Batch: - Journalism Batch of 2020

Semester: - Six
Name of the course, - (0610) Fundamentals of Business Journalism (JR)
Name of the student, -Arpan Cheema
Roll No: - 1833
PRN: - 17050422026
SEAT NO: - 224519
.1) What is the Sensex and why is it called so?
A) Sensex is an index or an indicator that is very sensitive to fluctuation of markets. It
gives one a general idea whether stocks have gone up or come down.
B) Sensex is an indicator of all the major companies of the BSE (Bombay stock
Exchange).
C) It provides an understanding of the cash market in India
Money → sentiment → Quantum of cash∈ hand
B) What happens when the Sensex rises?
If the Sensex goes up it indicates that the prices of the stocks of most of the major
companies on the BSE have gone up. If the Sensex goes down it means the prices of
the stocks have gone down. The Sensex, therefore is regarded as the pulse of the
domestic stock market in India. The index is calculated by the free flowed
capitalisation method which does not depend on the company’s outstanding shares,
but on the shares which are readily available for free trading.

C) Where is the BSE and NSE situated? Please provide their full forms
The BSE stands for Bombay Stock Exchange founded in 1875 and NSE stands for National
Stock Exchange which was founded in 1992, both of these entities are located in Mumbai,
erstwhile Bombay. Mumba is the financial capital of India. Most of the trading takes place
there, here there is more fluctuation and therefore it affects sentiment.
D) What is the Nifty all about?
The NSE has a flagship index called NIFTY which represents the top stocks of the NSE.
The NIFTY is made up of fifty different stocks from all the listed companies at NSE.
These fifty companies represent twenty- one sectors and there is a mixture of sectors, so
that the sentiment of the market is maintained. It is a well-diversified index in terms of
free-float market capitalisation traded on the bourse (Bazar).

Q.2) What is inflation, recession and depression?

Inflation can be defined as the rise in prices or a fall in value of money. Simply put, an
increase in the cost of necessity items such as bread, milk butter etc. It can be further be
defined as a persistent, and substantial rise in the general level of prices related to an increase
in the volume of money and resulting in the loss of value of currency (opposed to deflation).
A recession can be defined as a significant decline in general economic activity in a
designated region. A recession can be typically recognized after two consecutive quarters of
economic decline, and is reflected by GDP (gross domestic product) in conjunction with
monthly indicators like employment.
Recession means that the public have stopped buying products for a while, which can cause
the downfall of GDP after a period of economic expansion (a time where products become
popular and the income profit of a business becomes large). This causes inflation which is the
rise of product prices. A recession is a widespread economic decline that lasts for several
months. A depression is a more severe downturn that lasts for years.
Depression is a sustained long-term down turn in economic activity which leads to the
economy to go into a virtual shutdown mode . Usually a recession lasting beyond two years
causes a depression. The most prominent example of economic depression is the global
economic recession of 1929
A )What can cause inflation?
A decrease in the value of money which forces one to buy the same commodity sat a
higher price without rupee rising in value is inflation.
The two main causes of inflation are :-
1) When there is a lot of cash liquidity in circulation, it causes the currency to
plummet:- The money supply is not just cash, but also credit, loans, and
mortgages. When the money supply expands, it lowers the value of currency.
2) When higher input costs such as diesel petrol goes higher- this increases the cost
of production of most commodities which use there commodities as raw materials
or as in the process of production.
3) Artificial price hike
4) Embedded inflation- when one decides to pay more for basic commodities.
5) Demand-Pull Inflation. Demand-pull inflation is the most common cause of rising
prices. It occurs when consumer demand for goods and services increases so much
that it outstrips supply.
6) Cost pull inflation:- occurs due to man made or natural disasters, The cost of
production of commodities increase and their supply also decreases but the
demand remains the same which leads to an increase in the prices.
B) Give us an overview of the 2007-08 global financial crisis
The collapse of the Lemmon Brothers in September 2008 almost brought down the entire
world’s financial system, like the butterfly effect. It can be taken on face value that in 2008,
the world saw one the worst recession in the United States had seen in eighty years.
First came the liquidity crunch when the banks had loaned huge sums of money to
infrastructure projects worldwide without any major collateral security.
Investing in Eastern Europe and Africa did not bring on the interests for the loans disbursed.
This resulted in a liquidity crunch suffered by the Lemmon Brothers.Subprime borrowers
started defaulting when the housing bubble burst. Many homeowners who now could not
afford conventional mortgages took interest-only loans as they provided lower monthly
payments. When the prices of real estate fell, many borrowers found their properties were no
longer worth the amount that they were paying for, and as these property owners were unable
to pay their mortgages or resell their houses for a profit. They were only left with the option
of committing a default. As market works, as the rates increased the demand slackened. The
situation became such that by March 2005, the sale of new homes peaked at 1,431,000.
Before the crisis took place the American real estate industry made up almost 10 percent of
the economy. When the market collapsed, it took a bite out of the GDP ( gross domestic
product).
The bottom line was that the banks were too depended on the derivatives. They sold a lot of
bad mortgages just to keep the supply of derivatives flowing. This in the end became the
underlying cause of the 2008 recession. The financial catastrophe subsequently spilled out of
the confines of the real estate and spread throughout the banking industry, bringing down
financial behemoths with it. The ones who were deemed “too big to fail” were Lehman
Brothers and Merrill Lynch. Went bankrupt and because of this, the crisis spread globally.
As the real estate prices fell, banks lost trust in each other, and were now too afraid to lend to
each other because they might receive mortgage-backed securities as collateral. Once home
prices started falling, they couldn't price the value of these assets. But if banks don't lend to
each other, the whole financial system starts to collapse. The stock market crashed in 2008.
On April 17, 2007, the US Federal Reserve announced that the financial regulatory body
which oversees the lenders would encourage them to work with lenders to work out loan
arrangements rather than foreclose In September, the Fed began lowering interest rates. By
the end of the year, the Fed funds rate was 4.25%. But the Fed did not drop rates far enough,
or fast enough, to calm markets.
The subprime crisis reached the entire economy of the United States by the 3rd quarter of
2008 the US’s GDP fell by 0.3%, its lowest in thirty years.
On September 29, 2008, the US stock market crashed. This affected the world economy,
withy US being a superpower, holding monopoly over trade through dollars.
On October 3, 2008, the US Government established the Troubled Assets Relief Program,
which allowed the U.S. Treasury to bail out troubled banks. The Treasury Secretary lent $115
billion to banks by purchasing preferred stock.
On February 17, 2009, Preisent Obama announced the American Recovery and Reinvestment
Act. The $787 billion economic stimulus plan ended the recession. It granted $282 billion in
tax cuts and $505 billion for new projects, including health care, education, and infrastructure
initiatives which help curb the immediate problems , but the affect of this recession on the
banking and real estate industry was long term. As the US economy crashed , there was
massive unemployment inflation was at its peak, which took the US economy a long time to
recover from.