Lets learn some quick fundas on Indian economy !

Friends, here are some concepts that appears infront of us manytimes, often daily. Some concepts like what is CRR? what is CDR? what is REPO? blah blah blah..so lets discuss some of them here..

I will try to post as many terms as possible but if i miss anything then please excuse me.



1) CRR :

Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with RBI. If RBI decides to increase the percent of this, the available amount with the banks comes down. RBI is using this method (increase of CRR rate), to drain out the excessive money from the banks.



2)Relation between Inflation and Bank interest Rates
Now a days, you might have heard lot of these terms and usage on inflation and the bank interest rates. I am are trying to make it simple for you to understand the relation between inflation and bank interest rates in India.
Bank interest rate depends on many other factors, out of that the major one is inflation. Whenever you see an increase on inflation, there will be an increase of interest rate also.



3) What is Inflation?
Inflation is defined as an increase in the price of bunch of Goods and services that projects the Indian economy. An increase in inflation figures occurs when there is an increase in the average level of prices in Goods and services. Inflation happens when there are less Goods and more buyers, this will result in increase in the price of Goods, since there is more demand and less supply of the goods. infaltion is determined on WPI, and friends here the concept of weighted averaegs comes into picture.

You can see how it is calculated in my earlier blog named "Soaring inflation"



4) What is REPO rate?

Whenever the banks have any shortage of funds they can borrow it from RBI. Repo rate is the rate at which our banks borrow rupees from RBI. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases borrowing from RBI becomes more expensive.



5) What is reverse REPO rate?


Reverse Repo rate is the rate at which Reserve Bank of India (RBI) borrows money from banks. Banks are always happy to lend money to RBI since their money are in safe hands with a good interest. An increase in Reverse repo rate can cause the banks to transfer more funds to RBI due to this attractive interest rates. It can cause the money to be drawn out of the banking system. Due to this fine tuning of RBI using its tools of CRR, Bank Rate, Repo Rate and Reverse Repo rate our banks adjust their lending or investment rates for common man.



6) PE Ratio:

The P/E ratio (price-to-earnings ratio) of a stock (also called its "earnings multiple", or simply "multiple", "P/E", or "PE") is a measure of the price paid for a share relative to the annual income or profit earned by the firm per share.A higher P/E ratio means that investors are paying more for each unit of income. It is a valuation ratio included in other financial ratios. The reciprocal of the P/E ratio is known as the earnings yield.



7) What is EPS?

The portion of a company's profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company's profitability.Calculated as:




In the EPS calculation, it is more accurate to use a weighted average number of shares outstanding over the reporting term, because the number of shares outstanding can change over time. However, data sources sometimes simplify the calculation by using the number of shares outstanding at the end of the period.

8) What is IRR?
The internal rate of return (IRR) is a capital budgeting metric used by firms to decide whether they should make investments. It is an indicator of the efficiency of an investment, as opposed to net present value (NPV), which indicates value or magnitude.
The IRR is the annualized effective compounded return rate which can be earned on the invested capital, i.e., the yield on the investment.
A project is a good investment proposition if its IRR is greater than the rate of return that could be earned by alternate investments (investing in other projects, buying bonds, even putting the money in a bank account). Thus, the IRR should be compared to any alternate costs of capital including an appropriate risk premium.
Mathematically the IRR is defined as any discount rate that results in a net present value of zero of a series of cash flows.

I think i should stop here, i will update this post in near future..
All the best, hope it helps..

Regards,
Ameya

Some quick inputs on RBI policy

Here are some good inputs on RBI's recent policy, i am posting summary of this article which is followed by a link to download the PDF article..

RBI Policy

At last week’s policy meeting, the RBI left the repo, reverse repo and bank rates
unchanged at 7.75%, 6% and 6% respectively but hiked the cash reserve ratio
(CRR) by 50bps to 7.5%.
RBI's stance retained the earlier emphasis on price stability and anchoring inflation
expectations as well as the emphasis on ensuring credit quality and orderly
conditions in financial markets. We retain our expectations for another 50bp
CRR hike in 1Q08 and look for more sterilisation bond issuances before policy
rate hikes are eventually seen as “unavoidable” in 3Q08.

Growth forecast maintained

3% WPI goal really a long-run “wish”
The RBI maintained its GDP forecast for FY2007 (Apr07-Mar08) at 8.5% and
repeated that the goal is to contain inflation close to 5%. It also mentioned
that the endeavour would be to condition inflation expectations in the range
of 4.0%-4.5%, so that in the medium-term, inflation can be brought down to
3%. We would not pay too much attention to this 3% medium-term inflation
target. Given the government’s fear that higher rates would slow growth, the
RBI would probably not have the freedom to raise rates sufficiently to bring
inflation down to 3%. RBI moves are, therefore, likely to be restricted to the
objective of containing inflation below 5%.

Here is the link to full article on this :

https://www.dbsvresearch.com/research\dbs\research.nsf/(vwAllDocs)/D5CFD6CDB260D21E482573F000354306/$FILE/in_2007nov6.pdf

Enjoy reading.

Regards,

Ameya

Quant Concept - Functions Part-II

Continuing to previous post on Functions, here are some more concepts on Functions..

Inverse of a function :
Inverse of a function exist only if, for every value of a dependant variable "y", ther exists only and only one value of independant variable "x".
So when ever question comes to find the inverse of a function, what you have to do is:
Replace every occurance of x with y, for e.g
you are given following function f(x)= 1/(x-2), and you have to find an inverse of this function, now, replace every x with y, so we have x= 1/(y-2)
Make this equation in the form of y,
therefore, y=1+2x/x => 2 + 1/x which is an inverse of the function.

Relationship between y=f(x) & y=f(x)+c
If you have a function of the form y=f(x)+c, then graph of your function will be shifted up on the x-y axix by "C" units.

E.g :
1) y=f(x)-c
Graph will be down by "C" units on x-y axis.

2)y=f(x+c)
Graph will be shifter to the left on x-y axix by "C" units.

3) y=f(x-c)
Graph will be shifted on to the right on x-y axix by "C " units.

Some important points:
For two functions to be identical , their domain should be EQUAL.
Domains of some functions:
1) y= root X => x>=0
2) y= root x => x>=0
3) y= root x^2 => x>=0

Hope this helps to many..
Happy studying..

Regards,
Ameya

Finally IIM results are out !!

Hey guys,
After long wait, IIMs have declared their results, i am posting some of the links and also some links from pagalguy forum where the discussion is going about the final calls. Enjoy..And all the best to all for next CAT 2008..

IIM-A
http://www.pagalguy.com/forum/cat-and-related-discussion/31201-iim-pgdm-2010-results-out.html
IIM-C
http://www.pagalguy.com/forum/cat-and-related-discussion/31220-iimi-2008-2010-final-results.html
IIM-K
http://www.pagalguy.com/forum/cat-and-related-discussion/31199-iim-k-pgdm-2010-results.html
IIM-L
http://www.pagalguy.com/forum/cat-and-related-discussion/31213-iim-l-2008-2010-final.html
IIM-B
http://www.pagalguy.com/forum/cat-and-related-discussion/31183-iim-b-pgpm-final-results.html
IIM-I
http://www.pagalguy.com/forum/cat-and-related-discussion/31220-iimi-2008-2010-final-results.html

Regards,
Ameya

If this doesnt inspire you, nothing will.

Very recently i came accross one of the superb video i have ever seen. It inspired me like anything else. I can challenge anyone that this video will inspire you and will awaken the fighter inside you if it is sleeping. I am posting the link to the video as i am unable to put the video directly out here. I am exclusively posting this link for those people who are left behind the race of CAT 2008 or let me make it more bigger-- LIFE.
I am sure when you see this video you will get a kick start and start your preparation will full power.
IF THIS DOES NOT INSPIRE YOU, NOTING WILL
Here is the link...
http://www.youtube.com/watch?v=BKXFGVMO3pc&feature=related


Happy studying..

Regards,
Ameya

Quant concept - Functions

So after so many days, i am writing about functions. Iwas too busy so just could not post the next posts. So here we go again..
Here are some very very important points about functions. I am starting with basics now..
1) Functions will always be in a form of
y=f(x)
equation will always be in a form of
f(x)= 0

2) when y=f(x)
x= independant variable
y= dependant variable

3) What is Domain of a function?
Domain is a set of values for viz equation make sense.
e.g y=x^2
so D = x>0 (i.e. x should not be zero in order to validate the equation, else if x=0 then y=0 and indirectly equation will be zero)

4) What are even functions?

f(x)=f(-x) then function is said to be even function

Some important points about function-->
1)Sum, difference,product,quotient of an even function is even
2)Graph of even function wil be always symmetrical about "y-axis" when x is independane variable and y is dependant varibale.
When this condition changes, then graph wil be symmeterical about "x-axis".
5) What are odd functions?
when f(x)= -f(-x) then function would called as od function

some important points for odd function -->
1) Sunm & difference of odd function is odd.
2)roduct & quotient is even.
3)The graph of odd function is always symmetrical about "Origin".

For now i am ending this post here as i need to go home and have a dinner. I will update this function tomorrow again with more concepts about functions.

I hope this helps to many people..

Enjoy & good night & sweet dreams :)

Regards,
Ameya

Soaring Inflation !!

I was having a bite in the canteen when it came to me that inflation soared to 7%. Bapre!!! was the only word i could utter. While inflation is at 3 years high, we all fear CRR hike by RBI. But a common man is always and will continue to suffer unless strong measures are taken. Consumer prices are hurting a poor, The government has already scrapped import duties on cooking oils and maize, extended a ban on pulse exports and on Friday stopped export incentives on basmati rice to boost local supplies after earlier banning non-basmati exports as a fighting measure. But anyways these measures are not enough to help a common man at grass root level.
I would like to add my last point here, how inflation is calculated :
The inflation rate is worked out from Consumer Price Index values (CPI). The CPI is calculated from the weighted prices of several groups of articles of consumption like food items, machinery, chemicals, metals, building construction material, etc. The inflation rate is the percentage increase or decrease in the values of CPI at a specified time interval.
Anyways this was only an update, and lets get back to our old topic. I am writing new post on a topic from QA - Functions & Graphs.