Sensex GDP growth --POSITIVE MOVE

Sensex PE multiple leads GDP growth

It has been a big indicator in the past of a turnaround in economic activity

Shishir Asthana / Mumbai Dec 01, 2012, 00:14 IST The market was expecting a poor GDP number for the September quarter, which was delivered by the government. In Q2, the economy grew at 5.3 per cent, a tad lower than the 5.4 per cent expected by economists. A sharp swing in mining and quarrying activity gave some respectability to the numbers. This sector had declined by 5.4 per cent in the September 2011 quarter, and as a result of this low base, the growth stood at 1.9 per cent last quarter. Manufacturing continued to remain depressed, posting a growth of 0.8 per cent as compared to 2.9 per cent a year ago. However, manufacturing did slightly better than the 0.2 per cent growth recorded in the June 2012 quarter.While the industry and the finance minister were disappointed when the Reserve Bank of India didn’t cut interest rates in October to boost growth, other data coming from the government suggests the central bank might not be in a hurry to do so. Department of Agriculture and Cooperation data reveals production of rice, coarse cereals, pulses and oilseeds are expected to decline by 6.5 per cent, 18.4 per cent, 14.5 per cent and 9.6 per cent, respectively. Thus, food inflation is likely to remain sticky, at least till the rabi season harvest at the end of FY13. For the first half, the GDP grew 5.4 per cent. RBI has revised this year’s GDP growth forecast to 5.8 per cent, suggesting the economy will need to grow at 6.2 per cent for the second half, which seems difficult. Thus, it is likely that RBI might reduce its GDP forecast further. However, the stock market did not share the gloom of GDP growth being near a decade low. Key indices are close to their two-year high levels and within 10 per cent of touching a new all-time high. While the markets appear to be running ahead of fundamentals, a comparison of GDP growth with the price to earnings (P/E) ratio of the BSE Sensex depicts a different picture. As the chart shows, markets are a lead indicator of the economy. In the past, GDP growth has shot up nearly a quarter after the market has risen. In the present scenario too, there is a small diversion between P/E and GDP, indicating the possibility of higher growth rate going forward. One data that points towards such a possibility is the positive growth in gross fixed capital formation which has increased by four per cent, indicating some revival in the asset creation. http://www.businessstandard.com/india/news/sensex-pe-multiple-leads-gdp-growth-/494190/

World Economy in Best Shape-STOCK MARKETS..

ALL IS WELL-----THE  NSE YESTERDAY REGISTERED 52 WEEK HIGH, WHERE AS HANGSENG CLOSE TO HIGHS - AT 21992 (52 WEEK HIGH AT 22150) AND DAX IS  AT -7401 (52 WEEK HIGH AT 7479).

THE FLIP SIDE IS DOW HAS FORMING TOP WITH UMBERELLA FORMATION IS NOT A GOOD SIGN.

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World Economy in Best Shape for 18 Months, Poll Shows

By Rich Miller - Nov 29, 2012 5:47 PM GMT+0530

The world economy is in its best shape in 18 months as China’s prospects improve and the U.S. looks likely to avoid the so-called fiscal cliff, according to the latest Bloomberg Global Poll of investors.Two-thirds of the 862 surveyed described the global economy as either stable or improving. That’s up from just over half who said that in September and is the most since May 2011.The U.S. came out on top for the eighth straight quarter when investors were asked which markets will offer the best opportunities over the next year. China ranked second, reversing a decline to fourth in the September poll of investors, analysts and traders who are Bloomberg subscribers. The European Union, beset by a debt crisis, was seen offering the worst returns.“The global economy is improving, recovering and healing, thanks to the U.S. and the emerging markets,” said Andrea Guzzi, a poll respondent and vice president of IST Investmentstiftung fuer Personalvorsorge, which manages money for Swiss pension funds. “More people are becoming wealthy, less and less are poor.”Stocks were seen as the asset of choice, with more than one in three of those surveyed on Nov. 27 forecasting equities would have the best returns in the coming year. Real estate came in second: Just less than one in five investors singled it out favorably, the best showing since the quarterly poll began in July 2009. Bonds were seen as offering the worst returns.

Fed Purchases

The Federal Reserve is expected to provide continued support to the bond market after its Operation Twist program ends next month, according to the poll. About three in four said the U.S. central bank will begin outright purchases of Treasury securities after its plan for swapping short-dated securities for longer-dated ones expires.A plurality -- two in five -- said the Fed also will continue buying mortgage-backed securities into 2014, a strategy dubbed QE3 by investors, shorthand for the third round of quantitative easing by the central bank.“The Fed is being very clear about monetary policy,” Gala Prada, a poll respondent and portfolio and asset manager for Fiatc Mutua de Seguros y Reaseguros, a Barcelona-based insurance company, said in an e-mail. “If the economy doesn’t improve, there will be a QE4 or more asset purchases.”

Tighter Rules

The growing optimism among investors about the world economy was not reflected in their views of the prospects for the financial services industry. About seven in ten said they expect large banks to reduce payrolls further in the next year after cutting at least 188,000 jobs over the last two years. A majority blame regulatory changes for the reductions.Banking authorities have tightened rules and raised capital standards on banks after the worst financial crisis since the Great Depression forced governments to spend billions of dollars to rescue ailing financial institutions.“Many countries have oversized banking sectors, which need to go back to more sustainable sizes,” Guzzi said in an e-mail from Zurich.The optimism on the world economy is based in part on an expectation that the U.S. will avert $607 billion in automatic spending cuts and tax increases scheduled for Jan. 1. Three out of four surveyed anticipate that President Barack Obamaand Congressional leaders will reach a short-term agreement to avoid the fiscal cliff.

OECD Warning

The 34-nation Organization for Economic Cooperation and Development in Paris warned this week that the world economy would tip into recession if the U.S. failed to act.Close to half of investors said they plan to increase their exposure to equities over the next six months, up from less than two in five in September.Respondents are most bullish about U.S. equities. A majority forecast that the Standard & Poor’s 500 Index will rise during that time frame. S&P 500 futures rose 0.6 percent to 1,415.8 at 7:08 a.m. in New York amid optimism President Barack Obama will reach an agreement with Congress over a new budget. The stock gauge has increased 12 percent this year.“U.S. companies have better profit potential, balance sheets and access to capital,” Christian Thwaites, a poll respondent and president and chief executive officer in New York of Sentinel Investment, which manages more than $27 billion, said in an e-mail.

Property Prices

U.S. property prices also are heading up, investors said. More than three in five forecast that housing values would be higher six months from now. A minority responded that way in the last poll in September.Home prices rose in the year ended in September by the most since July 2010, climbing by 3 percent, according to the S&P/Case-Shiller index of property values in 20 cities.The housing market has been supported by the Fed, which has said it expects to hold overnight interbank rates near zero until at least the middle of 2015.Forty-five percent of investors said the U.S. central bank would enhance understanding of its policies and help the economy if it tied its pledge to keep rates low to specific thresholds for unemployment and inflation. One in four said such a move would be confusing if such a goal-oriented commitment replaced the Fed’s current calendar-specific rate promise.The Fed itself is split over the issue. Fed Vice Chairman Janet Yellen and Chicago Fed President Charles Evans have supported a switch, while Philadelphia’s Charles Plosser and the Dallas Fed’s Richard Fisher have voiced doubts.

Commodities, Bonds

Commodities lost some favor in the latest survey. Only 12 percent said it will be the best-performing asset class over the next year, down from 18 percent in September.Investors remain downbeat on bonds. Forty-eight percent intend to reduce their holdings of U.S. Treasury bonds over the next six months, the most since the poll began asking that question in May 2011. By a slim margin -- 50 to 45 percent -- respondents viewed Treasuries as a safer investment than AAA- rated U.S. corporate bonds, such as those of Microsoft Corp. and Exxon Mobil Corp.More than two of five investors expect European Union markets to offer the worst opportunities over the next year. That was the most negative reading in the poll, followed by Japan, with 23 percent, and the Middle East, with 17 percent, up from 7 percent in September.

Iran Strike

Forty percent of respondents are less likely to put money into Egypt since President Mohamed Mursi took over in July -- 10 times the amount who said they are more likely to invest.Protesters and police clashed in Cairo on Nov. 28 as Egypt’s opposition resolved to stand firm against Mursi and the Muslim Brotherhood in a showdown over his self-decreed powers.Half of those surveyed said they don’t expect a military strike against Iran’s nuclear program in 2013.Israeli Prime Minister Benjamin Netanyahu has repeatedly warned that time is running out to prevent an Iranian nuclear bomb, which he expects to be aimed at Israel.Iranian President Mahmoud Ahmadinejad, who regularly denounces Israel as an illegitimate regime that should “disappear,” says his country’s nuclear program is for peaceful purposes.The poll of Bloomberg customers was conducted by Selzer & Co., a Des Moines, Iowa-based company. The survey has a margin of error of plus or minus 3.3 percentage points.

To contact the reporter on this story: Rich Miller in Washington at rmiller28@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

http://www.bloomberg.com/news/2012-11-29/world-economy-in-best-shape-since-2011-investors.html

STOCK MARKET - INVESTMENT STRATEGY..

“Investors wrongly base their investments on past returns”

AARATI KRISHNAN

Markets may do well even while there are challenges and by the time all challenges are resolved, there may be little juice left.

When a fund house manages to multiply your money nine-fold in 10 years, it draws in even the most sceptical of investors. That is what HDFC Mutual Fund has done. The fund has been remarkably consistent too, a sign of the level-headedness with which Prashant Jain, the fund’s Executive Director and Chief Investment Officer, approaches the often whimsical business of stock market investing.

Is the fund’s past a hard act to live up to? And are high stock returns in India a thing of the past? Business Line spoke to India’s most respected fund manager, to get his views. Four of your equity funds have managed returns of 25 per cent or more in the last ten years, with HDFC Top 200 proving very consistent across market cycles. Can you tell us what made this track record possible? One competing fund told me it must be due to a quant-based model!!

Let me first clarify that there is no quant-based model at work — in fact, I have never used one. My approach to investments has been pretty simple. Buy sustainable businesses that are managed by good managers, at or below fair values, maintain reasonable diversification and have patience. I think it is also fair to say that while the performance of HDFC Top 200 over medium to long periods has generally been good, there have been short periods when the performance was average. In 2007, for example, when the rally was mainly led by stocks in real estate, NBFCs and power utilities, the fund did not do well. The fund stayed away from these sectors as, in our opinion, these stocks had issues of either quality or valuation or both. Whereas this hurt short-term performance, it helped performance when the markets finally corrected the excesses.

A key feature of the investment strategy has been to invest in good quality, sustainable businesses that are available at reasonable valuations. It is essential to maintain this discipline in tough times and not to succumb to pressure, in order to control risk. Risk control is as important to wealth creation as is generating returns. An investor who generates moderate returns fairly consistently with limited downside risk is likely to do better when compared with another investor who sometimes achieves spectacular returns but makes occasional considerable losses. A 16 per cent return over a decade is more than 20 per cent returns over nine years followed by a 15 per cent loss in the tenth!

Investor faith in equities is at a low ebb today, with the Sensex return over five years at barely 3 per cent, while gold has managed 25 per cent. Can past returns be replicated over the next 10 years?

Even 10 years ago, one had neither expected nor targeted 30 per cent returns. It is, therefore, hard to say how the next 10 years will be, but the guiding principles should stay the same. It needs to be noted that a significant portion of the total returns of a fund over long periods comes from market itself. Despite the pessimism in the markets and the challenges in the economy, in my opinion, unless we really mismanage, the economy should, in the current decade, grow faster than in the last decade.

The markets should also, over the medium to long term, do well, given the prevailing below average price-earnings (PE) multiples and the likely fall in interest rates. Thus, in addition to earnings growth, returns should be aided by expansion in PE multiples. Another source of returns for an actively managed fund is the out-performance. HDFC Top 200 has outperformed the benchmark by a handsome margin over long periods. We will endeavour to continue this. But most out-performance is achieved due to market excesses and is, therefore, typically lumpy.

HDFC Top 200 and HDFC Equity are today among the biggest equity funds in the industry, each managing over Rs 10,000 crore in assets. At what point does size become an impediment to performance?.It is true that these funds are larger than other funds. But the size of these funds and in fact, of all mutual funds put together, is small compared with the Indian markets. The largest fund is just about 0.2 per cent of the market capitalisation. There is thus little risk of being crowded out.Fund sizes are not close to a point where they start impacting performance, particularly against the benchmarks, in my opinion. I did a small study of performance of funds larger than Rs 1,500 crore and smaller than Rs 1,500 crore against their benchmarks.

The proportion of out-performing funds in both categories is nearly the same. Over longer periods, larger funds have, in fact, fared better. We often cite HDFC funds as an illustration of how well active investing works in India. But with fewer active funds out-performing the indices in recent years, would you still advocate active investing?.I am a believer in active investing. By and large, nearly all HDFC funds have added value over benchmarks over medium to long periods. Yes, there is an increasing tendency to index globally. But as Warren Buffett observed — “in any sort of a contest — financial, mental or physical — it’s an enormous advantage to have opponents who have been taught that it’s useless to even try”.

The market has rallied 20 per cent this year. There are worries that this is not backed by fundamentals. Is this the time for retail investors to buy stocks or should they take profits where they are available?. Despite the up-move in the markets, PEs are below long-term averages and interest rates are likely to fall over time. In my view, over time, there is room for markets to do well and apart from earnings growth there is room for multiples to expand too. I am not saying that there are no challenges or that everything is great. However, please remember that markets know as much as you and I. Markets discount both bad and good news fairly quickly. Thus, markets may do well even while there are challenges and by the time all challenges are resolved, there may be little juice left in the markets.

Past experience suggests that PEs tend to move 10-12 times at the lower end and 20-25 times at the upper end. The journey from bottom to peak and back takes considerable time and investor patience at lower PEs is well rewarded over time. Every market cycle usually has new lessons for investors. What should we learn from the most recent one?. In the 20 years that I have been with the markets, I have experienced three major cycles and in each one of these a vast majority of investors have mistimed their investments. This is disturbing but unfortunately true.

Consider the accompanying data. As the Sensex went up from 3000 levels in 2003 to a peak of above 21000 in January 2008 before ending close to 15600 levels in March 2008, net sales of equity mutual funds increased from just Rs 118 crore in 2002-03 to Rs 53,000 crore in 2007-08. Since then, in down markets and at lower PE multiples over the years from 2009 to 2012, equity funds have seen outflows of Rs 6,000 crore. In simple terms, when PEs were high, more than Rs 50,000 crore worth of equity funds were purchased in one year in FY08 and when PEs were lower, nearly Rs 6,000 crore worth of equity funds were sold by investors over four years.

This is so because investors wrongly base their investments on past returns and on news flow and not on PE multiples. Investors should simply practise low PE investing. Low PEs are typically available only when the news flow is bad, when market sentiment is weak and when the markets have not been doing well. Presently, though the markets are up 20 per cent, PEs are below long-term averages. Further, interest rates are likely to move lower. Investors, in my opinion, should maintain or increase allocation to equities in line with their risk appetite and with a long-term view. Going by the lack of flows in equity funds for last several quarters and in fact some redemptions, history may repeat itself. As long as this behaviour of investing disproportionately large amounts after strong past returns and investing close to nothing after poor market returns continues, in my opinion, investors will continue to gain less from equities and several may continue to feel dissatisfied.

As Einstein said, “Insanity is doing the same thing, over and over again, but expecting different results.”

http://www.thehindubusinessline.com/features/investment-world/investors-wrongly-base-their-investments-on-past-returns/article4130573.ece?homepage=true&ref=wl_home

The different shades of Arvind Kejriwal....

The different shades of Arvind KejriwalIn the 17 years since joining the IRS, he has carved out a place as a maverick warrior against corruptionUpdated: Tue, Nov 27 2012. 09 56 AM IST

New Delhi: The year was 1995. On the first day of his job in the Indian Revenue Service (IRS), Arvind Kejriwal received some unsolicited advice from a senior official that perhaps shaped the course of his life from a civil servant to a social activist and a politician who is now the scourge of the political establishment.

“That man told me how to make money in the beginning (of one’s career) and then pretend to be an honest officer for rest of the life,” Kejriwal recalls. “I was shocked and taken aback.”He was 27 years old. In the 17 years since, Kejriwal has, to use a cliche, come a long way. He has carved out a place for himself as a maverick warrior against corruption. The audacity with which he has taken on powerful people—from Sonia Gandhi’s son-in-law Robert Vadra and India’s biggest builder DLFLtd, to Bharatiya Janata Party (BJP) president Nitin Gadkari and Reliance Industries Ltd chairmanMukesh Ambani—has won him a following, although the jury is still out on whether this will pay an electoral dividend.

His opponents dismiss him as a publicity hound in a hurry to carve out his own political space by taking on the ruling Congress as well as the principal opposition BJP.At the last count, Kejriwal had 169,000 followers on Twitter and, by his own admission, has become quite a public personality—a fact with which he is yet to come to terms.From the speed at which he operates—he has moved from one target to another in his fight against public malfeasance under the banner of the India Against Corruption forum ahead of the launch of his Aam Aadmi Party on Monday—Kejriwal has appeared to be in a race against time. He accuses politicians of selling out the country.“Yes, we are in a hurry,” he said. “The way this country is being sold, it will not be saved. Coal, iron, thorium, land have been sold, jungles are sold out, mountains are being sold in Himachal Pradesh and rivers in Chhattisgarh; what is left now? In some time, they will sell the Taj Mahal, Lal Qila and Rashtrapati Bhavan,” Kejriwal says.

On Monday, the Aam Aadmi Party started a membership drive and introduced the 23 members of its national executive, which includes lawyer Prashant Bhushan, Right to Information (RTI) activist Manish Sisodia and former television journalist Shazia Ilmi. Kejriwal is the national convenor.Kejriwal’s political ambitions led to the parting of ways with Anna Hazare, who initially spearheaded the nationwide agitation for an independent anti-corruption ombudsman called the Lokpal. He was accused by critics of using Hazare to promote his political goals by joining the campaign for a Jan Lokpal Bill that fell flat in Parliament. Kejriwal denies the charges.“Anna is not a toy to be used,” he said. “No one in this country uses anyone. We are not in selfish politics, we are here for the country.”

Kejiwal says he himself had been “personally hostile to the idea” of turning political and that the decision to launch a political forum was made only after six-seven months of brainstorming within his team.Kejriwal was born in a small-town family in Haryana on 16 August 1968. His father Govind, an engineer like him, worked in several companies before settling down to a job in a Hissar-based steel firm. His mother Gita completed high school. Kejriwal has a sister and a brother, both younger than him.

Like any other student

After studying in schools run by missionaries, he cracked the examination for admission to the Indian Institute of Technology (IIT) on his first attempt and joined the mechanical engineering stream at IIT-Kharagpur in 1985.Rajiv Saraf, his IIT batch-mate, remembers Kejriwal as a student like any other who gave no one an inkling that he had activist and political leanings. “For us, it just came out of the blue; we had never expected this,” said Saraf, who runs a software company.“We never discussed corruption in the campus because it was not of that big a scale or at least was not discussed in the newspapers,” Saraf said. “The only paper we used to get was The Telegraph because of our proximity to Kolkata. Arvind was just like (any) another student and he gave preference to dramatics over academics. He would go out and drink or play cards with us.”Saraf is Kejriwal’s best friend from his college days and one of the people who helped him raise loans to reimburse the government for his voluntary retirement from the civil service after he had taken two years’ paid study leave.

Kejriwal has several friends, many of them in the US, who all contribute and give him Rs.25,000 every month for a living so that he can continue his fight against corruption.“Rest of the expense is borne by my wife, who is an additional commissioner in income-tax department. I have no other source of income and I do not take any money from Indian Against Corruption,” Kejriwal said. He and his wife Sunita have two children—daughter Harshita and son Pulkit.After graduating from IIT, many of his friends left for the US, but Kejriwal stayed back. He took up a job with Tata Steel Ltd and was posted at the company’s Jamshedpur design plant in 1989.Poosarla Srinivas, who worked with Kejriwal, recalls him as a humble and approachable person. “After office hours, we used to hang out together. He would share his conviction do something for the underprivileged. After he quit his job at Tata, he went to (meet) Mother Teresa and saw the plight of the poor and sick,” Srinivas said. After some time, Kejriwal returned to his job at Tata Steel. He also appeared for the civil service examination, and made an unsuccessful attempt to get into a top management college. He cleared the civil service exams and was posted in the Indian Revenue Service. His first posting was in Delhi as an assistant tax commissioner.

Harsh Mander, a civil servant-turned-social activist and Kejriwal’s instructor at the Lal Bahadur Shastri National Academy of Administration in Mussourie, remembers him. “He was different from others and would always talk about corruption. I always felt that he had energy and wanted to do something about it,” said Mander.

RTI activism

Kejriwal worked in the tax department for some time, but his heart was never in the nine-to-five routine. In 1999, he took a sabbatical to work with Parivartan, a non-government organization.In the same year, on the advice of Mander, Kejriwal met Shekhar Singh, a person who would later join him in a movement that would give India landmark legislation in the form of the RTI Act.Singh, a working committee member of the New Delhi-based National Campaign for People’s Right to Information (NCPRI) and an RTI activist, has known Kejriwal for 12 years. Apart from Kejriwal, Mander and Singh, other working committee members of NCPRI include Kejriwal’s close aide and Supreme Court lawyer Prashant Bhushan.“Arvind is a very competent person and there is no reason why, if other people can start a political party, then he can’t? But the only challenge is whether his party will be fundamentally different from other political parties,” Singh said.

While there are a large number of social activists across the country, Kejriwal belongs to a small subset that has taken on political issues and won public attention. What separates Kejriwal from other social activists is the fact that while the others focus on two or three issues, Kejriwal has the big picture in mind, according to his associate Abhinandan Sekhri.Having taken up RTI as a cause, Kejriwal co-founded the Public Cause Research Foundation, which espoused transparent and accountable governance, in 2006 along with two other people—his long-time aide and former television journalist Manish Sisodia and television producer Sekhri.According to Sekhri, who has known him for almost 10 years, Kejriwal is the “ideal person” to lead a movement like the one against corruption given his focus and steadfastness.“People often criticize Arvind because he does not compromise. But, today we need someone like him, who will not compromise against a system that asks you to compromise at each and every stage,” said Sekhri, who is also the co-founder of “Newslaundry”, a current affairs and media website.

Not everybody agrees.

“Arvind has a set of views on how things should change and he would brook no opposition to it. He refutes everything with a belief that only what he says is correct,” an RTI activist who has known Kejriwal for almost nine years said, requesting anonymity.According to this person, Kejriwal had at one point dismissed RTI work as a “waste of time” given that information commissions were not performing and government functioning was too opaque.“By that time, he was totally disillusioned with the RTI Act,” he said. “He does not want to hear or listen, but he still wants to consult. Beyond a point, people lost faith in him as there is no point in only signing attendance registers.”For his work on RTI, Kejriwal won the prestigious Ramon Magsaysay Award for emergent leadership in 2006.

The politician Kejriwal

Kejriwal says he has jumped into the mire of politics with the intention of cleansing it by taking a top-down approach.From an activist to a full-fledged politician, he has had a rollercoaster journey, and he is still fighting for political credibility. He claims, however, that he is now stronger and more mature. “I think now I have the patience and ability to tolerate more,” Kejriwal said.Kejriwal’s idea of governance and the basic ideology of his Aam Admi Party is based on the principle of “Swaraj”, or total decentralization of power. He released a book of the same name earlier this year. India Against Corruption would be the “watchdog” of his party, he added.Kejriwal and his team members are also aligning with several smaller anti-graft movements, rights movements, organizations and smaller political parties. Even before the launch of the party, district-level teams were already in place in Orissa, Uttar Pradesh, Rajasthan, Punjab and Haryana. According to Singh, Kejriwal has it in him to take the Aam Aadmi Party forward.

“One of the major reasons why Arvind can be successful is that he is a very effective speaker, a fantastic organizer, which we all have seen in the past, and has a fairly high level of commitment and interest in the issues that he has taken up,” he said.The RTI activist cited above doesn’t think Kejirwal will be different from “other political leaders”, most of whom do not believe in a democratic system. “He is a leader with strong non-democratic traits; he is in a way choosing the conventional method of leading people, doing politics,” he said.

http://www.livemint.com/Politics/XERu7Qq6eidzuQrpQewQcN/The-different-shades-of-Arvind-Kejriwal.html

$2.3 billion loss by UBS trader - BLAME INDIAN outsourcing unit

Indian outsourcing unit blamed for $2.3 billion loss by UBS trader

Press Trust of India | Updated On: November 26, 2012 17:02 (IST)

London: Key controls for "detection of suspicious trading activity" failed at an India outsourcing unit, contributing to $2.3-billion loss caused by a rogue trader of global banking giant UBS, a joint probe by British and Swiss regulators has found.This is the third instance when outsourcing of key oversight jobs by global banks (British giants HSBC and Standard Chartered being the other two) to India has come under the regulatory scanner abroad for ineffective controls against suspicious financial transactions. 

UK's Financial Services Authority (FSA) fined UBS 29.7 million British pounds (about Rs. 265 crore) for failing to prevent large-scale unauthorised trading in this case, while Swiss regulator FINMA (Financial Market Supervisory Authority) also said it has found serious risk management deficiencies and major control failures at the bank. In its probe report, FINMA said that UBS' back office operations team was responsible for ensuring timely confirmation of deferred-settlement trades, identified through "a specific report maintained by an outsourcing provider based in India (the 'T+14 report')".The probe found that the bank's online trade supervision system SCP (Supervisory Control Portal) and the 'T+14' report "were key controls for the detection of suspicious trading activity, but both proved to be ineffective. 

"The failures of these controls serve to illustrate poor organisation and risk management within UBS," FINMA said.FSA and FINMA jointly initiated a probe in September 2011 after it came to the light that a London-based trader of Swiss banking major had caused substantial losses totalling $2.3 billion (about Rs. 13,000 crore) due to unauthorised trading on the bank's Exchange Traded Fund (ETF) desk.

http://profit.ndtv.com/news/corporates/article-indian-outsourcing-unit-blamed-for-2-3-billion-loss-by-ubs-trader-313796?pfrom=home-otherstories

HP investor who owns 200 shares sues company

HP investor sues company for handling of 2 deals

Associated Press | Updated On: November 27, 2012 09:16 (IST)

Hewlett-Packard now has a legal headache to compound its misery as the company tries to recover from a series of setbacks that have hammered its stock price and raised doubts about its future.

An HP stockholder who owns 200 shares is suing the company in a complaint that alleges management concealed problems in two key acquisitions that have turned into financial albatrosses.The lawsuit filed Monday in a San Francisco federal court comes after Hewlett-Packard Co. stunned Wall Street last week with its own allegations of accounting shenanigans at Autonomy, a business software maker acquired for $10 billion last year. HP referred its findings about the alleged fraud to securities regulators in the U.S., and the United Kingdom, where Autonomy was based before the acquisition.Other shareholder lawsuits are likely as investors try to recover some of the wealth that has evaporated since HP replaced Mark Hurd as its CEO in August 2010.

The revelations of a suspected accounting scandal within Autonomy caused already skittish investors to dump HP's stock. HP had already been losing favor because its personal computer and printer businesses have been faltering as more people buy smartphones and tablet computers.To make matters worse, HP disclosed in August that its $13 billion acquisition of technology consulting service Electronic Data Systems wasn't working out as well as management envisioned.

The trouble in Autonomy and EDS has forced HP to absorb nearly $17 billion in accounting charges in the past two quarters, resulting in the biggest losses in the company's 73-year history. The Autonomy deal was negotiated while HP was being run by Leo Apotheker, who was ousted 14 months ago. The EDS acquisition closed in 2008 when Hurd was still in charge.Monday's lawsuit filed by shareholder Allen Nicolow also alleges that HP knew that the EDS and Autonomy deals were duds long before management acknowledged the problems. The complaint alleges HP's management tried to whitewash things in an attempt to prop up the company's stock price.
HP, which is based in Palo Alto, Calif., declined to comment on the lawsuit.HP's shares closed Monday at $12.74, leaving them worth less half their value at the beginning of the year. The shares peaked this year at $30 in February. Nicolow bought 200 shares of HP stock at $21.87 in May, leaving him with a paper loss of about $1,900 at Monday's close.
Nicolow's lawyers are hoping to get the lawsuit certified as a class-action representing all HP shareholders who bought the company's stock between Aug. 19, 2011 and Nov. 20 this year.
The lawsuit seeks unspecified damages from the company, Apotheker and current HP CEO Meg Whitman. Catherine Lesjak, HP's chief financial officer, and James Murrin, the company's chief accounting officer are also named as defendants.In statements last week, Whitman said HP didn't learn about Autonomy's alleged accounting ruse until a whistleblower alerted her after she replaced Autonomy CEO Mike Lynch in May. Lynch maintains Autonomy did nothing wrong and that HP came up with the allegations of deceptive accounting to cover up the damage caused by its own bad management.

Chitra Ramakrishna to be new CEO, MD of NSE

SPECIAL CORRESPONDENT

The National Stock Exchange (NSE) on Monday appointed Chitra Ramkrishna as Managing Director and CEO of the exchange with effect from April 1, 2013, for five years.

Ms. Ramkrishna has been with the NSE since its inception and at present serves as the Joint Managing Director. The NSE board also elected Ravi Narain, the present MD and CEO, as Vice-Chairman. “The Vice-Chairmanship in non-executive capacity will be effective from April 1, 2013. In his capacity as Vice-Chairman, he will continue on the board of NSE,” stated an NSE release here.

Mr. Narain is now on the board of NSE as Managing Director and CEO and his current tenure will end on March 31, 2013.

http://www.thehindu.com/business/companies/chitra-ramakrishna-to-be-new-ceo-md-of-nse/article4137089.ece

Bernanke: 'Stakes are high'.......

Bernanke: 'Stakes are high' on fiscal cliff

By Annalyn Kurtz @CNNMoney November 20, 2012: 2:30 PM ET

NEW YORK (CNNMoney) -- Federal Reserve Chairman Ben Bernanke on Tuesday urged lawmakers to act as soon as possible to avoid the fiscal cliff. "Coming together to find fiscal solutions will not be easy, but the stakes are high," Bernanke said, speaking before the Economic Club of New York.The Fed chief cited projections from the Congressional Budget Officethat predict the $7 trillion combination of spending cuts and tax increases could send the U.S. economy toppling back into recession.He also cited Europe's debt crisisas an obstacle to U.S. economic growth.

"Currently, uncertainties about the situation in Europe and especially about the prospects for federal fiscal policy seem to be weighing on the spending decisions of households and businesses as well as on financial conditions," Bernanke said."Such uncertainties will only be increased by discord and delay," he added.Bernanke said U.S. economic growth has been "disappointingly slow" and although the unemployment rate has been declining, it is still well above its pre-recession level.

But Bernanke pointed to the housing sector as an encouraging sign in the recovery. Home sales, new construction and home prices have all started rising recently. Bernanke said he hopes that will turn into a "virtuous circle" where higher home prices lead to a rise in mortgage lending, which in turn, could lead to even higher home prices."These developments are encouraging, and it seems likely that, on net, residential investment will be a source of economic growth and new jobs over the next couple of years," Bernanke said.

Mortgage rates have fallen to record lows amid the Fed's recent policy of buying mortgage-backed securities. Last week, the average rate on a 30-year fixed mortgage fell to 3.34%, according to Freddie Mac.At its September meeting, the Federal Reserve launched a third round ofquantitative easing, which entails buying $40 billion in mortgage-backed securities each month. QE3 was combined with an existing policy, known as Operation Twist, which swaps short-term Treasuries for longer-term bonds .

Between the two programs, the Fed is currently buying a combined $85 billion in long-term bonds every month.The Fed has been trying to stimulate the economy for over three years now, and has exhausted its usual tool by keeping interest rates near zero since late 2008. Buying massive amounts of bonds is an unconventional way of trying to lower rates further.The Fed has said it plans to keep interest rates at "exceptionally low levels" until the outlook for the job market improves "substantially." Bernanke added little clarity to that vague statement in his speech Tuesday.

"In other words, we will want to be sure that the recovery is established before we begin to normalize policy," he said.The Federal Reserve's next policy meeting is scheduled for December 11 and 12. At that point, the Fed will have to decide what to do about Operation Twist, which is scheduled to wind down at the end of the year. 

http://money.cnn.com/2012/11/20/news/economy/bernanke-fiscal-cliff/index.html?iid=HP_River

China's accelerated growth-- Recovery HOPE

China's factories show accelerated growth

By Charles Riley @CNNMoney November 21, 2012: 10:04 PM ET

HONG KONG (CNNMoney) -- China's manufacturing industry showed further signs of improvement in November, according to a key early indicator.

HSBC said its initial Chinese purchasing managers' index, or PMI, rose to a 13-month high of 50.4 in November from 49.5 last month. The reading ticked above the benchmark of 50, meaning that manufacturing is now in a state of accelerated expansion. The bank's final reading for the month will be released Dec. 1."This confirms that the economic recovery continues to gain momentum towards the year end," Hongbin Qu, an economist at HSBC, said in a statement.

"However, it is still the early stage of recovery and global economic growth remains fragile," Qu said. "This calls for a continuation of policy easing to strengthen the recovery."China's economy has grown at an average of around 10% a year for the past three decades, allowing the country to rocket past international competition to become the world's second largest economy. Along the way, China's markets have opened to the rest of the world, trade has increased dramatically and many of China's citizens have joined an emerging middle class.

But last month, Beijing reported that GDP growth slowed in the third quarter to 7.4% as weak demand -- especially in the eurozone -- weighed on exports.The downturn, however, is beginning to look like a temporary phenomenon. China's economy is heavily dependent on the manufacturing sector, which appears to be mounting a strong recovery.Zhiwei Zhang, an economist at Nomura, said in a note that the new HSBC data bolsters forecasts of a GDP rebound in the fourth quarter.The turnaround comes at a crucial time for China's Communist Party, which last week completed a once-per-decade leadership transition. The party, meeting in Beijing, named seven men to its powerful Politburo Standing Committee. Xi Jinping, a chemical engineer with a prestigious pedigree, was installed as the next party boss and tapped to be China's next president. 

http://money.cnn.com/2012/11/21/news/economy/china-hsbc-flash-pmi/index.html?iid=HP_Highlight

LAWS of Warren Buffet

The teachings of Warren Buffet

By P V Subramanyam | Yahoo! Finance India – Mon 1 Oct, 2012 11:06 AM ISTWhat Warren Buffet says about basic investing, spending, savings are so true. Most of us know it, however too many of us do not live it.

If it does make a change in your life, thank HIM (I mean God) because this is common sense. WB said it once, I am just reproducing it.

1. On Earning:

Do not depend on a single income. Invest and create a second/ third source of income:

This means when you are young your first task should be saving and investing. By creating a second source of income you are quickly reducing your dependence on your job. This could help you to set out on your own one day. The quicker you can do it, the better.

2. On Spending:

If you buy things that you do not need, you may soon have to sell things you need: 

It kind of summarizes Gen X’s reaction towards ‘luxuries’. As a part of Gen X we were perhaps criticised for some of our expenses, so it could be a generational thing even for WB. However, having goals and knowing where you are going, and not spending just to ‘show off’ are important lessons for all generations.

3. On Savings:

Do not spend what is left after spending, instead spend after you save/invest:

Also called ‘Pay Yourself First’. If you realise that investing in a pension plan or for your kid’s education is just helping you to save more later on. It is not a sacrifice, it is just postponing consumption. So understand, invest and then spend.

4. On taking Risk:

Never test the depth of the river with both your feet: 

If you are doing something, do small. If you are a first gen investor, do not be carried away by equity lovers like me and put all your money in equity. Do a SIP with a small amount, and test the waters. Do a SIP of Rs. X (which could be 10% of your take home pay) for 5 years and then step up. And for heavens sake understand risk of inflation, and the concept of real returns

5. On Investing: 

Do not put all eggs in one basket:

Immaterial of who you are and how much you understand, create a portfolio. A full range lunch plate is always better than just one item. So create a portfolio with bonds, bond funds, PPF, NSC, equity, mutual funds, and on the risk side medical and term insurance.

6. On Expectation:

Honesty is expensive, do not expect it from cheap people:

Not everybody is honest, nor does everybody want to be honest. Honest advisers are difficult to find especially in Health and Wealth, be careful.

The author P V Subramanyam is a Chartered Accountant by qualification and a financial trainer by profession. Writing being a passion he also regularly pens his thought in his blog Subramoney.com

http://in.finance.yahoo.com/news/the-teachings-of-warren-buffet.html