12100
VAT @ 12.5%
1512.5
CGST @ 10%
SGST @ 10%
Invoice generated to 13612.5
Retailor
Retailor to Consumer
Total Price @ COGS
12100
Profit Margin
1000
Total Price
13100
VAT @ 12.5%
1637.5
CGST @ 10%
SGST @ 10%
Invoice generated to 14737.5
Consumer
With GST
(Rs)
10000
1000
11000
1100
1100
13200
11000
1000
12000
1200
1200
14400
Table 2: Difference in taxes
Challenges To GST
Around 140 countries around the world has
implemented the GST. At centre level, indirect
taxes contributes to around 25% of its revenue
and similarly at state level it contributes around
80%. The majority of states revenue is coming
from indirect taxes. The majority of collection for
all states is coming from sales tax and entry tax
while having inter-state transaction. So states
are generally reluctant to implement GST. The
two biggest challenges in front of both centre

and state government which can be biggest
failure if not planned properly are as follows:
- IT Infrastructure
The whole tax collection will be done at point of
sale terminal of retailor of wholesaler. Hence this
money they will be online transferred from State
facilities to centre facilities. According to current
structure the centre will be collecting Interstate GST (IGST) and will be crediting to state.
So there is huge requirement of compatibility of
both centre and state facilities and hence huge
IT framework will be required.
- Revenue Neutral Rate
From table 3, we have seen that at both centre
and state revenues, collection of indirect tax
forms major role. The state is heavily dependent
on indirect tax. So GST rate should be such that
the revenue generated should be same as it
is with current tax structure and if GST rate is
higher, than it will put extra burden on consumer
and if it is lower, than it will put extra efforts
on government shoulders to source funds to
fulfil their expenditures and ultimately impact
economic development.
Road Ahead
Tax clarity is very important and proper
formulation of policies helps the country to
grow at faster pace. The implementation of GST
is in progress stage and the current government
is fully supporting One Nation, One Tax policy
system. Currently, petroleum products, stamp
duties on immovable properties, alcoholic and
tobacco products does not come under ambit
of GST framework. Once the government is able
to generate desired revenue by charging right
revenue neutral rate (RNR) and able to achieve
desired revenue so in the long run government
can plan for incorporating above mentioned
products. GST framework will incentivize all
domestic and foreign investors and helped
to receive economic benefits which were
untouched by VAT.
Finsight
Classroom
Cover
Story
FinGyaan
29
NIVESHAK
FinView
30
NIVESHAK
Interview With Mr. K. Biju George

General Manager, IDBI Bank
Off Late There Has Been Discussions

About Having A Presence Of Strong
Bond Market In India , That Would Help
To Diversify The Risks That Are Related
Project Finance In India , We Would Like
To Know Your Opinion On This And The
Way Forward For India?
The statement is quite encouraging but seems
to be far from reality. However reality might
be that country has relatively underdeveloped
bond market majorly dominated by Government
bonds. A vibrant bond market would definitely
support / augment the credit needs of the
corporate sector especially for long term asset
creation.
Despite better returns, nearly nil history of
defaults, subdued volatility (especially to policy
changes), corporate bonds continue to register
very low turnover ratios and mostly restricted
to private placement (more than 97-98%).
It is expected that an active & efficient bond
market could possibly augment / bridge the
perceived gap in the projected fund requirement
for the asset creation in the country especially
in the infrastructure segment.
Given the current scenario, market is badly
in need of some Market Makers who could
improve / ensure liquidity. Going forward market
also expects to gain momentum with some of
the enablers like broader credit enhancement
policy, encouragement for public placement &
retail investors, transparent secondary market,
better turnaround mechanism in placement,
reliable robust benchmark for the yields etc.
Banks In India, Especially Those In The
Public Sector, Are Stressed, Argues The
Reserve Bank Of India In Its Recently
Released Financial Stability Report.
The Ratio Of Stressed Assets To Gross
Advances Has Risen From Around 6 Per
Cent At The End Of March 2011 To 11.1

Per Cent By March 2015. How Are The
Banks Managing The Increasing Bad
Debts, Corporate Debt Restructuring And
Stressed Assets?
Stressed assets in the banking system
especially with the public sector banks is really
a matter of great concern. The bad loans not only
affect performance of the banks, hampers its
liquidity, which could turn as strong constraint
for the economy. This need to be seen as a
systemic issue and an early resolution could
only could restore health of the financial sector,
bring an environment for long term growth of
the economy.
The current situation pauses lot of challenges
not only banking system but also to policy
makers and regulators. Country has seen certain
macro-economic policy initiatives in the recent
past which could lay foundation for successful
restructuring of viable accounts. With the
revised regulatory guidelines lenders are in a
better position to fight menace of bad loans. To
tie over the current situation, banks are mainly
looking at restructuring the viable corporate
debts and enforce security / liquidate unviable
ones.
There have been welcoming breathers from
RBI for Infrastructure & Core industries in form
flexible structuring (5/25) for new and existing
projects (post DCCO) has helped the lenders to
manage a bit in limited operational projects.
However, major stressed assets / bad debt is in
projects which are stuck before DCCO. For such
projects, a strong mechanism giving some real
relaxations from RBI, permissible sacrifices in
terms of NPV from banks which may be or have
to be compensated by the promoters in later
part of higher yielding curve of the projects is
needed.
NIVESHAK
FinGyaan
JULY 2015
lower leverages), sponsor support and counter

party guarantees for the performance etc. are
some of the mitigants applied for the sector.
Though the market seems to be flooded with
large renewable energy proposals, especially
in solar power generation, lenders seems to be
taking a very cautious approach.
Basel III Increases The Risk Assigned To
Funding Of The Long Term Projects By
Banks, Thereby Increasing The Provisions
Required To Be Set Aside, How Should
Banks React To This Important Change
That Is Going To Happen Soon?
When compared earlier guidelines, Basel III
focuses mainly on consistency, quality and
transparency of capital. Guidelines puts lot of
pressure on the requirement of the Tier I capital
for the banks.
Under the Basel III guidelines profitability of
the banks could be impacted on account of
combination of increased capital requirements,
capital buffers and minimum liquidity
requirements. Apart from this, increased stress
in the portfolio, bad loans could further hurt
profitability and in turn could increase their
capital needs. This would result in pressure on
lowering cost on resources and increase rate of
interest on assets to maintain the profitability.
Though the implementation of Basel III could
improve the loss absorbing capacity of the banks
due higher risk coverage, presence of capital
buffers, constraints in building up assets, it is
felt that banks could take a cautious approach
in extending loan term loans.
The recommendation for reducing the leverage
could lead to reduced lending and choosy
assets, especially in long term. Further in the
light of regulatory guidance for reduced leverage
exposures in relation to Tier I capital and further
reduce the levels to much lower than existing,
the banks may impose stricter credit exposure
norms and there could be a measured approach
to long term loans.
Banks have been given further one more year
by the regulator for implementation of the
guidelines reckoning industry-wide concerns
on stresses, asset quality and consequential
impact on the performance/profitability.
How Do You Expect The Indian Economy
Will Perform Over The Next Year (With
Global Economies Like China, Greece In
FinView
We Have Seen Lot Of Bad Debt In The Road,

Power & Steel Sector Over The Last Few
Years. Currently We See A Lot Potential
And Focus In The Renewable Energy Space
(Especially Wind And Solar). What Would
Be Approach Of The Bank Towards This
Sector For Risk Mitigation And Project
Selection?
Very relevant question reckoning current level
of renewed interest in the renewable energy
projects. The sector has seen tremendous
growth in the last 3-4 years with solar energy
generation showing nearly 100 times growth in
the past 4 years. Like in other sectors, banks
continued to be major source for the long term
financing to renewable energy projects as well.
During the RE-Invest 2015, first Renewable
Energy Global Investors Meet & Expo organised
by the MNRE, country has seen green energy
generation / financing commitment by public /
private entities to the extent of more than 275
GW, manufacturing commitment of 60 GW
and financing commitment (largely from public
sector banks) to the extent of 70 GW amounting
to over 3 trillion in the coming years.
Sector pauses a lot of challenges to the
lenders especially given the fact that it is yet to
mature and lenders approach is generally a mix
of project & corporate finance wherein lenders
expects comfort / commitment from promoters
apart from the cash flows.
The financing challenges could include ,
relatively nascent stage of the sector with high
amount of uncertainty in project parameters,
regulatory & policy constraints and its changes
,lack of experience /knowledge by the lenders
while apprising, lenders tend to go by the normal
bench mark project parameters(DER, DSCR,
Tenure , IRR etc), high level of counter party risk
due to DICOMS deteriorating financial health.
With the experience learned from the past ,
Lenders tend to choose the projects reckoning
the exposure constraints to the sector(reckoned
under power), robust PPAs with payment
security mechanisms (supported by revolving
LC /BG), better tariff structure & tenure(fixed,
escalable with long tenure), volatile project
costs(varying AC:DC ratios & falling capital
cost), technology, reputed equipment suppliers,
realistic projections at
dependable CUF
levels(limited supply of Class I sights for wind),
comfortable service coverage ratios( go with
31
FinView
32
NIVESHAK
Turmoil And US Central Bank Expected

To Hike Interest Rate)?
Though every other National, International
agencies suggest the Indian economy could grow
in excess of 7.5%, the same could be read in
conjunction with current developments in China
& Greece. Reports suggest that developments in
China could be matter of larger concern for India
rather than Greece.
I personally feel that bottlenecks in
infrastructure & policies, external challenges
could impact growth targets. As far as credit
off take is concerned banks are yet to see any
major traction especially in Infrastructure and
manufacturing sectors.
For Student Readers We Would Like You
To Elaborate On The Different Bundle Of
Banking Products That Are Currently
Provided By The Banks To Fund A Project
And The Allocation Of The Same?
The loan products for projects are tailor made
to suit requirement of each project. At IDBI, over
the years, the art and science of project funding
has evolved and matured in response to the
industry experience. The banks products for
project funding majorly include long term loans
for capital expenditure. The loans/ facilities for
the projects are generally structured in line with
the nature of the industry, economic life of the
project, revenue cycles etc.
Bank also recommends judicious use of nonfund based products for project funding mainly
to take advantage of deferred payments from
supplier as well as to arbitrage on the lower
foreign currency funding in case of imports
of capital goods. Depending upon the various
requirements of the project performance and
project construction/completion/ performance
guarantees are provided. The bank also could
extend bridge facilities (both Fund & Non Fund
based) pending Financial Closure of the project
facilities on a selective basis.
The bank also offers structured products for
efficient project financing solutions, pre bid
advisory , arrange for assistance from ECAs,
ECBs, carry out merchant appraisals & project
evaluations on standalone basis , develop tailor
made products for specific project financing
requirements etc.
IDBI has a very active, dedicated Project
Appraisal, Syndication & Structuring desk which
offers end to end solutions for project financing

needs mainly in Core & Infrastructure segments.
Currently IDBI is ranked 2nd in the Bloomberg
League table as Indian Borrower Loans Book
Runner and Indian Borrower Loans Mandated
Lead Arranger for the H1 of CY15.
What Would Be Your Advice To The
Management Students Who Would Like
To Make A Career In Debt Syndication
And Project Financing?
Banking is generally perceived as boring and
mundane in many ways due to lack creative
freedom one could experience in in the desk.
I strongly believe that project financing could
be seen as an aberration to that notion and
its really exciting & fulfilling. Every project
financing transaction could throw up many
challenges mainly as these are generally ring
fenced stand alone projects with finite life,
depending on purely cashflows and not value
of the assets. Most of the project financing
structures are without recourse/ partial recourse
which needs thorough understanding on the
project parameters to establish the cash flows.
It is typically an investment decision which
requires deep due diligence of various aspects
of the project, viz., industry, technical, market,
financial, legal and commercial. In a way a
project finance professional need to convince
oneself about the viability of the project and
then structure the lending structure with
necessary covenants reckoning various project
participants.
Syndication should not be misunderstood as
selling as it requires deeper understanding of the
project and the structures. It calls for stronger
relationship with market and sustained efforts
for convincing potential participants. The debt
market is very competitive and differentiator
could be only the quality service. Success of
any project finance deal could depend on the
structure & deliverability and a successful
project finance professional could be somebody
who understand the above facts better.
Overall the career in project finance and debt
syndication is enriching, provides innumerable
opportunities for learning provided one should
be open to fresh ideas ,update regularly & with
right attitude and could make boring banking
sound like an oxymoron.
33
NIVESHAK
FinFunda
of the
Month
SMART BETA
BHAWANA SARAF
IIM Shillong
Sir, I am planning to invest my savings.

I have come across a term Smart Beta,
could you please explain me the meaning?
Smart Beta refers to an investment style
where the manager passively follows
an index designed to take advantage
of perceived systematic biases or
inefficiencies in the market. Smart Beta
can also be understood as the returns that can be
generated from illiquid or private markets such as
real estate and infrastructure which offer attractive
risk-return trade-offs and which can provide
important diversification benefits when added to
a conventional portfolio of equities and
bonds.
Sir, there are other investment strategies
but why is Smart Beta gaining popularity?
The increased popularity of Smart Beta
is linked to a desire for portfolio risk
management and diversification along
factor dimensions as well as seeking to
enhance risk-adjusted returns above capweighted indices. One of the key attractions of
Smart Beta is that it is less expensive for investors
to evaluate the worth of these strategies than to
analyse and monitor the performance of
active managers.
Sir, what exactly is the approach followed
by the Smart Beta investors?
Smart Beta proponents recognize &
challenge existing benchmark construction,
arguing it has inherent flaws because its
based on price or capitalization. In other
words, the non-smart-beta approach
over weights larger components in an index,
which then has a disproportionate effect on index
returns. Smart Beta proponents say their approach
by equally weighting securities, selecting the most
undervalued component as measured by P/E, or by
some other empirical methodarguably can provide
better returns or lower risk and therefore has a value
beyond traditional indexing.
Sir, Is Smart Beta related to the beta, which

defines the systematic risk, in any way?
In capital asset pricing model, Beta is the
sensitivity of an asset to the movement in
the market where the beta of the market
is one. However, any passive investment
strategy that weights individual securities,
as defined by its objective or algorithm, different
than the traditional market capitalization weighting
approach can be understood as a Smart Beta
strategy. Hence, they are not related to each other
in any way.
Sir, currently how do investors perceive
Smart Beta as an investment strategy
and what progress has it made among
the investor group across the world and
particularly in emerging economies?
In January 2014, Russell Investments
conducted a survey of equity investment
decision makers at almost 200 asset
owners in Europe and the Middle East, and
North America. It found that 32% of asset
owners currently have Smart Beta allocations, with
adoption greatest among the largest asset owners.
Likely future adoption is poised to rise rapidly:
88% of respondents with over $10bn in AUM have
evaluated Smart Beta or plan to do so in the next 18
months, falling to 77% among respondents with AUM
between $1bn and $10bn.
The financial markets in the emerging economies
such as China, India, etc., are still developing. They
offer opportunities for active managers to leverage
their skills in timing the market. India has also
embarked on the journey of Smart Beta ETFs &
ETPs with one offering as of Dec, 2014. As and when
these markets become more efficient & developed,
the number of passive investments would increase
at a higher rate and Smart Beta products may
become the choice of the investors.
Thank you for the session sir. Now I have
understood the intricacies of Smart Beta
as an investment strategy. I can take an
informed decision and plan my investment
approach accordingly.
Classroom
Cover
Story
CLASSROOM
34
WINNERS
Article of the Month
Prize - INR 1500/Ankur Kumar
IIM Shillong
June FinQ Winners
1 st Prize - INR 1000/Sachin Kumar Sethi
SIBM, Pune
2 ND Prize - INR 500/Priyanka Tewari

IIM Shillong
35
ANNOUNCEMENTS
INVITATION FOR ARTICLES
As Niveshak enters the seventh year of its wonderful journey, Team Niveshak is coming out with its 7th Annual Special Anniversary Issue to be launched this August. For
this purpose, we invite critical views on the theme THE NEXT BIG THING IN INDIA
(Explore to find next Burning thing by exploring the current spark) from B-schools &
Corporates across India. The top three articles would be awarded with Cash Prizes
worth Rs. 6,000. The contributors of the featured articles in the Niveshak Annual edition would get Niveshak goodies and Certificate of appreciation.
Instructions
Please send your articles before 16th August, 2015 to niveshak.iims@gmail.com
The subject line of the mail must be Article for Niveshak_<Article Title>
Do mention your name, institute name and batch with your article
Please ensure that the entire document has a wordcount between 1500- 2000
Format: Microsoft WORD File, Font: - Times New Roman, Size: - 12, Line spacing: 1.5
Please do NOT send PDF files and kindly stick to the format
Number of authors is limited to 2 at maximum
Mention your e-mail id/ blog if you want the readers to contact you for further
discussion
Also certain entries which could not make the cut to the Niveshak will get figured
on our Blog in the Specials section
SUBSCRIBE!!
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Thanks
Team Niveshak
COMMENTS/FEEDBACK MAIL TO niveshak.iims@gmail.com

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ALL RIGHTS RESERVED
Finance Club
Indian Institute of Management, Shillong
Mayurbhanj Complex,Nongthymmai
Shillong- 793014

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FROM EDITORS DESK

All images, design and artwork

04 The Month That Was

Article of the month

China Stock Market Bubble

Is World Economy Going

Interview With Mr. K. Biju

The Month That Was

The Niveshak Times

Lanka that will allow the latter to draw up to

credit facility, its chief and eminent banker KV

supervision and the development of new

FINANCE CLUB, INDIAN INSTITUTE OF MANAGEMENT SHILLONG

The Month That Was

The Niveshak Times

FII, DII Net turnover (in Rs. Crores)

MARKET CAP (IN RS. CR)

LENDING / DEPOSIT RATES

Data as on 28th July 2015

FINANCE CLUB, INDIAN INSTITUTE Of MANAGEMENT SHILLONG

CONS NON DURABLE

July Performance of Niveshak

Opening Portfolio Value : 10,00,000

Is World Economy Going into Great

In 2005, Dr. Rajan, in his Jackson Hole speech,

recession, the unemployment rate in December

So, to spur the stagnant US economy the Fed

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from $534-$623 billion a year to $712 billion a

every six month. The Greece government total

into being in 1999. The common currency was

negative interest rate, but it did not help (6). In

Now here again

Today Greece, Portugal, Ireland are having high

The Bank Of England Spree

-4.31% in the year 2008 and 2009 respectively

economy- are adopting beggar-thy-neighbour

The debate is still on whether the QE was the

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Chinas stock market

of the investors and it is just postponing the

countrys communist party, according to

by increasing number of participation from

the market downwards. The IPO market looked

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often oversubscribed 60 to 80 times that tied up

the stock markets. This left the Shanghai and

cash and demand made it easier to invest by

shares. The bubble in the margin lending did ease

What Does This Mean For The Chinese

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The Greek Debt Crisis:

What the fuss is all about!

such a small economy as Greece has ruffled

Fig 1: Greek Creditors

History of the Greek Debt Crisis

Fig.2: Greek Subsidies and other transfers (as a % of expense)

debt. It became imminent by 2010 that Greece

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Fig. 3: Greece GDP and Unemployment rates in Europe

measures imposed upon the Greeks. No wonder,