Understanding the SENSEX Breeze...Since the Sensex follows the market capitalization weighted method, we have to find the market capitalization (or size of the company in terms of

Shriram City - News Letter - Breeze - 1st November 2014

1st NOVEMBER 2014

“The greatest of faults is to be conscious of none.” - Thomas Carlyle

Understanding the SENSEX

We have all heard of the stock market, and some of us regularly invest in it too.

Learning and understanding the different terms and concepts involved can be rather

challenging, and it’s possible that we may be familiar certain names and words without really

knowing what they stand for. Let us try to understand one of these terms in this edition of

Learning Curve.

The S&P Bombay Stock Exchange Sensitive Index, also called the BSE-30, or simply

the SENSEX, is the best known stock market index in India. Just like how a temperature

reading can tell us about the health of the body, the SENSEX is the pulse of the Indian

stock market. It is designed to reflect market sentiments, and comprises of 30 of the largest

and most actively traded stocks from different industries. The base year is set at 1978-79

and the base index value for that period is 100 points.

WHY IS THE BASE VALUE SET TO 100 POINTS?

The total value of shares in the market at the time of index construction is assumed

to be ’100′ in terms of ‘points’. This is for the purpose of ease of calculation and to

logically represent the change in terms of percentage. So market capitalization moves up by

10% the next day, the index will also move up 10% to 110.

HOW ARE THE STOCKS SELECTED?

The stocks are selected based on several qualitative and quantitative criteria.

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HOW IS THE INDEX CONSTRUCTED?

The construction technique is quite easy to understand if we assume that there is

only one stock in the market. In that case, with a base value set to 100, let’s assume that

the stock is currently trading at 200. Tomorrow, if the price hits 260 (30% increase in price)

the index will move from 100 to 130 to indicate that 30% growth. Now let’s assume that on

day 3, the stock finishes at 208. That’s a 20% fall from 260. To indicate that fall, the

Sensex will be corrected from 130 to 104 (20% fall).

Our second step to understand the index calculation. Let us try to extend the same

logic to two stocks – A and B. A is trading at 200 and let’s assume that the second stock

‘B’ is trading at 150. Since the Sensex follows the market capitalization weighted method, we

have to find the market capitalization (or size of the company in terms of price) of the two

companies and a proportionate weightage will have to be given in the calculation.

How do we compute the size of the company in terms of price?

That’s simple. Just multiply the total number of shares of

the company by the market price. This figure is technically called

‘market capitalization’.

We assume that company A has 100,000 shares outstanding and B has 200,000

shares outstanding. Hence, the total market capitalization is (200 x 100000 + 150 x 200000)

Rs 500 lakhs. This will be equivalent to 100 points.

Lets assume that tomorrow, the price of A hits 260 (30% increase in price) and the

price of B hits 135. (10% drop in price). The market capitalization will have to be reworked.

It would be – 260 x 100,000 + 135 x 200,000 = 530 lakhs. That means, due to the changes

in price, the market capitalization has moved from 500 lakhs to 530 indicating a 6%

increase. Hence, the index would move from 100 to 106 to indicate the net effect.

This logic is extended to many selected stocks, and this calculation process is done

every minute, and that’s how the index moves! For the purpose of calculation only free float

market value is considered, instead of the total number of shares. Free float is the total

number of shares available for the public to trade in the market. It excludes shares held by

promoters, governments or trusts, FDIs etc.

2


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NOW, LET’S SEE HOW THE SENSEX MOVES.

Sensex value = Current free-float market value of constituents stocks/Index Divisor

So, the numerator is available straight from the BSE site. It’s the total of free float factors

of 30 stocks x market capitalization.

NOW, THE DENOMINATOR.

The index divisor nothing but the present level of

the index. So now, we have all the figures.

Question:

Let’s assume that the free-float market capitalisation is Rs 10,00,000 Crores. At that point,

the Sensex is at 12500. What would be the value of Sensex if the free-float market

capitalization is Rs 11,50,000 Crores? (see below)

Adapted for Breeze from

www.sharemarketschool.com

Answer:

Sensex Value should be 14375


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Did You Know Series (DYKS) - 15

PART I – Rules of DYKS

The details and rules of the DYKS are as follows:

Each issue will contain 3 multiple answer questions

All staff members are eligible and are encouraged to reply to the questions

All replies to be sent only to [email protected]

The mails should be sent from the official mail ID of the employee.

The response mail should be as follows:

SNo. Required Information Employee Entry / Answer to quiz

1 Employee Name

2 Employee Number

3 Designation

4 Email ID

5 Branch code and name

6 State

7 Answers:1

2

3

The name of the staff from whom the first correct response comes will be published in the subsequent issue of ‘Breeze’. This will be for each of the states.

======================================================================

PART II – Answers to Quiz of October 2014 issue

SNo Question Answer

1

Who is the most important person

for our company?

(d) – A and C above A customer with NIL arrear, Customer who in

occasionally in arrears

2

Who is responsible for providing

solutions to customers who write

mails to customer care?

(e) All of the above Branch Managers of branches to whom the clients

belong, The state heads/ State head offices, Division/Zonal heads,

Company head office

3

Customer care mails should be

replied with in −−−−− of receipt

(b) 24 hours

PART III – Statewise correct responses to Quiz in October 2014 Issue

S.No State No. of responses

1 Andhra Pradesh 1

2 Haryana 1

3 Uttar Pradesh 1

4 HO - Chennai 3

mailto:[email protected]


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PART IV – State wise 1st correct response to Quiz in October 2014 Issue

S.No State Name

1 HO - Chennai Chithra Karthick

2 Andhra Pradesh P. Devashish Rao

3 Uttar Pradesh Dhiraj Kumar

4 Haryana Vijay Chopra

PART V– Quiz - November 2014

1. How many co-operative banks are listed under the ACH facility?

a. 200

b. 149

c. 218

d. 170

2. UMRN refers to

a. Unique Mandate Reference Number

b. Unique Mandatory Reference Number

c. Unique Missed Registration Number

d. Unique Mandate Registration Number

e. All of the above

3. Frequency of Non CTS PDC clearing effective from 01 Nov 2014 is

a. Weekly twice (Monday and Friday)

b. Seven days a week

c. Only once in a week (Monday)

d. Only once in a week (Friday)

By

Sri D. Srinivasan (Sr. Manager)

BPR, Santhome


Mathematics for life…..

If A=1, B=2, C=3, D=4, and so on till Z=26

H+A+R+D+W+O+R+K = 8+1+18+4+23+15+18+11 = 98

K+N+O+W+L+E+D+G+E = 11+14+15+23+12+5+4+7+5 = 96

L+O+V+E = 12+15+22+5 = 54

L+U+C+K = 12+21+3+11 = 47

None of them makes 100, Then what makes 100?

Is it MONEY? NO!

M+O+N+E+Y= 13+15+14+5+25 = 72

LEADERSHIP? NO!

L+E+A+D+E+R+S+H+I+P =12+5+1+4+5+18+19+8+9+16= 97

Every Problem has a solution if we change our “ATTITUDE”

A+T+T+I+T+U+D+E = 1+20+20+9+20+21+4+5 = 100

IItt iiss tthheerreeffoorree OOUURR “““ AAATTTTTTIIITTTUUUDDDEEE””” tttooowwwaaarrrdddsss llliiifffeee aaannnddd wwwooorrrkkk ttthhhaaattt

mmaakkeess oouurr lliiffee 110000%% SSuucccceessssffuull..

Contributed by

Mr. T. Jaghannathan

Internal Audit and Control

Mylapore, Chennai

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Though incorporated in the year 1986, Shriram City Union Finance, commenced the Two Wheeler business only in

the year 2002. We have served more than 30.50 lakhs customer till date. The business is delivered from more

locations in the country than the number of locations where our branches are. We operate from close to 4250

dealer points from almost 22 states.

Being a flagship product of our Company, we have deployed a battery of staff to handle the TW business. Every leg

of the journey is inaugurated by the “High Energy” Sales Executives at the dealer showrooms, to the “Never Tiring”

Field Investigating executives, on field. These field staff are ably supported by the zealous staff at the office playing

a key role in appraisement, disbursement, and other back office activities. The strong recovery team, legal and

seizing teams play a major role in making this business a grand success. Our technology team have also played a key

role here for error free recording of our business transactions. Not to leave the leadership team, under whose

guidance the whole structure functions, the TW business is a well-oiled machine working tirelessly for the Company

with an urge to succeed at all times.

The beginnings had been very humble. We never reckoned to be an entity, leave alone being a leader, in this

industry in 2002. Till 2007, with industry giants like ICICI, Citibank and GE operating in full force in the market, it was

considered close to impossible for any new company to enter the TW financing business. With deep pockets the

“Stalwarts” of the industry lured both the dealers and customers alike to stay on top and create a strong entry

barrier. The business was done in the way defined by them.

Our warriors were literally standing outside the dealer showrooms to scout for business that had trickled off. It was

in 2007, for the first we signed up with the first dealer to have a finance desk of our own inside the showroom. This

marked the beginning of “No Come Back”. It unleashed the ways and means of conducting this business in a way

which the industry had never witnessed in the past. A whole lot of new set of customers were able to own a TW,

which were not possible in the period earlier. It opened up gates of newer markets for Dealers.

With time and “not so viable” business models the industry heavy weights started to wither out, thereby helping

Shriram City to establish itself to be a significant player in the market.

As we speak, the TW Hire Purchase industry constitutes 23% of the total TW sales in the country which is at 1.25

million vehicles per month. Among the financiers, HDFC Bank and IndusInd Bank lead the race, closely followed by

us. Bajaj Auto Finance, TVS Credit and other financiers are far behind us. The Banks rely primarily on a 3rd party

credit rating for their potential customers and form the basis on which the credit decisions are made at the Banks.

They definitely take the top cream of the customers, but compromises on interest rate charged and more

importantly spend lot more to originate a loan.

It would be perfectly apt to proudly announce that our core group philosophies guided us to conduct this business

profitably for day one. Low cost business model, catering to newer customers who were hitherto denied

mainstream credit were the cornerstone of our success. We in fact took a conscious dip into the so called “Hard”

way of appraisement. We never depended on the customer ratings by the “Established” external credit bureau.

With core knowledge of our customers and the geography, our team arrange to conduct personal visits and

enquires about our clients to establish their credit history and repayment capacity. We empowered our teams to

make independent assessment of the clients. Contrary to the popular belief of dependence on established credit

processes that the Banks followed for sanctioning of loans, this was the key to our longevity in this industry.


Simple approval mechanisms and process flow ensured that the time lag between sourcing and disbursement was

minimal. Technology developed by our in house experts, was adequately leveraged to ensure able support was

given to the entire process.

Moving away from rewarding the dealers with just financial payments, we steered the partnership towards

expanding their horizon of customers and anchored it on a “Relationship” based model. This shift was perceived as

a winning way by all dealers who shifted loyalties over a period of time. Today we have dealers and manufacturers

calling us to commence our business in their showrooms and for their brands.

Today, after a strenuous, enjoyable journey, we are clocking an average of around 55000 vehicles a month which

peaks up to 90000 during the festive season. Since inception we have made more than 3 million people an owner

of a two wheeler, a major chunk of them using it for their business purposes, thereby making significant

improvement to their lives. Traditionally the southern market had been our stronghold, where our TW finance

also reflects the same trend. Erstwhile combined Andhra leads the pack for us with more than 1 million vehicles,

closely followed by TN at around 9 lac vehicles. Northern Region constituting 5 states is fast catching up with

their southern counter parts. Maharastra, MP, Chhattisgarh, Gujarat, Kerala and Karnataka are not far behind.

The compounded annual growth rate in the last 6 years just in AP and TN had been 39%.

With so many captive financiers clogging the market, a host of NBFCs, Banks providing lower cost of loans, and

many others opting out of the business for various reasons, we are still maintaining our position of being the most

sought after TW finance Company in the country.

Our portfolio does not comprise only of top cream customers. We have had our share of risks in lending,

investigation, repayment, seizing etc. We are completely aware of our challenges and are putting up control

mechanisms for checks and balances. We recognize that it had been a hard journey and will continue to be one.

Our success is vindicated by our healthy earning rate of around 28% on our settled loans till date.

Without an iota of doubt all this success is completely attributable to each and every staff, who have worked with a

constant zeal to succeed, had always raised their bar of performance, thereby the Company’s. We shall continue to

emulate our good practices and learn on from our challenges and march ahead in the years to come.

s rs rs rs rs r

SRI.G.M.JILANI SRI.V.NIRANJAN RAO SRI.V.PRAVEEN KUMAR SRI.S.RAJENDRAN

Hearty Congratulations to Shriram City’s

Two Wheeler Teams across the country!!!!!!


A parting thought…..

We cannot solve our problems

with the same thinking we used when we created them.

- Albert Einstein

Editorial Committee

Shri K.Subramaniam

Senior Consultant, CO, Mylapore

Smt M.Subhashree

TED., BSC, Santhome

Sri M.Radhakrishnan

Consultant, BSC, Santhome

Ms. Teena Philip

Business Manager, BSC, Santhome

Communication Address:

Editorial Committee, (News

Letter—Breeze)Shriram

City Union Finance

144, Santhome High Road,

Chennai—600 004

Phone: 044 43925300

Email:

[email protected]

7

mailto:[email protected]

Documents

Understanding the SENSEX Breeze...Since the Sensex follows the market capitalization weighted method, we have to find the market capitalization (or size of the company in terms of