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Why is china's stock market in crisis?

By: Gazal Trehan

tock markets in China are tumbling.

A three-week plunge has knocked

about 30% off Chinese shares since

mid-June. China’s securities regulator has

warned of “panic sentiment” gripping

investors, many of whom are individuals

that have borrowed heavily to play the stock

market. Hundreds of Chinese companies

have suspended dealings in their shares in a

bid to arrest a frenzy of selling. The

authorities have stepped in with various

measures, including a surprise interest rate

cut. But so far, their efforts have failed to

stem the rout and some analysts say the

moves by officials have only served to

heighten alarm.

Investors and policymakers around the

world are looking on with growing concern

that turmoil in the stock markets will spill

into China’s real economy, the second-

largest in the world and a huge engine of

global growth.

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But weren’t China’s stock markets soaring

just a few weeks ago?

They were. China’s stock markets had

previously been among the highest

performing in the world, and had hit a

seven-year peak in the middle of June. The

Shanghai stock market had surged more than

150% in 12 months.

What was behind the dramatic rise in

shares?

Investors have been piling in, encouraged by

falling borrowing costs as the central bank

loosened monetary policy. Unlike most

other stock markets, where investors are

mostly institutional, more than 80% of

investors in China are small retail investors.

The rise was also fuelled by a switch away

from property investment following a

clampdown by the government on excessive

lending by banks. Laws liberalizing the

stock market also made it easier for funds to

invest and for firms to offer shares to the

public for the first time. The past six months

have seen a record number of businesses

listed on the Shanghai and Shenzhen

exchanges.

Why did the market turn?

Analysts were already warning that the

dramatic rise in China’s stock markets was

driven by momentum rather than

fundamentals. Stocks were looking wildly

overvalued at a time when the Chinese

economy was losing steam. As fears grew

that the rise in many stocks was

unsustainable, the selling started.

Even China’s bullish securities regulators

admitted markets had become frothy before

they turned down.

What is the economic backdrop?

China’s economy was already losing steam.

Its GDP growth rate halved from 14% in

2007 to 7.4% last year. The next GDP

figures in mid-July are expected to show the

slowest growth since before the financial

crisis.

In a sign of softening demand, imports have

been falling in recent months. Exports have

also eased off, despite government measures

to stimulate growth.

But analysts are divided over the scale of the

risk to the real economy from the stock

market turmoil. They question the strength

of links between the two.

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Jasper Lawler, an analyst at CMC Markets,

said: “It goes without saying that

movements in the Chinese stock market

don’t necessarily correlate to China’s

economy. This applied on the way up when

Chinese stocks rallied more than 100% in

the space of a year while economic growth

was the slowest in six years. This should

also be the case on the way down; just

because stocks are crashing, it doesn’t

necessarily have a knock-on effect on

China’s economy.”

BRICS cooperation

helps to build new

international

framework

By: Kaushal Kishore

he New Development Bank

BRICS (NDB BRICS), formerly

referred to as the BRICS

Development Bank, is multilateral

development bank operated by the BRICS

states (Brazil, Russia, India, China and

South Africa) as an alternative to the

existing US-dominated World Bank and

International Monetary Fund. The Bank is

set up to foster greater financial and

development cooperation among the five

emerging markets. Together, the four

original BRIC countries comprise in 2014

more than 3 billion people or 41.4 percent of

the world’s population, cover more than a

quarter of the world’s land area over three

continents, and account for more than 25

percent of global GDP. It is headquartered in

Shanghai, China. Unlike the World Bank,

which assigns votes based on capital share,

in the New Development Bank each

participant country will be assigned one vote

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and none of the countries will have veto

power.

"All the BRICS, (Brazil, Russia, India,

China and South Africa) economies have

become founding members of the AIIB,

while China, India and Russia turned out to

be the three largest shareholders of the

bank," an article titled "BRICS cooperation

helps to build new international framework"

published in the Global Times daily said.

"The establishment of the BRICS New

Development Bank, an emergency reserve

fund, and the AIIB will break the monopoly

position of the International Money Fund

(IMF) and the World Bank (WB)," said the

article written by Liu Zengyi, research

fellow of Shanghai Institutes for

International Studies.

"It will motivate the IMF and the WB to

function more normatively, democratically,

and efficiently, in order to promote the

reform of international financial system as

well as democratization of international

relations, it said.

A characteristic of this year's BRICS

summit at Ufa was the economic and trade

cooperation, especially the collaboration of

development strategy among the BRICS

members.

The meeting endorsed the Russia-initiated

BRICS Strategic Economic Partnership,

which provided a blueprint for the

organization’s economic and trade

cooperation in the coming years, said the

article.

The initiative will push each economy to

advance toward the goal of "setting up deep

integration of markets, multi-level

communication, efficient network of land,

sea and air passages, and closer cultural

exchanges," it said.

During the summit last week, the BRICS

countries conducted dialogues with the

Shanghai Cooperation Organization (SCO)

and the Eurasian Economic Union (EAEU),

in which each side discussed the expansion

of exchanges in politics, economy and

culture, it said.

China and Russia have reached an

agreement over connecting the Beijing-led

"One Belt, One Road" initiative and the

EAEU.

"It is a coincidence for the summits of

BRICS and SCO to come together in the

same city and at the same time. But it

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showed that the BRICS countries and

Eurasian nations are eager to build a new

framework of international politics,

economy and security, with more

democracy, equality, openness and

inclusiveness," it said.

While the BRICS group mainly focuses on

economic cooperation, the SCO was

established primarily for mechanism of

security cooperation, it said.

"Regional stability is the basis of the

economic collaboration, while the latter can

boost the development of the former. In light

of this, both the BRICS and the SCO will

jointly and effectively promote stability and

prosperity in Asia and the entire world," the

article said.

CITICOIN and its

parent BITCOIN –

Future Currencies?

By: Rajan Kumar

n 7th July 2015, Citibank

announced its research on their

digital currency ‘Citicoin’ which

is their own version of Bitcoin. The bank is

doing a test run with the currency on three

block chain networks within the lab (we will

get to know about block chain further in the

article)with no real money involved as of

now. This confirms the promising nature of

digital currencies and the opportunities

financial institutions see and can exploit. To

understand the concept of digital currency

we need to understand Bitcoin and its

functioning.

Banks are the backbone of any economy, as

they maintain the money supply and provide

a safe avenue for keeping and investing your

money. There is also a trust factor between

customers and banks for handling savings,

but the 2008 crisis confirms that all banks

may not oblige. Also as we move towards

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ecommerce and buying more and more

things online, why should you pay a cut to

the banks for every online transaction? An

anonymous programmer, Satoshi Nakamoto

invented Bitcoin in 2009 which provides a

solution to above two problems. So, what

exactly is bitcoin?

Bitcoin is the first decentralized digital

cryptographic currency which can be mined

at a fixed rate per day. Currently 25 bitcoins

are mined each day globally. A miner

downloads bitcoin mining software and the

software runs complex algorithmic problems

over the bitcoin miner network on the

internet. Out of 25 bitcoins, units of bitcoin

a miner can mine are proportional to his

computer processor speed divided by

number of miners on the network. The

perceived value behind the bitcoin is the

solution to the algorithmic problem which is

unique for each unit of bitcoin mined. As

per the algorithm only 21 million bitcoins

can be mined ever, out of which 12 million

are already mined. Monetary value of a

bitcoin is dependent on the demand and

supply phenomena and keeps fluctuating. A

bitcoin is worth a whooping amount of Rs

18060 as of today which means Rs 21672

crores worth of Bitcoin money is already

flowing. Instead of mining you can also buy

them from other users or Bitcoin exchanges

present in 229 countries including India.

How is it better? It has zero transaction cost.

You can hold your mined bitcoins in a

wallet which can be an online website,

mobile app, desktop app or a hardware token

and you can transact free of charge. No user,

bank, or country can force a fee and you can

do cross border transactions with ease.

However, only you have the responsibility

to verify the payee before a transaction as a

bitcoin transaction cannot be reversed. Our

banks keep a record of our transactions in a

central ledger, however on a bitcoin

network; the concept of block chain comes

in. On a block chain network all the bitcoin

users record any bitcoin transaction over the

network. If X transacts with Y using

bitcoins, all the bitcoin user devices will

record and verify it. This helps in avoiding

use of copied digital code of the currency

and eliminates double spending of one unit

of bitcoin. Any attempt to fool the bitcoin

community with a faulty transaction will get

rejected.

Bitcoin is not yet extensively used and is

currently in the phase of infrastructure

building for its use. Amazon, Subway,

Wordpress, Victoria Secret and whole host

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of websites along with bars and pubs in

Sydney and London accept bitcoins. Despite

some having their apprehensions about

bitcoin, everyone accepts this revolutionary

invention with a potential to further

improve. Raghuram Rajan in an interview

with Pranoy Roy opinionated his concern

over security of the bitcoin system and its

fluctuating value but foresees its evolution

into a better and safer currency 10-15 years

down the line.

Greece: From Beginning

of mess to a humiliating

agreement with Europe

By: Vishal Sukhija

n 2001, Greece was among the first

countries to approve the new currency

i.e. Euro. The launch of unified

currency Euro was hailed a success as it

surpassed the dollar in value and everything

was going smooth.

And yet for Greece, it seems now to have all

fallen flat. How did it happen?

Greece joined the euro zone before the

launch of the euro at the beginning of 2002.

For joining euro zone it was a condition that

a country had to prove its "economic

convergence" with the other euro zone

members – it was meant to ensure that

different countries would not threaten the

existence of common currency.

When Greece was accepted in euro zone,

warnings were raised. But fake accounts hid

the true extent of its deficit. One of the

economic convergence requirements was

that a country should not have a budget

deficit of more than 3% of GDP. It was a

requirement imposed on all countries, yet

the extent to which Greece hid its economic

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problems from its fellow euro zone members

was huge.

Two years later, a new government came to

power and it took a look at the books. What

it discovered was shocking. The budget

deficit was not 1.5%, as reported, but 8.3% -

- five and a half times higher than thought.

The government faced a dilemma: What

should it do with this awful information?

But as the Olympics approached, it

concealed figures. This was the country's

turn to shine on the international stage as

Olympics were coming back to their

originating country. Instead of revealing the

extent of the deficit -- and starting to deal

with it -- the government covered it up.

In 2007, the financial crisis came. Financial

crisis started from U.S. but it spread around

the world. And it hit countries around the

globe to varying extents. Other European

Union countries were severely affected --

notably Spain and Ireland.

And Greece was hit far harder than many

other countries. With a deep gap between

revenues and expenditures, it was

vulnerable. In 2008, the country's tax

collection, already worse it was, collapsed.

The hole in the budget grew too big to hide.

Greece needed help and the other euro zone

countries, fearing that, if Greece defaulted

on its debts, other euro zone countries' cost

of borrowing would rise to unsustainable

levels -- felt they had no option but to give

that help.

In 2009, international investors, felt cheated

when they came to know about the fact that

Greece's previously announced debt and

deficit figures were inaccurate, they became

worried about the country's ability to pay its

debts.

The country's credit rating was downgraded,

first by Fitch and then by Moody's.

With investor confidence disappearing, the

country's cost of borrowing spiked and the

situation ran the risk of running out of

control. So the other euro zone countries, in

the form of the so-called troika -- the

European Commission, the European

Central Bank and the International Monetary

Fund -- stepped in to cure up the patient.

In May 2010, leaders of the euro zone and

the Greek government agreed on the

conditions for a 110 billion-euro bailout

loan. But the bailout came with strict

conditions -- among them that the

government had to improve its tax collection

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and save money in an effort to bring its

budget into balance.

Saving government money, though, meant

laying off government workers. And that

meant that those workers had less to spend,

so other businesses suffered and lay off

workers, too. Unemployment rose,

depressing government tax revenues.

But still, the bailout medicine didn't do the

trick. In February 2012, the government

accepted another bailout loan, bringing the

total borrowed to 246 billion Euros. A new

austerity (cut social expenditure) plan was

agreed upon as well.

The amount owed to the international

lenders was now 135% of the country's GDP

and things were just getting worse.

Unemployment rose to near 30%. Youth

unemployment soared over 50%.

In 2015, the budget refused to balance. More

money was needed -- and also, debt relief, if

the country were ever again to stand on its

own two feet.

The country was now led by the left-wing

government of Alexis Tsipras. Relations

between representatives of the international

lenders and Tsipras and his finance minister,

Yanis Varoufakis, were poor -- hampering

negotiations.

In June, the negotiations broke off, with

each side apparently daring the other to be

the cause of provoking Greek exit from the

euro zone. At the end of June 2015, Greece

defaulted on a repayment to the International

Monetary Fund.

The banks started to run out of money.

Capital controls were introduced, limiting

the amount of money people could withdraw

each day.

After weeks of discussions, including the

break of negotiations and the holding of a

referendum -- in which the Greek people

voted "No" to more austerity -- a deal to

lend the country more money and cancel

some of its past debt was needed soon to

avoid having the country fall out of the euro.

That would have unknown repercussions --

for Greece, the euro zone and the global

economy.

On 12th July 2015, In exchange for the

package, which could amount to as much as

€86 billion ($95 billion) over three years,

Mr. Tsipras (Greek PM) has had to sign up

to precisely the sort of demands his Syriza

party railed against during its successful

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election campaign in January. The pledges,

on matters like VAT and pension reform,

must be legislated by the Greek parliament

not later than July 15th. A week later further

legislation must follow, including a total

overhaul of Greece’s judicial system.

But that is just the start, as Mrs. Merkel

(German PM) had warned that Greece must

also enact further pension reforms, open up

professions, loosen trading rules, privatize

its electricity network, reform its labor

market and strengthen its banks. Once that is

out of the way, Mr. Tsipras’s government, if

it is still standing, will have to produce plans

for “de-politicizing” the Greek

administration, a task that has eluded every

government since Greece obtained its

independence from the Ottomans in 1832. It

must accept complete oversight from the

hated “institutions” (once known as the

troika) who will return to Athens to oversee

the work of Greek officials. At the insistence

of the Dutch PM, Mark Rutte, it will have to

roll back any legislation it has passed since

taking office that violates previous bail-out

agreements (or compensate for their

consequences by passing new laws). Most

painful of all, it will have to deposit what the

seven-page summit statement calls “valuable

Greek assets” into an independent

privatization fund with the aim of raising

€50 billion over the course of the bail-out.

As for the rest of the euro zone, there will no

doubt they will be relieved that the latest

chapter of the Greek crisis has been closed,

even if many more are to come. But when

they emerge from their post-summit sleep

they will face two awkward questions. First,

how can they expect a government which

was selected in opposition to austerity and

foreign instructions to implement reforms

that prevented its far more influential

predecessors? And second, how can a euro

zone that was created to drive integration

and foster trust between its members thrive

when it appears to have had precisely the

opposite effect?

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Draft IFC: Tussle between Government and

RBI

By: Niladri Ukil

uch has been discussed in the

media about the proposed changes

the Indian Financial Code hopes to

bring in the regulation and structure of the

Indian financial system. The main point of

contention that has risen between the Govt. of

India and the RBI stems from distribution of

responsibility and authority with regard to

inflation targeting. To get a better perspective

we must look at how central banks all over the

world evolved over time and how they discharge

their duties while interacting with respective

local governments. Today, central banks are

public policy institutions whose main goals are

to preserve monetary stability and promote

financial stability. There is a convergence of

views in both developed and developing

economies that price stability has to be the main

objective of monetary policy. According to the

handbook, at the start of 2012, 27 central banks

adopted inflation targeting as their monetary

policy framework. In a majority of these

countries — 15 out of 27 — the inflation target

is decided both by the government and the

central bank. At the heart of any governance

arrangement is the design of decision-making

structures. Human factors will always remain

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important to outcomes, but human behavior is

subject to influence by structural and procedural

aspects of the environment. If central banks

simply implemented the government’s policy

instructions, the preferred arrangement might be

to have a single chief executive responsible for

running the institution – the model for

government departments. Group decision-

making is thought to lead to better, more

accurate decisions – an idea that has both

theoretical and empirical support. Different

individuals may have different mental ―frames

through which they interpret information and

options. Combining those interpretations

through discussion, followed by consensus

forming or voting, effectively allows a group to

base its decisions on a set of concerns,

information and judgments that is much larger

than would be available to an individual. Boards

or committees for decision-making on interest

rates are now very prevalent and have become

the focus of a mushrooming field of research. In

only a handful of countries is the governor still

legally and practically responsible for interest

rate decisions (Aruba, Israel, Madagascar,

Malta, New Zealand and Papua New Guinea). In

some other cases, the governor remains legally

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responsible, but decisions are made within the

context of committee meetings that entail a vote

or consensus forming (Canada, India, Malaysia,

South Africa). Virtually without exception, the

governor, by law, chairs the policy board and the

management board. Because the governor’s role

usually includes that of ―chief policymaker and

thus bears the greatest responsibility for the

policy outcome, it makes sense for the governor

to chair the policy board. The Central Bank has

to maintain a close relationship with the

government to fulfill its objectives. These

interactions may be of both formal and informal

type. In industrialized countries, it is common

for the governor and the minister of finance to

meet one-on-one or in a small group, less so in

emerging market economies.

In contrast, it is far more common in emerging

market economies than in industrialized

countries for a government representative to

participate in meetings of the central bank’s

board or for the governor to participate in

cabinet meetings. Strikingly, for about half of

the central banks from emerging market

economies, the coordination of monetary and

fiscal policy is a key purpose of their high-level

meetings with the government, while none of the

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central banks of industrialized countries say that this is why they meet with government.

The composition of the Monetary Policy

Committee (MPC), as suggested by the revised

draft of the Indian Financial Code, put out by the

Finance Ministry on Thursday, swings in favor

of the Centre. The draft recommends a seven-

member committee, headed by the RBI

Governor, who will have the casting vote in case

of a tie while taking the decision on policy rates.

The panel has suggested two members

(excluding the RBI Governor) from the central

bank — one nominated by the RBI board and

the other by the Governor. The other four

members will be appointed by the Centre. The

recommended composition is in contrast with

the Urjit Patel committee recommendation,

which suggested a five-member team — two

external and three from the RBI.

The idea of a central bank is tied — almost

inextricably — to the notion of functional

independence. The virtue of this is to insulate

the bank, and critical monetary policy decisions

from political interference and pressures of

populism. The idea of government nominees on

the MPC goes beyond the practice followed by

most other countries, where such committees are

made up entirely by representatives of the

central bank and independent members. It is a

veiled attack on the autonomy of the RBI itself

and a method to override the strict fiscal

discipline forced on the parliament to curb

wasteful populist spending. Under the monetary

policy framework the RBI Governor would have

to explain the reasons for not meeting inflation

targets. This responsibility coupled with

proposed misrepresentation of RBI in the MPC

and proposed withdrawal of the veto power of

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the Governor lands him in a situation where

though being held responsible for the success of

inflation targeting he has little control to check

populist policy moves by the Govt. in power. If

the IFC is passed with its current proposals

intact this would foreseeably impact the

financial health of the country in future and

would represent another instance where the will

to control the pillars of society by politicians has

ended up eroding the base of our beautiful

democracy.

.

OLD STRUCTURE

REVISED PROPOSAL

The Monetary Policy Committee will consist of

(a) the Reserve Bank Chairperson, as chairperson of the Monetary

Policy Committee;

(b) one executive member of the Board of the Reserve Bank, as

designated by the Reserve Bank Board;

(c) two members, appointed by the Central Government, in

consultation with the Reserve Bank Chairperson; and

(d) three members appointed by the Central Government.

The Monetary Policy Committee will comprise

(a) the Reserve Bank Chairperson as its chairperson;

(b) one executive member of the Reserve Bank Board

nominated by the Reserve Bank Board;

(c) one employee of the Reserve Bank nominated by the

Reserve Bank Chairperson; and

(d) four persons appointed by the Central Government

The decisions of the Monetary Policy Committee will be binding

on the Reserve Bank, unless such decision has been superseded by

the Reserve Bank Chairperson.

The decisions of the Monetary Policy Committee will be

binding on the Reserve Bank.

In exceptional and unusual circumstances, if the Reserve Bank

Chairperson disagrees with a decision taken at a meeting of the

Monetary Policy Committee, the Reserve Bank Chairperson will

have the right to supersede such decision.

In the event of a tie amongst the members of the Monetary

Policy Committee, the Reserve Bank Chairperson will have a

second and casting vote.

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Effect of IPO on

Competing listed firms.

By: Siddharth Bhan

hile small companies are making

more by going public it’s a win-

win situation for them, but is it

same for the investors? Would an investor gain

by investing in an IPO or he should invest in

competitors, there’s a need to identify the

movement of share price, i.e. can an investor

avail the benefits of an IPO by investing in

competitor or he should invest in an IPO firm. I

found that IPO announcement has a positive

effect on the stock price of listed competing

firms whereas in the case of post listing

performance of an IPO we found that the

investor would have gained if he had invested

the same in the IPO rather that of a competing

firm. I have collected the data from the period

January 2012 to December 2014 i.e. a total of 13

IPO’s with 33 IPO competing firms (i.e. firms

with similar business model). For the purpose of

research I have eliminated those companies

whose market capitalization was less than 500

million. The factors like stock split, Bonus etc.

were all taken into consideration for the purpose

of study. These stocks were having different

value so in order to scale all stocks to same level

I have used share price multiplier base as 100 as

of 6 months from the date of RHP for pre IPO

analysis and second multiplier at the time of

listing for post IPO analysis.

IPO Trends over the years

Let us first take a look at the frequency

distribution of IPOs over our reference period.

Our Sampling period is three years long.

However, the IPO activity across this period

wasn’t uniformly distributed.

It is distinctly seen here that the IPO market

witnessed a slump between jan-2012 and Nov-

2012. There were periods that lasted for months

with less than 3 public offers. In other periods

when the market was “hot” we had even

witnessed multiple issues in a single month. The

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6 months 

prior to RHPRHP date Listing date 6 months 

after listing

1 week 

prior to 

RHP

PRE IPO PERFORMANCE 

Comparing IPO with 

competing firms 

POST IPO PERFORMANCE

issue of IPO performance in “hot‟ markets is an

entire research area by itself. The phase between

Jun-2014 and around Oct 2014 was one of those

periods, characterized by a large number of IPOs

and widespread under-pricing. It is similar to a

“boom” period.

IPO TIMELINE

The study sought to find the effects of IPO on

.competing listed firms quoted at BSE & NSE.

The study has been done in 2 parts i.e. Pre IPO

performance & Post IPO performance.

For the purpose of pre IPO performance- A

comparison is made between six months prior to

RHP date to RHP date with the same 1 week

less to find out the effect of IPO announcement.

For the purpose of post IPO performance- A

comparison is made between IPO competing

firm with IPO.

Where: RHP- Red herring prospectus

Pre IPO analysis- Period from six months prior

to RHP to RHP date.

Post IPO analysis- Period from listing date to six

Months after listing date.

PRE & POST IPO ANALYSIS

BSE S&P SENSEX: In case of Pre IPO

performance of stocks net effect of IPO

announcement is 2% i.e. 3%-1% (33 companies)

whereas in case of sectoral indices is concerned

the Media, GOLD & INFRASTRUCTURE

competing firms recorded a real growth of 8%,

7% & 6%. This should be noted that in India

advertising expenditure to GDP is less than 1 %

which is substantially lower to other developed

and under developed countries. Interestingly

print & T.V media contribute over 75% of the

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advertising spent. As Indian economy continues

to develop & media reach increases, advertising

expend to GDP ratio is expected to increase.

Moreover the electronic media industry did not

mature to a considerable extend i.e. digitization

phase 1 & 2, the timely roll out of further phases

will certainly benefit the industry.

SECTORAL INDICES: In case of Finance &

Realty sector competing firms recorded a

stagnant growth. Moreover growth in these

Industries remains at 2% & 8%. A Negative

growth is analyzed for IPO competing firms in

FMCG sector at -10%. The reason for the

stagnant growth of financial services sector was

due to the uneven political climate led to

stagnant economic scenario thereby leading to

lower infusion of capital in core industries,

inflation remain high side, thereby reducing

disposable income & leading to lower demand.

Additionally the FY14 proved to be the most

challenging year for Indian commercial vehicle,

thus vehicle financiers too faced enormous

challenges.

BSE S&P SENSEX: In case of Post IPO

performance a comparative analysis has been

done for the period of 6 months for IPO’s and

their competing firms. An investor would have

gain 50% more returns in an IPO than investing

in competing firm whereas during the same

period SENSEX movement was stagnant at 5%.

SECTORAL INDICES: For the purpose of

deeper analysis we have analyzed each IPO with

their respective sector. There’s a general trend

analyzed when investor Mr. A invested INR RS

100 in IPO and its competing firm, Mr. A gained

considerably high in case he invested in IPO in

comparison to competing firm. The greatest

upward movement is seen in IPO’s over

competing firms of financial services, Realty &

infrastructure sector at 68%, 67% & 57%

whereas during this same period the respective

index moved mere -3%, -9% & 5% respectively.

CONCLUSION:

India is a growing economy; this brings us more

economic opportunities but also increased

competition. We have tried to find out what

opportunities Competing firms bring in for the

competing listed firms. The results should be

interpreted as indicating the markets expectation

of untapped opportunities still lying in the Indian

economy which new companies provide clues to

for the industry as a whole.

.

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Crowd-funding: The

next generation Angel

Investor

By: Poulomi Kundu

eb has never stopped to

astound and energize

entrepreneurs, business

people and investors. Up till now, everyone

realized that the web was a real drive to

advance and offer products and services, yet

no one had even the scarcest bit of the

thought that the web could likewise assume

an essential part in creating new

organizations and bringing new ambitious

entrepreneurs to the industry. The uplifting

news is that this is really conceivable now in

India with the most recent and progressive

approach to reserve your current or new

business. This progressive methodology is

called “Crowd-funding”.

What precisely is crowd-funding?

Crowd-funding is a compelling approach to

raise a lot of cash to support a current

business or to begin another wonder. What

makes crowd-funding unique in relation to

other options of masterminding funds for

your business is that here you will be taking

funds from individuals who trust you and

who have faith in your thoughts. Along

these lines, fundamentally, in crowd-funding

platform would help you raise the required

capital in the shortest possible time. You just

have to convince them that your idea is

W

Page | 20  

 

commendable. Really, there are bunches of

businesses that can take advantage of crowd-

sourcing and crowd-funding in India. These

businesses incorporate, however not

constrained to, product or service based

industries, political crusades, potential

craftsmen, creative innovations, or

individuals with terrific ideas, yet not able to

fund those thoughts to execute.

Some of the most important advantages of

crowd-funding are as follows:

No Need of banks for funding: These are

times when it is difficult to get advances

from saving money establishments and other

loaning administrations. This is particularly

valid for little organizations or people who

are looking to kick-start their organizations.

It's so difficult there to persuade the banks

of your creative ideas as they simply

searching for risk free benefits.

Unparalleled exposure: When you utilize

Crowd-funding to back your start-up or

existing business, this accurately implies

that your business would be presented to a

huge number of clients and speculators all

over world. This is the ideal approach to

accomplish awe-inspiring exposure of your

business even before beginning it.

Affirmation that your thoughts are worth

investing: It happens such a variety of times

that a business begins with a wrong thought,

and this thing normally costs a ton of cash to

any start-up ambitious person.

Consequently, it bodes well to present your

thoughts before the overall population, and

know the beat of your clients. In the event

that they fund you it essentially implies that

your thoughts have the capability of earning

you a great deal of money.

Types of Crowd-funding

Crowd-funding can be of three types.

Donation and reward based: The platform

accepts a donation from many backers for

projects. In most cases, the return involves

finished goods like a signed DVD of the

movie backed by the crowd. For example

Ketto is famous for this kind of crowd-

sourcing in India.

Lending based: These crowd funds take

money from different people and facilitate

loans or micro-finance to the needy. Micro-

finance platform Milaap is an example of

such crowd sourcing in India.

Equity based crowd-funding: This mode

of crowd-funding, where donors take a share

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of equity in the project or start-up, is not

legal in India yet.

Regulations in Crowd-funding

Crowd-funding ordinarily includes young

ambitious people and small groups of

individuals raising funds for their ventures

through different online stages including

people and additionally associations.

Generally, such stages are additionally being

utilized for launching products that

guarantee certain financial returns to the

patrons.

While it is still in an incipient stage in India,

contrasted with extensive markets like the

US, China and the UK, the trend is getting

up to speed quick particularly in the wake of

development of social networking as a key

stage for such exercises.

International Organization of Securities

Commissions, a group of market regulators

across the world including SEBI, as of late

called for more prominent administrative

checks on 'crowd-funding' investment

products to dodge any potential systemic

dangers in future.

A few focuses SEBI ought to note about

crowd-funding:

All crowd-funding destinations are not

the same:

SEBI needs to recognize something like a

Kick-starter where individuals pay ahead of

time for products and services like RangDe

which is a micro-financing service where

funds are raised by means of crowd-funding.

Don't constrain value into crowd-

funding:

The certainty that SEBI is attempting to

push these rules brings up issues on what

silly minimum guarantees crowd-funding

activities will need to have. It would be ideal

if you let this not be a rehash of the Angel

funding rules.

How to handle fraud?

SEBI needs to elucidate who will be

responsible if an organization tricks

individuals off their cash. There have been a

few cases of individuals setting up false

claims to raise reserves for different tasks

and never conveying. Will the crowd-

funding stage be considered responsible all

things considered? Will these stages need to

screen these tasks ahead of time?

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Start-ups focused?

It is great that SEBI needs to help new

businesses raise funds effortlessly through

crowd-funding, however we trust the rules

are not made on account of new companies

alone. As of now the majority of the crowd-

funding tasks in India are craftsmanship

related.

Will just staying online help?

They say that E-business in India just got a

help when they launched the idea of cash on

delivery. Correspondingly, crowd-funding

will need to take a gander at building an

offline base to induce mass awareness and

encouraging larger participation. Platforms

likewise need to take a look at these roads.

We accept that development of crowd-

funding as another Angel Investor in India

will support confidence and business

enterprise. However, if we truly need to

utilize this industry in India, we have to

innovate and look beyond just building up

the platform.

Still depending on your children to sail you through your years after Retirement? By: Shreya Kohli

If yes, do not be! Face the truth right now.

Your child did not exactly have an

alternative while being born except depend

on you for its living. Now that they are big

enough to earn for themselves does not

mean that they would be willing to fund for

you after you retire.

“But why do I need to think about retirement

now? I just had a kid!”

Well of course that’s the first thought that

might occur to you. Its ironic targeting

people in the younger age group while

comfortably ignoring those in their 50’s, but

how would you prepare for retirement if the

Page | 23  

 

luxury of time is no longer available to work

in your favor?

Take for example you manage to keep aside

a crore after all your years of hard-work for

a peaceful life after retirement. With a 9%

rate of interest and an 8% rate of inflation,

you might consider withdrawing around

75,000 per month for the first year. Adding

all your household expenditures, electricity

bill, food supply, transportation and all, it

may prove to be sufficient isn’t it? But what

about the ever persisting inflation? Do you

expect prices to remain the same through

your lifetime? Let’s tabulate it.

Number of years Withdrawal amount

1 75,000

2 81,000

3 87,480

4 94478.4

5 102036.672

6 110199.6058

7 119015.5742

8 128536.8202

9 138819.7658

Number of years Withdrawal amount

10 149925.347

11 161919.3748

12 174872.9248

Plus a few more months and within 12.5

years that’s the end of all your life-long

savings.

That fast? Yes, the killer inflation played its

role brilliantly and finished it all off.

Or maybe if you cut your spending

drastically you might be able to survive it.

Retirement is an event in life which all of us

have to go through. We don’t have a choice

in this matter, do we? Years of patience and

perseverance can help you survive the

golden age of retirement with peace and

comfort. But also, you need to take into

account the unforeseen expenditures you

might have to face, the major one being

medical expenses as your health can take a

turn for the worse at any point.

We need to plan, implement as well as chalk

out a full-fledged itinerary to make the most

of what we have today.

Page | 24  

 

Let’s see how we can get about doing this:

Save more: Start of saving as much as you

can right now! Being young, you could save

much more right now if you are past the

child rearing stage. Since everyone is living

longer, these savings will supplement your

living standard in retirement. Try adding

more to your saved amount every time that

you end up with a bonus or a raise. Also, the

earlier you save the more it gets

compounded, which means you end up with

more than you may have figured of. Go by

the saying-“The early bird surely gets a

better pie.”

Determine your retirement amount

beforehand: There is a retirement target

which you need to predict as of now to make

your journey after retirement comfortably

easy.

As for this you need to know:

Your life expectancy (which can be

estimated by the health status of your

family )

Your current needs and expenditure

The rate of inflation

Maximize your earning: Look for ways to

increase your income which may in turn

increase the amount you might have set

aside for retirement. Work longer, not just

by the hours in a day but by the years in

your life. Also, you can work part time at

some places to generate some extra pocket

money which may come in handy if you are

able to preserve it. Minimizing your taxes

may also be a great way to maximize your

wealth.

Take a little risk in life: You may get

constant interest on your money if you go

dump it in a bank, but then you wouldn’t

retire rich either. Invest your money in

stocks and real estate and even though that

may be a nail biting experience, but that’s

the only way to make big money. Although

be informed about your investment and act

distinguishably, unlike the crowd.

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