29 Jul 2015

From the President's Desk

Finitiative – A dream which came true a few years back, when our seniors, with the support of management created a platform where students could share their knowledge and experiences and learn from each other. 

The objective of Finitiative is to create a bunch of successful traders and finance experts at our campus. We ensure this by organizing all kind of students’ activities related to finance which include, but not limited to guest lectures by leading finance professionals of Indian corporate, workshops by resource persons and stimulating student contests like stock trading, mutual funds, case studies, research papers, literary events like article writing, blog, debate to name a few.

With events like Prayas - our own live stock trading platform, Vinimaya - an event simulating basic accounting, Lock, Stock & Negotiate-interactive stock market event, Kick starting our blog and conducting guest lectures, last year has been quite eventful & successful. This year we plan to achieve greater success with our united efforts and with guidance from management, I am sure we will succeed.  

On this occasion of inauguration of our club, I wish good wishes to all of us and may we achieve success in all our endeavors.

Thank you.

24 Oct 2014

Word on the Street - Muhurat Trading

Muhurat trading is the auspicious stock market trading for an hour on Diwali (Deepawali). It is a symbolic and old ritual, that has been retained and observed for ages, by the trading community.  As Diwali also marks the beginning of the New Year, it is believed that muhurat trading on this day brings wealth and prosperity throughout the year.  The time of the muhurat trading is specified by the stock exchange.

Source - www.nseindia.com/products/content/muh_trading_web.htm

This Deepawali the Indian stock markets observed the customary Muhurat Trading session from 6:15 PM  to 7:15 PM. The 30-share Sensex ended up 64 points at 26,581 and the 50-share Nifty closed 19 points at 8,015.

Some very interesting facts on Muhurat Trading:

Know how the Markets performed during the recent Muhurat trading - 

20 Oct 2014

Reflections on Finance

What do you actually mean by Finance ? The word "Finance" itself has been evolving as centuries pass by .Even if you look at the definition part it covers a wide range of areas. From mere lending of money it has now evolved into accounting, banking, Financial instruments, Financial markets, Corporate Finance, Public Finance, Finance Regulators, Personal Finance and so on. For everything and anything you can easily relate it to money. Finance has become so popular and unavoidable in each one's life.
History states that in 2000BC lending of money to farmers and traders started in Assyria and Babylonia which got evolved and now we call it as banking. If one looks at evolution of finance or indeed our economy as such we can see that it is becoming more complex .The scope as well as the areas covered under finance branch is expanding. Finance has thus become the crux and epitome of each and every business and indeed the whole economy. The whole economy in one way or another depends upon the financial performance of various industries and sectors. After Globalization, world became small and easy to access but financial aspects became complex .Corporate Finance ,Mergers and acquisitions, Tax Regulations started gaining importance.
Finance can be fun as well. So it’s like a matchstick where it will give light and happiness to you and the entire room in the form of "money" or will burn your finger if you don’t use your money well or if you don’t follow the various rules and regulations that one needs to know .The best example is the Great recession which started in US in the year 2007(Sub -Prime Crisis) , the impact of which is still continuing.
Apart from macro level, finance is also very much important for each and every individual. One needs to have a sound financial knowledge, one needs to know the various financial instruments and the risks associated with it to have a secure future. Financial planning is like building a pyramid, where you have to strategically and tactfully build it so that it won't collapse because after all its your money, your sweat and hardwork and I bet no one wants to lose this one easily ...!!
So in short, one could say that the word finance has become the part and parcel of each one's life whether knowingly or unknowingly and evolution of finance is still continuing.

This Article is written by Rahul Tomy (PGDM 2014-16)

17 Oct 2014

Word on the Street - Economic Cost of Fear

Economic Cost of Fear is the Damage Caused by the Indirect cost of public risk aversion which ends up being more than that of the  direct cost of healthcare outlays and other containment expenditures. This term came much into focus after the recent Ebola outbreak in many countries across the world.

The losses are found in the form of empty hotel rooms, declines in restaurant patronage, or in school closures that disrupt employees and parents’ work routines. Or they come from the blow to consumer confidence that accompanies widespread fear. 

Financial analysts and others have been trying to estimate the potential effect of Ebola on the global economy.

The World Bank predicts that as much as $32.6 billion, or 3.3%, will be shaved from the pan-West African economy if the crisis continues for two years, and spreads into neighboring countries” beyond Liberia, Guinea and Sierra Leone most of which it blames on “aversion behavior.”

Read more at - 



This Word is suggested by Vinita Jagannathan (PGDM 2013-15)

12 Oct 2014

Financial IQ – Not for me, I am an Engineer!?

On a hot and arid afternoon in Delhi, my friend decided to show me around the bustling and exuberant Khan Market. That’s when we entered Bahrisons Booksellers which is one of the oldest book shops in that area. My friend strolled past the other sections and directly went to the section marked in bold - FINANCE.  This took me by surprise. I was tempted to understand how a Mechatronics engineer could be even remotely interested in reading Finance.  On that particular day, a book that he recommended changed my rather traditional perspective on Finance. 

Well, we all thought that hard work at school and straight A+ at graduation were a sure shot way to land up in a high paying job. Or at least our parents said so! This might not be entirely factual, mainly due to two reasons – Firstly, economies grow and crumble and so do companies, so there is no such term as a “steady job” .Secondly, by getting the ‘Employee of the month’ title, you are making your employer richer – NOT YOURSELF.

By stating these certain realities (startling for a few!), I don’t mean to undervalue the benefits of the so called “steady job”. This is to drive the point that Financial Literacy is a must for every person who wants to achieve financial independence. Period.

Alas, the clich├ęd responses to this:  I am no good at math, I don’t see myself working with a Finance/Accounting firm anytime in the future, Accountancy bores me to death or I am the creative sort of person, not really in to structured stuff! This is a dogma passed on through generations.

The irony is that our education system doesn’t recognise Financial Literacy as a prerequisite for young professionals, who are just beginning to carve their path in the corporate jungle. Working hard (okay! the trend is working smart) will guarantee you promotions and hiked-up pay packages. With that comes an increased tax cut on our income, thereby making our government richer (read overfilled exchequer coffer :P) and at the same time, inching our employer towards fulfilling month-end targets.

We have often read/seen instances where millionaires have gone bankrupt, one of our neighbours losing his/her job, pay cuts due to slump in the economy, and the worst of all – when we ourselves are left with a zero balance, inspite of earning fat pay cheques every month! Those with work experience are sure to agree. This brings me to stress on my earlier point that living a life oblivious of the importance of personal finance is like a frog in a well.

Financial knowledge for many of us is akin to maximising our savings. Few years back, when I was working with an MNC, my parents used to emphasise on the importance of saving a portion of my monthly income. And this portion would lie in my savings bank account where I would earn 4% on my daily balance. Trust me the returns were miniscule! The realisation that occurred to me is that I have missed out on other opportunities to make my money grow. Simply put, I was working for money and not making money work for me.

For a lot of people, including my own family, owning a house or a car is a big investment. My simple question is - if these are assets, then why is the expense column related to the house/car increasing more than the income column (seems more like a liability!). A true asset in your Balance Sheet is an investment which increases the Income side in your Profit & Loss account. And it is this income which flows from our assets that should fund the luxuries we all wish to enjoy in life – maybe a trip to Las Vegas or owning a red Porsche ;)

So how we do we amass this whole concept of Financial knowledge? A simple and basic understanding of the following four aspects is the key:

1. Accounting: the simple difference between a true asset & liability

2. Investing: the various options of making money work for you

3. Understanding markets: demand and supply patterns

4. Tax laws: tax exemptions and deductions available in India

If you are still giving this a second thought, be reminded that once out of academics, it is only one thing that will help you step aside from the proverbial rat race – your chutzpah! (Haider style, I say :D)

Coming to the book which was instrumental in transforming my pattern of thinking with regard to Finance– the best-selling Rich Dad Poor Dad by Robert T. Kiyosaki.

Cheers to my Delhite friend for the incredible recommendation!

This Article is written by Sonika Krishnan (PGDM 2013-15) 

9 Oct 2014

Word on the Street - Ghosting

Even in the world of Finance, Ghosting (which has an obvious resemblance to the verb form of ghost) has a negative connotation. This is an illegal practise which is prohibited in most countries and can result in serious charges against defaulters.

Ghosting, essentially would mean an illegal attempt by two or more market markers to bring about changes in the price of a particular stock. This involves two parties where one party tries to inflate or deflate the price of a stock while the second party does a similar action which tries to either enhance the results of the first party or make it look ambiguous. Here, the parties can be an individual or a company.

This activity becomes unethical and illegal because it violates the basic norm of trading/investing – equal and fair competition among all investors. Here, the investors falsely tend to believe the upward/downward slide in prices and sell them at below the actual worth which takes a hit on their gain. And the market makers have a share of the profit from the price fixing.

For more information, visit these links: http://www.opednews.com/articles/Are-Financial-Markets-Bein-by-Danny-Schechter-090709-731.html , http://www.ft.com/cms/s/0/c4baf670-1bfe-11df-a5e1-00144feab49a.html#axzz3FQc0fljv

This Word is suggested by Sonika Krishnan (PGDM 2013-15)

5 Oct 2014

Looking to invest? Game for P2P?

Imagine you are sitting on a cash pile, with no idea on where to invest it. Well, you have a range of options. You can
      1.Open an FD Account with a bank.
      2.Invest in securities
      3.Invest in Real Estate
      4.Invest in gold

These are the traditional avenues to which you can shift your money. Logically, going by the diversification rule, your portfolio will consist of a mix of these. Why? Every option has a level of risk and return attached to it. So, a mix of these options will ensure that the risk is rewarding.

Let’s draw a risk-returns matrix and see where each option sits

So, now where would you place your pile? On one option or many?

To most of the readers, this is elementary knowledge. You guys are probably wondering, “This is Financial Management 101! Where is she going with this?”

I agree with you guys. However, I am about to present to you a fifth option. And that is Peer-to-Peer lending. Yes, I am talking about “shadow banking”.

According to Wikipedia, “Peer-to-peer lending, commonly abbreviated as P2PL is the practice of lending money to unrelated individuals, or "peers", without going through a traditional financial intermediary such as a bank or other traditional financial institution.”

I learnt of the existence of P2P when I received a spam mail from one of the P2P marketplace site, called Faircent.com. I decided to explore more and uncover this investment trend. Apart from Faircent, we have i-lend. There are other P2Ps in the market, but they focus on lending to companies and not retail investors/borrowers.

So, how does this model work and why will anybody choose P2P?

P2P portals help lenders meet borrowers. Lenders can choose from a list of verified borrowers on the website. They are also advised to spread their investment among borrowers to lessen the risk of default. The investment begins from INR 5k upwards and for this risk, the lenders get a return of 15%-24% on i-lend and upto 25% on Faircent. The borrowers can borrow from INR 25k to 100k at 12% upwards. The portals charge an upfront fee from both lenders and borrowers and get the borrower’s documents and employment details verified by a third party. A contract with terms and conditions is signed within a week, with a recovery process in place for those who default on payments.

What is the advantage of P2P?

Bank customers can sometimes struggle to secure bank loans because of employer credentials, salary requirements or credit history. Around INR 3.8 trillion ($61 billion) in personal loans, excluding home loans, were outstanding in March 2012, a Reserve Bank of India report shows. This includes education loans and credit card dues. Thus with bad loans mounting, banks in India have become wary of lending in certain sectors in the past few years.

Informal lending is common in India, with businessmen and family members often lending money in times of need. P2P is a progression of that, with the money flowing not from family/friends but from other like-minded people. According to a research article by Mr Ankit Shah, a Senior Associate Consultant for Finacle (Infosys), the advantage of P2P lending is the likelihood for the borrower to secure the loan at a lower rate of interest as compared to a bank loan and the likelihood for the lender to receive a better interest rate as compared to a bank deposit. P2P lending asset class is different from the traditional savings account or stock market linked investments. The only risks involved here are the counterparty risk and the concentration risk. Concentration risk can be greatly mitigated by spreading the loan amount across a large number of borrowers. As for the Credit risk, lenders can decide to lend only to borrowers having a specific credit profile, which is listed on the sites.

What is RBI’s take on P2P?

As per a Jun 2014 RBI report, “India’s ‘shadow banking’ sector essentially refers to the large number of ‘unregulated’ entities of varying sizes and activity profiles, raises concern partly because of the public perception that they are regulated. Technology-aided innovations in financial disintermediation such as peer-to-peer lending warrant a regulatory preparedness.” “While in certain regulatory jurisdictions this space is being looked at as more favorable, some other regulators have raised concerns mainly relating to distress for lenders in the event of a sudden closure of such platforms. While these platforms are still new to India and the scale of transactions is insignificant, this is a gap which requires regulatory attention. This is all the more important since in developed markets, mainstream financial market participants and products are making an entry into this space amidst concerns over regulatory arbitrage.”

What’s on the cards?

Mr Shah continues to say that, P2P lending is still in its nascent stage. With evolving models, better regulatory mechanisms and improved credit rating facility, we may see more and more lenders and borrowers participating in this new way of lending. In the coming years, it can have the depth to support a larger participation. Also, with internet users spending more time on social networks, it is likely to generate higher interest in people in the time to come.

So, if you are sitting on a cash pile, where would you place your bet? The traditional avenues or P2P?

This Article is written by Vinita Jagannathan (PGDM 2013-15)

2 Oct 2014

Word on the Street - Anonymous Whistle-blower

A Whistle Blower is Anyone who has and reports insider knowledge of illegal activities occurring in an organization. Whistle-blowers can be employees, suppliers, contractors, clients or any individual who somehow becomes aware of illegal activities taking place in a business either through witnessing the behavior or being told about it.

Source - http://www.investopedia.com/terms/w/whistleblower.asp

To check wrongdoing in markets, the National Stock Exchange (NSE) has put in place an anonymous whistle-blower mechanism on the lines of the Dodd Frank Whistleblower Programme in the US.

Read more at:

The following link can be used access the NSE's Anonymous Tip off Portal -

This word is suggested by Vinita Jagannathan (PGDM 2013-15)

28 Sep 2014

The Game of Valuations

“A 7-billion dollar company which is yet to make profits”, how strange does that sound at the first place?  A mere online book store in 2007 to a billion dollar company, little did the world know that the next Indian Alibaba was in the making. By now you might have guessed what I am talking about! “Yes its Flipkart”, the new sensation in the Indian e-commerce sector. 

Its way of handling logistics, its loss-leader strategy and its smart inventory management made it popular in no time. The Bansal duos from IIT-D indeed are doing a great job.  Flipkart is today considered to be valued between $5 billion to $7 Billion. In a span of 3 years there has been a drastic change in the whole equation, from $1 billion to $7 billion a 5x-7x growth in valuation. This is not just amazing it’s incredible!  The recent acquisition of Myntra and a rapid spree of funding -  Flipkart has certainly taken it to new levels. 

 Image Source - www.dazeinfo.com

 But as they say, the higher you go, the deadlier the consequences of a fall. The question today is, how long can a company survive on valuations alone?  No doubt that VC, PE funding is critical towards growth of a startup, but can overdoing it cause harm? It looks easy to see an entrepreneur in his early 20s with a smart idea and backing of capital funding becoming a millionaire in no time, but a sneak peek into historical data can be alarming. A research taken up by Shikhar Ghosh a lecturer at Harvard Business School says “about 75% of VC backed firms do not return investors”. 

But yes, we can be always optimistic and consider Flipkart to be in the other quarter (the rest 25%). Facebook was once considered as a business model which would never actually make money, but is now known to be among one of the greatest companies in the world. Founded in 2004, Facebook did not really have a proper revenue model in place for quite some time, but investors were pretty hopeful and did pour in a lot of money and faith into the business. It saw  profits in early 2008, four long years after being founded. Flipkart - the King of Indian dot com ventures - apparently is growing at a similar pace. Interestingly, some of the investors like Tiger Global, Naspers, and ICONIQ who invested in Facebook are also investors in Flipkart, clearly proving that investors are pretty hopeful about Flipkart being the next revolution in Indian or perhaps world e-commerce space.

Funding can be like runways, its important for startups to have a long runway.  It’s quite evident that startups do run without any earnings for the first few years of  establishment and this is when funding provides a runway to cover these firms, by providing capital to make the right investments in Infrastructure and Human Resource.  Having said that, profits too are a very crucial part of any business,  something that cannot be ignored for long. It’s a fact that today many Indian startups are surviving on Valuations alone. Flipkart might already seem to be “Too big to fail” but then thats what the Lehman’s were known for as well. 

This Article is written by Prakash Philip Zacharia (PGDM 2013-15)

26 Sep 2014

Word on the Street - Collateralized debt obligation (CDO)

A structured financial product that pools together cash flow-generating assets and repackages this asset pool into discrete tranches that can be sold to investors. A collateralized debt obligation (CDO) is so-called because the pooled assets – such as mortgages, bonds and loans – are essentially debt obligations that serve as collateral for the CDO. The tranches in a CDO vary substantially in their risk profile. The senior tranches are relatively safer because they have first priority on the collateral in the event of default. As a result, the senior tranches of a CDO generally have a higher credit rating and offer lower coupon rates than the junior tranches, which offer higher coupon rates to compensate for their higher default risk.

Source - http://www.investopedia.com/terms/c/cdo.asp

Read more about how CDO's Lead to the Subprime Crisis in 2008 at:  http://bonds.about.com/od/derivativesandexotics/a/CDO.htm