Are Call Centers A Disease for Young Indian Minds?

I have nothing against the 17yr oldz working in the call center or the IT/ITES industry accounting for 1/4th of the country's total exports. The industry was estimated to export as much as $40 billion in 07-08 and employed more than 3.6 million people indirectly in 2007.

So what is the problem? I have a serious issue with the call centers in India disabling young Indian minds. A young call center employee on an average works 50-52 hours in a week in night shifts, has an average age of 19 years and takes home on an average a salary of Rs 1.32 lakhs per annum. Along with this, 80% of call center employees suffer from migraines and sleep disorders and have an average debt of Rs 11000 on their credit cards. I see the industry as a disease for many creative and capable minds as it acts as a deterrent for studies and career enhancement. Most youngsters who join call centers stick to the job after graduation and do not pursue further studies. Over 92% of these are given ad-hoc designations for promotion and are paid on an average only 23% of what a US counter part would get.

Whether India's growth is going to come at a cost of higher education being shackled and replaced with the Call Culture or should the consideration that call centers provide employment to a few million be a reason good enough for us to accept it?...... Is the price that we are paying worth the cost involved? That is something I leave for you to answer.....

India's Future Sunshine Industry

Nuclear Power Corporation of India Ltd. (NPCIL) seems determined to take India's nuclear dreams down the road to success. It is in talks with companies and representatives from countries such as Kazakhstan, Canada, France, Russia and US to make this a reality. It recently signed a deal with Areva of France for 6 new reactors worth $12.3 billion. This is not shocking when you take into account that India has a target of building 22 reactors by 2014. Its also the reason why on this year's Republic Day function, the chief guest was Kazakhstan President Nursultan Nazarbayev, a country which India has not had good relations with. Two days later, Mukhtar Dzhakishev, president of Kazatomprom, the state-owned nuclear holding company, said that new Indian atomic power plants would use Kazakh uranium as fuel.

So what's this gonna do for the country? Imagine this. The power plants of today at a mega scale have a 4000MW capacity. As compared to this, each nuclear reactor on an average costs $2.4 billion and provides a capacity of .78GW so it makes more sense to invest more in nuclear technology in the long run.

The country's total power requirement stands at 137000MW and today nuclear power constitutes to only about 3% of this due to difficulty in sourcing of uranium, technology disparity and safety concerns. But by 2032, India will increase this to 63000MW at least, at a cost of $80 billion and 40 new reactors. Moreover, this is expected to be at least a$200 billion business from India over the next 35 years. That gives more than 50 of the world's top nuclear engineering companies a reason to get into a brawl. Add to this list names such as Heavy Engineering Limited, Tata Power and L&T and you can count on the future sunshine industry for India.

100% FDI in Education?

The outflow from India on education to foreign countries is more than Rs 20,000 crore. Should 100% FDI investment be allowed in education and would it benefit the country? The answer to this is tricky. India on paper has allocated 6% of the National Income for expenditure towards education but the fact still remains that this has not been put in action. A 100% FDI was proposed in February 2007 but is still under the rugs. The fact is that if you are a believer in free markets than no sector should be government regulated especially when the country has one of the worst literacy rates in the world. Experts are of the opinion that the government sees this as a cultural and heritage issue rather than a market driven principle which is successful in many Scandinavian countries and in several parts of Europe. There is little or no funding for primary education for the poor in the country because that costs the government money and thus quotas are a easy scapegoat.

The issue of Karnataka enforcing Kannada as a compulsory 1^st language in schools proves this point. With an evolving world, knowledge needs to evolve and if privatization and globalization is the need of the hour then that is what needs to be done. History proves that customers at every level have benefited from free markets and Airlines and Telecom in India are living examples of this.

The Satyam Saga: A Story of Numbers

The Chart above says it all. Satyam's numbers on returns as compared to peers, never looked suspicious. The Debtors consistently kept rising from 2005 to 2008 from Rs 780 Cr to Rs 2854 Cr and so did the Cash Balance and the Net Profit. The company never showed a loss since 2004, not even in a single quarter.

Laughing STOCK

Wal-Mart: An Asshole or Headed by One?

Some of the places that Wal-Mart managed to wreck:

Middlefield, Ohio
Hearne, Texas
Bentonville, Arkansas
Brookfield, Missouri
Belmont, North Carolina
Chandler, Arizona

Wal-Mart costs state tax payers $100 million a year and county tax payers $32 million a year by passing on employee health care to Medicaid and State Health Programs. And roughly how many Wal-Mart employees are on Government or State Health Care Programs? Over 53400 and this is a conservative figure.

It spends at least $ 147.7 million every year on its anti-union measures to keep worker's union ut of the company. It has been accused of cheating workers for at least $1400 million in unpaid wages since 2002. It faces at least 10000 open cases in 31 states across America for wage and hour abuses. It receives subsidy of over $1.3 billion nationwide, and this gives it the power to under price products to kill competition.

The Walton Family of Sam Walton, Founder of Wal-Mart is amongst America's richest families. The family is worth over $100 billion but they donate less than $10000 a year to Wal-Mart employee welfare.

So now you tell me whether Lee Scott, the CEO of Wal-Mart is an asshole or works for one?

Chrematophobia

Have you ever been nervous to go to the bank or been overtly cautious while writing a cheque? Do you avoid taking charge of financial transactions at your home or dealing with money? If so then you might be suffering from a very rare form of phobia known as Chrematophobia or Fear of Money.

People suffering from this rare condition tend be be very nervous around money or transactions of financial nature. As a result of this, such people are very bad with investments and often stack away large amounts of cash at home. If you do indeed have any of the symptoms of Chrematophobia then you should try speaking to a counsellor or seek professional help regarding managing your investments. In fact, its good to try and invest in safer modes of investments in small amounts to overcome the phobia and gain confidence. Unlike some other forms of phobias, Chrematophobia is completely curable and can be overcome in a matter of couple of months.

Putting Elliott Wave Theory to the Test

When I found out about Elliott Wave Theory, I couldn't wait to put it to test and find out whether the theory actually holds good in practice or not. To put things in perspective, Elliott Wave Theory derives its argument from the concept of Mass Psychology, i.e. the general tendency of people to behave in a general way in the long run. For example say when we eat something spicy, the general tendency is to drink a lot of water while only a few probably go for a glass of juice or beer or something else.
The Elliott Wave Theory proposes that market prices unfold in specific patterns, which practitioners today call Elliott waves. The wave principle posits that collective investor psychology (or crowd psychology) moves from optimism to pessimism and back again. These swings create patterns, as evidenced in the price movements of a market at every degree of trend. (Source: Wikipedia)
To put the theory to test, I have picked the BSE 30 stocks and marked the Elliott Waves for each of their stock prices. Based on this, each of the stock prices should reach a certain bracket within the next 3 months. Whether it actually happens or not will tell us based on a probability study whether the principle holds good or not. The graph below for GMR explains the concept.

As per the Wave Theory, the next wave should be that of an upward trend or the "motive" wave. Based on this GMR should reach a price between Rs 95 and Rs 105 within the next 3 months. Similar would be the analysis for the BSE 30.


Lets wait and watch whether the Wave Theory actually works or not.....

Better of 2 Evils

A question on every one's mind this Monday must have been that how did Citi manage to bag a $20 billion commitment from the congress when a week earlier the Big Auto were denied $25 billion and asked to chalk out a business plan about how to plan to utilize the money.

The answer is very simple though bitter. Its a matter of picking the better of 2 evils. If the auto industry goes down, then no doubt it will have a significant impact on the employment numbers in US, but if the second largest bank in US does down, then it will take with it much more than just employment. The impact could forestall an even worse shock to the already fragile financial system.

In the words of David Resler, chief economist with Nomura Securities International, "You can't have a financial world without the major banks".

But will there be a Detroit without the Big Auto?

Sacrificing Rupee for Stability and Security

The rising dollar in the face of the worst financial crisis US has seen since the Great Depression is not a miracle but a sound and systematic intervention which has kept dollar afloat. Its a simple case of "you scratch my back and i scratch yours". The Fed helped the Asian economies during 1997 and helped strengthen the Euro during 2000. Why? These countries understand that its in mutual interest to keep dollar stable and strong which in turn would enable currencies pegged to it remain stable and also be in the best interest of countries who have built up huge dollar reserves.

With crude eventually rising due to decreased supply by OPEC, its in every one's best interest to keep the dollar strong for the time being. In fact India's Central bank, The Reserve Bank of India has been piling up dollars since 2002 and has purchased $75 billion worth of USD in the last 4 years. It has bought on average of $10 billion a month for the last seven months. With dollar being the standard currency for global exchange and trade settlement combined with crude traded only in dollar, India is betting on being safe and sacrificing the strength of rupee keeping in view the long term interest of the nation. But this range of sacrifice in the near term is between Rs40 on the lower side and Rs 50 on the higher side. Any less of any more, and you will find RBI intervening.

Vietnam Next In Line

A bigger havoc tends to supersede a smaller incident at times. Whether the incident in question is small or not would depend on the degree of inference drawn. Amidst the hue and cry about US going into depression, UK cleaning its mess and Iceland melting, I guess people forgot about Vietnam. Vietnam has been a victim of instability risk.

The country has a trade deficit of 14.4 billion USD which has tripled over the last year. The imports have gone up by 67% and companies that were trading at a P/E of 30-40 last year are right now crawling at 10-20. The picture becomes clear when you look at the trade deficit in terms of the country's forex reserves that stand at just 20 billion USD. That sums up to 72% of the forex reserves. Analysts are looking at this as a trigger for a major crack in the economy and have put their money on several banks and brokerages falling. Another Bail Out??????

Fundamentals Look Strong

The ripple effects of financial turmoil in US have no doubt been felt in India. The Sensex hovering close to 9800 and hitting year lows, there is a sense of uncertainty in the minds of the investors. It makes me laugh when I hear people say that Euopean Banks are going to crash. Logic has to kick in somewhere and for a few it does kick in very very late. But is the India story really come to a standstill?

The fundamentals suggest otherwise. One of the indicators of this is the unemployment numbers. US posted unemployment at 6.1% which might go up to 10% over the next year. This would result in 6 million Americans losing their jobs. But India is relatively stable so far in this context. Though the IT companies at large have laid off employees, the other sectors have been conservative in not letting go of the talent pool. The new hire rate has been kept low and many Indian companies are hiring employees from US or transferring them to Asian operations. Apart from this the companies in India have been posting strong numbers. This is a good sign. The figures suggested by Global Insight for a GDP growth rate of 8.5% are unrealistic right now. I am hopeful that the country will hit a 7.5% mark this year.

New Face of Risk Management

Every displacement at large has a negative connotation to it due to its nature of ruling out the obvious. Similar is the story of the recent economic turmoil. But it has a brighter side to it. Of course, we can cry over spilled milk and point out a 1000 things that we did wrong but the important part is finding the things that are right and need to be done. Risk management traditionally has focused on Risk Transfer which worked well during the early 1999 to late 2003 period. But with increased exposure to derivatives and other exotic financial instruments, the world has now come to realize the significance of other key areas Risk Management can help in. Risk Assumption and Risk Elimination are the areas of focus for the Risk Management industry as a whole. This comes as a result of a heightened need to safeguard business interest so that core activities can be conducted without the threat of value erosion. Businesses had been so focused on “Know Your Customer” post September 11 that the “Know Your Business” part was neglected.
With the derivatives exposure globally being at least 10 times the entire recorded tangible investments, the importance of Risk Management services globally has taken centre stage. Risk management against terror threat, intentional risk, exposure risk and cyber threat are the prime areas of focus today.

Barclays: Quiet Moves

Barclays for over a year now has been trying to expand its market presence in India. It’s recent growth and profits have been encouraging, primarily on the back of premium lending. For quite a while now, it has been looking at IndusInd Bank to expand its operations in India. With IndusInd’s net profit rising by 51%, backed by growth in core fee and net interest income, Barclays is expected to push harder than ever to acquire IndusInd. The two coming together would give Barclays the much needed wider base of presence in the country. But Mr. Romesh Sobit is less likely to give up on a healthy growing business on easy terms, unless the two banks work out a mutual synergy.

Not The Right Time for Rights Issue

With the 10000 mark breached for the Sensex, the markets seem soft and direction driven. Right now does not seem to be the right time to come out with a rights issue. A rights issue would result in devaluation of the stock and they are offered at a discount to the market price and this makes the premium existing on the capital appreciation less attractive for the current investors. With stocks right now trading at lifetime lows, its bad timing for companies like Tata Motors and Chettinad Cement to come out with a rights issue. They demand is expected to be frozen....Certainly not the right time for a rights issue.

Stronger Than Ever!!

A glimpse through a financial newspaper tends to give you an overall picture of how good or bad things actually are. I always have believed that a GDP growth rate of 9%+ is not sustainable for India. What's heartening is that global companies are still seeing demand growth from India, which is a positive sign for the economy. Boeing expects demand from India to grow in future and IT/ITES firms and banks are posting good numbers. A majority of this growth is coming from core business growth an not extraordinary or off balance sheet items.

This has been the case with HDFC, IndusInd, State Bank of Hyderabad etc., who have all recorded good growth in Net Profit backed by growth in core service fee and Net Interest Income. Real estate companies too have shifted their attention to core infrastructure development from land acquisition. Such adjustments in business focus will ensure stable growth and help mitigate uncertainty to a large extent.

Risk Management: The Need of the Hour

A survey by KPMG on Consumer Market Companies investing in India in Fall 2006 stated that the #1 reason for these companies to invest in emerging markets such as India and China was Revenue Growth. With the current scenario, companies are expected to float very bad numbers for the coming quarter and most of them are expected to withdraw guidance.

But the companies that are banking on this chaos are Risk Management firms. I am not talking about Investment Banks who are into risk management but companies that specialize in risk management. Their business is said to have grown by 3% in less than 2 months and is expected to rise further. The growth is not just in terms of the number of clients but the extent of service depth for existing clients as well. Clients are demanding more extensive risk mitigation mechanism and customized software. Most of these softwares run into millions if not more. So practically speaking, the liquidity seems affected because it is being squeezed to certain specific segments.

Ripping You Off

It came as a surprise when I found out that the largest counterfeits in the world are shoes & sneakers which are estimated to cost the industry $12 billion annually in US alone. But that ain't the point we are going to swell on right now.TRAI's unparalleled commitment to make cell phones available for the masses in India has resulted in calls being charged at Rs 3 per minute once to 30p-50p per minute today. But there is a hidden side to the apparently customer centric telecom industry in the country. As much as 12%-16% of your monthly cell phone expenses are in the form of surcharges and these don't include the taxes that you pay on the charges. Between 1%-4% of your total call time every month is in the form of charges for drop calls. This might appear like a very small figure but Cell phone charges are the 3rd largest form of fee burden on earth, largely because of the penetration of cell phones today.
Some "phone" for thought...right!!!

FED Facts

Article 1 Section 8 of the US Constitution states that:
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States:
“To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”

This power has been given to the Federal Reserve which in simple word means that the Fed can issue currency at will without any gold or silver backing it up. Most of this money coined by the Fed is loaned to the US Government and the government uses tax payers’ money to pay the interest on it. The facts about Fed are little known. It is the only financial body in US that has never been audited in 100 years. One of the theories of Kennedy assassination states that Fed was the reason JFK was assassinated. On June 4, 1963, President Kennedy signed the Presidential decree, Executive order 11110 which would strip the Fed off its power to loan money to the US government at interest. It also hinted that the Fed in future would have to report its affairs like any other financial institution in US and would have to make all information publicly available. In place of the Fed, the US Treasury Department would be given the authority to issue currency which would be backed by Gold and Silver. After signing the order, President Kennedy was assassinated in less than 5 months.

Even to this day, the Fed does not undergo any audit procedure and very little financial information about how the Fed functions is made public on its website. Mostly, the website has information about economic indicators and money circulation and a Balance Sheet which shows aggregate assets and liabilities of the banking system in the US.

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Lehman Brothers Neck Deep in Losses

Lehman Brothers posted a whopping $3.9 billion loss during the third quarter on account of the credit crisis. This is very bad news for a company whose stock has already plummeted by 80% this year. The mortgage bets it banked on during the 1997-2003 period are coming back to haunt it now.

What's coming in the form of a rescue is an undisclosed buyer for 55% stake in its prized business of investment management. The annual dividend this year will be hit by 92.68% because of this loss. This is the last thing Richard Fuld wanted to deal with right now. He is already in trouble and is on the list of the top 10 CEOs most likely to step down this year.