Tuesday, 28 October 2014

Hedging

As we all know international trade happens on a continuous basis and hence traders are always exposed to currency risk for exports and imports. To overcome this currency risk, traders subscribe to a service knows as “hedging” offered by banks.  Banks via hedging service provide currency fluctuation protection to traders by charging a fee. This fee is floating and is determined by considering factors such as rate of currency fluctuation occurring in world economy.To exemplify, let’s take an example of a trader in India selling goods to United States (US). Let’s say he sells goods worth Rs. 61 million to a buyer in US on credit period of 6 months. Now this buyer is to get $1 million taking 1USD/INR= 61.00. Now assume INR becomes strong in this six months time and the exchange rate becomes 1USD/INR=58.00. When the buyer pays, this translates to only Rs.58 million which causes a loss of Rs. 3 million to the Indian exporter. Similar case can be for an importer when INR weakens. Now if this trader subscribes to hedging service offered by a bank, the bank would pay the loss of additional Rs.3 million to the trader nullifying his loss. This is a kind of risk absorption service offered by bank. Not only goods and services but borrowings are also hedged for risk minimization.
What traders do is when they expect the currency to be stable, they do not hedge which they consider as an unnecessary expense and expose their trade/borrowings to currency risks. But this can cause huge losses even resulting into collapsing of businesses as happened during economic recession in 2008.
Hedging is pivotal to international trade and it is important that businesses adopt a balance between hedged and un-hedged and strike a balance for optimizing their profits with minimized currency risks.
Thanks for reading!!

-Varun Chauhan

Tuesday, 14 October 2014

Foreign Trade & Foreign Exchange


Imports and exports are a very crucial part of country’s economy. In present geographical scenario each country does not have complete resources to sustain entire needs of its economy. A country has to import goods and services which it is deficient in and export goods and services which it feels are surplus in production. This is what is called a ‘foreign trade’ and happens across the world in present global scenario. It may happen that a country may impose restrictions on some of the products being exported in view of controlling prices of the products within the country or impose restrictions on imports of some products and services in view of protecting the industry producing the same goods and services from external competitors. These are known as trade restrictions.
Now comes the most crucial part, the instrument on which this trade happens – the currency. There are about 150 different currencies in the world. The US Dollar being the most traded currency forms the base currency of most trade happening in economic world. This gives rise to a logical question – Why only US dollar? Why not any other currency? The explanation lies in the fact that it’s currently the most stable currency in the world economy. The stability comes from the economy of the United States. US dollar is reliable as it has never been devaluated. This currency is so reliable that countries like Panama, El Salvador and Ecuador use it as the only official currency with no local country currency.
As we all have observed that a currency values change just as share values change. There a many factors which determine the value of a currency with respect to the base currency. To exemplify let’s take India Rupee (INR) versus US Dollar (USD). Now the value of INR will depend on factors like Inflation, Interest Rates, Current Account Deficits, Public Dept, Terms of Trade, Political stability and Economic performance of India. These factors together determine value of currencies across the world.
Thank You for reading !!

-Varun Chauhan

Monday, 29 September 2014

Vittarth-The Finance Club of DoMS IIT Roorkee presents Trader's Radar






"You don`t need to be a weatherman to know which way the wind blows" - Bob Dylan 

Successful companies aren't born, they're made and they have to work their way from humble beginnings at which time they are considered as penny. Traders Radar brings the opportunity to find these hidden gems which will promote and test the acumen of students from b-schools spanning all over country. The objective is to generate maximum returns while choosing amongst the world of penny stocks (Stocks trading below 20 Rs and Market Cap less than 100 cr, must be listed either on BSE or NSE) on a real time platform.

Vittarth the finance club of DoMS IIT Roorkee presents Trader's Radar.
It's Live on Dare2compete.com.


Please do register and win!!!!

Link for event description and registration :
http://dare2compete.com/competitions/11994/Traders-Radar/Department-Management-Studies-IIT-Roorkee 

Friday, 4 October 2013

MANTHAN-2013

Finance Summit

Topic of discussion

Rethinking risk in financial institutions: Making CFO-CRO partnership work

Risk assessment and management is one of the core considerations in the field of finance, be it lending or investment decision. The topic has acquired greater relevance in the current financially turbulent times when every institution has to carefully gauge the various factors contributing to risk.  For management student and future leaders, it is vital to have a sound understanding of the subject. Fortunately students at DoMS, IIT Roorkee got such an opportunity to learn about the same. The event was Manthan, the finance summit conducted at DoMS, IIT Roorkee, on the topic of “Rethinking Risk in Financial Institutions: Making the CFO-CRO Partnership work” which was scheduled on 29th Sep 2013. It was organized by Vittarth, he finance club of the DoMS, IIT Roorkee in association with ISTD Dehradun Chapter. The sponsors include some of the key brands such as Union Bank of India, Punjab National Bank, Oriental Bank of Commerce and Bank of Baroda. The student was very enthusiastic about the event as eagerly waiting for the same.

The event saw participation of several well known industry leaders as well as distinguished academicians from the department. The list of guest speakers includes:
·         Mr. Diwakar Pundir – Chief Credit Officer, Bajaj Finserv-Lending
·         Mr. Anil Kapoor – AGM (HR), BHEL
·         Mr. Gaurav H Talwar – VP & Head-Delivery and Operations, DCB Bank
·         Mr. Rajiv Saksena – Associate Director & Dy. Head Corporate Group, North BNP Paribas
·         Mr. Jiwan Jyoti Nayar – Asstt. Regional Manager, Oriental Bank of Commerce




The event took off with a welcome note from the students. Then a lamp lightening session was done to formally start the proceedings which followed by a speech from Dr. Santhosh Rangnekar, Head of the department. He welcomed all the guests and explained the vision of the department to the guests and emphasized on the fact that Return on Investment (RoI) is the key consideration in any management program. 




Then Dr. P. K. Ghosh (Dean Finance, IIT Roorkee) delivered the keynote address where he explained that mobility of money is related to market growth which in turn is affected by national and international policies. This describes some of the risks associated with financial institutions. He also touched on product development and stated that it require a thinking about the society. He further explained how research and innovation can make the difference and provide competitive edge. He cited examples of several nations such as Korea, Vietnam and China how their research efforts are driving their growth. His thoughts were well received. It was now the turn of batch presentation where guests were introduced to the strengths and achievements of the departments.


It was now the turn of the guests to share their understanding and first one was Mr. Diwakar Pundir. Mr. Pundir 1997 batch alumnus of IIT Roorkee and also has an MBA degree from IIM Banglore. His areas of specialization include credit analysis, banking, risk management and lending. He was also accompanied with his spouse Mrs. Himani Pundir. Mrs. Pundir is an alumnus of the very first batch of DoMS. She offered her gratitude for providing opportunity to visit her alma mater. Mr. Diwakar started by saying that risk and return are the most important aspects from bank’s perspective and a manager has to make the balance between these two.  On the subject he observed that it is not CFO-CRO relation but it’s actually CFO-CRO-Management relations as the ultimate decision is taken by business managers. He then deliberated upon the emerging trends in financial service industry and how product complexity is increasing day by day.  He focused on regulatory compliances such as priority sector lending becomes important in context of RoI. The guest also talked briefly about the global financial crisis and its impact on financial markets. Overall he made us aware that how complexity of business is increasing. Then the guest spoke about the risk management and explained various types of risk viz. credit risk, interest rate risk, currency risk and liquidity risk. In addition to these, he also mentioned broader economy risk by taking India as an example. Since Indian economic growth has been reduced by approx. 50%, this poses extra challenges for institutions. Then regulatory risk also poses a challenge. After a thoughtful lecture on risk, the speaker moved to the CFO-CRO relationship. He mentioned that both CFO and CRO have areas of convergence as shareholders, regulators and management are the common feature. As for responsibility, CRO responsibility basically lies with risk management and mitigation where CFO’s scope of work is broader including strategic planning. He shared an interesting fact that CROs also have to respond to queries for growing business without taking additional risk. Finally he introduced us to stress testing and scenario planning by demonstration how changes in an actionable event affect drivers of business.

After the fascinating discussion, the next speaker was Mr. Anil Kapoor. Mr. Kapoor is also a 1982 batch alumnus of IIT Roorkee (then University of Roorkee). Mr. Kapoor walked us through the timeline of BHEL. He shared the information that today BHEL has 17 manufacturing divisions, 4 power sector regional centres, 8 service centres and 4 overseas offices. It also has 48000 strong workforces building the nation. Financial performance of BHEL is also presented. The speaker then deliberated on the key challenges faced by the organization as listed below:
·         Slowing global and Indian economy
·         Indian power sector is in stagnation
·         Rising competition
·         Decreasing margins
·         Critical raw material BoP vendor skill deficit
·         Major retirement in next 5 years
·         Technology shift in major production unit
From there, he took us to BHEL Haridwar and also spoke
 about certain issues having financial implications. The main reason
 is backing out of the customers. In some other situation,
BHEL itself halts the work due to non-payment from client. Additionally, as the competition is growing, BHEL has concentrated on new products which demands intensive research. According to the speaker, the situation of R&D in India is insufficient and we still depend upon other countries. He explained that even with borrowing, some amount of customization is needed which calls for research.


The third speaker was Mr. Gaurav H Talwar. Meanwhile Dr. J. L. Gaindhar, President of Alumni Association of IIT Roorkee also joined. Mr. Talwar showed the gap between Indian economy and USA economy. He stated that USA is 3 times bigger than India but has only one third of the population. USA is also the biggest importer as well as exporter of the world. Even 2/3 of entire world currency and around 60-70% of trade is in dollars. USA is also the 3rd largest producer and largest importer of oil. USA is also way ahead in terms on innovation and research. All these factors give it an unparalleled weight and make it a world leader. Hence, if USA sneezes the world gets a cold. The speaker then went on to compare USD and INR. He stated that in 1947 the dollar and rupee were equivalent. At that time there was no debt on India which now is in tune of $300 billion. He also touched about the situation in 1991 when India has to pledge its gold. After the comparison, he touched on the topic of why the dollar-rupee gap is increasing. As per his view, it is related to demand supply mismatch. India has traditionally been having lesser export than import. So far the gap has been managed through FII but now the decreasing foreign investment is making situation worse. Oil and gold are the two main imports of India and that is why there are calls to reduce consumption of them. The speaker shared his apprehension that India’s credit rating may be downgraded and this again puts additional pressure. The speaker was concerned about current situation and wished a speedy recovery.


The fourth speaker was Mr. Rajeev Saksena. He is also an alumnus of IIT Roorkee and then completed his MBA from FMS, Delhi. He appreciated the contribution of IIT Roorkee in education and nation building. He started with defining risk as probability of something undesirable. Then he touched risk management process which involves pre due-diligence, due-diligence, post due-diligence and periodic audits. As for the topic, he suggested that there is a need to rethink over the relationship between the CFO and CRO. He advised the future managers to always be alert and never let the guard down. He gave an example of an otherwise normal trade but using an Iranian vessel for transportation. He then explained how Iran sanction can play havoc. Another example was given for a $6 billion out of the court settlement for irregularities in dollar payments. Therefore one must be continually thinking. There is no harm in raising a doubt and seek clarification if something is not clear. Adherences to system, compliances and procedures are essential for everyone. A bonus of few lakhs is insignificant when compared to 40 odd years of career and loss of reputation. He also explained his personal experience of one case in which a party was found in malpractices.


The last speaker of the day was Mr. Jiwan Jyoti Nayar. Mr. Nayar specifically talked about risk management in commercial banks. He observed that banks, as opposed to sophisticated financial institutions, have to cater to general masses which need different risk management processes. In case of a crisis (like Uttarakhand Disaster) banks have to suffer losses. Another aspect is that banks have to lend to financially illiterate clients and hence the risk assessment becomes more qualitative. In such a situation, even credit rating could not be taken as baseline and there is a need to look beyond established methods of financial analysis.


This marked the end of the summit. A note of thanks was delivered and the guests were presented mementos for their valuable time. The summit saw an interactive audience and intelligent questions. It proved to be extremely useful for budding managers.

Sunday, 11 August 2013

MANTHAN-2013

Finance Summit

                                       Topics of discussion:

                         New Banking Laws: Enabler of Growth

                     Investor Behaviour During Financial Crisis


The Eminent Speakers
Mr. Paresh Sheth
CEO, Indus1Advantage iBank
Mr. Jagannadham T.
Head Research, SMC Global Securities
Mr. Vipul Jain
VP, Max Life Insurance
Mr. Jitendra Solanki
Founder, JS Financial Services
Mr. Pawan Kumar
Founder, Trishna Trading and Research

Our Guests of Honour
Dr. S. Rangnekar
HoD, DoMS, IIT Roorkee
Dr. A.K. Sharma
Associate Professor, DoMS, IIT Roorkee.
Mr. R.S. Singh
Chief Manager, CANARA Bank, Roorkee
Mr. Diwankar Chowdhry
Chief Manager, Union Bank of India
Mrs. Aruna Bhat
Treasurer, ISTD, Dehradun Chapter.






















New Banking Laws: Enabler of Growth



Point of bill – As new licensed banks have to open 25% in unbanking region of India, will it
could solve the problem of rural banking as private companies would be reluctant.
Point of Bill - The Banking Laws (Amendment) Bill, 2012, which has now been cleared by both houses of Parliament, seeks to increase voting rights of investors in the private sector banks to 26 percent from the existing 10 per cent. Shareholders' voting rights in the public sector banks is capped at 10 per cent. This will make the Indian banking sector attractive for the overseas investors and is expected to lead to consolidation in the industry.
News - Draft rules issued in 2011 had barred companies in the property and brokerage industries from applying, and disagreement between the central bank and finance ministry over exclusions had slowed the release of the final rules. Now today all the corporate are allowed to enter and open the banks.

Investor Behaviour During Financial Crisis


Larger questions
1.      Are Institutional Investors Part of the Problem or Part of the Solution?
a.      They quit when they see trouble in the functioning of the company
            Are Asset backed securities preferred during crisis?
 .        If people are motivated to follow this behaviour what will be the repercussions on the economic system as a whole
            Is the Bayesian Model significant and practical in real life scenarios?
 .        What are the models that have come up in recent times and are favourites among the professionals?
            Effect of Basel norms on the situation of the economy
 .        Do these  prevent an economy from falling into a financial crisis
a.      Do these make situation more difficult
b.      How to decide correct time to impose and implement the norms
c.       How much does general perception of the financial crisis and its handling by the government affect the effectiveness of implementation of financial policies

These days we see a plethora of new laws that have been introduced into the banking sector. Do these laws and policies actually serve as an enabler for growth? How should investors behave during a financial crisis? To build a clearer perspective regarding some of these topics Vittharth, The Finance Club of DOMS IIT, Roorkee organized Manthan 2013 on the 24th of February. The Event was graced by the presence of some eminent speakers from the industry, the esteemed faculty of the department and the students.


The event started with the traditional lighting of the lamp and the welcome note given by the head of department Dr. Santosh Rangnekar. This was followed by an introduction regarding the theme of the event by Dr. A.K. Sharma. He stressed on the fact that during these troubled economic times how the banking sector had to balance the lending aspect at the precise rates to the common people as well as provide financial assistance to the industries. He also stated that the three main goals of this sector were priority lending, rural banking and Financial inclusion.


The next speaker to take the dias was Mr. Paresh Seth, CEO at Indus Advantage iBank. Mr. Seth stated right from the outset that he promoted a free market economy. He felt that the idea of introducing new players into the sector was not very prudent as it to incur additional uninvited costs. Whatever changes were to be implemented could have been done with the existing players in the sector at a fraction of the cost. He also stated that even though new players would give cause to rise in employment in the sector that it would be short lived as some players would end up exiting. He further stated that rural banking would be rather difficult to implement in India as there was very little return on investment. He added however, that the opportunities for graduates was high in the IT and Research and development sector. According to him there was a huge requirement for business analysts if a bank was to develop itself from scratch. He also threw light on some of the new banking laws which now state that the voting rights have gone up to 26%. He said this would particularly be a boon for mergers and acquisitions.


The next speaker was Mr. Jagannandham T. who right from the outset was as dynamic and enthusiastic as one could be. He is the current Head of Research at SMC Global Securities. He dove right into the importance of macro economy. He started with the term ‘Chimerica’ and explained how world dominance has shifted from the U.S. to China. He added that these days America was only known for its Military Power and how it had increased its Debt limit over the past few years. He also spoke briefly about the state of Euro and its future in the world economy. He went on to state that even though the Euro and the European Union are experiencing troubled times currently we cannot deny the importance of this currency in the world economy today. He explained how 28% of the FOREX Reserves in the Central Bank are Euro Denominations. He further went on to explain the role that some of the major players like China and Japan are playing or not playing in the world economy these days. He aptly concluded a very insightful interaction by saying “In good times bad MBA’s are created while in bad times good MBA’s are created”.


The stage was then graced by the presence of Mr. Vipul Jain, Vice President at Max New York Life Insurance. He started by explaining that the customer today is much more knowledgeable these days. He stated that as managers in the industry to be successful it is imperative that we understand the Ecosystem of the customer. He also stressed on the importance to start at the lowest level in order for us to better understand the subtle nuances of the industry. He spoke about the 24 Degree to 48 Degree theory stating that if you don’t sell in 48 degree heat you can’t make decisions in a 24 degree air conditioned office.


The Final speaker of the day was Mr. Jitendra Solanki, Founder at JS Financial Advisors. He spoke about the importance of personal finance and how the indifference towards personal finance on path of common people in our country has become a cause for concern. He further stated that during a financial crisis it is important to understand that the risk tolerance of a customer changes rapidly. It is important to understand why an individual behaves in this manner, where he is today and where he aspires to be tomorrow.
Finally a Panel Discussion was held in accordance to the theme – Investor Behavior during a Financial Crisis. The Panelists touched upon topics like the ongoing recession in India, Lack of penetration of Demat Accounts in India. All the panelists concurred to the fact that financial independence was the key to being asuccessful investor as it allows an investor greater freedom to take risks and hence get higher returns. An example quoted was the takeover of united spirits by Diageo and how intra-day trading on this deal helped many Indians make millions in a day.


The event was concluded by the Note of thanks given by Kaushik Dutta a first year MBA Student from the department. All in all it was an exceptional knowledge gaining experience for all the students. It definitely went a long way in enabling the students correlate the theoretical knowledge gained in the classroom to the real world experience.

Saturday, 8 October 2011

Competitions

ITAX Academic Simulation - Final Result for Round I:

A: (The First) GRAND INVESTOR - Mr. Mohan Chakradhar
B: (The First) Winner of Virtual Market - Mr. Chakradhar
C: (The First) Winner of ITAX Market - Mr. Nikhil Shrivastava
D: (The First) Most Active Trader (MAT_F, Female) - Ms. Shikha Sharma
E: (The First) Most Active Trader (MAT_M, Male) - Mr. Pawan Upadhyay

Wednesday, 21 September 2011

ITAX Incorporated on 21-09-2011.

ITAX Academic Simulation - Final Result for Round I:

A: (The First) GRAND INVESTOR - Mr. Mohan Chakradhar
B: (The First) Winner of Virtual Market - Mr. Chakradhar
C: (The First) Winner of ITAX Market - Mr. Nikhil Shrivastava
D: (The First) Most Active Trader (MAT_F, Female) - Ms. Shikha Sharma
E: (The First) Most Active Trader (MAT_M, Male) - Mr. Pawan Upadhyay


ITAX Academic Simulation - Preliminary analysis report for the first round by N_Corp http://nciitr.blogspot.com/ :



















 ITAX Academic Simulation rate charts for the first round:













ITAX launches IAS - ITAX Academic Simulation




To know more about the project inception and the intricacies; please visit our presentations section and go through the ITAX presentation.


Message by Mukesh Kumar, the ITC (Investment & Trading Coordinator)


Investment and Trading Activity Exchange, ITAX, has been created for those, who are interested in learning stock market and knowing daily movements of market.

Virtual accounts of these guys will be created and they will be informed about the daily movements of the market. Please send the request to join the group if you are Interested so that teams can be conveniently created : http://www.facebook.com/groups/252323871475489/.

Very interested candidates will be mentored on technical and fundamental analysis of the stocks . our session will be divided into 20 modules based on two widely recognized books.

Thanks!!

Tuesday, 20 September 2011

Videos

Steve Jobs Stanford Commencement Speech:





The intelligent frauds:




The Federal Reserve; one of the theories:


video


Warren Buffet secrets:

video

1. How Stock Market Works 




2. "Greed is good" one min from an epic movie WALLSTREET (1987) 



3. Wall street (2010) Douglas speech. 

Monday, 19 September 2011

Initiatives@V

In the field of stock market investing.
1. Investing Game Competitions 
  •    - Virtual trading with 25 lakhs each 
  •    - Weekly winners 
  •    - Certifiactes, Prizes 
  •    - Regular display of top gainers 
2. Fixed Return Scheme
3. Pooled Investment
4. Live trading Sessions
5.Consultacy at minimal charges.


http://vittarth-domsiitroorkee.blogspot.com/2011/09/itax-incorporated.html

Meaning of 'VITTARTH'.

The initiative ‘Vittarth’ is basically taken to bring people with interest in finance together & help them in refining there Fin-skills through mutual learning.  We meet four  times in an fortnight with a power pact session which includes Documentaries, videos, case-studies, quizzes, paper presentations, group discussions,  &  Knowledge transfer  from domain experts.