Professional Documents
Culture Documents
Newsletter - 1st Oct To 15th
Newsletter - 1st Oct To 15th
Newsletter - 1st Oct To 15th
Volume 3||Issue 4
In this Issue
Indian
SEBI bars DLF from
securities market for 3 years
3) Market Watch.5
4) IIMR 20 Weekly Update6
5) FinGyan .7
6) Finsight...8
7) Guess It!.................................9
Inc's
foreign
investment doubles to
$3.02 bn in September
Manjeet Kumar
crawls
on
weak
investments,
consumer
demand
PGDM 2014-16
Global News
Fed likely to end bond buying, may signal caution on rate hikes
The Federal Reserve is likely to reassure investors later this month that it won't stand idle if global
turbulence threatens the U.S. economy, but a proposal from one top policymaker to keep on buying bonds looks to
be a bridge too far
A sharp decline in the unemployment rate over the past year had given the U.S. central bank confidence it
could bring its so-called quantitative easing of monetary policy, or QE, to an end at its next meeting on Oct. 28-29,
and it had bolstered the forecast of many officials for a mid-2015 interest rate hike. But mounting signs of
weakness overseas, particularly in euro zone powerhouse Germany, and a related drop in global stock markets
have led investors to question the central bank's resolve. Perhaps most troubling for the Fed, bond market measures
of inflation expectations has turned sharply south.
Indian News
Narendra Modi appoints Raghuram Rajans ally Arvind Subramanian as CEA
Ending two months of uncertainty, U.S.-based economist Arvind Subramanian has been appointed as the
Chief Economic Advisor, on a day of drama in which the finance ministry's top civil servant was sacked. Setting
out his priorities, Subramanian said: "For any economy like India, two big things are macro-economic stability
and, of course, creating the conditions for rapid investments and growth."
Subramanian's new job gives him considerable influence over the next budget, due in February, as
expectations grow for significant reforms to free up the Indian economy.
Deals Section
Major Companies in Action
Market Watch
SENSEX
26108.53
Company
BHEL
109.19 (0.42%)
226.55
3.40
2,877.10
3.05
HDFC Bank
885.30
3.04
Aurobindo Pharma
953.90
19.13
BSE
Top
Losers (Last Week)
Religare
Enterprises
358.30
16.54
Hero Motocorp
Returns - Sensex
23.32% 1Week
YTD
6 Months 15.40%
1 Year
-0.70% 1Month
-2.00% 3 Months
27.90% 2 Year :
40.30% 3 Year :
2.10%
53.40%
CNX NIFTY
Company
GSFC
7779.70
TCS
31.50 (0.41%)
Returns - CNX NIFTY
YTD :
23.41% 1Week
-1.00% 1 Month
-2.50% 3 Months
1.80%
6Months:
14.80% 1 Year
28.70% 2 Year
37.40% 3 Year
52.00%
Gold - 5 Dec
27256.00
193.00
-0.7%
Silver - 5 Dec
38399.00
473.00
5095.00
230.90
Price % Gain
Price % Loss
118.45 14.28
2,444.90
-8.73
Sesa Sterlite
232.75
-2.76
Hindalco
139.70
-2.24
127.60 -16.14
13.34 -15.57
Price % Gain
Aban Offshore
Zee Entertain
556.10 -13.56
322.40
3.28
-1.22%
BHEL
226.75
3.26
14.00
-0.27%
HDFC Bank
885.25
3.07
3.70
-1.58%
61.44
78.26
98.73
-0.39
-0.03
0.01
Price % Loss
-0.64%
HCL Tech
1,505.50
-9.08
TCS
2,441.15
-8.85
232.65
-2.72
-0.03%
0.01%
Sesa Sterlite
FinGyan
Over-Allotment or Green shoe Option
A provision contained in an underwriting agreement that gives the underwriter the right to sell investors more
shares than originally planned by the issuer. This would normally be done if the demand for a security issue proves
higher than expected.
Green shoe options typically allow underwriters to sell up to 15% more shares than the original number set by the
issuer, if demand conditions warrant such action. The term is derived from the fact that the Green Shoe Company,
now called Stride Rite Corp. was the first to issue this type of option.
A green shoe option can create greater profits for both the issuer and the underwriting company if demand is
greater than expected. A green shoe option can provide additional price stability to a security issue because the
underwriter has the ability to increase supply and smooth out price fluctuations if demand surges.
Underwriters use over-allotment option in the following way to bring about price stability. If the stock price drops
below the offering price, the underwriters can buy back some of the shares for less than they were sold for,
decreasing the supply and hopefully increasing the price. If the stock rises above the offering price, the
overallotment agreement allows the underwriters to buy back the excess shares at the offering price, so that they
don't lose money.
Finsight
How to predict stock movement correctly!!!
Let me tell you this by way of a story. Lets say one day you receive a newsletter sent to you by a person who
claims to have some predictive skills about the stock market. The newsletter states that Reliance Industries will go
up by more than 10% over the course of next one month. You look at it and you toss it aside, but you dont forget
to notice that after one month, it has actually gone up by 10%.
You say, Well, that can happen any time. Its a random thing.
The next newsletter comes in the beginning of next month, and this time it predicts that Reliance will fall by 10%.
Again a month passes and you notice that the second prediction has also come true.
A third prediction comes at the beginning of the next month, and this time he makes another prediction
about Reliance which also comes true. And the fourth, fifth, and the sixth prediction also turn out to be true.
You start thinking, This cant be a coincidence! This man has real predictive powers.
But, whats really going on? Well, its a scam. The newsletter publisher has no predictive powers. But he does
know that if he makes three different predictions about Reliance that it will go up, or down or nowhere then
one of the predictions will come true, although he has no clue which one will come true.
So he sent his first newsletter to 364,500 people. 121,500 people get the first prediction, and an equal number get
the second and the third prediction. Obviously, one third of the recipients 121,500 of them will get the correct
prediction.
The publisher drops the others and focuses on these 121,500 for the next edition. This time he divides them again
in three groups each having a size of 1/3rd or 40,500 recipients. Again, each group gets a different prediction, and
one group, will obviously get the correct prediction.
He continues this process for four more rounds by which time, he would have 500 very-impressed recipients each
of whom would have received six correct predictions in a row and you were one of them and you dont know
whats really going on. All you get to see is six correct predictions in a row.
So, when the next six predictions are offered to you, for a price of Rs.50,000, you immediately start thinking how
easy would it be for you to recover this cost from the trading profits made on the basis of the next prediction alone.
Moreover, you would get over-confident and perhaps borrow money to finance the next operation. You will also,
eventually, go broke.
Its a funny story, and the way it is told, its obvious to anybody that this is a scam. But to the gullible people,
under the influence of availability bias where they dont see what they dont see and therefore assume that
thats all that there is to see well, they go broke.
In the investment business this happens often that people go broke over-reacting to what they know, and underreacting to what they dont.
I mean just think about it Isnt mutual fund advertising a variant of the stock market newsletter scam?
When you look at mutual fund advertisement, what do you see?
You see claims like: During such and such period, our Technology/Infra/Real Estate fund was the best performing
fund in the country.
What you dont see is that the fund house has a number of funds, which may not have done as well as the one
being touted in the advert. So you are unlikely to be made available all of the facts about all of the ones. Rather,
what that will impress the most will be the one thats made available to you.
If you are in charge of designing adverts for mutual funds, you know that you must only talk about winners to take
advantage of the gullible public which will chase recent excellent performance.
Youd know that your job is essentially to exploit the readers availability bias. And if the IT fund is not doing so
well anymore because that bubble has burst, then perhaps its time to not talk about it anymore, and perhaps its
time to replace it with data pertaining to the hot Real Estate fund!
Guess It!
Below are the 5 clues about a company. First three people to identify the company correctly
will be declared as winners in our next newsletter.
1) This Gujarat based company entered into the market after 2000 but in this small duration entered into the league
of Top 6 with highly established brands.
2) It helps the backbone of our country to increase productivity.
3) Its 5 year Sales CAGR is 25%+ , 10 year Profit CAGR is 20% + , 5 year Average ROE is close to 20%
4) The Stock has gone up over 200% in the past one year.
5) The company has a market cap of over 800 Cr