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ChaanakyaTracking the economy.

A Wealth Incorporation

Publication

July 16, 2012

Vol. 6

Issue 08

Christ University

Institute of Management

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Index

News National 3 International 5

Rates and Graphs 7

Contemporary Articles

Financial Stability and Price Stability: Tough Pillars to Balance 9 RBIs Financial Stability Report 10

Debate

Tulipomania 11

Stock Watch

HDFC 12

Commodity Market Guar 15

Scams

Money Laundering Scam 16

Did You Know Stock Market Jargons 17

Crossword 18

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National News

Sanjeet Kumar [II MBA J]

GAAR may not apply to tax haven investments

Investors coming via Mauritius and Singapore may breathe easy, as the provisions of theGeneral Anti-Avoidance Rules (GAAR) may not apply to their transactions. The governmentmight also spare foreign institutional investors (FIIs) who route their investments through taxhavens, provided those are genuine residents of tax havens. To end uncertainty, a clarificationwill also be issued on retrospective amendments.

Current account deficit hits all-time high of 4.2% in FY12

With a sharp rise in the import bill and an economic downturn, Indias current account deficit

(CAD) shot up to $78.2 billion (4.2 per cent of gross domestic product) for the year endedMarch 2012, from $46 billion (2.7 per cent of GDP) the previous year. This is the highestlevel of CAD everboth in absolute terms and as a proportion of GDP according to theReserve Bank of India.

For the quarter ended March, CAD rose to $21.7 billion (4.5 per cent of GDP), comparedwith $6.3 billion (1.3 per cent of GDP) for the corresponding quarter the previous year.

Rupee fall to hit India Incs margins by 11kcr

The rupees depreciation of 9.36 per cent against the dollar in the first quarter of the currentfinancial year is expected to increase India Incs mark-to-market (MTM) losses on foreign

currency loans by over`11,000 crore in April-June.

In the year ended March 2012, when the rupee had depreciated from 44.59 to 50.88, a fall of14.11 per cent, 162 listed companies had made a provision of`14,976 crore in their profitand loss (P&L) accounts for losses on foreign currency fluctuations.

ICICI Bank sells Kingfisher debt to Srei Infrastructure Finance

Indias largest private lender ICICI Bank Ltd sold its entire `430 crore exposure inKingfisher Airlines Ltd to a debt fund managed by the Kolkata-based Srei InfrastructureFinance Ltd, even as pilots at the cash-strapped airline stepped up pressure on themanagement for immediate payment of salaries.

ONGC to sell 35% in CBM blocks

Oil and Natural Gas Corporation (ONGC) has decided to sell around 35 per cent of its stakein four of its coal-bed methane (CBM) blocks. The state-run company will offload its stake tothe bidders for a certain financial consideration and production sharing at a later stage,according to sources close to the development.

Aditya Birla Group to buy Canadas Terrace Bay Pulp for Rs.605 crore

The Aditya Birla Group on 5th July 2012 signed an in-principle agreement to buy the assets

of Ontario-based Terrace Bay Pulp Mill for`605 crore ($110 million). The acquisition would

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would be carried out through AV Terrace Bay (Canada), a special purpose vehicle in whichtwo group companies, Grasim Industries and Thailand-based Thai Rayon Public, would holdstake.

IKEA on Indias doorstep as govt accepts key demands

Swedish furniture retailer IKEA might not have to wait much for its India entry. TheDepartment of Industrial Policy & Promotion (DIPP), after a meeting with companyrepresentatives this week, moved swiftly and decided to accept some of their key demands,including relaxation of the 30 per cent mandatory sourcing requirement from day one.

IT firms in queue for CEMEX deal

Indian information technology majors Tata Consultancy Services (TCS), Wipro and Infosys,and global players such as IBM, are vying for a contract worth $1-1.2 billion from theMexico-based CEMEX, the worlds third largest cement maker.

The seven-year outsourcing deal is in its last stage of bidding and covers both IT and businessprocess outsourcing. Sources said the deal might also involve the sale of Neoris, a subsidiaryof CEMEX that provides IT services and consulting.

Banks face RBI heat on no rate cut

The Reserve Bank of India (RBI) has come down heavily on banks for not cutting interestrates, despite a reduction in the policy rate by as much as 50 basis points (bps) in April. In thepre-monetary policy meeting with bankers on 9th July 2012, the central bank wanted to knowthe reasons for the failure of policy transmission.

RBI emphasised for monetary transmission to be effective, the base rate should be reducedand not the spreads alone, said a banker who attended the meeting.

MCX-SX receives green signal for equity trading

A third national-level equity exchange is set to go live in the next few weeks, with the MultiCommodity Stock Exchange (MCX-SX) securing regulatory permission to operate as a fullfledged stock exchange. This comes after a four-year wait and an intense legal battle betweenthe stock exchange aspirant and the Securities and Exchange Board of India (Sebi).

MCX-SX will be the first national level equity exchange to be launched since 1998. While

the BSE is 150 years old, the NSE had gained recognition in April 1993. The government hadallowed the Inter-connected Stock Exchange to launch operations in 1997, but the bourse wasa failure.

IIP growth glimmers in May

Industrial production showed bleak signs of recovery in May, rising 2.4 per cent, owing to aslight uptick in electricity and consumer durables. This followed contraction for consecutivemonths. In May 2011, industrial growth had stood at 6.2 per cent.

Industrial growth, as measured by the Index of Industrial Production (IIP), contracted 3.1 percent in March and 0.9 per cent in April. IIP growth for April was scaled down from the

earlier estimate of 0.1 per cent.

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InternationalNewsSanjeet Kumar [II MBA J]

European leaders agree to give bailout fund to banks directly

Euro-area leaders agreed to relax conditions on emergency loans for Spanish banks andpossible help for Italy as an outflanked German Chancellor Angela Merkel gave in onexpanded steps to stem the debt crisis. They also opened the way to recapitalising lendersdirectly with bailout funds once Europe sets up a single banking supervisor.

US manufacturing shrinks

The manufacturing sector shrank unexpectedly in June for the first time in nearly three yearsas new orders tumbled, one of the starkest signs to date of the extent of the slowdown in the

US economy. The Institute for Supply Managements index of national factory activity fell to49.7 from 53.5 the month before, missing expectations of 52.0, according to a Reuters poll ofeconomists, and below even the lowest forecast. It was the first time since July 2009 that theindex has fallen below the 50 mark that separates expansion from contraction.

Euro zone factories hit hard in June

Euro zone manufacturing took another hefty blow in June and factories are preparing forworse to come, according to business surveys on 2nd July 2012 that showed jobs were cut atthe fastest rate in two-and-a-half years. Markits Euro zone Manufacturing PurchasingManagers Index (PMI) was unchanged at 45.1 in June, above the preliminary reading of 44.8and holding at its lowest reading since June 2009. The survey again showed factories in the

regions two biggest economies, Germany and France, are succumbing to a downturn thatstarted in southern Europe.

Microsoft to write down $6.2 bn

Microsoft Corp admitted its largest acquisition in the Internet sector was effectively worthlessand wiped out any profit for the last quarter, as it announced a $6.2-billion charge to writedown the value of an online advertising agency it bought five years ago. The loss comes dueto 2007 purchase of a Quantive, which was expected to boost Microsofts online advertisingrevenue and counter rival Google Incs purchase of digital ad firm Double Click. The worldslargest software company said in a statement that the acquisition did not accelerate growthto the degree anticipated, contributing to the write-down.

Moody cuts Barclays outlook

Ratings agency Moodys changed its outlook for Barclayss standalone bank financialstrength rating to negative from stable, citing the resignations of senior executives includingChief Executive Bob Diamond in the wake of an interest rate-rigging scandal. Moodys saidon 5th July 2012 the downgrade reflected concerns that the departures and the consequentuncertainty surrounding the banks direction would be negative for bondholders. The ratingsagency said shareholder and political pressure on Barclays could lead to pressure on the bankto shift its business model away from investment banking and to reform perceived failures inits business culture.

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Volkswagen to buy all of Porsche

Volkswagen says it is able to proceed with its deal to to buy the 50.1 per cent stake inPorsches automotive business that it does not already own for $5.6 billion. Volkswagen said

Wednesday that it had reached an agreement with German tax authorities allowing the deal togo forward, ending a seven-year takeover ordeal.

Yahoo and Facebook settle patent suits

Yahoo and Facebook agreed on 7th July 2012 to settle a legal fight over their patent holdings,ending what was shaping up to be one of the nastier court battles in Silicon Valley in recentmemory.

Under the terms of the pact, the two companies will expand an existing partnership, includinga deeper integration of Facebook tools into Yahoos content pages.

Regulators approve NYSEs plan for its own darkpool

Regulators have approved a controversial proposal from the New York Stock Exchange thatwill result in some stock trades being diverted away from the traditional exchange.

The programme, expected to begin later this summer, will direct trades from retail investorsonto a special platform where trading firms will bid to offer them the best price. The tradingwill not be visible to the public.

Intel to buy 15% of ASML for $4.1 bn

Intel Corp will spend more than $4 billion to buy up to 15 per cent of ASML and bankroll theDutch companys research into costly next-generation chip making technology, a major voteof confidence in the European firm that sent its US shares soaring 6 per cent. Intel hopes tospeed the adoption of the next generation of chip manufacturing processes from ASML by asmuch as two years. That will require intensive capital investment, but delivers billions offuture savings by cutting chip production costs, analysts said.

Peugeot to shut plant, to cut 14,000 jobs

PSA Peugeot Citroen, Europes second-biggest car maker, will close the first auto factory inFrance in 30 years and eliminate 14,000 jobs in an effort to stem widening operating losses.

The automaker will cut an additional 8,000 positions in the current reorganisation, on top of6,000 job reductions already announced last year, Chief Executive Officer Philippe Varinsaid today at a press conference in Paris.

Euro zone factory output rises in May

Euro zone factories unexpectedly stepped up production in May, but output fell in France andthe Netherlands in a further sign that the blocs sovereign debt crisis is also hurting itsstronger economies. Industrial production in the 17 countries sharing the euro rose 0.6 percent in May from April, the EUs statistics office Eurostat said on 12th July 2012, beatingexpectations of economists polled by Reuters, who had forecast no growth in the month.

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Rates

Pankaj Sharma [II MBA J]

Repo Rate 8.00%Reverse Repo 7.00 %Call rate 7.10%-8.15 %Inflation 7.55% for May 2012Forex Reserve $287.622 Billion as on 6th July, 201291day T-Bill 8.2275%IIP 2.4% for May 2012

8.56 GS 2021 8.5582%

Graphs

Pankaj Sharma [II MBA J]

53

53.5

54

54.5

5555.5

56

56.5

57

1-Jul 4-Jul 7-Jul 10-Jul 13-Jul

Rs/$

Rs/$

28500

28900

29300

29700

30100

30500


Gold(per 10 gram)

Gold(per 10

gram)

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91

94

97

100

103

106


Oil(per bbl)

Oil(per bbl)

1200000

1500000

1800000

2100000

2400000

4600

4800

5000

5200

5400

5600


future rates open interest

4600

4800

5000

5200

5400

5600

16,500.00

16,900.00

17,300.00

17,700.00

18,100.00

18,500.00


sensex nifty

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Financial Stability and Price Stability: Tough Pillars to

Balance

Dhruv Chopra [II MBA I]

The recent global financial crisis has generated an intense debate on the role andresponsibility of central banks in maintaining financial stability. Over the centuries, the worldhas experienced periodic financial crises, prompting changes in the way we think aboutmonetary and financial stability. Yet, we are not immune from crisis.

In the present context there are many questions which arise. What is the main objective of thecentral banks around the world? Is monetary policy stabilization the sole objective of thecentral bank? Is financial stability the important aspect where the bank should also focusupon? Do central banks have necessary instruments to handle the multiple objectives? But

before going further, it seems that the current global crisis have undermined the view thatmonetary policy should only have a single objective of price stability which is right nowfollowed by most of the central banks around the world including our own Reserve Bank OfIndia. Before the crisis and for the past decade central banking has been dominated by whatcould be called the Jackson Hole consensus which holds that central bankers prime task isto keep inflation low and stable, however, such perception was belied by the recent crisis. Itbecame clear that financial stability can be jeopardized even if there is price stability andmacroeconomic stability. Consequently, post-crisis assessment increasingly veered towardsexplicit recognition of the financial stability objective.

On the same objectives recognition there are many views like Eichengreen, Prasad andRajan (2011) suggest a dual mandate of price stability and financial stability for the central

banks, Mr. Subir Gokarn in 2010 was of the view that broader mandates for central bankswill need to be made explicit and conditional on the priority of the core mandates. In contrast,Svensson in 2010 argued that it was important to distinguish financial stability policy frommonetary policy to avoid conceptual and practical confusion between the two policies. Butthe dominant view, however, seems to be that financial stability should be a sharedresponsibility, as monetary policy instruments of central banks can only have a partial impacton the ultimate objective of financial stability.

Even if the financial stability is considered too as a prominent objective of the central bankscontemplation but is our Lender of Last Resort well equipped with the instruments to handlethe financial stability? Central banks functioning with a single instrument of short-terminterest rate, particularly those with inflation targeting framework may not be equipped to

achieve multiple objectives following Tinbergens assignment rule (achieving a multiplenumber of independent policy targets requires an equal number of policy instruments) andmany have argued that interest rate is too blunt an instrument for dealing with overallfinancial stability issues. So it is now felt that while interest rate continues to be the dominantinstrument for implementing monetary policy, supplementing it by other quantity or macroprudential instruments even in normal times will enhance the flexibility of monetary policy toattain multiple objectives.

Therefore, post-crisis, there has been greater emphasis on introducing additional instrumentsfor central banks to deal with aspects of financial stability. In short, the role of central banks

in ensuring overall stability of the financial sector has now got a fresh impetus.

Sources: 1. Price Stability and Financial Stability An Emerging Market Perspective - Address by Shri DeepakMohanty, ED, RBI, on June 27, 2012.2. http://www.economist.com/node/14303627

3. http://www.rieti.go.jp/en/china/05120702.html

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RBIs Financial Stability Report

Vicky Crasto [II MBA I]

"The combined effect of the dismal global macroeconomic situation and the muted economicperformance on the domestic front has caused marginal increase in risks to stability was thefocus of the fifth Financial Stability Report (FSR) by the Reserve Bank of India, released onJune 28, 2012. The RBI publishes these half yearly reports in an attempt to share the resultsof its surveillance with the markets players. This is based on the best global practices of thecentral banks and the IMF (International Monetary Fund). This report has two objectivestoecourage a debate and creates an awareness of the vulnerabilities of the financial system.

The report said that the macroeconomic risks to the financial stability had gone up due to theEuro crisis. The global slowdown in the growth, dampened commodity prices and reducedcapital flow has adversely impacted the economy.

So of the risk highlighted in the report were the risks rising from the rising current accountdeficit which is about to touch 4 percent in FY12. This rise is mainly due to the deprecatingrupee due to the worsening global economic and financial conditions and muted capital flow.On the other hand the report says, Banks remain resilient to credit, market and liquidity risksand would be able to withstand macroeconomic shocks, given their comfortable capitaladequacy positions. The report positively indicates that Indian banks have adequate capitalto withstand macro economic shocks. Furthermore it says, Banks in India will migrate toBasel III from a position of relative strength but there could be challenges in the form ofhigher cost of capital.

However some of the chief concerns expressed by the reports regarding the banking system

were the increased dependence of banks on insurance and mutual funds for short term funds.The random failure of a bank which has large borrowings from the insurance and mutualfunds segments of the financial system may have significant implications for the entiresystem, the report said. According to the report, 81% of borrowings were from mutual fundswhich comprise CD issuances which are short term.

Other concerns were the increase in the slippage ratios, rise in the quantum of restructuredassets and a high rate of growth in the non performing assets relative to credit growth. Alsothe rapid growth of NBFC engaged in lending against gold posed risked because they arehighly dependent on the banks and if their business model failed it would endanger the entiresystem.

The underlying tone of the report was one of caution. With corporate being burdened withrising debt, risks from unhedged foreign currency and deceleration in export paints a verygloom picture for the next quarter.

Sources:

Risk to financial stability on the rise: RBI, IBN Live, Posted on Jun 28, 2012 at 09:58pm IST. Retrived

from http://ibnlive.in.com/news/risk-to-financial-stability-on-the-rise-rbi/268416-7.html

A robust system in turbulent times, The Hindu, Posted on July 8 , 2012. Retrived from http://

www.thehindu.com/business/Economy/article3613911.ece

RBI says risks to financial stability on the rise, DNA Posted on Jun 28, 2012, 21:25 IST retrived from

http://www.dnaindia.com/money/report_rbi-says-risks-to-financial-stability-on-the-rise_1707999

Getting rid of the blind spots, The Economic Times, Posted on July 4, 2012. Retrived from http://

epaper.timesofindia.com/Default/Client.asp?Daily=ETM&showST=true&login=default&pub.

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Tulipomania

Bhavesh Dhanesha and Rohit Munka [II MBA J]

Try to recall a bubble burst and one will think of Dotcom, Japan or Sub-prime crisis of US. Thesecrisis have affected the financial life of many when speculation starts losing its sheen. Many have losttheir fortunes in the financial bubbles related to technology, property and stock market. But moreprosaic, more sublime and more dangerous was a flower called tulip that was popular not only for itsrarity and beauty but also insane speculation.

Tulipomania occurred in the Netherlands. In 1593, a botanist named Carolus Clusius brought tulipsfrom Constantinople to the Dutch land with an intention to do research on these flowers for medicinalpurposes. Clusius planted a small garden in his house. These tulips were rare in nature and were anexcitement for the neighbours as it was not a produce of their land. The Dutch found these rare speciesof flowers very attractive. Their humble request to Clusius for giving or selling these flowers wasturned down. Therefore, they stole a few bulbs of these flowers from Clusius garden and started

selling them for profits. Soon these flowers were traded on local market exchanges. These bulbsbecame very exotic in the country and became a status symbol. Comparable with precious metals thesetulip bulbs were sold for at least $1,200 in current US Dollars. Some rarer species of these flowerswere traded at double the rate of a simple tulip flower bulbs. More amusing fact was that these flowerbulbs were exchanged for a bed, a complete suit of clothes, a thousand pounds for cheese, four fatoxen, eight fat swine, twelve fat sheep and the list is not exhaustive. A derivatives market, similar tomodernday options and futures contracts, eventually rose so that traders could conduct trade all yearround. Later, a virus not harmful for humans, affected the tulips which created nocturnal blue patcheson the petals. Such a flower was rarer and many sold their properties to trade a bulb of these rare tulipsthat were valued at $ 75,000 (adjusted to current US Dollars).

The height of the bubble was reached in the winter of 1636-37. Good tulip traders were earning upto $60,000 (adjusted to current US Dollars). This led to an increase in the traders and, with them increase

in the supply of tulips from other countries. The already expensive tulips saw a twenty fold increase intheir prices in a single month. By the month of February 1637, reached its peak and inflated prices lost

their support when buyers started defaulting on contractsthat led to an increase in the supply. This meltdown isshown in the figure. But after knowing about the storywhat should a trader actually do to optimize their trade.However following two decisions are being taken by atrader:

Capitalize when the going is good

During a bull run one always flows with the wave andenter the sea to gather pearls as the information is

ubiquitous. This means most of the traders or investors enter the market after witnessing the bull runand further expectations for growth. Ultimately, most of them make small returns.

Trade with a rational mind

One should always keep oneself updated with information because when you move with the wave, thedepth in the sea increases and one should know to swim. A bubble burst may look like a problem, butis only a cycle and, the consequences of excesses during the uptrend. The bear market will give way tothe bull market when the process of cleansing begins i.e poor ideas fail and exit the market. Forexample, in this bubble due to an increase in demand for tulips, ordinary tulips were painted and thensold in the market. This denotes that many a times during expansion there is less focus towards qualitythat ultimately leads to failure. And a downfall is an opportunity to rework towards the strategy, be itbusiness or trading.

Source: http://www.thebubblebubble.com/tulip-bubble/http://www.damninteresting.com/the-dutch-tulip-bubble-of-1637/

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HDFC

Deebadwita De [II MBA J] and Shashank Mishra [II MBA N]

The Housing Development Finance Corporation Limited (HDFC) was amongst the first toreceive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in theprivate sector, as part of the RBI's liberalisation of the Indian Banking Industry in 1994. Thebank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with itsregistered office in Mumbai, India. HDFC Bank commenced operations as a ScheduledCommercial Bank in January 1995.

The foundation of HDFC's business model robustly rests on reaching out to new customersegments and untapped markets. This ideology is aptly mirrored in their unabated efforts inleveraging their distribution channels, which include HDFC Sales Private Ltd (HSPL), HDFCBank and third party Direct Selling Associates (DSAs). Besides local and regional DSAs,

tie-ups with institutional partners having a pan-India reach, led to substantially augmentingthe reach.

Company Profile:

Customer base of 26 million.

Through various economic and business cycles, HDFC has realised that a steady paceof growth has held it in good stead.

Strong distribution network and retail customer franchise.

Leading player across retails loan categories.

Large tax collector for Government of India.

Significant provider of cash management services for public sector and semigovernment undertakings.

Market leader in credit card (5.6 mn cards as of Mar 12).

Key Highlights:

HDFC Banks net advances growth was strong at 22.2% yoy, while deposit buildupwas also healthy, growing by 18.3% yoy.

Net profit up by 30% to `14.5 Bn.

Gross advances increased by 22% to `1,969 Bn.

Deposits up 18% to`2,467 Bn.

CASA ratio at 48.4%

Core Net Interest Margin at 4.2%

Core Cost-to-income ratio at 49.8%

Gross NPA / gross advances at 1.0%

Net NPA / net advances at 0.2%

Capital adequacy ratio (CAR) - total 16.5% of which tier I at 11.6%

June 12 quarter has beaten market expectation with a 30.6% increase in profits QoQ

basis.

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Performance Of Subsidiaries:

HDFC Securities Limited Amongst the top retail equity brokerages in the country

Over 180 branches and 1.4 million customers Revenues from brokerage as well as distribution of financial products FY 2012 - Net Profit : `541 million

HDB Financial Services

NBFC catering to certain customer segments not served by the Bank. Network size of 180 branches. FY 2012 - Loan book : `39,641 million, Net Profit : `511 million

Financials :

Source: Analyst presentation by HDFC from www.hdfc.com

Source: HDFC Annual Presentation from www.hdfc.com

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Key Developments in the stock:

CASA ratio would witness structural improvement in the longer term supported byimproving maturity of substantial branches added.

The retail loan growth continues to be robust and well-diversified. HDFC Bank has been cross-selling multiple products such as Mutual Fund SIPs,

broking accounts, credit cards, insurance, etc. This is helping in improved otherincome for HDFC.

June Q 12 results have beaten the market expectations.

The comparative chart analysis of HDFC and NIFTY shows that HDFC has outperformed theNIFTY for last 6 months.

Recommendation for the stock:

HDFC is the biggest player in retail loans specially in home loans. With its unique valuepreposition and huge market share, HDFC is expected to outperform the market. Their hugebranch network will help in better operations and achieving profits. Their healthy NIM (Net

interest margin) supports a long term view for the stock. The recommendation for the stock isBUY for a period of 12 months with a target of 640.

Call: Buy

CMP: 575

Target Price : 640

Time Period: 12 months

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Guar

Srinivas Prasad K [II MBA J]

Guar (Cyamopsistetragonoloba) is a leguminous crop, which grows best in sandy soils andneeds moderate, intermittent rainfall. It is a hardy, drought resistant bush and is sown afterthe first monsoon showers between the second half of July and early August. It is harvestedduring late October-November. Green pods of Guar are consumed as a vegetable.

India is the major producer of Guar Seed followed by Pakistan and US. India grows 7 to 9Lakh MT, or 80% of the world's annual guar production. Rajasthan is the major Guarproducing state, accounting for 70% of the production. Gujarat, Haryana, Punjab, U.P. andM.P. are other producing states. Industrially it is used in mining, petroleum drilling andtextile manufacturing. In food it is used as a thickener and as a mean of preventing ice crystal

formation in frozen desserts.

Demand: World market for guar gum is estimated to be around 150,000 tons/year, 70% ofwhich is produced by India and Pakistan. US consumption is estimated to be around 40,000tons/year. The export from India is around 115,000 tons and the domestic market is of around25,000 tons. India exported 33000 tons of guar gum refined split and 84000 tons of guar gumtreated and pulverized in 2002-03, which together accounts for an export of 117000 tons ofguargum exports valued above `300 crores. The main demand of guar seed originates fromthe US petroleum industry and also the oil fields of Middle East.

Market influencing factors: The production is directly related to monsoon. In Rajasthan, therainfall fluctuates between years and thus results in high volatility in production andconsequently on prices. While the demand is almost constant over the years, supply varieslargely between years. The physical market of the commodity involves speculators andstockists. The commodity is subjected to a long storage period based on demand and marketprices. There are no Government rules and regulations governing the production, distribution,marketing, exports or imports of the commodity and the market forces determine the prices.

With monsoon starting late with scattered rainfall in some parts of Rajasthan, areas borderingMadhya Pradesh have also received marginal rainfall, which provided adequate moisture forsowing guar seed. With farmers sowing higher quality seeds anticipating the monsoon willbring in more rain required for a good crop this year. Even though Hyderabadbased CentralResearch Institute for Dryland Agriculture forecasted a 10-15 % decline in Gaur seed

production this year. Large farmers have already sown guar in the irrigated land early thisseason, especially in regions like Sri Ganganagar, Hanumangarh, Bharatpur and Alwar.Around 80 per cent of the sowing area in Rajasthan is rain-fed. Jodhpur, Barmer, Bikaner andJaisalmer are still awaiting rainfall.

Sources: http://www.business-standard.com/commodities/storypage.php?autono=480370

http://www.mcxindia.com/SitePages/ContractSpecification.aspx?ProductCode=GUAR_SEED

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Money Laundering Scam

Ankita Pagaria [II MBA J]

Stud farm owner Hasan Ali Khan leads the list of top ten income tax defaulters in financial

year 2008-09 in the country, who together owe more than `80,000 crores in taxes.

Hasan Ali Khan, son of a Hyderabad excise officer, is a scrap dealer with the annual incomeof `30 lakhs. He has a Swiss bank account with `8 billion in deposits. This figure isverified by India today from a letter written by UBS, Zurich, to khan. The government ofIndia has confirmed the existence of this account in UBS and ordered him to pay 50000 crorein tax on that wealth. Khan has not paid a rupee.

Hasan Ali, a somewhat mysterious Pune based racehorse owner is reported to have illegallytransferred more than 35000 crore sums of money to seven Swiss bank accounts. These

Accounts have been frozen at the request of Indian government.

He is reported to have links with politicians and big businessmen. Apparently, money waslaundered through Mauritius. Ali who races horses at the Bombay Race Course made hismark in the city approximately 10 years ago. He is married to the daughter of a trainer at theBombay race course and has begun investing in horses. The Enforcement Directorate(ED) on March 7 froze seven out of 10 Swiss bank accounts of the trader operating from asix-storey building in Koregaon Park area of Pune. .

Income Tax (IT) authorities in Mumbai and Delhi claim to have stumbled upon a hugemoney-laundering racket in which money is sent to Mauritius through hawala orunauthorized money transfer channels and it comes back to India as investment in stock

market and other areas. Senior Income Tax officers said the department stumbled on it ,whenthey raided a stud farm owner in Pune, who owns a flat on Peddar Road in Mumbai as well.During the search, the officials said they found details of accounts in Swiss banks in variousnames in which `20,000 crore was deposited. Some big names from Indias political andcorporate worlds held these accounts, the I-T officials said.

According to the treaty, the capital gain earned from investments from Mauritius is not taxedin India. The investor benefits because in Mauritius there are no tax on capital gains. I-Tauthorities suspect the profit was then routed to Swiss banks. In January 2008, an FIR waslodged on this ground with the Worli Police Station in Mumbai. But before he could bearrested, Khan went absconding. After remaining underground for over a year, Khan

surrendered before a local Mumbai court on 15 dec,2008. The court remanded him to policecustody. Khan was arrested by ED and booked under the provisions of Prevention of MoneyLaundering Act (PMLA).

The Mumbai High Court on Aug 12, 2011 granted bail to him saying that there are noingredients of proceeds of crime in the case made out by the Enforcement Directorate againstHasan. He deserves to be released on bail. The court, however, directed him to appear beforeED everyday and stay either in Mumbai or Pune.

Sources:

http://www.newsanalysisindia.com/109032007.htm

http://www.business-standard.com/india/news/hasan-ali-gets-bail-in-money-laundering-scam/144240/

onhttp://indiatoday.intoday.in/story/who-is-hassan-ali-khan/1/131363.html
http://www.newsanalysisindia.com/109032007.htmhttp://www.business-standard.com/india/news/hasan-ali-gets-bail-in-money-laundering-scam/144240/onhttp://www.business-standard.com/india/news/hasan-ali-gets-bail-in-money-laundering-scam/144240/onhttp://indiatoday.intoday.in/story/who-is-hassan-ali-khan/1/131363.htmlhttp://indiatoday.intoday.in/story/who-is-hassan-ali-khan/1/131363.htmlhttp://www.business-standard.com/india/news/hasan-ali-gets-bail-in-money-laundering-scam/144240/onhttp://www.business-standard.com/india/news/hasan-ali-gets-bail-in-money-laundering-scam/144240/onhttp://www.newsanalysisindia.com/109032007.htm

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Stock Market Jargons

Vinay Goel [II MBA L]

Death Cross - The point on a chart where a securitys long term movingaverage drops below its short term moving average.

Iron Condor- The options strategy of buying or selling four differentoptions contract at four different strike prices.

False Bottom- The temporary price that traders mistakenly assume is astocks low point.

Contango The conditions in which a short term contracts cost less thanlong term ones.

Triple Town - When a security peaks three times at approximately thesame price, all within a short period of time.

Defensive stocks - Stocks that remain stable during periods of economicdecline are known as defensive stocks. The resistance to market declinesmakes defensive stocks attractive.

Convexity - The term refers to low sensitivity of a bond to changes ininterest rates.

Dont Fight the tape - The term that advises the traders not to bet againstmarket trends.

Volcker Rule - Trading restrictions put on financial institutions. TheVolcker rule separates investment banking, private equity and proprietarytrading sections of financial institutions from their customer lending arms.

Torpedo Stock - A stock that has fallen substantially in value and thatlooks like it will continue to fall in value in the foreseeable future. Thisname refers to this type of stock's similarity to a battleship after it has beenstruck by a torpedo: it goes down fast and continues to sink until hits thebottom.

Trading Halt - A temporary suspension in the trading of a particularsecurity on one or more exchanges, usually in anticipation of a newsannouncement or to correct an order imbalance.

Poop and Scoop - A highly illegal practice occurring mainly on theinternet. A small group of informed people attempt to push down a stock byspreading false information and rumors. If they are successful, they can

purchase the stock at bargain prices. .

Sources: Retrieved on 14th July, 2012. www.stocktionary .com

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Crossword

Reddy Sreedhar T [II MBA L]

Across4. Aravind Rao, the Managing Director & CEO of this company has recently resigned

after what the company called a "special review of its corporate governanceprocedures".

7. The one day International conference held in Japanese Capital Tokyo provides a muchneeded financial assistance of 16 Bn US dollars to this trouble torn nation.

8. Mr. Jagadish Shettar is the new chief minister of this state, and 3rd CM in a span of 4years.

9. This US based company in India signed an agreement with Indian Institute ofTechnology (IIT) Madras on 5 July 2012 to support its faculty and students in CloudComputing Research.

10.This Indian University won the Golden Peacock Environment Management Award2012 on 8 July 2012, the main theme of this meet was driving sustainable businessthrough green economy.

Down1.This Indian bank in planning to open three overseas branches in Sydney, Dubai and

London before the current fiscal.2. He was appointed as Director of Institute of Banking Personal Selection (IBPS) on 2nd

July 2012.3.In a policy aimed at benefitting country's 120 Cr population , the union govt of India on

4th july 2012 unveiled the 5.4 Bn Dollar free '.........' policy.5. Engineers India Ltd. (EIL) on 6 June 2012 announced to secure Consultancy Services

Contract from this Petroleum Corporation Ltd. for Integrated Refinery ExpansionProject (IREP) at Kochi. It costs around 720 crores rupees.

6. This Indian Automobile major invested 100 crore rupees for Research andDevelopment (R&D) centre for two-wheelers on 4 July 2012 with the investment planof 500 crore rupees till 2017, which will enable the company's two wheelers to

undertake in-house design and development of engine technology for its motorcycles.

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Kritika Banerjee

Editor

Sanjeet Kumar

News

Reddy Sreedhar T

Crosswords & Quiz

Pankaj Sharma

Graph & Rates

Arnab Basak

Investors check

Bhavesh Dhanesha &

Rohit Munka

Debate

Vinay Goel

Did You Know

Dhruv Chopra

Contemporary Articles

Ankita Pagaria

Scams

Srinivas Prasad K

Commodity Market

Debadwita De &

Shashank MishraStock Watch

Prachi Sharda

Buzz Words

Vedang Dave &

Sandeep Kumar

Boyapati

Review Committee

Kritika BanerjeeCreative Head &

Design

Team Members

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About Us

Chaanakya is the official Finance Magazine of

Wealth Incorporation, the Finance Club. It is released fortnightly.Its objective is to keep each & everyone abreast with the activities

and events of the world of finance.

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