Volume 4, Issue 2 | June 2010

The Monthly Finance Magazine from IIFT
AG Bank Yuan Appreciation
Moving towards Flexibility...

The Biggest IPO!!

OIL Deregulation
The Side Effects!!

Clouds of Turnmoil
In Europe

IN

TR

O D TH UC E IN H G EX IST FO PE OR R RT Y O TH S F EF SP IN IR EA FIN ST K. EE TIM .. TI E IN

June 2010

From the Editor’s Desk

INFINEETI | Vol 4, Issue 2

Hello Friends,

T
Team INFINEETI
Editor-in-Chief Soumya Kanti Bag Editorial Board Ashutosh Sharma Ritika Yadav Sayani Ghosh Sukrit Munjal Coordinating Committee Arun Singhal Neha Daga Design Soumya Kanti Bag Feedback/ Queries infineeti@iift.ac.in infineeti@gmail.com

he European crisis is the biggest challenge the world is facing, Mehak talks about the problem, the steps being taken and the likely impact on India. Ashish discusses about the biggest IPO by China’s Agricultural Bank till date and how it would shape the economy of China. With this issue, Infineeti has invited articles from the Industry experts. To take this initiative off, Mr. Rahul Sonthalia has thrown up a startling fact which we are going to see in times to come - the U.S crisis may soon revisit the world! He talks about a option ARMS, and how they are going to have a staggering effect on the already unsteady U.S. economy. Sukrit is back with his analysis on the latest trends in The Indian Stock Markets. Sourav mulls over the implications of appreciation of Yuan and how it would enhance the process of global rebalancing. Madhuri talks about the oil deregulation and how government is pulling all stops to make this attempt a successful one. Ashutosh thinks that Europe debt crisis can turn into a contagious disease. He shares his views on policy to be adopted and interdependence of growth and fiscal consolidation. Finally, Arun tries to bring some element of fun in Finance with Finnword. Happy reading!!

Soumya Kanti Bag
(Editor-in-Chief)

Indian Institute of Foreign Trade

3 2

.INFINEETI | Vol 4. Sourav tries to explain the various dimensions on this issue. The articles throws light on how drastic deregualtion would have affected the Industry and how the private players are changing the game this time. 12 Yuan Appreciation-The Outcomes The economy of China has finally decided to appreciate its currency under various geopolitical pressures. 7 Agriculture Bank of China . This article talks about the problem. 14 Deregulation of Oil Price and its affects Madhuri talks about the nuanced phase out process of regulation of oil prices launched by the government of India. or is it something more destructive. The government still maintains an optimism regarding this step as this shall aid China’s imports. surge in inflation rates.The Dragonish IPO 9 Experts Speaks 10 Taking Stocks 17 2010 European sovereign debt crisis: Is it turning into a contagious disease 20 FinWord Indian Institute of Foreign Trade 3 . Massive budget deficits.Is it a repeat of what happened in US.steps being taken and the likely impact on India. Issue 2 Contents June 2010 4 | Cover Story Clouds of Turmoil over Europe Europe is in trouble. But the question remains is complete oil deregulation a veiled disaster?? Read on to know. one being its relations with the US..devaluation of currency. the signs are alarming.One thing that remains to be seen is that this might culminate into rising inflation.

But the present scenario with global equity markets on a downswing. to rebalance the European economy and to sustain political cohesion of Europe continues. Issue 2 Mehak Gandhi Clouds of Financial Turmoil Over Europe Europe seems to be enshrouded in dark clouds – not merely the ash spewed out by the Icelandic volcano that has disrupted air travel – but the clouds over Europe stemming from concerns over its financial stability.June 2010 Cover Story INFINEETI | Vol 4. The White House projects that the deficits this year will reach $1.6 trillion. The huge budget deficits in Greece. The large deficits have evoked com- Indian Institute of Foreign Trade 5 4 . The economic crisis has laid bare the inherent weaknesses of the European economy. euro’s future under the scanner and downbeat sentiment over Europe seems to have vast implications for the fate of the fragile global economic recovery.4 trillion in 2009. Portugal and Spain threaten to break the euro’s back. Italy. Ireland. many well-developed countries are becoming aware of the hazards of running unprecedented levels of public debt as they emerge from global recession. The US budget deficit hit $1. roughly 10% of the economy’s GDP. So far. Unlike The US Crisis As the struggle to maintain the euro – the common European currency. the common currency has managed to prevent any massive devaluation and an accompanying surge in inflation.

But while the authorities make strategic plans for Europe. but ultimately. and these economies had little control over national taxes and spending over the years. US differs from Greece and other smaller European countries whose markets have come under speculative attack because it benefits from a well-established currency.INFINEETI | Vol 4. and its credit markets are considered safe havens in the times of financial turmoil. The Greek crisis has spread to become a eurozone crisis. Europe has to bail out divergent economies lashed to a single currency. Greece is an extreme example. even it cannot hold up Europe alone. In US. with the recent turmoil still afresh in their minds. whether some countries should be barred from the monetary union. sagging confidence in the European Central Bank’s independence and speculative fears that a currency designed to last forever might break apart. These are promises to spend money that is financed by debt. entire economies are collapsing under the weight of debt. However. The consequences are 800 billion euro ($1 trillion) splurged for a debt crisis led by Greece. Decisive Times for Europe International markets have been on a see-saw ride as it is still not fully believed that the $1 trillion European Union aid package to save troubled nations such as Greece and Spain will be enough to prevent another credit crisis. Europe’s woes are manifestations of wilting welfare states that can no longer deliver all the entitlements that the politicians keep legislating. dollar. However. just three entitlement programmes – social security (for retirees). western politicians will have to come to grips Indian Institute of Foreign Trade 5 . they do so with the hindsight of the economic challenges US had gone through. Unfunded liabilities like guaranteed pensions are growing everywhere. This strategy was sustainable when the ratio of beneficiaries to workers was low. in the coming years. The public sentiment continues to be cautious. it was the banks that were failing and yet being bailed out by the strong Federal Reserve. and it may take some time before faith all over the world is finally restored. and ultimately. Germany is leading the way to fix the loopholes overlooked when euro was first founded and decide whether the currency will be used to promote growth or censor inflation. while in Europe. but others are not far behind. The German economy still looks strong. Medicare (for the aged) and Medicaid (for the poor) may swallow up 20% of GDP in 2020 as against 7% today. In the US. Issue 2 Cover Story June 2010 parisons to Greece. which will have to be repaid by a future generation.

as compared to only a part of euro exposure. The euro has slid to its lowest since the Lehman Brothers collapse and while the dollar has strengthened against the euro.June 2010 Cover Story INFINEETI | Vol 4. Europe is the second largest market for the Indian IT industry. seen as a ‘buying opportunity’ because even as Europe is doing what it can to keep interest rates lower. accounting for nearly $15 billion worth of exports. life is all about exercising prudence in testing times. Companies usually ensure that a higher percentage of dollar exposure is hedged. The author is a second year student of The Indian Institute of Foreign Trade. The Impact On India India. . it is bullish for the equities. is more sensitive than ever to the global economy... When the clouds clear. this situation is being fore it’s too late. Issue 2 with the problem and ensure that change comes beHowever. it is inevitable that in the long-run. which has only just recovered from the fallout of the US slowdown. we’ll realize that it was an imperative correction for the world economies and a golden opportunity to foresee the potential growth. Kolkata. While the European crisis is likely to affect flows to India in the near term as risktaking is cut back. the revenue realization will be lower and the weak euro would affect profitability. Cross currency hedges against the euro and the pound are less common than rupee-dollar hedges. it has not strengthened against the rupee to the same extent. Indian Institute of Foreign Trade 7 6 . A weakening currency in Europe is a worry for India’s export-focused IT sector. The markets at home remain volatile while reacting to global news. markets will stabilize and growth will return. with its huge share of exports and foreign investments in GDP. In the wake of the current scenario. at the same time. Ultimately.

With around 350 million customers. This is a welcome change after what happened in the last quarter when as many as 47 IPOs across the world were shelved on apprehensions of sinking capital markets. IPO deluge seems to be back again. Bourses have been volatile for a while now on fears of the Sovereign Debt crises sending the world economy into doldrums yet again. AgBank is the last of the “big four” state banks to list. Agriculture Bank of China (AgBank) and Petroleo Brasileiro. the primary market in the emerging markets have outperformed their developed counterparts with emerging markets raising as much as three times the amount than developed countries in the last quarter. The government owned AgBank is all set to break all records as far as the size of IPO is concerned. Apparently. It initially planned to raise a whopping $30 billion that will overshadow the previous record of $21. These apprehensions have sent stock indices from Tokyo to New York to their lowest levels of 2010.INFINEETI | Vol 4. state-controlled petroleum major from Brazil are all set to raise $50 Billion from the capital market.The Dragonish IPO A fter a hiatus of a few months. and has assets mainly in agro-based loans.9 billion IPO by Industrial and Commercial Bank of China in October 2006. Issue 2 Ashish Sharma June 2010 Agriculture Bank of China . Indian Institute of Foreign Trade 7 . AgBank is issuing 53 Billion equity shares and is diluting 15% of its stake in a dual listing that will see its shares traded in both Hong Kong and Shanghai. The enormity of this deluge can be judged by the fact that just two companies.

since the return on capital from the rural loans is typically 20-30 percent lesser than those in urban areas owing to small loan sizes and large monitoring costs the risk increases considerably.. These figures value AgBank to be at 1.1 Billion from Hong Kong and $ 10. Ghaziabad .79 times the estimated 2010 book value. It intends to raise around $13.52 Yuan to 2.48.88-HK$3. Will the IPO meet the investors’ expectation or set the sentiments for the upcoming IPOs remains to be seen. the IPO has already been oversubscribed several times and all set to shatter all records in the primary markets. INFINEETI | Vol 4. Issue 2 loan burden. A strong backing by the state and cornerstone investors should ensure that the offering goes ahead despite weak market sentiments. As I write this. Even the upper end of the range of IPO will make the IPO worth around $23 Billion against $30 Billion planned.68 Yuan. the Shanghai arm will sell with a price range of 2. there is suspicion about the IPO as the bank is considered to be the weakest of the four banks in terms of the quality of loans and bad Indian Institute of Foreign Trade 9 8 . This drop can be attributed to weak market sentiments and the fact that the Chinese stock markets have lost around 20 percent in the recent months.1 Billion from the Shanghai arm of the offering.55 to 1. Amongst the eleven strong cornerstone investors are Qatar’s sovereign investment fund.. Despite the strong support from the government and the cornerstone investors. British bank Standard Chartered and Hong Kong’s richest tycoon Li Ka-Shing. The author is a second year student of Institute of Management Technology. Further.June 2010 While the Honk Kong arm would sell with a price range of HK$2.

a loan.says Bloomberg.. higher principal balance. 9 Indian Institute of Foreign Trade . Thus the recovery in the US markets is still a long way to go The author is the head of the Equity Research team at Kredent Academy and the visiting faculty at IIFT . This helped a huge number of home buyers in US take loans with very low monthly payments initially and which allowed them to pay less than even the monthly accrued interest thus resulting in a “negative amortization”. The more than 30-35% fall in the value of property will not help the borrowers to refinance their mortgage and which will lead to a further slowdown in housing prices. California.000 and the ARM has accrued monthly interest in arrears of $1. the data show.500 a month in two years”. $500 will be added to the borrower’s loan balance and the next month’s interest-only payment will be calculated using the new. which means that the unpaid portion of the accruing interest is added to the outstanding principal balance. popular during the housing boom for its low minimum payments before resetting at higher costs later.INFINEETI | Vol 4.500. in 2007. For example. About 1 million option ARMs are estimated to resett in the next four years. Issue 2 Expert Speaks June 2010 Rahul Sonthalia Option ARMs Threaten Housing Rebound A n Option ARM is an adjustable rate mortgage.000 loans recast. This will also result in more write offs on the balance sheets of the large banks/ lending institutions as the payments are difficult to come across. if the borrower makes a minimum payment of $1. with the peak coming in August 2011 when about 54. “Shirley Breitmaier’s mortgage payment started out at $98 when she bought a three-bedroom home in Galt.. The reset occurs when the outstanding mortgage balance reaches a level of 130-150% of the initial mortgage balance. The 73-year-old widow may see it jump to $3. This reset will lead to further foreclosures in US and will be a threat to the housing recovery. About three quarters of those loans will adjust next year and in 2011.

Sensex and Nifty. coupled with good monsoon led to an increase in FMCG sector by 8. as against 49. has put pressure on Margins in this sector. Auto sector saw a growth of 8.374 cr. China.38%. On back of optimistic macro economic outlook. Futures & Options The June series opened at 43. worries over the Euro crisis subsided and the decision of the Chinese Central bank to appreciate Yuan provided momentum to Indian markets.13% growth. wherein the Nifty future was Indian Institute of Foreign Trade 11 10 . small-cap index outperformed.June 2010 Stock Watch INFINEETI | Vol 4.46% over previous month’s close. thanks to the government’s decision on deregulation of fuel prices. Auto.10%. As the month progressed. positive sentiments among market participants led both the benchmark index. At 6. Weak demand from the largest consumer. Capital Index grew by 7. up by 4. Capital goods and Oil& Gas sectors were among the top performers. majorly due to healthy auto sales number in the month of May 2010. FMCG. while Oil & Gas sector gained. Only the metal index closed in red for the month of June. while the mid-cap index closed in line with the benchmark. last month.45% and 4. A surge of 48% exports in coffee.262 cr. The markets also reacted positively to the government’s decision on deregulation of fuel prices. Issue 2 Sukrit Munjal TAKING STOCK T he month of June began with volatility due to global economic conditions. coupled with increase in ore prices.71% due to pickup in order inflows.

Sectorally speaking. allowing it to increase and decrease as per international crude oil prices.INFINEETI | Vol 4.777 cr. Indian Institute of Foreign Trade 11 .. foreign institutions were net buyers of Rs. The author is a second year student of Indian Institute of Foreign Trade. Issue 2 Stock Watch June 2010 14. 7. During the month. and the domestic players were sellers of Rs. Metal. banking and sugar space continued to be the laggards on Dalal Street due to negative sentiment seen in the global markets.713 cr.900 level which was considered to the strongest support from a long term perspective. and Stock futures were 28. . Kolkata . Credit rating agency Crisil said the decontrol of petrol price will positively impact the financial risk profiles of oil marketing companies. 4..402 cr. The rollovers to the June series were very low as the global scenario was not quite healthy but still Indian markets were holding strong above the 4. Indian markets outperformed as huge leadership was seen in Reliance Industries and the Oil marketing companies after the government removed control over price of petrol.860 cr. Even with all the negative sentiments across the globe.

It again revalued its currency in July 2005 under constant demand from the US and the EU.June 2010 Sourav Roy INFINEETI | Vol 4. Yuan the Chinese currency was devalued on several occasions until 1994. After that China maintained a constant rate for several years. hina is facing a similar kind of pressure to revaluate its Yuan as was faced by Japan during the 80’s to revaluate its Yen. Markets across the world have been rallying on the announcement of the latest flexible exchange rate regime followed by China. a dearer Yuan will increase inflation in the short term. 2010 Indian Institute of Foreign Trade 13 12 . Issue 2 C Yuan Appreciation-The Outcomes that it would follow more flexible exchange rate policy. This led to a considerable pressure from other countries on the Chinese government to appreciate its currency. China has not allowed its Yuan to appreciate. A strong Yuan may be good for US exports to China but since China still forms a major pie of US imports. After the commencement of economic reforms in 1974 in China. more flexibility in exchange rate will strengthen Yuan against world currencies. So any appreciation will boosts internal consumption in China. So. Floating of Chinese Yuan will help ease the tension between China and USA as USA blames the undervalued Chinese currency for its huge trade deficit with China. Any appreciation in the Chinese Yuan will increase the purchasing power of Chinese people. China has recently been under strong international pressure to revaluate its currency. From July 2005 to July 2008 China allow its Yuan to appreciate. Considering the growth rate of Chinese economy and huge surplus they have. But 2008 onwards. Peoples Bank of China announced on June 20. The undervaluation of Chinese Yuan has been a bone of contention in the relationship between China and other countries especially US. Under this pressure.

Although this is likely to be a slow process. this will increase the prices of commodities like metals.e. competitors of China including India. Almost all analysts urge caution. If Yuan strengthens against the world currencies. it does signal a move in the right direction. Any appreciation of Yuan will make goods cheaper leading to an increase in the imports. The author is a student at Institute of Management Technology. pointing out that any moves in the Yuan are likely to be slow and controlled.. Thailand etc will gain. In turn. Impact of floating Yuan on commodity market will depend on the speed and extent to which Yuan will appreciate compared to US Dollar. Chinese currency’s appreciation will bring some comfort to other countries that are competing with China as they will be able to allow their currency to appreciate. Indian Institute of Foreign Trade 13 . oil.INFINEETI | Vol 4. etc. Ghaziabad . This will make them less concerned about inflow of fund and help them curb the inflation. Global manufacturing and resource companies who supply equipment and commodities will benefit from Yuan movement as this will make their products cheaper. higher as June 2010 the Chinese will be able to import more raw materials until equilibrium will be found. as appreciation will take some of the edge away from the Chinese export since Chinese goods will become comparatively costlier. Issue 2 thereby reducing the dependence on export for economic growth thus helping in the process of global rebalancing.. supply and demand from China. Chinese airlines will be benefited by cheaper imported fuel. It will affect the commodity market by impacting export and import i.

After long deliberation for more than a year. The deregulation of diesel prices in a phased manner is contrary to the complete deregulation recommended by the committee. cooking fuels will continue to be subsidized. According to the Government the reduction in overall subsidies has been made to manageable limits and the Improved profitability situation of upstream companies post the APM (Administered Indian Institute of Foreign Trade 15 14 .7/litre. Diesel prices have also been increased by Rs2/litre and are going to be deregulated in a phased manner. domestic LPG prices have been increased by Rs35/cylinder. This EGoM decision is in sync with partial implementation of Kirit Parekh Committee’s report. Issue 2 Madhuri Gosh Deregulation of Oil Prices and its Effect O n June 25. the Empowered Group of Ministers (EGoM) took a major policy decision on the country’s retail fuel pricing. that the increase in kerosene and domestic LPG prices is less than that proposed by the Kirit Parekh Committee. the EGoM has freed the price of petrol from the government’s control. petrol price was increased by about Rs3. The policy change is viewed as an instance of the government parleying with the ‘Industry’ and also another frontier for making profits. In the cooking fuel segment. However. and kerosene prices by Rs3/litre. 2010.June 2010 INFINEETI | Vol 4. It seems although. Immediately after the announcement.

There are however pertinent questions surrounding the timeline of the diesel price deregulation. maybe considering the possible political fallout in case the prices were increased significantly. OIL India.INFINEETI | Vol 4. and the company would get more aggressive if the government policy regarding the complete deregulation of diesel prices gets clearer. Thus. According to FICCI. EOL has already started to ramp up its entire retail account of the proposed de-regulation outlet network. Even BPCL. the announcement of petrol deregulation seems to be a step in the right direction and will benefit PSU oil companies. It has also made efforts towards divestment in IOC. stable and lower product cracks of subsidized products. ONGC. enables them to bear a relatively higher subsidy burden. The downstream oil companies are likely to be key beneficiaries while there is a neutral outlook for the upstream oil companies as many analysts are still debat Indian Institute of Foreign Trade 15 . RIL has also started opening its retail outlets. we were not anticipating any increase in the retail prices of kerosene and domestic LPG. The government has marginally increased prices. the frequency of change in petrol price and the pricing band for petrol price . stable and reform-oriented government.000million. HPCL and BPCL. The deregulation of auto fuels is likely to result in the re-entry of private players like Reliance Industries (RIL) and Essar Oil (EOL) that had closed down their retail operations due to lack of a level-playing field. Experts say that if the recommendation of the Kirit Parikh committee would have been accepted in totality under recoveries would have come down drastically. and is likely to be the most affected on account June 2010 of increased competition due to the deregulation. Significantly lower under recoveries along with cash subsidy of Rs200. All said. Issue 2 Pricing Mechanism) gas price hike. OIL and GAIL to the levels of around Rs16. 000 million -20. could ramp up its retail operations at a much faster pace as it has overlapping presence with RIL in the highway segment. with most of it having started and rest about to start. 000 million to be provided by the government would have resulted in a reduction subsidy-sharing burden for ONGC. the government has taken a “very nuanced approach” in freeing up petrol prices. Subsidy for under recoveries on the sale of cooking fuel to the private marketers is also still under consideration. viz. Deregulation hinges on stability in crude prices. The absence of announcement of subsidy sharing formulae makes it difficult to judge the beneficiaries of the deregulation move. IOC. GAIL. under recoveries and subsidy sharing structure.

June 2010 ing whether the move will lead to improvement in the earnings of the Oil Marketing Companies (OMCs) or upstream segment or government finances. Many say. We certainly hope that this time around the Government’s decision is a sound economic one and its intention to reform the oil sector is met with better fate. Issue 2 of administered pricing mechanism (APM) in 2002 (which had to be later folded up in 2004 with the government’s interference when the OMCs wanted to pass on the increasing crude prices to the consumers). Having said that. INFINEETI | Vol 4. The author is a second year student of The Indian Institute of Foreign Trade. the extent of the oil bonds issued may determine the fate of the OMCs going ahead. There are inflationary concerns as Government takes a subdued outlook on crude oil prices. we cannot forget the previous unsuccessful experience of the Centre on dismantling Indian Institute of Foreign Trade 17 16 . There is however need to evolve a mechanism to provide a cushion against the volatility in global oil prices.. For now this seems to be Government’s step towards stabilizing country’s oil economy by tackling the structural problem of oil subsidies in the country and being fiscally responsible as well as send correct price signals to consumers so that there is no wastage of scarce resources.. Delhi .

Greece and Spain). governments across Europe – in both deficit and Fiscal countries – are announcing fiscal austerity packages that are going to prolong the recession for sure and damaging the prospects of recovery especially in employment. Out of them Ireland and Greece are facing the real possibility of sovereign default. In the midst of a fragile and easily reversible recovery after a very severe recession. Battering the eurozone is scary to the financial markets with their cups of sorrows continues to fill. Greece and Spain are considered to be the epicenters of the European debt crisis but in fact Spanish and Greek banks were no worse than banks in the strong eurozone countries. Issue 2 June 2010 Ashutosh Sharma 2010 European sovereign debt crisis: Is it turning into a contagious disease E uropeans are seemingly coping with the trauma of 2010 European sovereign debt crisis. It acted like a poison pill and speeded the concern about possible default to the other parts of the European economy and thereby fearing the possibility of contagion in the entire eurozone. The countries that are currently under financial pressure and those that are seen as potentially under pressure very soon are recognized as PIIGS (Portugal. especially Germany which has taken a condescending attitude to the problems of Greece and Spain.INFINEETI | Vol 4. Ireland. Three of the semifinalist teams in FIFA 2010 are from Europe and people are enjoying the moment with hope that Europe will emerge as the winner of FIFA world cup once again. However the uneven macroeconomic performance of member countries of Europe may overshadow the possible win. These countries are already facing a hard time from financial markets 17 Indian Institute of Foreign Trade . Italy.

the U. The more the financial markets strike the government bond markets. The Government bond market is the focus of the current crisis which is causing a possibility of sovereign default of these countries. and the Netherlands have invested a significant part of their lending in these five countries. European banks had as much as $2.June 2010 that have forced up bond yields and created a drought of credit to borrowers in these countries. the proportion is less but the amounts involved are significantly more.95 trillion in loans outstanding to these five countries at the end of December 2009. Basel June 2010. Hence the lending of banks to these countries is denominated by private debt. the Indian Institute of Foreign Trade 19 18 . Chart 1 shows that banks based in France.K. INFINEETI | Vol 4. Germany. Chart 2 shows that French and German Banks together account for more than half of Greek debt. Considering the worst effected countries of European crisis – Greece and Spain. In Spain. Credit lending by governments accounts for less than one-fifth of the total exposure of banks to these countries. Issue 2 Chart 2 : Banks exposure to Spain and Greece Source : Bank for International Settlements Quarterly report . And those holding such debt are unavoidably at some risk of a fall in the value of their assets.

European Union helped world in diversification of market powers and a serious alternative to USA. The European Union is 53 years old now dating from the treaty of Rome in 1957. Delhi. The author is a second year student of The Indian Institute of Foreign Trade. Union should try to remodel the interdependence leading to a greater drive for fiscal integration as well as a focus on wage-lead growth in the entire Indian Institute of Foreign Trade 19 .Probably it is suffering from mid life crisis. This effect is seemingly propagating to other parts of Europe because of interdependency between the economies.. Today when Union is under the threat of disintegration. The earlier aims of the European project. Issue 2 more the governments of Greece and Spain are forced to announce and implement severe austerity packages that entail large cuts in public expenditure with adverse effects on employment and output.INFINEETI | Vol 4. June 2010 region. Union does not appear to be able to deliver the promised security and prosperity to all its citizens. Achieving both growth and fiscal consolidation seems highly unlikely – growth will have to give way. It is possible that what is being considered as a crisis of currency and bond markets of Europe can affect the recovery of the world from the 2008 recession. The expressions of this mid life crisis have started coming up and will become more and more evident in near future. such as peace and unity are looking timid under the pressure of financial markets.. . serious austerity measures may lead to little option but to cut the budgetary deficits of countries rapidly implying a steep recession and a drop in imports.

a monthly crossword. Please send in your entry to infineeti@iift.ac. Issue 2 FIN-WORD Feeling bombarded with the finance jargons??? Not really! So you think you have it in you? Infineeti introduces Finword.in The first correct entry will have his/her name published in the magazine. which will test your mettle as well as build on your knowledge. Last Finnword’s Winner: Deepak Agarwal ACROSS 2 Level of company’s debt in relation to its equity capital 3 Type of annuity where payment starts at a later date 6 Type of bonds whose coupons are sold seperately 11 Institution planning world’s biggest ipo 12 Name of a flower having some significance in finance 13 The general tendency of a economic crisis to spread DOWN 1 Relationship between price and earning of a share 4 The price level at which analysts think people will sell 5 Entering into an agreement to reduce or eliminate risk 6 Transaction consisting of converting receivable into marketable security 7 The most simplified and basic type of financial instrument 8 Science related to specialising in finance and insurance 9 A type of debt which can be redemeed earlier than its maturity 10 Amount paid by an insurer to the insured to compensate for the loss Indian Institute of Foreign Trade 21 20 . ** Answer to be published in the next issue.June 2010 Fun-with-Fin INFINEETI | Vol 4.

INFINEETI Indian Institute of Foreign Trade New Delhi | Kolkata Indian Institute of Foreign Trade 21 .in or infineeti@gmail.ac.INFINEETI | Vol 4.com ALL RIGHTS RESERVED. Issue 2 June 2010 Please send your feedback and querries to: infineeti@iift.

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