Prof.

Rajiv Vohra
 Continuous Evaluation : 20%
◦ Assignments : 10%
◦ Class Interaction : 10%
 Group Presentation/Case Studies : 20%
 Mid Term Examination : 20%
 End Term Examination : 40%
 Understanding the Concepts
 Ability to Think and Articulate
 Questioning and Criticizing the Ideas Generated
 Presentation of Facts and Original Ideas
 Why have you taken Wealth Management?
 What are your expectations from the course?
 What do you want to achieve at the end of this course?
 List investment options available to an average Indian?
 What is Money?
 What is an Investment? Why do people invest?
 On what parameters are investments made?
 Difference between Debt and Equity?
 Money is anything that is accepted as store house of value, which can be
exchanged for payment of debts and purchase of goods or services.
 Is Money an asset?
 Narrow Money (M1): Money supply with the public, currency notes with
the public and demand deposits with the banks
 M2=M1+ post office Savings Bank Deposits
 Broad Money (M3)= M2 + Time Deposits with banks
 M4 = M3 + Other Post Office Deposits.
 Non Marketable Financial Assets
◦ Bank Deposits
◦ Post Office Deposits
◦ Company Deposits
◦ PF Deposits
 Equity Shares
 Bonds
◦ Government Securities
◦ PSU Bonds
◦ Debentures
 Money Marker Instruments
◦ Treasury Bills
◦ Commercial Papers
◦ Certificate of Deposits
 Mutual Funds
◦ Equity Mutual Funds
◦ Debt Mutual Funds
◦ Others
 Life Insurance
◦ Unit linked Insurance Policies
◦ Term Insurance
◦ Endowment Policies
 Retirement Solutions
 Real Estate
 Precious Objects
 Derivatives
 Rate of return
 Risk
 Marketability, Convenience/Liquidity
 Taxation
 Time Horizon
 Amount
 Government Policies
 This is principal amount borrowed This the value of your shares when
Capital/
And does not vary unless you you purchase them and may rise or
Principal
Repay funds. fall

Repayment arrangement are

No repayment options. The shares
Repayment Agreed at the time of debt is
Exist till the company is wound up.
drawn

Return on funds lent are through

Return is in the form of dividends
Return Interest. Interest is either fixed
And capital appreciation
Or floating

Participation in
No ownership rights. Ownership rights
profit
 Retail Financial Services
◦ Deposits
◦ Lending
◦ Investments
 Wholesale Financial Services
◦ Corporate Borrowing
◦ Merger & Acquisitions
◦ Underwriting new securities (Debt and Equity)
◦ Foreign Exchange Dealing
 Reserve Bank of India
 Banks
 Non Banks
◦ Finance Companies
◦ Fund Managers
◦ Housing Finance Companies
◦ Investment Banks
◦ Life Insurance Companies
◦ Stock Brokers
◦ Superannuation Funds
 RBI: India’s Central Bank and is responsible for formulating and pursuing
monetary policy
◦ Monetary Policy
◦ Liquidity Support
◦ Payment System Control
◦ Control on Banking Sector
◦ Control on Foreign Exchange Dealers
◦ Control of Non Banking Financial Companies
 SEBI
◦ Conduct of Underwriter for issue of Capital, FII, Portfolio Managers, Mutual
fund Industry, Credit Rating Agencies.
◦ Conduct of Stock Exchanges, Stock Brokers.
◦ Regulation of Custodian of Securities.
◦ Guidelines for Corporate Governance.
 IRDA
 Pension Fund Regulatory and Development Authority
 What do you understand by the phrase “Economic Environment?”
 Which factors govern this Economic Environment?
 Do we need to study them?
 What is Monetary & Fiscal Policy ?
 What is Repo Rate and Reverse Repo Rate?
 What is a business cycle?
 Objectives of Economic Policies
◦ Guide growth while controlling Inflation.
◦ Achieve Maximum Employment.
◦ Steady growth in national income as measured by output of goods
and services.
◦ Improve balance of payment by guiding foreign trade and
investments.
◦ Reduce Regional Imbalances.
◦ Reduce economic Imbalances in the Society.
Macroeconomics: Looks at the overall, big picture and general principles
 Government Policies

 Balance of Payment

◦ Current Account: It encompasses the country’s international trade in goods and

services, the income flow resulting from Non Resident Investments, our
investments overseas.
◦ Capital Account: Flow of capital into and out o India by way of equity investments,
direct or portfolio and debt, long and short-term and public and private.
 Foreign Exchange Rates
 The Terms of Trade

 Inflation

 Household Savings Rate

Microeconomics: It looks ate the general markets, individual companies and

the impact on individuals
 Inflation: It is the rise in general level of prices of goods and services. An
erosion in the purchasing power.
 Is Inflation Bad for an Economy?
 Difference Between Primary & Secondary Markets
◦ Issuance of Prospectus
◦ Increasing obligation by the issuer of securities
 Top Down Investment Approach
 Bottom Up Approach
 MONETARY POLICY
◦ The objective of Monetary Policy is to foster Monetary and Financial Conditions
that will help control inflation, promote growth in output on a sustainable basis
and exploit country’s strength in International Trade.
◦ Open Market Operations
 Buying and Selling of Government Bonds
◦ Discount Rate Policy
 Setting of Interest Rates, also called the bank rate at which member banks
can borrow from the central bank.
◦ Reserve Requirement Policy
 CRR & SLR
◦ Interest Rate Regulation
 Currently RBI controls only saving bank deposit rates and minimum term
deposit tenure ( 7 days for amounts greater than Rs 15 Lakhs and 14 days for
any amount)
 RBI Concerned with Inflation

Reduce Bank Reserves by

Selling Securities in Open Market

Reduction in Bank Reserve leading

To reduction in Money Supply

Increased Interest Rates and

Tightening of credit norms

Reduction in Long term Investments

Reduction in aggregate demand,

Income, output and thus inflation
 FISCAL POLICY
◦ It refers to the use of government spending and taxing power to achieve
macroeconomic objectives.
◦ The government raises its resources through taxation, borrowing and other
revenue sources.
◦ Government expenditure influences both private investments as well as private
consumption.
◦ Taxation reduces private consumption besides influencing investment and
potential output.
 The total market value of goods and services produced in India after
taking out the cost of goods and services used up, in the product
process before deducting depreciation of the economy’s capital stock.
Measuring GDP
1. The Product Approach: The total valued added by households, farmers,
businesses and each level of government.
2. The Income Approach: It totals the factor incomes i.e. the gross
incomes paid to labour and capital as the factors of production,
depreciation and net indirect taxes.
3. The Expenditure Approach:
1. Consumption
2. Investments
3. Government
4. Exports
5. Imports
 Repo (Repurchase) Rate Repo rate is the rate at which banks borrow
funds from the RBI to meet the gap between the demand they are facing
for money (loans) and how much they have on hand to lend.
◦ If the RBI wants to make it more expensive for the banks to borrow money, it
increases the repo rate; similarly, if it wants to make it cheaper for banks to
borrow money, it reduces the repo rate.
 Reverse Repo Rate This is the exact opposite of repo rate. The rate at
which RBI borrows money from the banks (or banks lend money to the
RBI) is termed the reverse repo rate.
◦ The RBI uses this tool when it feels there is too much money floating in the
banking system If the reverse repo rate is increased, it means the RBI will
borrow money from the bank and offer them a lucrative rate of interest. As a
result, banks would prefer to keep their money with the RBI (which is
absolutely risk free) instead of lending it out (this option comes with a certain
amount of risk)
 ◦ Consequently, banks would have lesser funds to lend to their customers. This
helps stem the flow of excess money into the economy Reverse repo rate
signifies the rate at which the central bank absorbs liquidity from the banks,
while repo signifies the rate at which liquidity is injected.
 Bank Rate This is the rate at which RBI lends money to other banks (or
financial institutions . The bank rate signals the central bank’s long-term
outlook on interest rates. If the bank rate moves up, long-term interest
rates also tend to move up, and vice-versa.
◦ Banks make a profit by borrowing at a lower rate and lending the same funds at
a higher rate of interest. If the RBI hikes the bank rate (this is currently 6 per
cent), the interest that a bank pays for borrowing money (banks borrow money
either from each other or from the RBI) increases. It, in turn, hikes its own
lending rates to ensure it continues to make a profit.
 Call Rate Call rate is the interest rate paid by the banks for lending and
borrowing for daily fund requirement. Since banks need funds on a daily
basis, they lend to and borrow from other banks according to their daily
or short-term requirements on a regular basis.
 CRR Also called the cash reserve ratio, refers to a portion of deposits (as
cash) which banks have to keep/maintain with the RBI. This serves two
purposes. It ensures that a portion of bank deposits is totally risk-free and
secondly it enables that RBI control liquidity in the system, and thereby,
inflation by tying their hands in lending money SLR
 Besides the CRR, banks are required to invest a portion of their deposits in
government securities as a part of their statutory liquidity ratio (SLR)
requirements. What SLR does is again restrict the bank’s leverage in
pumping more money into the economy.
 Recession
◦ It is a Business Cycle contraction, a general slowdown in economic activity over
a period of time.
◦ It is a decline in a country's gross domestic product (GDP) growth for two or
more consecutive quarters of a year.
 Depression
◦ It is a sustained, long-term downturn in economic activity in one or more
economies. It is a more severe downturn than a Recession
◦ Another proposed definition of depression includes two general rules: 1) a
decline in real GDP exceeding 10%, or 2) a recession lasting 2 or more years
 Trough to expansion
◦ WPI Falling
◦ Interest Rates falling
◦ Consumer sentiments increasing
◦ Consumer demands increasing
◦ Retail sales increasing
 Expansion to Peak
◦ GDP increasing, IIP increasing
◦ Capacity Utilization Increasing
◦ WPI Increasing
◦ Labour market tightening
◦ Growing expectations that the boom cannot last
 Peak to Contraction
◦ GDP Falling
◦ Industrial Production Falling
◦ Capacity Utilization falling
◦ Labour productivity increasing
◦ Unit labour cost decreasing
 Contraction to Trough
◦ WPI Falling
◦ Retail Sales declining
◦ Unemployment rising
◦ Housing Starts declining
◦ Home lending falling
◦ Consumer sentiments decreasing
 Leading Indicators
◦ Consumer sentiments
◦ Consumer purchases around festivals
◦ Movement in realty sector
◦ Automobile sales
 Coincident Indicators
◦ Job advertisements
◦ Credit off take by private sector
 Lagging Indicators
◦ Unemployment Rate
◦ Employment Growth
 These partial indicators along with broader measures such as National
Account, Consumer Price Index, Balance of payment and government
policy statements provide information about the current state of
economy and likely direction.
 Financial Press
 Research Papers
 Company Reports
 Economic Calendar