Mutual Funds and Market Risks

by Charumati Haran


“Mutual funds are subject to market risks. Please read the offer document carefully before investing.”

How often have we heard this disclaimer in advertisements? Have you ever wondered what mutual funds are and how they are subject to ‘market risks?’

Battle of Bulls and Bears

by Charumati Haran

Statues of the bull and the bear in front of the Frankfurt Stock Exchange

Courtesy Wikimedia Commons

“Bulls, not bears, go into hibernation" - UK Reuters

“Wall Street Week Ahead: Torn between bulls and bears” - US Reuters

“Apple mauled by bears again” - CNN Money

If you follow the news in the financial world, you might have come across the terms “bull” and “bear.” If you have ever wondered what they mean, here’s an explanation.

Cash Transfers: A Good Idea?

by Shweta Chopra


Cash transfers are getting a lot of attention in India these days as a possible substitute to government subsidies provided to people under various welfare schemes (health, education, agriculture, food rations, etc.). Cash transfer policies mean that the government transfers cash, instead of commodities and services, to below-poverty-line (BPL) households. Their logic is that people are then free to ‘buy’ these services in the open market.

The success of cash transfer programs in some parts of the world has led many to think about cash transfers more seriously. Despite its success around the world, there is not much empirical evidence on the success of cash transfer programs in the context of the Indian economy.

Investing in Bonds

by Deepthi Sai

The term ‘bonds’ surfaces every now and then in discussions pertaining to the economy. You may have read about a company or the government ‘issuing bonds’ often. This article aims at elucidating the jargon associated with bond markets.

Understanding Credit Ratings

by Sreevidya Raman

And we’re back to the threats. Standard and Poor’s (S&P) has recently released a statement warning India that it will downgrade its credit rating to ‘junk’ if it does not follow through with the popularized reforms (FDIs in the retail and aviation sectors) in the next 24 months. To show how serious it is about the threat, the rating agency has elaborated further to say that chances of downgrading India’s rating are one in three.

US Elections (Part 2): Obama vs. Romney

by Anisha Bhardwaj


From the previous article, we learned the basics needed to understand the upcoming elections. However, the amount of jargon prevalent in the pre-election debates requires specific attention. Some of the distress the US is facing today was inevitable. The credit crunch was always going to cause a lot of suffering in America regardless of who was in control. But politics, far from offering a remedy, is now adding to the national angst.

And the Nobel Prize Goes To...

by Deepthi Sai

Traditionally, economics suggests that markets have an innate tendency to work efficiently. Keeping supply constant, if demand for a good rises, then prices automatically start rising so that only the handful of people willing to pay the higher price can get the good. This self-regulating ability of markets was called the ‘invisible hand’ by Adam Smith, the pioneer of political economics. But what about something like dating? How exactly is one allocated the right partner? Surely there exist allocations that are not governed by prices. Dr. Alvin E. Roth of Harvard University and Dr. Lloyd Shapley of UCLA answered questions regarding efficient allocations in such cases for which they were awarded a Nobel Memorial Prize in Economic Sciences in 2012. So what exactly did their research entail?

Kingfisher Crashes

by Sreevidya Raman


Vijay Mallya has been in the news an awful lot lately, seemingly for all the wrong reasons. Caught in the eye of a financial storm, he is struggling to keep Kingfisher Airlines afloat. But what brought about this nasty predicament?

Winning the War on Drugs

by Deepthi Sai


Everyone knows that no government likes drugs, such as heroin, cocaine and ecstasy, flooding their markets. Drugs are very easy to get addicted to and push people to commit crimes so they can procure money to satisfy their needs. In order to combat this issue, the government spends a lot of money curtailing supply. Drugs are clearly illegal, but there still manages to be huge market for drugs in the underground economy. So how effective is this ban on drugs anyway?

Understanding Equity Shares

by Shweta Chopra


Equity shares are an important concept and a good investment opportunity in today’s economy. This article aims to provide you with some basic information about these shares, their characteristics and what role they could play in your lives.

Marginal Standing Facility: A Bank's Last Resort

by Deepthi Sai


The marginal standing facility (MSF) was introduced by the Reserve Bank of India (RBI) and has been effective since 9 May, 2011. Before we see what this facility entails, it is important to review a few terms. Also, it is highly recommended that you read the article ‘Banks, the State and Stuff’ first for better understanding.

Liberalizing the Indian Economy (Part 2)

by Sreevidya Raman


In part one of this article, we learned about liberalizing the economy in the sense of allowing foreign direct investments (FDIs) in the retail and aviation sectors. A second set of measures have also attracted a lot of - albeit mostly negative - attention. The hike in diesel prices of Rs. 5 per liter and the cap on LPG to six cylinders annually is not exactly a measure that is being welcomed by anyone, really.

US Elections (Part 1): Democrat vs. Republican

by Anisha Bhardwaj


The upcoming United States Elections in November 2012 will have the world watching as Democrat candidate and current President, Barack Obama and former Republican Governor of Massachusetts, Mitt Romney race for the title of the President of the United States.

Before understanding the implications of either of them winning - for the United States or the rest of the world - it is important to understand the basic differences in their ideologies. One way to start is by learning about the two parties they represent.

Liberalizing the Indian Economy (Part 1)

by Sreevidya Raman


India is ushering in an age of reforms. The current developments on foreign direct investments (FDI) in multi-brand retail, diesel price hikes, and the cap on subsidised LPG are spurring passionate debates. While the country still does not seem to have moved past Prime Minister Manmohan Singh’s uncharacteristically bold stance against West Bengal Chief Minister Mamata Banerjee¹, we should first understand its economic implications. We will discuss FDI in the retail and aviation sectors, then move on to diesel price hikes, and the cap on subsidised LPG.

Banks, the State and Stuff

by Deepthi Sai


The health of any economy is largely dependent on 3 main players:

• The central bank (e.g., the Federal Reserve System in the US, Reserve Bank of India);
• Financial institutions and commercial banks (e.g., Bank of America, Citibank); and
• The government.

Interaction between these players is what either saves or drowns an economy. And to understand the functioning of the economy, it is essential to understand how they interact.

Sub-prime Crisis

by Shweta Chopra


It’s very common to find people completely lost regarding very important economic occurrences that affect the entire global economy. The US sub-prime crisis of 2007 is one such example. Even students of economics don’t know exactly what happened, or how it may have added to or led to the recession that followed. This is an attempt to make sure everyone, including people who have never even heard of terms like GDP, can understand how exactly this crisis unfolded.

Depreciation of the Indian Rupee

by Deepthi Sai

The rupee has been depreciating consistently against the dollar over the last twelve months and it reached a historical low in June 2012. Depreciation implies a fall in the value of a currency. When the value of a currency falls, we need more of it to buy any good, which is the case with the rupee. One may recall the times when a dollar could be bought for an average of Rs. 46 as opposed to Rs. 56 today. This steep fall in the value of the rupee has made it the worst performing currency in Asia.

Making Sense of the SENSEX

by Shweta Chopra

How many people actually understand what the ticker at the bottom of news channels actually means? Not many. It’s not uncommon to hear whining when a husband switches the channel from a dramatic soap to the news, just to check on this bizarre ticker. So why does he do so? For all the kids out there who are clueless – here’s making sense out of all that.

LIBOR: London InterBank Offered Rates

by Anisha Bhardwaj


Recently terms like LIBOR and Barclays have been making the headlines. Though it may not seem to be of direct relevance to you, you’ll be surprised at how consequential it can be. Once again the global economy is highly integrated and a glitch in one part most definitely has an impact on every player in the economy. So what is all the jargon about?

Beginning of the European Economic Crisis

by Deepthi Sai


The Euro crisis has been talked about a lot lately. Before understanding the current scenario and how it is affecting the global economy let us back up a bit and understand what has happened and how it ballooned into a full blown crisis in the first place. The Euro came into existence in 1992 and was established as a part of the Maastricht treaty by the European Union (EU). Member states were evaluated based on certain economic parameters to qualify to join the currency. In the 1990s, a number of European countries decided to keep aside their respective currencies and were given an equal amount of Euros instead.

Birth of the Chinese Dragon

by Shweta Chopra


For most laymen, common examples of growing, developing economies are India and China. There are constant comparisons between the two countries on news channels and in newspapers. Despite being two very different countries in terms of the political structure and institutional factors, the two are similar in many ways: in terms of the population sizes they support, the high economic growth they are experiencing vis-à-vis the rest of the world, among others. We have some amount of knowledge about India’s economic growth story and how it began, but China’s unprecedented growth story is something most of us are unclear about.