The bascis of CRR- a must read for all - 14th feb 07

WHAT IS THE RBI SIGNALLING.a) tame the inflation monster b)suck out excessive liquidity from the system.
Bad for we students who have raken education loans to fund our studies. The floating rate hitched junta - be prepared to take a hit on the EMIs or tenure.Same goes for housing loan ppl. May be it signals that the goodies we enjoyed over the past two years are waning and things returning to square one.However this is the distinctive feature of any economy.

The Reserve Bank of India has surprised the market by raising the Cash Reserve Ratio by 0.50 per cent, effective in two stages. Without getting into the details of what the CRR is and how it works, suffice to say that a hike in CRR implies a decline in liquidity in the economy; in this instance, a 0.50 per cent hike will drain out Rs 14,000 crores (Rs 140 billion). The result - higher interest rates.
Before we get down to how this will impact you, here's what we think of this move - sends a strong signal that the RBI is clearly focused on taming inflation, which in recent months has risen dramatically. While in the near term this will have an adverse impact on overall economic growth, from a long term perspective, it will be beneficial for the economy (as over the long term inflation is likely to be a lesser concern).

How will the CRR hike impact you as an investor/borrower?

From a stock market perspective Rising interest rates have several implications including -
a)slowing down the overall growth in the economy; this effectively means that demand for goods and services, and investment activity, gets adversely impacted .

b)apart from the fact that overall growth is impacted, companies take a hit on account of higher interest costs that they have to bear on their outstanding loans (to the extent their cost of funds is not locked in) since some investors tend to leverage and invest in the stock markets, higher interest rates increase expectation of returns from the stock markets; this has the impact of lowering current stock prices

an overall decline in stock prices has a cascading effect as leveraged positions are unwound (on account of meeting margin requirements), leading to still lower stock prices .

So, from a short term perspective, higher interest rates should adversely impact stock market sentiment.

From a long term perspective however our expectations of returns from the stock markets remains unchanged. As mentioned earlier, RBI's move to tame inflation over the long term augurs well for long term economic growth (there is more predictability and therefore risk premiums are lower). This will ultimately benefit well-managed companies.

So what should you do now?It's difficult to say how the stock markets will react; or for that matter to what extent the markets will react. In the last few trading sessions, there has already been a correction of about 4 per centSE Sensex. Any irrational fall in stock prices, in our view, should be seen as an opportunity to add to your exposure, in installments, to equities/equity funds, your planned asset allocation permitting.

It is impossible to predict near term movement in stock prices. And therefore any investment you consider should be made keeping in mind that in the near term you could be sitting on losses on fresh investments. From a 5 year perspective however we are reasonably confident that a well managed equity fund can deliver returns in the range of 12-15 per cent per year. This is not to say that you will make this return every year.

There will be years in which you may lose money, and others where you may make far more than what we have projected. Over the 5 year tenure, on a point to point basis, yo
u will average a return of 12-15 per cent per annum, which in our view is a realistic estimate.
From a debt market perspective
If you are contemplating on investing monies in the debt market, you will benefit from higher interest rates on offer. However, existing investors in debt oriented funds may take a one time hit; but at the same time, since overall interest rates are higher, from here on, such funds will yield higher returns.
So what should you do now?Although the interest rates have risen quite a bit, it may still not be the best time to lock in all your money in long term debt instruments (interest rates may still rise).

Go in for short term Fixed Maturity Plans, which yield attractive post tax returns (you could get an annualised return of about 8 per cent on a post tax basis for a three month deposit).
If you can take some risk, go in for well managed Monthly Income Plans (MIPs) that are offered by mutual funds. Go in for the low risk option (equity less than 20 per cent of assets) with a quarterly dividend option.
With higher interest rates and possibly lower stock prices, MIPs could yield an attractive post tax return.

From the perspective of a borrowerAs a prospective borrower, you are the worst hit. The cost of money i.e. interest rates will rise post the CRR hike. You will probably need to settle in for a lower loan amount given the EMI.
If you are an existing borrower, as long as the rate of interest on your loan is fixed, you are immune to any rise in interest rates. However, if you have a floating rate loan, then expect either the tenure of the loan or the EMI to jump soon.

strategic mgt - 9 jan 07

21 st century mgt.


self leadership is in. No body 2 command and control u. u r yr own leader and destiny maker.
new need- employees with emotional intelligence.globalisation - the new mantra for survival. In a globalised economy, u have to be on your toes always.
women are assuming executive positions in greater numbers.
roce = margins * ato = profit/sales * sales/capital employed
= profit/capital employed ....capital = FA + inv + debtors - creditors
why does a company exist ? as per strategy, to create value to all stakeholders in the business.Strategy is the roadmap to achieve these goals . corporate/divisional /functional.basically str. mgt scans the environment, considers all possible options,resource mobilisation ALL for one single goal: to create sustainable competitive advantage.wat is competitive advtg: -- delivering superior value to yr customers relative to your competitors.value addition and exxtra value must be delivered at the same cost.
IT must work as a complementary tool for business.

the main challenge is : TO ACHIEVE EXTRAORDINARY RESULTS CONSISTENTLY, BY USING ORDINARY RESOURCES OF THE COMPANY AND THAT TOO, BY USING THE BARE MINIMUM.

in strategy formulation phase, u have the options on competitive positioning. u can position yrself the best vis a vis yr competitors.
i environment u hv the internal and external environment : internal -- culture,chain of command,skills, structure.formulation = mission + objectives + strategis + policies.
activities needed to accompish a plan = program . cost of a program is the budget.a policy = a plan of action to assist in decision making.Regulatory policies limit discretion of individual business owners and corporations. Businesses who disregard these policies may be fined, or may be threatened with sanctions.regulatory policies are restrictive in nature.

employees are of two types I can do (has capability) and I will do( shows commitment)....best is to have a combination of these two types..will do types are better than the can do types as commitment is most imp. it reflects yr attitude to yr work.blue ocean strategy = create uncontested market place(market developement).

porters genrric competitive strategies :competitive advtg . vs competitive scope.asically cost leadership, differentiation on a broader scope . focussed differentitauon on narrower scope.corporate level: directional strategy, portfolia and parenting str.

A strategic framework for product line additions(7 jan 07)

Product life cycle concept: isnt it like the life of a human being...slow sales during intro., then rapid pickup during growth phase,relatively constant growth during maturity and decreasing sales during decline.However not all life cycles are the same.mktg decisions cannot be based solely on this precept.
A particular products life cycle is not fixed.there is agin the TPC ( total prodyuct concept)GEAP Product circles (G-generic,E- expected product,A - augmnted ,P-potential product)Lot of R&D has to go to leap into the potential product category.Productisation of service --- this means u do customisation of a service and give it a name.A new company willing to enter the market must offer a potential product. something ahead of its times....that wil create the buzz.product differentiation can be either tangible or intangible. Tangible- ex a bike offering 120 km/l. Intagible benefits in the form of branding,through communication,peace of mind to customers.
FOR COMMODITIES, YOU CAN COMPETE ONLY ON PRICE.THATS WHY BRANDING IS SO IMPORTANT BECAUSE U CAN COMMAND A PRICE PREMIUM IF U BRAND.
marginns on services is always much higher than products.