Edunology - Saumya Aggarwal

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What is Indian Retail market shape?

Predominately, The Indian retail sector is unorganised. It consists of "kirana" stores or small stores in every corner of the road. They are typically managed by single owner or family members. These are pan shops, general stores, convenience stores and multi commodity vendors.

FDI in Retail Approval

Henry Ford, the genius inventor once famous said,"Don't find fault, find a remedy”. Is it the mantra followed by Congress, mind you not UPA as all parties are not together on FDI. India’s Cabinet unveiled plans to liberalize foreign direct investment in a broad range of sectors including multi-brand retail, a move that could allow foreign supermarkets into the country.

For many, this is seen as bold move from scam ridden government, indicating slowing economy might actually take Congress ultimate seat from New Delhi.

Different perspectives

Adi Godrej, president of the Confederation of Indian Industry, welcomed the move and said publicly government has “restarted the reform process.” He further added this is a major step in the right direction and “this will not only end a long standing uncertainty in policy making but also boost investors’.

R.V. Kanoria, the president of the Federation of Indian Chambers of Commerce and Industry, said  FDI in retail announcement “reflects the resolve of the government to usher in a retail revolution in the country and also signal to the investor community that India is committed to furthering reforms.” He said this move will infuse new technology and help improve supply-chain infrastructure.

Kishore Biyani, managing director of Pantaloon Retail (India) Ltd ., the country’s biggest retailer by market capitalization and sales, said: “The opening up of the multi-brand sector to foreign direct investment will provide us opportunities to bring in foreign investors in various business like our home retail, electronic retail, food retail businesses.”

Leading consultancy firm, PricewaterhouseCoopers India, estimates that opening up the retail sector will lead to significant improvement of supply-chain infrastructure, which will help reduce food waste by 30% to 40%.

Mukhtar Abbas Naqvi, a spokesman for the main opposition Bharatiya Janata Party, bashed Congress move by saying FDI will hurt small traders.  “We are in favor of reforms but such reforms will not help our troubled economy. Unfortunately the government is not sensitive to small businesses that will be adversely affected by this move. They seem to have rushed into this decision without much thought,” added Mr. Naqvi.

My view on FDI:

- Organized players will rope in huge investments which will help India in longer run as "kirana" shops can not put such massive investments.

- Significant improvement in supply chain infrastructure which will eliminate wastages and enhance operational efficiencies.

- It will create millions of jobs from front end to back end helping youth getting food at end of the day.

- Various middlemen will be made ridundent and hence farmers & end consumers would be happy.

- These organised relatiers are registered hence pay sales tax, income tax, octroi and other government duties which will boost government revenue (which can ulitised for India's growth if Congress alliances do not end up eating all of the money through corruption).

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After have downloading Office 2013 for many months, I finally installed and tested it. Though there are not many new changes, however following are worth mentioning.

Much-improved interface

Office 2013 has got much improved interface, doing away with the sometimes-distracting 3D look of the Ribbon, and adding swaths of flat color. It's far easier on the eyes than earlier versions of Office.

The File tab (previously called Backstage) has been revamped, to great effect. For example, when you create a new document now, you get to see thumbnails of available templates. There's a lot more as well, including simple ways to make the Ribbon disappear and then come back when you need it.

Full editing of PDF files

How many times you have found PDF files very hard to work with since editing is just not on.

No longer. Word now opens PDF files, and gives you full editing capabilities. You can save the resulting files as PDFs or any file type that Word supports. This, by itself, is reason enough to upgrade.

Auto-created bookmarks

This new feature will prove to be a big productivity-booster for those who work with long Word files. Save a Word file and then open it at some later point, and you have the option of jumping to the location you were when you last were working on or viewing the file. No more scrolling and search -- you jump straight there.

In-Office image search

Finding images to insert into Office documents such as PowerPoint presentations has never been an easy experience. That changes with Office 2013. From right within Office, you can use Bing search (you were expecting maybe Google?) to find suitable images, and then pop them right into any Office document.

Excel's QuickAnalysis tool

If you're not a spreadsheet jockey, figuring out the best way to analyze and present data can be a puzzler. No longer. With Excel's Quick Analysis tool, just highlight the data, and Excel will offer suggestions on the best way to format it, analyze it, present it, and more. Even experienced Excel users will welcome this new feature.

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The power grid collapsed because some states apparently drew more power than they were authorised to do to meet the rising demand during the summer, said chairman of the state-run Uttar Pradesh state Power Corporation Avinash Awasthi. The power deficit was worsened by a weak monsoon that lowered hydroelectric generation and kept temperatures high, feeding the appetite for electricity.


Weak Monsoon: Farmers have now started using energy-intensive water pumps for irrigation to save their recently sown crops which pushed up demand. Also, hydro-power accounts for about 20 per cent of installed power capacity but reservoirs have only 24 per cent of the water they can hold -- just about half of what they carried at this time last year.

Politics: Many state governments give farmers free or near-free electricity, triggering a vicious cycle. The policy of selling electricity to consumers at politically correct prices is making the things worse.

Coal Supply: Coal shortage also chose the right time to trigger the crisis. The industry has advocated abolishing a 1973 Act that nationalised coal mining. Changes to the law are expected to allow professional miners to scout for and mine coal.

Distribution: The government-owned distribution monopolies in the states have all but lost their ability to buy power because their political bosses force them to sell it cheap, sometimes free, to voters. This opportunism is hurting the economy: the government estimates unaccounted for sale of power in India, at a third of the total, costs the country 1% of its gross domestic product.

The road ahead

Introduce competition in all three areas of the business - generation, transmission and distribution - to enhance productivity and contain leakages. Create an independent watchdog that can withstand the political pressures playing on different links of the nation's power supply chain.

Finally, free up pricing to make consumers more responsible for the electricity they use. This has been the broad course of electricity reforms the world over.

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As seen in old Hindi movies, trade unions, on back on militants, are creating problems for businesses to grow. This has been phenomenon in Gurgaon for quite sometime. The violence at Maruti Suzuki's Manesar factory, which killed one senior employee and injured close to 100 others, bodes ill for the future of not just Maruti but also the industrial hub of NCR.

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Slower growth and high volatility, Reserve bank is expected to cut Repo and Reverse Repo rates by 25 basis points in its policy review on Monday, 18th June, 2012.

What are current rates?
Repo Rate - 8%
Reverse Repo Rate - 7%

RBI has room to support economic activity as industrial production growth remains weak  and inflation is under sub 10% level.

The industrial production grew at just 0.1 per cent from a year ago in April. Meanwhile, the wholesale price index based inflation rose to 7.55 per cent in May from a year ago because of higher food and fuel prices.

 Bloomberg survey on Reserve Bank of India policy suggests all major economists predicting 25 basis points rate cut. Only Religare and Bank of Baroda economists are predicting 50 basis points, rest all either suggesting 25 basis points or no change.

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Earlier this week, ratings agency Standard and Poor's raised concerns over India's investment grade ratings and said India could be first BRIC nation to lose this grade status. This event was rather predicted as India factory output data came flat in April. I am not a big fan of S&P or Moody ratings, this reminds me how they failed during 2008 crisis to correctly rate derivatives instruments. If they can't rate few instruments, how can they rate giant economies. Having said this, I would concentrate not on rating agencies but mainly on Indian economy.

Recently, I heard one of friend said "India is destined to grow but China is determined to grow". I thought a lot about this statement, checking the growth of other BRICs. China and Brazil both have slowed but India's GDP figures are the worst in last 9 years. It gives me a feel that "All is not well".  I analyzed the situation mainly from three points:

1. Government failure since 1991 Liberalization: India was thought to grow due to its large customer base, high savings and foreign investment that would come up. A deeper look suggest that India was growing at 6% till mid 1980s and situation today is not different. With quarter ending March, growth was 5.3% as opposed to expected 6%. People who were involved in liberalization are considered to be GOD and VISIONARIES but rather than this, India grew on human optimism.

2.  Finances: Rupee depreciation to 55-56 level, depressed government bond yield and high gross bad debts with restructured loans in Banks. RBI firepower is limited to push up rupee, but we still feel decent as oil prices went down luckily. Brent is trading in range of 81-83 dollars a barrel. Banks are forced to buy government bonds, more borrowing means corporates can not raise much.

 3. Politics and corruption: Baba Ramdev estimates 10 lakh crores of Indian black money sitting abroad. This much money can not be made by fair practices and made to sit idle in a foreign land. Policy is at complete standstill, coalition government is unable to pass key reforms of FDI. Over 10 lakh crores of government revenue was sacrificed by ManMohan Singh for coal blocks. Reason given by his government was we want poor to benefit, I believe if this was the intention then government should have taken this money and distributed to poor by creating more true jobs. All knows how much money in getting looted by UPA flagship money making scheme of NREGA (National Rural Employment Guarantee Act).

Perhaps India will bounce back. And if that doesn't happen, there could be a miracle where public rise to the occassion and excercise right to vote and throw out this corrupt government. I am still bullish about India, remember "India is destined to grow" and would bet my money on it. Hopefully the small pieces of growth & economy will start coming togther sooner than later.

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JPMorgan Chase, the biggest U.S. bank by assets, suffered a trading loss of at least $2 billion from a failed hedging strategy. This post looks at deeper reason and analysis of what triggered this loss.

What happened?

It is believed after the entire loss math that JP Morgan did hedging or rather entered into bets with CDX family of investment grade, popularly known as Markit CDX IG. The Markit CDX North America Investment Grade Index is composed of 125 equally weighted credit default swaps on investment grade entities, distributed among 6 sub-indices: High Volatility, Consumer, Energy, Financial, Industrial, and Technology, Media & Tele-communications. Markit CDX indices roll every 6 months in March & September. Current series is 18.

With index, your exposure is broken into various assets rather than one CDS or company. Since it was Investment Grade, JP Morgan believed these companies would never default or credit spreads would remain low.  Let us look at CDX IG Series 18 movement for 5 years, the credit spreads widended in April and May. If JP Morgan betted against increase in spreads and named it only hedge then trouble was round the corner.

Even if these companies may not default, but from pure trading perspective JP Morgan positions into CDX made a loss due to credit spread widening. Since the size of exposure was huge, losses were also huge.

The results:

1. JP Morgan stock tumbled on New York Stock Exchange. It has been more than 20% loss in stock prices since the news is out.
2. Regulators and lawmakers are now likely to push Dimon for more details about the trades. Those details will guide how regulators now view the issue and its impact on the Volcker rule, said Karen Petrou, managing partner of Washington-based Federal Financial Analytics.

3. Likely changes in risk management of banks globally. CEO, Jamie Dimon opposition to Volcker rule to ban proprietary trading by big banks may be criticized.

Courtsey: Bloomberg, Markit