Financial terminologies

Mostly, we all are confused because of some financial terminologies. Here are a few to resolve them. 

Tranche

A portion or instalment, especially, of a loan or share issue.

1. One part or division of a larger unit, as of an asset pool or investment.
2. A group of securities that share a certain characteristic and form part of a larger offering.
3. Any part, division, or installment.

"Tranche" is the French word for "slice".

A piece, portion or slice of a deal or structured financing. This portion is one of some securities that are offered at the same time but have different risks, rewards and maturities. Tranche is a term often used to describe a specific class of bonds within an offering wherein each tranche offers varying degrees of risk to the investor.

For example, you might need cash flows in the short term and another investor could have a need for cash flows in the long term but not right now. To take advantage of this selling situation, an investment bank could split some security or asset into different parts so that you receive the early cash flows of a mortgage and the other investor has the right to receive the latter cash flows.

LIKE-FOR-LIKE or LFL

Like for like or LFL is a comparison of this year's situation to last year's in a particular company, taking into consideration only those activities that were in effect during both time periods. Like-for-like is a method of valuation that attempts to exclude any effects of expansion, acquisition & merger or any other event that artificially enlarge a company's sales or net worth.

This method is often use to forecast the same for current year if all the conditions are similar...

Weaken gold and strong Dollar- driving global economy towards....

There is an intrinsic co-relation between gold prices and the US dollar. When the demand for the US dollar falls, banks investors around the world invest more in gold.

Gold is considered to be a hedge against inflation, recession, and other times of uncertainties, especially due to its high demand and finite supply. This precious metal was, for a long time in history, used as currency, and is still a safe haven for investors. Consequently, most central banks around the world invest more in gold to preserve their assets during volatile economic conditions.

On the other hand, the US dollar is widely accepted as an instrument of global currency exchange. Hence, most central banks also invest their funds in the US dollar.

When USD appreciates, an increasing numbers of investors shift their investment from gold to Dollar. This fall in demand causes the value of gold to depreciate. This behavior of investors creates an inverse relationship between gold and the US dollar.

During the 19 century, The US dollar became a true fiat currency, traded on foreign markets and used as a reserve currency without risking the US gold reserves, while the price of gold was freed from the restraints that had been imposed on it by financial policies designed to keep currencies under control. Now US dollar was free from gold standard and now it can fluctuate more widely.

The value of the gold remains stable in comparison to currencies, but its price in any given currency can fluctuate as the perceived value of that currency changes.

Downward trend in gold price in USD reflect confidence the currency. Thus, the price of gold tends to move in opposite directions to the value of the US dollar.

In the year 2014, gold had a steady start and the prices rose through much of the year, fueled by geopolitical tensions. However, of late, prices have fallen due to a stronger dollar.

In early 2014, gold started at $1202 per ounce and showing upward trend and in March gold was on its 6 months high $1379 per ounce, due to global worries, it left investors in a situation to think bullion as a safe vault. However, the bubble soon burst as gold prices fell below $1,300 per ounce at March end, on stronger-than-expected U.S. economic data.

Gold prices remained on either side of $1,300 before plunging to $1,244 per ounce in the first week of June on positive U.S. economic indicators and lower demand in China as well as India in contrast to the record levels last year. During July mounting tensions over Ukraine and Gaza sent gold prices to a 3 month high of $1,339 and sustained its upward trend through July and August.

Since July, the U.S. Dollar Index (USD) – a measure of U.S. currency against a weighted basket of its peers – has gained roughly 9%. That's a stunning move for a major currency over a span of just four months. The USD Index just peaked at 87.60 – the highest since 2010.

In September, prices remained steadfastly under the $1300 range, eventually dipping to a 2014 low of $1,215 in September on the back of a strong dollar. News of U.S.-led air strikes in Syria lifted gold price from these levels. As the dollar rose to four-year highs, gold prices fell to a nine-month low of $1,207 per ounce in September end.

During September gold bounce back from nine month low to $1222 per ounce this was the time when global equity market fell.

Gold prices are likely to drop further as USD continuous to strengthen. Additional, persistent economic recovery may prompt the Federal Reserve to raise interest rates sooner than expected. The waning of geopolitical tensions will also weigh on gold prices. However, advent of the festive and wedding season in India is expected to spruce up demand in one of the biggest markets for gold.

Oil prices posted their sharpest losses since 2011. Spot gold was down 0.6 per cent at $1,184.44 an ounce at 1033 GMT, while US gold futures for December delivery were down $13.10 an ounce at $1,183.50. "Weakness in oil prices isn't good for gold, because inflation expectations are adjusted downwards," ABN Amro analyst Georgette Boele said.

The OPEC decision also hurt stock markets and other commodities, with copper falling to an 8-month low. Sliding oil prices are set to remain in focus as US markets reopened after the Thanksgiving holiday.

 Data source:-

http://www.kitco.com/

http://www.zacks.com/

http://www.smarterwithmoney.in/

http://articles.economictimes.indiatimes.com/

http://www.macrotrends.net

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Is Russian economy about to hit recession?

The Russian economy is near stagnation, with continued depressed domestic demand leading to growth of 0.8 % in the first half of 2014, similar to 0.9% in 2013. It was operating on the threshold of recession in the first half of 2014 with quarterly seasonally adjusted growth for the first two quarters close to zero. As a result, Russia’s growth dipped in the first quarter under that of all other relevant comparator country groups. Consumer and business sentiments were already weak in 2013 due to lingering structural problems and contributed to the wait-and-see attitudes of households and companies and leading to a slowdown of the Russian economy to 1.3% from 3.4 %in 2012.

I past three month Russian currency ruble has fallen upto 23% against USD. Such a plunge inevitably brings inflation in the form of more expensive imports, a worry given that consumer prices in Russia are already rising at over 8% a year.

The head of the Central Bank of Russia, Elvira Nabiullina, is struggling to nip this trend in the bud. First, on November 5th, she hiked interest rates, to 9.5%. That means that rouble deposits earn far more than dollar ones, which should make the currency more attractive. Next, she attempted to deter bets against the rouble by replacing the central bank’s puny and predictable sale of $350m a day in its defence with the threat of far bigger ad hoc interventions. Finally, she crimped commercial banks’ access to roubles to limit their ability to speculate against the currency.

While making changes Ms Nabiullina needed to be more courageous. The main reseaon ofr  The first is oil. In the first half of 2014 Russia’s exports brought in $255 billion, with 68% of that coming from sales of oil and natural gas. During that period oil prices averaged $109 a barrel; today they are close to $80. Applying a proportional cut to Russia’s energy exports would slash revenues by over $40 billion, more than wiping out Russia’s current-account surplus.

There are other reasons to sell roubles and buy dollars. Across the economy there is over $120 billion in external debt maturing in the next year according to central bank data.

The dependence on Western markets and currencies pains Vladimir Putin, Russia’s president. On November 10th he signed a deal with Xi Jinping, his Chinese counterpart, that will see Russia export gas from Siberia to China via new pipelines. The deal provides a huge new source of demand, and could see China replace Europe as Russia’s main export market.

But the pipelines will take years to be built and financing for the project has yet to be secured. In the meantime Russia may have to cope with low oil and gas prices for years. On November 12th a new set of forecasts from the Energy Information Administration, an American government agency, said that oil prices are likely to average $83 a barrel in 2015.

If VLADIMIR PUTIN is not short of problems and many of them are his own creation. There is the carnage in eastern Ukraine, where he is continuing to stir things up. There are his fraught relations with the West, with even Germany turning against him now. There is an Islamist insurgency on his borders and at home there is grumbling among the growing numbers who doubt the wisdom of his Ukraine policy.

Russia’s oil-fired economy surged upward on rising energy prices; now that oil has tumbled, from an average of almost $110 a barrel in the first half of the year to below $80, Russia is hurting. More than two-thirds of exports come from energy.

The immediate worry is the oil price. Mr Putin is confident it will make progress. But supply seems set to increase, with OPEC keen to defend its market share. American government agencies predict oil prices could average $83 a barrel in 2015, well below the $90 level Russia needs to avoid recession (by keeping its budget in balance). If global demand weakens—Japan has slipped into recession since the latest round of forecasts—the oil price could fall further. That would immediately prompt investors to reassess Russia’s prospects.

Russia’s firms have over $500 billion in external debt outstanding, with $130 billion of it payable before the end of 2015, at a time when few Western banks want to increase their exposure to Russia.

Russia’s public finances are also much healthier than those of many of the countries against which it is pitted over Ukraine. The budget deficit was 1.3% of GDP last year, whereas it stood at 3.3% for the EU. Government debt amounted to a mere 13% of GDP, compared with 87% in the EU.

Russia’s current account is in surplus, forecast by the IMF to be 2.1% of GDP in 2014. In contrast countries like Turkey and South Africa, which took a battering earlier this year as investors worried about fragile emerging economies, are projected to run deficits of 6.3% and 5.4% respectively.

Russia’s economy is teetering on the verge of recession. The central bank says it expects the next two years to bring no growth. Inflation is on the rise. The rouble has lost 30% of its value since the start of the year, and with it the faith of the country’s businessmen. Banks have been cut off from Western capital markets, and the price of oil—Russia’s most important export commodity—has fallen hard. Consumption, the main driver of growth in the previous decade, is slumping. Money and people are leaving the country.

In 2007, when oil was $72 a barrel, the economy managed to grow

at 8.5%; in 2012 oil at $111 a barrel bought growth of just 3.4%.
Between 2010 and 2013, when oil prices were high, the country’s net outflow of capital was $232 billion—20 times what it was between 2004 and 2008. Russian economists are now debating how long before the economy faces collapse. Most think it can totter on for two years or so.
But there is a real chance things could get a lot worse a lot sooner. The depreciation of the rouble, which closely tracks the oil price, has helped Russia cushion its budget as that price has slumped (see chart). When the oil price falls, so does the rouble; thus in rouble terms the amount of money the oil brings in stays roughly the same. But it cannot buy as much. Russia imports a great deal—the total value of imported goods, $45 billion in 2000, was $341 billion in 2013—and so a devalued rouble quickly stokes inflation. It is predicted to reach 9% by the end of this year; for food the rate is higher still. If it is to compensate the population for this loss in its spending power, the government will have to run a bigger deficit. If it does not it will face discontent. A weak rouble also makes servicing foreign debt more expensive. Russia’s sovereign debt is just $57 billion, but its corporate debt is ten times as high. Some of it has been racked up by state corporations and national energy companies, which gives it a quasi-sovereign status. And by the end of 2015 Russian firms will have to repay about $130 billion of foreign debt.

A return to higher growth in Russia will depend on solid private investment growth and a lift in consumer sentiment, which will require creating a predictable policy environment and addressing the unresolved structural reform agenda.

Current market condition 

Data source:- http://www.economist.com/

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What is financial modeling? Basics, Types and importance.

In present era many people or say about more than 60% don’t know what financial modeling is? It is not only Valuation or budgeting or forecasting, it is much more than that. It is a tool to make calculation in easy and faster way.

LET CHECK WHAT IS FINANCIAL MODELING…

Financial modeling

Financial modeling is anything that is used to calculate, forecast the financial number automated calculation of given data and making recommendations. It can be a simple formula or a set of complex financial equations.

Famous website investopedia for financial information describe it as “The process by which a firm constructs a financial representation of some, or all, aspects of the firm or given security. The model is usually characterized by performing calculations, and makes recommendations based on that information. The model may also summarize particular events for the end user and provide direction regarding possible actions or alternatives. A model, for example, can summarize investment management returns, such as the Sortino ratio, or it may help estimate market direction, such as the Fed model.”

Use of financial models

• Historical analysis of a company
• Projecting a company’s financial performance
• Project finance
• Investment planning
• Equity search
• Company/firm valuation
• Personal finance
• Budgeting
• Investment banking
• Government
• Bank and financial institutions

Users of financial models

• Business owners and entrepreneurs
• Finance and Accounting professionals
• Financial Consultants
• Individuals for personal finance

The areas where we can use financial modeling skills

• Forecasting future raw material needs
• Valuation of a security
• Benefits of a merger
• Check the size of the market opportunity
• To check the profitability
• Check investment requirement
• Quantify and predict risk
• Portfolio performance
• Identify undervalued securities

What are the types of financial modeling?

• There are different financial models that we can use as per our requirement.
• Comparative Company Analysis model
• Sum-of-the-parts model
• Leveraged Buy Out (LBO) model
• Merger & Acquisition (M&A) model
• Industry-specific financial model
• Option pricing model
• Corporate finance models
• Discounted Cash Flow model
• All the above mentioned models are being use to solve different problems.

What do we required to do financial modeling?

• You should know accounting/finance and valuation
• You should know excel
• KNOW “what problem are you going to solve”
• You should know the scope, benefits and limitations of financial modeling
• Model should be easy to understand
• Model should be flexible enough to revise in future
• It should decision maker

 So now if you are not doing company valuation it doesn't mean, you don't know modeling, you know but it is just you are not working on valuation. 

SO DON’T GET CONFUSE AND HAPPY MODELING…. :)

Largest Indian public sector bank SBI stock split in 1:10

State Bank of India, India's largest public sector lender, moved higher in trade as 1:10 stock split comes into effect. November 21, as the record date for a stock split in the ratio of 1:10, i.e. a share of face value Rs 10 is split into 10 shares of face value Rs 1 each.

The stock price has split from Rs 2,911 per share to close at Rs 297.10 per share after the split.

It now becomes easy for investors to acquire the stock at a lesser price, as it had run-up sharply in the past one year.

The stock closed at Rs 297, up 2.01 per cent, on the BSE. It touched an intraday high of Rs 298.70 and a low of Rs 291.05 in trade yesterday.

(11/21/2014)

Close                                       -           305.5 (+2.83%)

Range                                      -           297.25 - 307.00

52Week                                   -           291.25 - 2,979.00

Open                                       -           299.90

Vol                                          -           21.01M

Mkt cap                                   -           2.23T

P/E                                          -           1.52

Div/yield                                 -           15.00/9.82

EPS                                         -           200.52

Shares                                      -           7.47B

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Reserve bank Of India (RBI) Tighten rules for NBFCs

For growth without any hurdle and to protect customers Reserve bank of India (RBI) has tightened rules for NBFCs”, by raising minimum capital requirements and restricting deposits.

The RBI, which has long warned of the risks posed by unregulated financial firms, said on Monday that their growth meant Non-banking financial companies (NBFCs) could now pose risks to the broader market. A senior RBI official said in September that the bank recognizes roughly 12,000 registered NBFCs.

"NBFCs are now deeply interconnected with the entities in the financial sector," the RBI said in a statement on Monday.

The new rules are meant to replace a set of loose guidelines that had previously governed the NBFC sector, which has grown rapidly in recent years. Analysts estimate NBFCs account for about 12 percent of the total assets in India's financial sector.

RBI tightened Tier 1 capital requirements and said NBFCs would need to hold capital levels of at least of 10 million rupees ($162,668) by the end of March 2016 and 20 million rupees by end-March 2017 to avoid losing their right to operate.

The central bank also said only certain investment-grade NBFCs would be allowed to take deposits, saying the firms would have until the end of March 2016 to acquire a credit rating. It capped deposit-taking at 1.5 times the size of a firm's minimum capital -- down from four times previously.

The RBI said the new rules would address risks posed by these firms "without impeding the dynamism displayed by NBFCs".

"RBI is slowly and steadily removing all kinds of arbitrage possible," he said, declining to be identified because he was not authorised to talk to the media. "To that extent, I am more inclined to believe, this is not the last of it."

Requirement of Minimum Net Owned Fund (NOF)  of Rs. 200 lakh

As per the new rules, The need for strengthening the financial sector and technology adoption, and in view of the increasing complexities of services offered by NBFCs, it shall be mandatory for all NBFCs to attain a minimum NOF of Rs. 200 lakh by the end of March 2017, as per the milestones given below:

·         Rs. 100 lakh by the end of March 2016

·         Rs. 200 lakh by the end of March 2017

 Exemptions

1.       In the circular dated March 21, 2014 on Early Recognition of Financial Distress, Prompt Steps for Resolution and Fair Recovery for Lenders: Framework for Revitalizing Distressed Assets in the Economy, ‘Notified NBFCs’ in the circular shall henceforth be defined as a) NBFCs with assets of Rs. 100 crore and above, b) NBFCs-D, and c) all NBFC-Factors.

2.       The revisions brought through this circular shall be applicable to NBFCs-MFI also except wherever in conflict with the provision of Non-Banking Financial Company- Micro Finance Institutions (Reserve Bank) Directions, 2011, in which case the Directions ibid will be followed.

3.       The minimum Tier 1 capital requirement for NBFCs primarily engaged in lending against gold jewellery remains unchanged for the present. This shall be reviewed for harmonization in due course.

4.       The above revisions shall be applicable to registered Core Investment Companies except wherever contrary with the provisions of Core Investment Companies (Reserve Bank) Directions, 2011, in which case the Directions ibid will be followed.

Data source:- http://rbi.org.in/scripts/NotificationUser.aspx?Id=9327&Mode=0

                      https://in.finance.yahoo.com/news/india-tightens-rules-shadow-banks-161434399.html

The war begins…Crude oil price will churn global economy.

The global demand for oil is declining as the United States moves toward self-sufficiency and is the only nation in a positive economic trend. Global economy other than USA turning down since 2007 including China and Russia no less Europe.

The oil price has fallen in the past week for the first time since one and a half years under the $ 100 mark dropping to test the $90 level. Because of the weak economic outlook for Europe, Russia, and China, the IEA has now reviewed its global demand forecast for 2014 and 2015 downward. They expect 2014 global demand of only 92.6 million barrels per day – an increase of 900,000 barrels per day from the previous year. For 2015, the organization expects global demand of 93.8 million barrels per day – an increase of 1.2 million barrels per day.



At the start of 2014, oil prices were already below the break-even point for Iran, Venezuela, Nigeria, and Iraq. But now, as prices drop below $90 per barrel, they're falling below the break-even point for Libya, Russia, and Saudi Arabia.

At the moment, it's looking like Russia's economy could be in serious trouble, Iran's is in flux — and Saudi Arabia seems far more positive about the situation.

Dwindling oil prices could crush Russia's economy

Russia's situation is getting most of the attention these days. The country was already suffering from weak growth — on pace to expand just 0.4 percent in 2014.

Now the dive in global oil prices is putting even further strain on the nation's economy. Russia account its oil revenues budget for about 45 percent, and the government's spending plans for 2015 had assumed that prices would stay in the $100-per-barrel range. If oil continues to sink below that, the country will either have to draw down from its $74 billion foreign-exchange reserves or cut back on planned spending — something that Russian President Vladimir Putin suggested was possible on Tuesday.

The Russian government’s recent draft federal budget for 2015 and projections for 2016 and 2017 give an overview of just how much falling commodity prices will impact government accounts. So far, despite sanctions and oil prices in decline since June, Russia will end the year with a surplus of 196.8 billion rubles ($5.04 billion). This amount has been in decline since the first quarter, however. A deficit is being budgeted for the next three years.


The key element of Russia’s budget planning is oil.

(Russian budget in the red. But Russian president Vladimir Putin says government will not raise taxes to compensate for falling oil revenues.)

Since the largest share of government revenue comes from oil and gas revenues, the ruble’s devaluation will play a significant role in meeting the budget targets for the current year, while posing risks for inflation down the road. This situation is worsened by falling oil prices since July.

Investors do not believe that Russia will use oil and gas as a weapon in its sanctions war against the West. In such a scenario, Russia would limit exports of natural gas to a dependent European Union. In theory, this would drive up prices as Russia tightens supplies.

Iran's economy was recovering, before the price drop

One big problem for Iran is that it also needs oil prices well north of $100 per barrel to balance its budget, especially since Western sanctions have made it much harder to export crude. And if oil prices keep falling, the Iranian government may need to make up revenues elsewhere — say, by paring back fuel subsidies for its citizens (always an unpopular move, at least in the short term).

Saudi Arabia seems more sanguine
Meanwhile, oil prices have now dropped below Saudi Arabia's break-even point — around $83 per barrel. But, so far, many the country's leaders sound a little more confident that they can survive the hit.

Saudi Arabia could respond by trying to cut back on its own oil production in order to prop up global prices. (The country is such a massive oil producer that it has a lot of control here.) But for the time being, the Saudis are signaling that they're prepared for low prices, possibly even a year or two with oil at $80 per barrel.

One question is how far Saudi Arabia can let prices fall without incurring too much domestic pain. In September, the International Monetary Fund warned that Saudi Arabia would run a deficit of roughly 1.4% in 2015, not least since the country has been ramping up big infrastructure projects and doling out foreign aid around the Middle East of late. That shortfall would force the country to start drawing down its massive foreign-exchange reserves.

So far, Saudi Arabia seems prepared to wait it out. According to the Financial Times, even if oil prices stayed at $80 per barrel for a year, the country would only need to draw down about $10 or $20 billion of its $750 billion in foreign-exchange reserves.

Saudi Arabia, the largest oil producer in OPEC, lowered his deliveries in August by 330,000 barrels per day to 9.68 million barrels a day in response to the low demand of the customers. Saudi Arabia’s production will see further decreases in hopes of stabilizing the price of oil. Saudi’s oil exports may already fallen to 7 million barrels per day – the lowest level since September, 2011.

Crude oil and India
The slide in crude oil prices to four-year lows is a huge positive for India as the country can produce one fourths of its consumption and depends on imports.

India's net imports of crude oil amount to about a billion barrels every year. So, if crude oil prices average about $100 per barrel in the current fiscal the country's import bill will fall by $10 billion (about Rs 61,000 crore), which is close to one-third of the current account deficit. Analysts say that if crude oil averages at $100 per barrel this fiscal, India's CAD will reduce to 1.3% of GDP from 1.7% in the previous year.

The Indian crude oil prices on the MCX have fallen sharply to around Rs 5,100 per barrel.

The good news is that the low fuel prices can give a push up to economies of the Emerging markets which are still finding their footing. The concerns with Euro Zone have been immense with IMF pointing on risks of recession unless action taken.






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Fourth Bi-Monthly Monetary Policy Statement, 2014-15

On 30 September, the Reserve Bank of India (RBI) announced fourth Bi-Monthly Monetary Policy Statement. RBI in its fourth bi-monthly monetary policy statement didn’t change the policy rates and kept it at 8 %.

Monetary and Liquidity Measures

On the basis of an assessment of the current and evolving macroeconomic situation, it has been decided to:

·         keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.0 per cent;

·         keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liabilities (NDTL);

·         reduce the liquidity provided under the export credit refinance (ECR) facility from 32 per cent of eligible export credit outstanding to 15 per cent with effect from October 10, 2014;

·         continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo rate and liquidity under 7-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system through auctions; and

·         Continue with daily one-day term repos and reverse repos to smooth liquidity.

Consequently, the reverse repo rate under the LAF will remain unchanged at 7.0 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 9.0 per cent.

Assessment

Since the third bi-monthly monetary policy statement of August 2014, global activity has been recovering slowly from the setback in Q1 of 2014, on the back of strengthening consumer spending and gradually improving labour market conditions in advanced economies (AEs) like the United States. However, the Euro area, where growth has stalled in the core economies, continues to be weak. Major emerging market economies (EMEs) continue to struggle with tepid domestic demand and headwinds from structural impediments. With monetary policy in AEs remaining highly accommodative, investor risk appetite has increased and spread to various asset classes. With volatility perhaps excessively low, financial markets have risen to new highs, driving surges of capital flows to EMEs. Apart from concerns about a sudden correction in financial markets if investors misread the timing of a reversal of the US monetary policy stance or if geopolitical tensions intensify, some downside risks to growth also persist, such as a possible further slowdown in the Euro area.

Domestic activity appears to have come off somewhat after the stronger-than-expected upturn in Q1 of 2014-15. In Q2, the growth of industrial production slumped in July, as capital goods production followed consumer durables into contraction. Exports cushioned the fall in manufacturing output, with the Reserve Bank’s industrial outlook survey indicating expansion in export orders.

Rainfall from the south west monsoon, now expected to be about 12 per cent deficient, will weigh on the kharif crop, mainly due to its uneven spatial distribution. 

Retail inflation measured by the consumer price index (CPI) came off the vegetable prices-driven spike in July 2014 and eased in all major groups barring food. Large and persistent upside pressures on food prices have resulted in their contribution rising to almost 60 per cent of headline inflation in August.The Reserve Bank will look through base effects.

Liquidity conditions have remained broadly balanced through Q2 of 2014-15, except for transient tightness in the second half of July and early August due to delayed Government expenditure. Thereafter, as these expenditures began to flow, liquidity conditions eased. With credit growth falling well below deposit growth in August and September, structural sources of liquidity pressures also eased. The average recourse to liquidity from the Reserve Bank, measured by daily net liquidity injection through LAF, term repo and MSF, decreased from `870 billion in July to `795 billion during August and further to `450 billion during September so far (up to September 28). The Reserve Bank revised its liquidity management framework with effect from September 5, 2014, with more frequent 14-day term repos and daily overnight variable rate repo operations, to ensure flexibility, transparency and predictability in liquidity management operations.

Non-food credit growth decelerated in September 2014, the lowest level since June 2001, despite liquidity conditions remaining comfortable and deposit growth remaining normal. Partly, this sharp deceleration is on account of a high base – monetary tightening to curb the exchange market pressures in July-September last year raised interest rates on alternative sources of funds and pushed up the demand for credit from the banking system. Adjusting for these base effects, non-food credit growth would have been around 11 per cent in September 2014. 

Incoming data suggest that the current account deficit, placed at 1.7 per cent of GDP for Q1 of 2014-15 may remain contained in Q2. Over April-August 2014, the trade deficit was narrower than a year ago, notwithstanding a slowdown in export growth in July and August and a strengthening of non-oil non-gold import growth to its highest level since March 2013. The improvement in the trade balance has benefited from the fall in the value of gold imports. Even as the external financing requirement stays moderate, all categories of capital flows remain buoyant. As a result, there has been an accretion to international reserves, even though reserves denominated in US dollars have moderated somewhat in recent weeks, largely because of the strength of the US dollar.

Policy Stance and Rationale

Since June, headline inflation has ebbed to levels which are consistent with the desired near-term glide path of disinflation -- 8 per cent by January 2015. The most heartening feature has been the steady decline in inflation excluding food and fuel, by a cumulative 111 basis points since January 2014, to a new low. With international crude prices softening and relative stability in the foreign exchange market, some upside risks to inflation are receding. Yet, there are risks from food price shocks as the full effects of the monsoon’s passage unfold, and from geo-political developments that could materialise rapidly.

The momentum of activity in all sectors of the economy is yet to stabilize. Agriculture should shed the effects of recent shocks and pick up in Q4 of 2014-15. Industrial activity will await improvement in the business environment and the resumption of consumption and investment demand before gaining sustained speed. Post-monsoon revival in construction activity and the likely strengthening of momentum in business and financial services should sustain the recent signs of expansion in the services sector.  The key to a turnaround in the growth path of the economy in the second half of the year is a revival in investment activity – in greenfield as well as brownfield stalled projects – supported by fiscal consolidation, stronger export performance and sustained disinflation. With expectations of these conditions remaining broadly unchanged, the projection of growth for 2014-15 is retained at 5.5 per cent within a range of 5 to 6 per cent around this central estimate. The quarterly growth path may slow mildly in Q2 and Q3 before recovering in Q4.

12. The fifth bi-monthly monetary policy statement is scheduled on Tuesday, December 2, 2014.

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RBI announced 4th bi-monthly monetary policy

Hi Every one,

First things first.. My apologies for not posting anything since a long time.

Currently, I am appraising RBI's (Reserve Bank of India) new policy. Would keep posted you all very soon with it, So far it appears to be a highly goal oriented self-justifying mechanism.

“How Inflation turned out to be the unsolicited exudate on RBI’s forehead and the ministry’s approach to get rid of it”

Certain downward movement in consumer price inflation failed to impress the RBI to cut rates immediately. RBI may reduce the Statutory Liquidity Ratio (SLR) further.

In August, RBI already had cut the SLR by 50bps to 22% of bank’s net demand and time liability. RBI had also reduced the total holdings of SLR securities in the HTM category by 50 bps, to 24% of NDTL.


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Business Plan- 3PL Company in USA

Executive Summary

The business is currently in its infancy.  At this point in time, License and other required permits are being actively sought to start the proprietary nature of the ABC Ltd. program and brand. It is intended that the business will remain small in the area of human resources and grow only as needed to support the needs of users.  That said it is expected to give the nature of the business exponential growth is likely over the next 3 years as licensure is secured as needed and uptake in both the consumer and business communities gains tractions.  It is also anticipated that, initially, there may be resistance by Governing body of USA freight management (state and federal) until appropriate documentation can be produced to support the contention of ABC Ltd. that this Freight transfer process is effective, secure, desirable to the consumer and, above all, profitable for their bottom lines.

Marketing will be a large consumer of capital, especially at launch and for the foreseeable future due to the nature and 'newness' of the concept. It will be necessary to educate consumers of all types as to the nature and veracity of this concept as a necessary tool for their lives in order to begin to build the customer base necessary to support this undertaking. Further, as it is the intention of ABC Ltd. to make this national, we will begin with 1 identified states in first year (Florida), reaching as many potential users as possible within this geographic and building significant membership prior to expanding to other regions. It is anticipated that we will use year one as a pilot program to best understand client needs and concerns, alteration our marketing efforts as necessary as we go.

Mission

The ABC Ltd’s mission is to provide the customer with the most satisfying shipping experience that they have ever experienced. We exist to attract and maintain customers. When we adhere to this maxim, everything else will fall into place. Our services will exceed the expectations of our customers.

 Company Summary

ABC Ltd. is a freight brokerage that specializes in third party logistics solutions. Our team of Freight Brokers will be dedicated to delivering businesses and individuals the best service experience possible, while reducing their freight costs and offering the most efficient technology tools available in the logistics industry. We will thrive on customer satisfaction, and guarantee personalized attention to each of our customers. We will approach each job with a sense of responsibility; caring for the safety of freight, adherence to schedules and the urgency of each freight load. Our versatile and proactive solutions will allow customers the peace of mind needed to effectively focus on running their business.

Start-up Summary

ABC Ltd. start-up costs include all the equipment needed for an office. Additionally, there will be legal fees, marketing fees, accounting fees, trade association dues, and deposit for the lease.

The largest expense for the office is a computer system. The minimum requirements for this we need a computer, printer, and CD-RW, Microsoft Office, and an accounting suite. The office will also require an internet connection, two land-line phones, fax machine, copier machine, and some office furniture.  The legal fees are for corporate formation, and the generation and review of contracts. The marketing fees are the costs associated with advertisements in industry journals, brochures, and website visibility generation. The accounting fees are for the services necessary for the formation of the business, while the majority of the accounting after startup will be done in-house with an accounting suite on the computer.

Start-up Investment	Cost
Business Computer & VoIP phone	$2,000
Furniture	$5,000
Equipment	$10,000
Licenses	$750
FMCSA Bond	$75,000
Website building exp.	$2,000
Other exp.	$500
TOTAL PROJECT COST	$95,250

Services

ABC Ltd. will provide a brokerage service to link manufacturers or suppliers of any kind of goods and their consumer companies. Freight brokers are basically the "middle man" between a shipper and trucking company, also referred to as "third party transportation providers." ABC Ltd. will work with companies to find a safe, economical way of transporting. ABC Ltd. basically is a link between two companies

1.    Manufacturer or supplier of any goods

2.    User of any goods supplied

Industry Analysis Summary

Domestic Mode of Exports and Imports by Tonnage and Value: 2007  and 2040
	Millions of Tons		Billions of 2007 Dollars
	2007	2040	2007	2040
Total	2,027	5,426	3,193	12,134

Total U.S. Imports via FLORIDA

Description	2010 Value	2011 Value	2012 Value	2013 Value	2010 % Share	2011 % Share	2012 % Share	2013 % Share	% Change, 2012 - 2013
Total FLORIDA Imports and % Share of U.S. Total	56,271	65,340	71,216	72,119	2.9	3.0	3.1	3.2	1.3
Total, Top 25 Commodities and % Share of State Total	16,790	22,676	29,800	29,275	29.8	34.7	41.8	40.6	-1.8

Total U.S. Exports (Origin of Movement) via FLORIDA

Description	2010 Value	2011 Value	2012 Value	2013 Value	2010 % Share	2011 % Share	2012 % Share	2013 % Share	% Change, 2012 - 2013
Total FLORIDA Exports and % Share of U.S. Total	55,399	64,929	66,202	60,461	4.3	4.4	4.3	3.8	-8.7
Total, Top 25 Commodities and % Share of State Total	18,127	28,318	29,077	25,720	32.7	43.6	43.9	42.5	-11.5

Strategy and Implementation Summary

ABC Ltd. will be going after the shipping industry in South Florida. This is a reasonable target, due to ABC Ltd’s industry knowledge. ABC Ltd. will be bringing customers aboard through the use of a website, advertisements in industry journals. ABC Ltd. will turn these leads into customers through our specialized knowledge which translates to superior service offerings.

SWOT Analysis

Strength

1.     Concept

The time is right for this concept. We are entering into the market when it is growing and it need to be flourish. We have all the opportunity to grow with the market. We have seen a down trend in previous year but now it is adopting upward trend.

2.     Reach

Florida play a vital role in USA’s economy as most of the export and import been done from its various ports. It has global connectivity.

3.     Cost Efficiency

Although the cost of establishment has been relatively high, now that the market opportunity exists, implementation will be relatively inexpensive. Corporate growth will be covered on a financial level by the operation of the system and Fees (Brokerage) paid by businesses.

From both a consumer and business standpoint, cost efficiency to generate any financial transaction will be cost-free.

4.     Superb cooperation among operating units

5.     Credit soundness 

6.     Strong significant accounting policies

7.     Price and quality of service

8.     Sophisticated and efficient procedures for the management of logistics supply chains 

9.     Marketing reach and efforts

Weaknesses

1.     Lack of funding

Starts up enterprises are always to some extent at risk financially unless they have significant financial backing from a strong external organization. Mr XXXXX has, to date, funded this undertaking privately which has placed a personal strain upon him.  Financing either from revenues (best case), or through funding instruments such as loans, grants or venture investment will be necessary to ensure continuing stability of the budget.

2.     Size

Currently, Fright brokers of America is poised for extensive growth both internally and externally.  Human resources, to date, have been kept to the barest minimum in an effort to hold down costs, but will be necessary as the company ramps up to develop market share.

3.     Instability of customers and service providers

4. Unable to draw meaningful conclusions as to each geographic areas over-all company contribution
5. Non-predictability of shortfall in Annually revenues 
6. Accounts receivable collection
7. Increased overhead expenses 
8. Increased facilities costs
9. Higher business taxes
10. Legal and related expenses
11. Cash flow fluctuates as a result of seasonality
12. Excess of customer billings over customer collections
13. Inability to predict supplier stability
14. Erosion in the company’s margins
15. Sensitive to economic cycles
16. Quick inventory rises

Opportunities

1.     Mobility

Our society has become one that expects nothing less than immediate gratification in all things and this includes their ability to manipulate their financial transactions whether for business or personal use which creates an environment rich for Fright brokers of America's introduction to a hungry market.

2.     Brand Awareness

Currently, Fright brokers of America is a relatively unknown brand. Strong marketing is being designed to support the name as a fright industry necessity over the coming months

3.     Vast market

Currently we are focusing in fright flow from and to south Florida only but in upcoming year we will have our branches or franchises in nearby states. It will increase our expense and cost but also it will increase our revenue and provide us a great connectivity.

4.     Negotiating favorable buy rates

5. Offering lower sell rates 
6. Growth and diversification of the Company’s international network and service offerings
7. Aggressive marketing 
8. Creation of unlimited advancement opportunities for employees
9. Current cash position and operating cash flows will be sufficient to meet its capital and liquidity requirements 

Threats

1.     Competitor Response

There is already significant competition in the Fright transfer business, some of them have good brand image and has good customer profile. There are many newly emerging firms, which are also doing the same as we. These organizations are at varying stages of readiness and services are, while generally considered close enough to make them direct competitors for market share, although not an exact match.  The most notably unique part of Fright brokers of America’s offering is the broking service fees and charges, both at the business and consumer ends of any transaction.  

2.     Political conditions in the United States

3. Taxation
4. Governmental policies concerning International trade
5. Rising costs in general
6. Political unrest 
7. Continued pricing and terms pressure 
8. Increasingly selective in which carriers to utilize
9. Operating results have been subject to a seasonal trend 
10. Weather patterns
11. Anti-competition allegations
12. Salaries and related costs 

Marketing Strategy

The Company intends to use a multitude of marketing strategies to promote and expand the freight brokerage and logistics consulting businesses operations. The Company will maintain its listing in the Yellow pages, create marketing campaigns within local newspapers, Industry magazines and promote the business through word of mouth advertising. The business actively advertises its affordable transportation and delivery services. Mr. XXXXX intends to maintain a website that allows customers to contact Management directly over email for more information regarding the Company’s freight brokerage services and pricing quotes. As the Company expands, the business will upgrade the website to include higher levels of functionality and support.  Additionally, Management intends to continually develop a number of referral and contractual relationships within among retailers, distribution companies, and moving businesses. Since these businesses regularly require trucking/tracking services, Management sees a significant opportunity to partner with these firms.

It is important for marketing strategy to develop an attractive image for ABC Ltd.

·         Initially for first year of operation, we will use online marketing and print media (Trade magazine) to spread the word over internet. Search Engine Optimization and social media marketing will let our users hear our presence online. Telemarketing agents will further reach to merchants in target area to announce how ABC Ltd. can help them. With tight budget for marketing, we will outsource our marketing activities to specialized companies in developing nations like Sri Lanka, India or Manila.

·         In second year of operation we will use our fund to invest more in advertising as we our stepping in 3 more states and we need fund, for funding we will raise our fund from external investor or from bank loan. We will be using this fund to print media magazines and new paper, Radio advertising. Contract with specialized advertising and public relation firms located in USA will guide us to utilize our resources efficiently.

·         With the beginning of third year of our existence, we plan to reach out for additional 6 states. We plan to allocate $0.18 million concentrating heavily on all penetrated 10 states.

·         For the fourth year, we will introduce ABC Ltd. to additional 6 states, announcing our existence to 16 US states. To cover this large audience distributed to such large geographies, we plan to increase our marketing spending to $0.288 million, which will be 14.2% of revenue earned for the year.

·         On our fifth year of existence, we will introduce ABC Ltd. to additional 6 states, we will surge our marketing spending to $0.396 million to cover all 22 states.

Target Market Segment Strategy

By focusing in Fright broking industry, ABC Ltd. will be able to offer superior service. To serve our client in a better way we require expertise and better connection with trucking companies. ABC Ltd. will form intimate relationships with the unique carriers because this relationship will provide ABC Ltd. with special insight, which will allow ABC Ltd. to meet any need a customer might have.

Florida is main junction to export import, as per the above research it’s a growing market. Whether it is an international trade or domestic trade Florida supply goods to everywhere.

Currently our main focus will be domestic transport and will move goods to every part of Florida itself. Once we are well known to the market we will move to next step that is to transport goods to all over the USA and nearby country i.e. Canada and Mexico.

In the freight broker market, there are general brokers that offer a wide range of services. There are a few companies that specialize. In 2002 there was 487thousands of ton goods travelled by trucks and it is expected that this figure will change and will reach to 928 thousands in 2035. We have a great competition but market growth indicate that we will have opportunity to grow.

ABC Ltd. will be marketing our business through several different outlets. The first is the Internet. A lot of the industry has moved to the Web as means for communication regarding freight quotes. ABC Ltd. will be developing a website where a customer can go to find out an estimate for freight rates. The website would key for finding the requisite information like weight, pick up and destination, and ABC Ltd. would work with our carriers to find them the most safe and economical solution.

ABC Ltd. will also be running advertisements in industry trade journals. The ads in the trade journals will provide visibility for ABC Ltd. to the manufacturers and buyers.

·         Take Advantage of Smartphones

·         Give Freight Management Software a Try

·         Be Location Aware

·         Yellow Pages and Classifieds

·         Distribute Fliers

·         Leverage your Network

·         Google rankings

·         Direct Mail

Advertising Strategy

•         Advertise on the radio.

•         Advertise in the Yellow Pages.

•         Advertise on a billboard.

•         Use stickers or magnets to advertise on your car.

•         Take out an ad in your local newspaper.

•         Advertise on a local cable TV station.

•         Advertise on Facebook.

•         Advertise on LinkedIn.

•         Buy ad space on a relevant website.

•         Use a sidewalk sign to promote your specials.

Internet Marketing

·         Email Marketing

·         Relationship Building

    Sales Strategy

		Sales Forecast
Year-1		2015
		Month- 1	Month- 2	Month- 3	Month- 4	Month- 5	Month- 6	Month- 7	Month- 8	Month- 9	Month- 10	Month- 11	Month- 12
		3%	4%	5%	6%	7%	7%	9%	9%	11%	11%	13%	15%
Truck Brokerage
	Florida	3,672.	4,896	6,120	7,344	8,568.	8,568.	11,016.	11,016.	13,464.	13,464.	15,912.	18,360.
	Other
		$3,672	$4,896	$6,120	$7,344	$8,568	$8,568	$11,016	$11,016	$13,464	$13,464	$15,912	$18,360
Year-2		2016
		Month- 1	Month- 2	Month- 3	Month- 4	Month- 5	Month- 6	Month- 7	Month- 8	Month- 9	Month- 10	Month- 11	Month- 12
Truck Brokerage
	Florida	11066	11066	11066	11066	11066	11066	11066	11066	11066	11066	11066	11066
	Other	30600	30600	30600	30600	30600	30600	30600	30600	30600	30600	30600	30600
	3states
		$41,666	$41,666	$41,666	$41,666	$41,666	$41,666	$41,666	$41,666	$41,666	$41,666	$41,666	$41,666
Year-3		2017
		Month- 1	Month- 2	Month- 3	Month- 4	Month- 5	Month- 6	Month- 7	Month- 8	Month- 9	Month- 10	Month- 11	Month- 12
Truck Brokerage
	Florida	12005	12005	12005	12005	12005	12005	12005	12005	12005	12005	12005	12005
	Other	94398	94398	94398	94398	94398	94398	94398	94398	94398	94398	94398	94398
	6state
		106,403	$106,403	106,403	$106,403	$106,403	$106,403	$106,403	$106,403	$106,403	$106,403	$106,403	$106,403
Year-4		2018
		Month- 1	Month- 2	Month- 3	Month- 4	Month- 5	Month- 6	Month- 7	Month- 8	Month- 9	Month- 10	Month- 11	Month- 12
Truck Brokerage
	Florida	13025	13025	13025	13025	13025	13025	13025	13025	13025	13025	13025	13025
	Other	163612	163612	163612	163612	163612	163612	163612	163612	163612	163612	163612	163612
	6state
		176,637	176,637	176,637	176,637	176,637	176,637	176,637	176,637	176,637	176,637	176,637	176,637
Year-5		2019
		Month- 1	Month- 2	Month- 3	Month- 4	Month- 5	Month- 6	Month- 7	Month- 8	Month- 9	Month- 10	Month- 11	Month- 12
Truck Brokerage
	Florida	14131	14131	14131	14131	14131	14131	14131	14131	14131	14131	14131	14131
	Other	238703	238703	238703	238703	238703	238703	238703	238703	238703	238703	238703	238703
	6state
		252,834	$252,834	252,834	$252,834	252,834	$252,834	$252,834	$252,834	$252,834	$252,834	$252,834	$252,834

Sales Monthly

Sales by Year

Milestones

ABC Ltd. has a big year forthcoming. In order to achieve the sales and marketing goals that have been outlined in this business plan, the company has deadlines to meet and ideas to implement. Some of these are outlined below:

	2015	2016	2017	2018	2019
Total load cost	680,000	2,777,732	7,093,561	11,775,804	16,855,570

To generate enough revenue to suffice Marketing and Sales budgets, we are determined to achieve above figures by the end of each respective years.

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