The IBS Times; 207th Issue, June 2018

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Team IBS Times

Ishaan Sengupta (Editor in Chief) Aarushi Jandrotia (Managing Editor) Nishika Tatiya (Associate Editor) Sambhav Jain (Associate Editor) Aishwarya Siram Amit Shovan Mandal Ayush Thalia Kartik Grover  Noel Mathew Tanay Sood

Designed By : Ishaan Sengupta

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Easing into finance, step by step‌ 2018 has started off with a burst of energy, especially when it comes to financial news and affairs. From frequent mergers, to pathbreaking legislations, the second half of the year looks to be heading towards an enterprising pandora’s box. It is therefore important that we highlight what happened in the first 6 months, analyse the misgivings and capitalize on observations.

This issue shall highlight on Financial Basics, important events and some knowledgeable tools to be explored for workreadiness and heightened employability.

Please write to us and become of part of these discussions.

Email id : editor.ibstimes@gmail.com Ishaan Sengupta Team IBS Times, Finstreet

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Contents

5 Stock Market: Can We Expect A Crash In 2019?

8 Mutual Funds – A Common Man’s Tool 11 The PNB Scandal: In The Drain 14 Banking Frauds And a Lot of Them…

17 Can Donald Trump Change The Fate Of U.S.A? 20 The Economics of Prohibition 23 ARIMA - Adequate Speculation Tools

Stock market: Can we expect a crash in 2019?

-Aarushi Jandrotia The answer to this question is a big fat NO, as far as the Indian market is concerned. Before, I comment about the future prediction of the stock market growth in 2019, I would really want to give the heads up about the current Indian market.

So here it begins: CURRENT SCENARIO: Not only BSE but all of the world’s market is crashing. Japan, Australia, South Korea and Taiwan are the examples. The BSE Sensex has fallen more than 1,200 points till now. It has even traded at nearly 2.95 percent lower. But made the market plunge down. Here are the following different reasons: 1. MARKET FALL OF U.S:

This all happened because the U.S’s Central bank, U.S Federal Reserve gave an indication that the there might be a hike in the benchmark interest rates. And we already know that interest rates have an inverse effect on the stock markets.

2. NINE YEAR BULL RUN EFFECT: 2017 was a great year for the Indian stock market. And the Sensex has also closed on 35,000 points. A sudden fall can also be expected due to the fact that the stock prices have been steadily rising.

On the prospect of tax cuts, corporate deregulation and infrastructure spending, The U.S stock market has climbed up to 23.8 percent since the President Donald Trump’s election. Which results to increase in the U.S bond yields and the also increase in the U.S wages, which in turn trigger the alarm of higher inflation and higher interest rates.

The fall of the American Stock market indices like Dow Jones Industrial Average and the Standard & Poor 500 by nearly 4 cent has not only had bad impact on Wall Street but also in BSE. The biggest intraday decline in the history was seen

by Dow by 1,600 points

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3. TAX ON LONG TERM CAPITAL GAIN: According to the budget 2018 there was a proposal of 10 per cent long term capital gains (LTCG) tax on equities and with this the decline in the Indian markets have been seen. It means the gains made on stocks held for more than a year in case of equity shares. This can have a future impact as well.

4. RBI POLICY: As acc. to the budget, there was a proposal that RBI might increase the repo rate over the concerns of the inflation and investors has become very cautious and this made the plunge in the BSE Sensex as well in the NSE Nifty. If this happens in future, there will be a drop in the shares of the stock market.

5. DEPRECIATION OF RUPEES AGAINST DOLLARS: As the Rupees is devaluing against Dollars, this also is dampening the sentiments of the investors. With this we can see the shed in the BSE Sensex as well in the NSE Nifty in the stock market.

If this continues in future as well then there will be drop of shares in the stock market.

FUTURE ASPECT: This year a bull market and it is believed to continue as a bull market. It is believed by a global investment bank that BSE Sensex index could hit 40K+

by December 2018 if earning growth accelerates to nearly 20 percent in a bullish scenario. The growth is expected to accelerate slowly. In FY2018 and FY2019 respectively the global investment bank expects earnings growth of 16 percent and 24 percent on a year-on-year basis respectively.

The S&P BSE Sensex could rally towards 41,500 on better-than-expected on policy measures as well as global factors , In the bull case scenario has a probability of 30 percent. In FY2018 the earnings growth would accelerate to 19percent and in FY2019 the earnings growth would also accelerate to 27 percent.

And, in the bear case scenario, the S&P BSE Sensex could push towards 25,000, if the policy response is moderate and global conditions gets worsen. And the profitability in the bear case scenario has 20 percent. In FY2018 the earnings growth would accelerate to 7 percent and in FY2019 the earnings growth would also accelerate to 23 percent.

6. FOREIGN INVESTORS: It was reported that Foreign Institutional Investors sold Rs. 1263.57 worth of equities in 5 Feb 2018. This event dragged down all the Sensex and Nifty components. So Indian Market has to gain back the trust of the foreign investors for stock appreciation.

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In 2018 and 2019 it is predicted by IMF that India will be the world’s fastestgrowing major economy. In latest World Economic Outlook Update, the IMF estimated that that Indian economy would grow by 7.8 percent in fiscal 2019-2020.

Thus this will make India the world’s fastest-growing economy for that year.

Despite few overhangs like crude oil at two-year high, slight slippage expected on fiscal front in the forthcoming budget, inflation at the upper end of RBI’s comfort zone, and probable geopolitical risks, Indian market will continue to remain bullish over the next 3-5 year investment horizon.

Nifty was 2,200, today it is 10,000 and it has already been a five-bagger, and I think it has got another three to go. So I will say something here is that markets are non-linear as we all know so there is no genius in that so even while the GDP grows to 3x in 10 years I think the market will do it in five. So our projection is that the market does 3x in 10, but inside that we have a view that most of those returns 90-95% of those returns come in the next five years and then we will enter a bear market.

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Ridham Desai, Head-India Equity Research and Managing Director, Morgan Stanley has to say that Equities will grow 3 times in 5 years and then will enter a bear market. He says “The facts are that earnings have slowed down but we are in a recovery that started about six quarters ago. We got two blips in that, we got the DeMon blip, we got the GST blip and particularly if ignore the GST blip actually revenue growth is at a seven quarter high and earnings are already accelerating. So margins have just started to expand and you will see that revert in this quarter. So I am fairly sure that we are in a new earning cycle.

It has been a slow steady one not like the V-shape one we saw in 2003-2004 and therefore this has been the longest bull market in India’s history, but also the slowest one. I mark the bottom in March 2009 after that the Nifty has made successive highs and successive lows, higher tops, higher bottoms as technical analysts will call it 7

Mutual Funds – A Common Man’s Tool - Nishika Tatiya WHAT IS A MUTUAL FUND? A mutual fund is an investment vehicle made up of a pool of funds collected from various investors for the purpose of investing in various stocks, bonds, money market instruments and similar assets.

The income earned through this investment is shared by its investors in the proportion to the number of units or shares owned by them. Thus, a mutual fund is the most suitable investment for the common man as it offers the opportunity to invest in a diversified portfolio that is professionally managed at a relatively low cost.

Post 2004, the industry has witnessed a number of mergers and acquisitions and steady rise in the penetration of mutual fund industry in India.

In India mutual fund industry follows a 3 tier systemTier 1- comprises of a sponsor who thinks of starting a mutual fund. The sponsor approaches the SEBI which is the market regulator and regulates the mutual fund also.

THE MUTUAL FUND INDUSTRY IN INDIA

Tier 2- Once SEBI is convinced, the sponsor creates a public trust as per the Indian Trust act, 1882. Once trust is formed it is registered with SEBI after which it is treated as a mutual fund.

The mutual fund industry started in the year 1963 with the formation of unit trust of India (UNI) with the initiative of the reserve bank of India (RBI) and the Government of India. The main objective then was to attract small investors and introduce them to market investments.

Tier 3- Entity that manages money in a mutual fund is the Asset Management Company (AMC) The trustees appoint AMC. The AMC charges fees for the services they provide which are borne by the investors as it is deducted from the money collected.

From then till now the size of the industry has doubled in terms of AUM (Asset under management) which have gone from above Rs. 68,000 crores to over Rs 1,50,000 crores.

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HOW INVESTING MUTUAL FUND CAN BE BENEFICIAL FOR YOU? 1. Simplicity – Mutual funds are straight forward and are easy to understand Mutual funds are no special case to this when we say anything can be made into something more complex than it needs to be.

However, if you want to invest in mutual funds you do not require any experience or knowledge of economics, financial statements, or financial markets to be a successful investor. In other words, Mutual funds are like baskets of investments.

Hundreds or even thousands of securities can be held in a single mutual fund. Investing in just one or two securities could be risky that is the reason why diversification is important.

For example, if an investor buys just a few stocks and those stocks see significant declines in price over a short period of time, the investor's portfolio can drop dramatically in value. But if the investor buys a mutual fund that holds 100 stocks, and a few of those stocks see price declines, the impact on the investor's account value is less.

Each basket holds dozens or hundreds of security types, such as stocks or bonds.

Therefore, when an investor buys a mutual fund, they are buying a basket of investment securities.

4. Variety – Mutual funds comes in various different types and categories There are many different types of mutual funds that you could invest in.

As you increase your portfolio of mutual funds, you will want to diversify into various mutual fund categories and types.

2. Accessibility – Mutual funds are Easy to purchase. You can find any finance services related firms to invest in a mutual fund for example, brokerage firms, discount brokers online, mutual fund companies, banks, and insurance companies.

Mutual funds that cover the main asset classes (stocks, bonds, and cash) and various sub-categories or you can even venture into specialized areas, such as sector funds or precious metals funds are some of the examples of mutual funds.

Even amateur investors can easily open an account at a no-load mutual fund company, and open an account within minutes.

5. Affordability – Mutual funds have low minimums Mutual funds can be bought with a relatively very small amount of (e.g., $500 for the initial purchase). Many mutual funds also permit you to buy more units on a regular basis with even smaller instalments (e.g., $50 per month).

3. Diversity – Mutual funds have wide market exposure. This diversification extensively reduces the risk of a serious monetary loss due to problems in a particular company or industry.

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6. Professional management – Mutual funds have a group of professionals researching and analysing investments so you don’t need to! Perhaps the greatest and the most important benefit of all is that investors can save countless hours of time, energy and frustration involved with the research and analysis required to find quality investments to hold in a portfolio. Rather than investing time and energy on investment matters mutual fund allows the investor to do things they enjoy in life.

-ed information about the fund’s holdings, performance and assets are available to all investors. This allows for transparency in the operation of Mutual Funds, which encourages investors to make informed investing decisions.

In recent times, the penetration of mutual fund in the domestic market is increasing drastically due to its low risk, good return and diversified features. Hence, mutual funds provide a good alternative for investors.

7. Flexibility – Mutual funds have several uses and applications. All of the above benefits that we have discussed of mutual funds cover into simplicity and flexibility. You can invest in just one fund or you can even invest in a wide variety.

The thing that makes mutual funds the best overall investment type for both beginners and advanced investors are automatic deposit, systematic withdrawal, annuity sub-accounts, dividends, shortterm savings, long-term savings, and nearly limitless investment strategies.

8. Liquidity – Mutual funds are easy to get in and get out. Another advantage of mutual funds is the ability to get in and out with relative ease. In general, you are able to sell your mutual funds in a short period of time without there being much difference between the sale price and the most current market value. However, it is important to watch out for any fees associated with selling, including backend load fees.

9. Transparent – Mutual funds are transparent. There are no hidden charges in Mutual Fund investments. All the requi10

The PNB Scandal: In The Drain

- Aishwaya Siram On 14th February 2018, Punjab National Bank (PNB) disclosed Rs11, 000 crore fraud allegedly by one of the country’s richest men, diamond merchant Nirav Modi. PNB’s shares plunged on the news, dragging down other lenders when it said the scam may extend to multiple banks.

PNB has alleged Modi for the fraud, a jeweller who’s on No. 85 on Forbes’s 2017 list of India’s richest people. It is alleged that Modi was helped and supported by a former PNB employee, Gokulnath Shetty, who was the deputy general manager in the FOREX department in one of its branches in Mumbai.

The Modis and their relative Mehul Choksi and companies linked with them partnered with Shetty .The bank states that they used fake PNB guarantees of worth Rs 11,000 crore to obtain loans from overseas branches of Indian banks.

THE START – The fraud dates back to 2011. Between then and January 2017, Shetty issued several fake PNB, letters of undertaking — without any collateral.

The bank claims they then bypassed the lender’s internal

messaging system in order to avoid detection and placed instructions by the Swift global payment system asking overseas branches of Indian banks to release the cash in the form of loans.

It came to notice in February 2018, when representatives of Modi’s companies approached PNB for a fresh loan. By then, Shetty had retired and his successor declined to honour Modi’s request. The firms contested that they have been availing this facility in the past also but the branch records did not reveal details of any such facility as informed by PNB. At this time the fake letters of undertaking were discovered.

WHO BEARS THE BRUNT? PNB is in talks with other banks and liabilities will be decided after the probe.

Sunil Mehta, the CEO of PNB added that it will follow the regulator’s instructions on repayment.

A senior government official said PNB will repay other banks their dues by end of March and it would A senior government official said PNB will repay other banks their dues by end of March and it would be funded from internal resources.

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The RBI hasn’t publicly commented on the case.

PNB has alleged that the money was used either to retire import bills or replenish maturing lines of credit with some other banks. PNB mentions the Hong Kong branches of Axis Bank and Allahabad Bank as the overseas banks.

Allahabad Bank’s is at about Rs 4,000 crore while the Union Bank is projected at around Rs 1,000-2,000 crore.

The sudden volatility in the prices eroded the market cap of these 34 stocks by over Rs 36,380 crores.

Benchmark BSE Bankex lost 1.2 per cent.

The corresponding figure for Axis Bank reads about Rs 2,000-3,000 crore.

PNB mentioned investor’s wealth worth Rs 8,077 crores and its stock tanked 20.6 per cent in the month of February.

The share price loss widened to 25 per cent till 12 pm intra-day today. The value of PNBs fraudulent transactions stands nearly 50 times the bank's Q3FY18 net profit of Rs 230.11 crores.

WHAT NEXT-

A RIPPLE EFFECT-

The Indian government has asked all banks to send reports involving this case.

PNB’s CEO said Modi has reached out to PNB to present a repayment plan but the bank has sought more details. Nirav Modi had left India even before the CBI complaint has been filed. The external affairs ministry has suspended Modi and his Choksi’s passports for the coming weeks. Modi, his family and business partner Choksi all left the country in the first week of January.

The details and dimensions of the Punjab National Bank scam are difficult to discern. These might be hard to sort out even over the next several months or years. India’s investigative agencies will struggle to figure this. It will require forensic audits help and painstaking reconciliation of SWIFT entries and letters of undertaking across multiple banks to be verified.

Modi was last spotted in Switzerland at the World Economic Forum’s annual meet in Davos (January 23-26).

EFFECT ON STOCK MARKET The banking sector took a hit after Punjab National Bank informed the exchanges on 14th February 2018 that it detected some unauthorised and fraudulent transactions worth $1.77 billion or Rs 11400 crores. 34 of the 39 listed banks' share prices fell between February 12 and February 15.

However, whatever the amounts at risk may be, those are likely to be stuck in the system for a while or are possibly unrecoverable.

Probably, Punjab National Bank will eventually take the hit, but it is likely to travel through the courts.

Most of the loans to Nirav Modi and to Mehul Choksi were taken from the overseas branches of other Indian public sector banks. So there will be a “negative network effect” rippling through the banking system as that money gets stuck. Other businesses in 12

the gems and jewellery will also be affected by this negative ripple.

DEEPENING PUBLIC MISTRUSTReserve Bank of India will have to bridge this gap in the supervisory system that allows easy based frauds. Scams exploiting in SWIFT supervision and issuing letters of undertaking without collateral are thus likely to surface across the public sector banking system.

This adds additional stress to the banking system at a point when it is in a bad shape. In its last Financial Stability Report released in December, the Reserve Bank stated that about 11% of all advances would have turned into nonperforming assets (loans for which the principal or interest payment is overdue for 90 days or more) by September.

That is about 11 trillion – which is about 100 times the size of the Punjab National Bank scam. However, in terms of gross domestic product, that is about 7.5%-8%.

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Banking Fraud And A Lot of Them...

- Shilpam Dubey If PNB fraud surprised you, read this article..

Recently, another state-run bank Union Bank of India filed a complaint to CBI against Hyderabad-based Totem Infrastructure Ltd for cheating on a loan amount of Rs 1,397 crore. Reportage of cases like these has escalated in the last one month as RBI has cracked down hardly on the banks after the enormous PNB fraud. Banking frauds have begun a commonplace these days, hardly shocking anyone, but it’s only the reportage that has increased. It would be safe say to say that the frauds which people know about form only a small portion of the total frauds in the banking industry. Not all the cats get out of the bag.

triggering steep falls in stock markets, plunging shares of PSU banks, and even to the extent of affecting India’s macroeconomic indicators.

While the fallouts have been staggering, what’s not surprising is the fraud itself. Frauds in banking have perhaps existed since time immemorial; the only difference is that with time their operations have evolved, fraudsters and cronies have figured different ways to carry out these frauds, every time finding a new way to get around the system.

Banking is about three things— Frauds, Frauds and Frauds..

There is no doubt that the amount of the PNB fraud of Rs 14,500 crore—this amount equivalent to 2 billion in US dollars, is almost double the recap amount of PNB, is one-third of its market cap, is more the GDP of some 15 countries, and lot other amusing data, let’s not get started on that—is enormous enough to shock the whole country, 14

There have been frauds of bigger numbers than the $2 billion PNB fraud too. There was another fraud revealed in 2015, when $3.2 billion worth (or even bigger as the actual size of the fraud could never be known) of export credit paid out by UCO bank were misused. It was a well-planned fraud, pulled off by foreign nationals, from Iran and Azerbaijan. Apparently, they used student visas to enter the country and set up shell companies, through which they got access to Iran’s UCO bank account.

Enforcement Directorate found out that advance payments that these shell companies took against exports to Iran, like diamonds, got diverted to certain entities in Dubai and Iran. In reality, these exports were never made.

This fraud was a result of misusing a rupee payment facility started by UCO bank in 2012. It was created to facilitate payment of crude oil imports to Iran paid

by Indian oil firms and payments received

by Indian exports to Iran. This is a very simple and useful service provided by the bank which fraudsters took advantage to divert funds. In fact, after this scam, a draft required that any credit for export should be covered within a year, to provide as a proof of actual delivery.

Despite that, bank services for export advances are still prone to frauds/ PNB fraud is also an example of that.

Another fraud by Winsome Diamonds also involving PNB, similar to Nirav Modi fraud (in fact a gentleman named Gokulnath Shetty, who used to work in bank’s corporate branch in Mumbai Cuffe Parade area is involved in both the frauds) came into light in 2013 when Winsome Diamonds defaulted on its.

payments for the first time. The company imported gold using banks' letters of credit facility, which they further exported to their UAE clients to make jewellery But, allegedly, UAE clients lost the money on over-thecounter currency derivative bets—which banks believe that Winsome has willfully defaulted and not lost out due UAE client. Hence, the fraud—involving Rs 6,800 crore, owed to 15 banks—is still unsolved. PNB, again, lost the highest amount in this fraud. Winsome Diamonds is the second largest willful default case in India, first being Vijay Mallya's Kingfisher Airlines.

No.. It’s not human to err, at least not multiple times!

What is important is to take the early warning signals seriously. When it comes to taking actions there is a huge amount of dilly-dallying by the regulatory bodies/investigation agencies. This is not just the scenario in India. US’s Bernie Madoff’s huge ponzi scandal of more than $50 billion came out in 2009 and US’s Securities and Exchange Commission (SEC) did get multiple information about the fraud long before but didn’t act upon it at the right time, resulting in escalating fraud size.

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RBI in its Financial Stability Report of June 2017 warned about the rising banking frauds and the misuse of SWIFT infrastructure in the last two years but these signals were completely ignored by the banks, and may be intentionally so.

It’s not rocket science to figure out why so many frauds occur under the nose of regulatory bodies/bank management but only come out after a point when not a lot can be reversed. It’s because people in top management of the banks are colluding too. Yes, there are systematic loopholes in Indian banking system— PSUs privatisation is required, some financial instruments like letter of credit and guarantees are more fraud-prone, bank technology is not perfect etc. but, all these factors, even collectively, cannot perpetrate a fraud, if corporates and bank’s management are honest beings.

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Can Donald Trump Change The Fate Of U.S.A? - Sambhav Jain Donald Trump is known to take aggressive decisions. One such decision came at a meeting with the bipartisan group of U.S. senators and representatives at the White House when he took strict actions on import of two metals: steel and aluminium.

Some of the lawmakers were in his favor to save steel and aluminium plants in USA but others argued that higher prices would hurt manufacturers that consume steel and aluminium. Trump was exploring options presented by the U.S. Commerce Department on whether restrictions on steel and aluminium are needed to protect national security.

Trump’s decision was backed by his opinion that he wanted to keep prices down but at the same time he also wants to make sure that they have a steel and aluminum industry for national defense.

In the wake of his decision US steel stocks rose, with the S&P 1500 steel index closing up 1.1% and outperforming the market. Alcoa Inc shares ended 1.4% higher and Century Aluminum shares up by 0.5%.

STEEL USED IN ENERGY INDUSTRIES Lawmakers were in favor of maintaining

U.S. energy independent. They took steps to protect U.S. producers of oil drilling and transport pipe and noted AK Steel is the last American producer of electrical steel.

One of the lawmakers argued that without relief from the imports, AK Steel is going to pull out of this business and so there wouldn’t be any steel plant.

It’s a dream job for every accountant to work for these firms. Also, big four provide ample job opportunities. They represent the pinnacle of an accounting career. All the big four firms are ranked on the Fortune 100 best companies to work for lists every year.

However, Republican Senator Pat Toomey cautioned that it would be difficult for Trump to justify a national security ruling because defense products are consuming only 3 percent of domestic steel output. So, it would be difficult to meet the need of US defense industry.

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The reports given to Donald Trump by the Department of Commerce depicted that its steel industry might face a situation similar to Second World War as foreigners are filling one third of American demand for steel.

Twenty eight percent of national capacity lies idle. The share of primary aluminium that is imported is 91% and 61% of local smelting capacity lies idle. The chart below shows the USA imports aluminium and steel in 2017.

mixture that would hit some countries with a harsh tariff and leave the rest with a larger quota. Each would have its own side-effects. The suggested tariffs of 24% on steel and 7.7% on aluminum would unite exporters to America and will witness high retaliation. As a result, price hikes will be seen to cover the tariffs.

This would threaten jobs in industries such as construction, oil and gas and car manufacturing. Many Americans are employed in these industries than in making steel and aluminum.

\ FINAL DECISION: On 26 March, 2018, President Trump imposed the tariffs on $60 billion in Chinese goods and limiting China’s ability to invest in the U.S. technology industry.

This move was in response to Beijing’s history of forcing U.S. companies to surrender their trade secrets to do business in China.

America’s economic security is at stake.

The recommendation given by Department of Commerce aims to cut metal imports by 12% of current American demand. Recently, steelmakers also urged Trump to take action to reduce steel import to curb global excess steel production capacity especially in China.

OPTIONS AVAILABLE WITH TRUMP Three options are presented to Trump: a broad tariff, a stiff and broad quota or a

President Trump directed U.S. Trade Representative Robert E. Lighthizer to announce within 15 days a proposed list of products with the increased tariffs.

After a public comment period, the final list comprising of target Chinese products that benefited from improper access to U.S. technology will be made public.

The president blamed China for the loss of 60,000 factories and 6 million jobs due to China’s competition and automation.

Trump said that unfair Chinese trade practices are responsible for the increased U.S. trade deficit with China, which has reached a record $375 billion.

Trump also ordered Lighthizer, US Trade Representative to complain to the World Trade Organization about China’s discriminatory licensing practices, an effort U.S. officials hope will draw support from U.S. allies in Europe and Japan.

CONCLUSION: Mr. Trump has characterized China as an “economic enemy” that has taken advantage of U.S. But such actions of Trump will only heat up tensions with Chinese government when Trump needs support for his campaign to curb North Korea’s nuclear program.

Mr. Trump’s action demonstrates his move from open and integrated world economies to a more protectionist economy.

Now, the world is waiting to see whether United States of America can stand on Trump’s decision of creating more employment opportunities and reducing the trade deficit or it goes back to normal old practices.

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The Economics of Prohibition

- Ishaan Sengupta Prohibition has been a topic for conversation since the American prohibition of Alcohol in the early 1900s.

The emergence of black markets after prohibition has also been evident.

However, legalizing it has enabled an economic surplus like nothing else.

Although Alcohol takes thousands of lives every year, its revenue generating capacity is second to none. In India, there are states that have banned Alcohol consumption without a license, to be a punishable offence, however a blackmarket, reigns supreme in such locations.

On the contrary, Union territories generate majority of their revenues on cheap liquor. There are states which profit on their own state taxes charged on Alcohol. This brings us to the question, If the legalization of Alcohol can generate enormous amounts of revenue, , there are other ‘intoxicants’ which might be less harmful than Alcohol but can be legalized for taxable revenue..

synthetic narcotic drugs like Cocaine, Heroin and M-Kat. This issue has been debated for decades, however, the legality of this ‘natural herb’ is far from being acknowledged. This debate remains a sempiternal debate due to the medicinal properties of marijuana, and for its track record of not causing a single death, unlike alcohol which takes thousands of lives every year. In India, Orissa is the only state which allows the sale of ‘Bhang’, one of the by- products of naturally grown cannabis which is available for sale at government shops.

Cannabis is the second most consumed intoxicant after alcohol in India and the World. Hence, its legality remains a controversial topic. Due to the recent legalization of Marijuana (both for medicinal and recreational purposes) many states in the United States, there has been a worldwide demand for reforms in this

The Narcotic Drugs and Psychotropic Substances Act bars the consumption, production and transportation of Cannabis/Marijuana/Ganja within the Indian geographical borders. It has been placed in a list which also includes fatal 20

sector. While a majority of citizens want it to be legal (at least medicinally), a few groups protest against it. Politicians have been heavily critical regarding the decriminalization of marijuana-related offences due to concerns of losing their vote bank’s confidence. However, some politicians, like Tathagatha Satpathy, an MP of the Biju Janata Dal confessed to smoking pot when he was in college and even spoke of the legality of Bhang in Orissa in a Reditt AMA. While psychological perspectives are an important constituent to this debate, other economic factors have to be taken into consideration. Two Indian MPs have also placed bills in the Parliament on Cannabis Legalization.

Cannabis is a cash crop. It is a tree and different parts of the plant are used for different purposes. The roots are often used to make ropes, the stem and branches are often used for making bags and mats respectively. The leaves are used for the production of the Psychotropic drug which has both medicinal and recreational uses. So it can be said that this plant has extreme economic prevalence.

To answer both these questions, it is necessary to analyse the findings of the post ‘de – criminalization of marijuana’ era of the above-mentioned states of the United States of America.

Certain research conducted by local civil society organisations suggest similar findings. They suggest that although there has been an intensive increase in tax revenue and a chance for the Government to invest in the construction of more public amenities, there still exists a black market for marijuana. The reason being the high prices charged by the Government licensed shops. However, there is no denial of the fact that the number of people smoking pot illegally has dropped drastically. Another cause of worry is the form in which marijuana is being sold these states. While pot is sold in its natural state for smoking, enterprises have started making Pot muffins and pot candy bars which ultimately increases the risk of attracting minors who are tempted to buy a chocolate bar which can get them high.

So, is legalizing this substance really a boon?

However, the cannabis trees are predominantly grown solely for sale in the black market for recreational use. The debate lies here – The major questions to be asked are that: Are the positive uses of Marijuana enough to outweigh the negative effects?

If legalized, what is the guarantee that its execution would yield positive results as theoretically suggested?

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The answer to this question is subjective but in comparison to other intoxicators, marijuana seems to be a fair player. In Orissa, growing marijuana for smoking purposes is illegal but chewing or drinking bhang is not. We can only think of the amount of tax revenue that the government gets by selling bhang (because bhang is used while worshipping Lord Jaggannath).

Legalizing marijuana can, therefore, benefit the state’s budget and this money can be used for developmental purposes.

There will be a decline in the cannabis mafia. However, to make sure everything goes as planned, it is extremely important to make sure that enforcement and execution are at its epitome. States like Himachal Pradesh, West Bengal, Goa and a consolidated north East top the cannabis consumption chart. Hence legalizing it can work as an amendment for the government.

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ARIMA - Adequate Speculation Tools - Tanay Sood “Do not save after what is left of spending but, spend after what is left of savings�

-Warren Buffet.

While making a budget, often there are certain areas where we consciously curb our expenditure or remain on the look-out for alternatives which are more costeffective. With the additional income, we tend to be lax in these areas.

It is advisable to make conscious attempts by sticking to your cost-effective habits. Instead of additionally spending on the current areas of your expenditure, you could redirect the money to create an investment for yourself. More money in hand should come along with a plan to create an additional reserve for investment.

While it is never harmful to reward yourself occasionally, but that should be done only after you achieve your financial goal. Learn not to get ahead of yourself, no matter what the situation is. Fast life and big money often dazzle many.

People soon start taking their income for granted and fail to prepare for any eventuality which might occur.

Therefore, remember never to get comfortable in any scenario – and always have an emergency fund, which will possibly take care of your income needs for 6-8 months, when you might need it the most.

We shall delve into one of the most significant statistical models to prove this point.

Autoregressive Integrated Moving Average Model commonly known as ARIMA model, also known as BoxJenkins model or methodology, is used for forecasting and analysis. Model is derived by general modification of an autoregressive moving average (ARIMA) model. Thus the model is represented as ARIMA (p, d, and q); where p denotes the autoregressive parts of the data set, d refers to integrated parts of the data set and q denotes moving average parts of the data set and p, d, q is all nonnegative integers.

The model does not assume any knowledge of any underlying model or relationships as in any other models, it works completely on the principle of uncertainty.

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ARIMA intensively depends on the past values of series as well as previous error terms for forecasting.

For this model to be successful, time series data has to be analyzed for better understanding and forecasting. For an appropriate ARIMA model, has to be identified for the datasets and the parameters should have the smallest possible values so that data can be analyzed properly and forecasted accordingly.

The ARIMA model is calculated on the assumption that series is ‘Stationary’, which implies that there is No Trend, Seasonality; a Constant Level, Variance, and Autocorrelations which remain steady throughout the entire series. What makes this model stand apart from other models is the ‘Differencing’, if the data so plotted on the graph indicates non-stationarity, then we should “difference” the series. It complements the non-stationary series to a stationary one.

So how do we do this? It’s simple, we subtract the observation in the current period from the previous one. ‘First differenced’, refers to a situation when a transformation is done only once in a series. Autocorrelations, which is the important function in the ARIMA model. It indicates how numerical values in a data series is related to itself over time. To be more precise, it measures what drives the data values at a specified number of periods apart and is correlated to each other over time.

Lag-1 differencing: yt-yt-1 Oder d = how many times to perform lag-1 differencing? d=0: no differencing (no trend) d=1: perform differencing once (liner trend) d=2: double- differencing This model requires the user to clearly define and specify the parameters p, d, q (Non – Seasonal part of the model) P, D, Q (Seasonal part of the model).

This is not a simple act and hence requires a good experience and expertise. The typical method to determine these parameters is Visual Inspection to detect the seasonality trend, autocorrelation chart, and partial autocorrelation chart.

The model is preferred over the exponential smoothing techniques especially when the data is long and the correlation between the past observations is stable.

However, if the data is short and volatile as well then smoothing method would perform better. Statistically, you shall have a minimum of 38 data point, for ARIMA model to be implemented.

The number of periods apart is usually called the “lag” which can be denoted as below, 24

As we are aware stock market works on strong technical and fundamental analysis with every individual, investment banks and brokerage houses depending upon internal and external factors that strive them to make concrete decisions regarding their investments.

It is very difficult to rely only on one statistical method as one might say ‘buy’ other ‘sell’, it all depends on the datasets and vigilant analysis. For example Time Series models are said to be difficult to interpret as they seem to play an auxiliary role in economics because they tend not to compliment well with economic interpretation as economist prefer to have more econometric models or general equilibrium models when trying to understand or propose any forecasts.

It is very important to define the ‘stock market trend’. It is not impossible to understand and predict the future absolute value of the stocks on daily basis, but one needs to equip themselves with the uptrend, downtrend and flat horizon and have enough indicators to forecast the trend with significant accuracy. Past behaviour plays a key indicator in significantly explaining us the dominant market variables that are both dynamic and volatile.

In the last decade, a number of intelligent systems and hybrid models have been proposed for making trading decisions in an attempt to outperform the main market and be profitable in stock investment. But what really outperforms in the end, be sensible and not greedy.

Contrary to this, time series models have a statistical approach, hence they shall be understood from a statistical approach, rather than being interpreted from a storytelling points. Accordingly moving average terms can be said to have smoothing effect while complex roots suggest periodic behaviours.

Forecasting a stock market or predicting the price movement is the most difficult problem in the world of finance. Thus, financial time series are complex and non-stationary. Therefore, it is very difficult to predict this movement even with the established parametric models.

Stock market prediction requires a combination of several computing techniques synergistically rather than exclusively.

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FINANCIAL TRIVIA

Northeast India’s first small bank, North East Small Finance bank (NESFB) started its services on Sunday. Rashtriya Gramin Vikas Nidhi (North East) Microfinance Limited received the Small Finance Bank License from the Reserve Bank of India (RBI) on March 31, 2017. Tata Trust chairman Ratan Tata and Assam's finance minister Himanta Biswa Sarma launched the first 28 branches of the bank

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