12 Golden Rules of the Stock Market

Rule # 1: First things first - First, decide whether you are a trader or an investor? Be sure that you really want to trade. It is common for people who think that they want to trade to discover that they really do not. Examine your motives and think about why you really want to trade. If you just want to trade for the excitement, you might be better off riding on a roller coaster or taking up hang-gliding. You need to examine your motives and the activity that will result from it as many times there may be some form of conflict. The share market is a stern master. You need to do almost everything right to win. If parts of you are pulling in opposite directions, the game is lost before you start.

Rule # 2: Match the trading or investment strategy to your personality - It is critical to choose a strategy that is consistent with your own personality and comfort level. If you cannot stand to give back significant profits, then a long-term buy and hold strategy, even a very good one, will be a disaster, because you will never be able to follow it. If you do not want to sit in front of your computer monitor, jobbing the market all day long, then do not even consider a day-trading method. The strategy that you decide to use must be right for you; it must feel comfortable.

Rule # 3: Know who you are financially for a moneyless man goes fast through the share market - This is one of the most important aspects of trading on the share market. Generally, a happy person is better at everything, including the share market. Consider your prospects and answer the following questions:

Is the capital you have all you will ever have?

Are you likely to need some capital in the near future?

Are you starting off by putting small amounts into the market and are you likely to increase it periodically?

How old are you?

Can you handle the stress of a fluctuating market?

Can you devote as much mental effort to the share market as you do to earning your livelihood?

Remember that you have tough competition out there. Once you have defined your prospects, you will discover how easy it is to adapt and learn. Some pundits feel that it is not necessary to define whether or not you are a short-term or long-term investor. One view is that one’s investment strategy needs to be constantly reviewed and tailored according to the general economic condition and trends. Sometimes you will find that your short-term flirtations may end up being long-term passions.

Rule # 4: The trend is your friend or a trend in motion is assumed intact until it actually ends - As long as the majority of both technical and fundamental indicators point in the same direction, one may logically conclude that market statistics and news can be trusted and that the trend will continue in the same direction. As night follows day, shares go from absurd undervaluation to outrageous overvaluation and it is within these parameters that the major investment opportunities lie. There is nothing to suggest that the approximate 20% annual historic rate of return that shares have been enjoying for the past 40 years, is about to drop. It is impossible to identify the exact bottom or top of the market. However, for those who take appropriate action once the junctures are recognised, the rewards can be substantial.

Rule # 5: Do not ever make the mistake of telling the market that it is too high or too low - The market is not a game of logic, but rather of mass emotion or psychology. It is not foolish enough to do what other people are doing. The public is right more often than not. Humans tend to imitate and it is the foundation of habit and custom. But be careful - the public is right during the trend, but wrong at both ends.

Rule # 6: If you catch the wrong bus, get off and catch the right bus - If you catch the bus to Kensington when your destination is Rosebank, no matter how long you stay on the bus, you will never reach Rosebank. In other words, do not continue with an incorrect decision. Forget about bookkeeping and trying to recover your costs. This is an academic approach. Rather invest your money in a share that at least gives an opportunity to recover your shortfall. The saying in the market is “do not throw good money after bad”. Contrary to what some analysts may recommend, this rule also applies to those people who love to average down. Charles H Dow once said “Pride of opinion caused the downfall of more men on Wall Street than all other opinions put together”.

Rule # 7: Never marry a share - A share can easily be replaced. There are times to hold shares and times to sell shares. If you want to buy back shares, you will find them.

8:Rule # Take your losses quickly, your profits slowly - Do not be eager to sell too soon or put a ceiling to your income. Conversely, one can add, do not fail to take profits. However, once you are in a loss-making situation, do not be locked in. Sell soon and buy something else that is rising. Discipline is probably the word most frequently used by exceptional traders. There are two basic reasons why discipline is critical. First, it is a prerequisite for maintaining effective risk control. Second, you need discipline to apply your trading or investment strategy without second-guessing and choosing which trades to take. You are almost always guaranteed to pick the wrong ones. Why? Because you will tend to pick the comfortable trades or in other words, what feels good is often the wrong thing to do. Remember, you are never immune to bad trading habits. The best that you can do is keep them latent. As soon as you get lazy or sloppy, they will return.

Rule# 9: He who looks back on the market, usually dies of remorse - The past has happened, put the future ahead of you. If you read the market incorrectly, go back and ask why. Keep a record of your share dealing transactions, not only for tax reasons, but also for discussion and analysis. This will enable you to analyse your investment decisions, good and bad, and learn from the experience. Remember, the virtue of patience. Waiting for the right opportunity increases the probability of success. You do not always have to be in the market.

Rule # 10: It is far better to buy a fine company at a fair price, than a fair company at a fine price.

Most individuals get bored when the usual market favourites are recommended, but their ears prick when the talk centres around a bargain that should not be missed. Dismiss talk like: “It is trading at a discount to Net Asset Value (NAV)” or “It has a large assessed tax loss, its problems will be overcome soon”. Too true, too true. The share market is a great leveller and when it discounts a share, there is normally a very good reason for it.

Rule # 11: After a drunken spree, you must expect a hangover - Following every rise in the share market, there is a correction or fall.

Rule # 12: When in doubt, stay out - If you are unsure about a decision, withdraw. You do not have to be fully invested at all times. With experience you will develop an inner sense and begin to judge the temperature of the market. Understand that you are responsible. Whether you win or lose, you are responsible for your own results. Even if you lost on your broker’s recommendation, or a bad technical signal, you are responsible because you made the decision to listen and act. Successful investors do not blame others for their losses.

stock market story - comic

Once upon a time in a village, a man appeared and announced to the
villagers that he would buy monkeys for Rs10.

The villagers seeing that there were many monkeys around, went out to the
forest and started catching them.

The man bought thousands at Rs10 and as supply started to diminish, the
villagers stopped their effort. He further announced that he would now buy
at Rs20. This renewed the efforts of the villagers and they started
catching monkeys again.

Soon the supply diminished even further and people started going back to
their farms. The offer rate increased to Rs25 and the supply of monkeys
became so little that it was an effort to even see a monkey, let alone
catch it!

The man now announced that he would buy monkeys at Rs50! However, since he
had to go to the city on some business, his assistant would now buy on
behalf of him.

In the absence of the man, the assistant told the villagers. Look at all
these monkeys in the big cage that the man has collected. I will sell them
to you at Rs35 and when the man returns from the city, you can sell it to
him for Rs50."

The villagers squeezed up with all their savings and bought all the
monkeys.

Then they never saw the man nor his assistant, only monkeys everywhere!! !

Welcome to the "Stock" Market!!!!!

The truth about cash-back credit cards

With increase in the competitiveness between different banks for credit card services, card companies offer a host of additional benefits such as rewards programmes, 'lifetime-free' services and cash-back offers increasingly nowadays to engage the brand awareness of the consumer consistently.

The hidden agenda behind each of these offerings is that the banks and financial institutions want the users to spend more. Spending is good as long as it is within predefined limits. This is within the user's control and must be exercised in order to reap the benefits of such offers and yet not become addicted to spending excessively.

Let's take a look at the features of one particular offering which has generated quite a following in recent times -- 'cash-back' offers, which are often promotional schemes for limited periods that are run periodically by all the credit card companies.

What are cash-back credit cards?

When accepting payment by credit cards, merchants typically pay a percentage of the transaction amount in commission to their bank or merchant services provider. Many credit card issuers share the commission with the cardholder by giving the card holder points, air miles or a monetary amount.

A cash-back offer is specifically for providing the card holder a small monetary amount as a reward for using the card.

Which transactions are included in cash-back offers?

Cash-back offers are valid on almost all kinds of expenditures or purchases done through the credit card. That is, besides spends on shopping and eating out, even balance transfers and bill payments are eligible.

How much money is returned through the cash-back offer?

Where a card issuer operates such a cash-back scheme, card holders typically receive between 0.5 per cent and 2 per cent of their net expenditure (purchases minus refunds) as an annual rebate, which is either credited to the credit card account or paid to the card holder separately, for example by cheque.

Cash-back percentage ranges around 2 per cent - 5 per cent for different cards and in some promotional schemes may even go up to 10 per cent exclusive to customers with a good credit profile.

What are the things to keep in mind while using cash-back cards?

There are some things that you should always keep in mind when you opt to avail such cash-back offers.

Where you are spending

The credit card cannot be used at any establishment that you choose. There will be a list of shops, stores, restaurants etc. that will fall into the category of cash-back transactions. If you spend at the establishments mentioned in this list you can avail cash-back, else you do not receive any reward.

The list of approved establishments is available on the credit card issuer's website or else can be asked for from the customer service department.

To ensure that you do receive cash-back, always ensure that you are spending at an establishment mentioned in the list of the bank's approved merchants.

Minimum cash spent

Normally, cash-back is offered only when the credit card holder spends a minimum amount on it. This could range anywhere between Rs. 1500 and Rs. 2500. So if you spend only Rs. 500 on the card, chances are very slim that you would be able to get any cash-back on that transaction.

Amount of cash-back

Normally, banks place a cap on the maximum amount of cash-back that it offers. It is important to check this because even if you have spent more doesn't necessarily mean that you are going to get a cash-back amount as per that transaction.

For example, if the bank's says that there would be a 10 per cent cash-back offer on all purchases, they would normally cap the maximum cash-back amount at Rs 1,000. So even if you spent Rs 40,000 and expected a cash-back of Rs 4,000, you are still going to get only Rs 1,000.

Other hidden requirements

Check for other requirements such as:

• Whether the card falls under the offer category
• Whether registration is required for earning cash-back
• Should one apply for a new card meant only for cash-back
• The period during which the offer is valid
• Does the offer apply at outlets having point-of-sale terminals, or should the purchases be made only where the card-issuing bank has installed such terminals?
• The products categories, which are eligible for the offer
• Should cash-back be collected at bank branches, redeem them at the POS outlets, or will the amount get credited automatically in the card-holder's savings account

Using a cash-back card can be very good indeed, provided that you use the card smartly within its limitations.

As mentioned before, it is important to confirm the minimum amount to be spent to be eligible for cash-back and the maximum amount you can receive as cash-back, because if the delicate balance between the two is not struck correctly, you may be over-spending which can lead to interest charges.

These things can completely overshadow the benefits of a cash-back card.

Recession ripples? Just hang in there!

These are tough times and we are still being buffeted by the ill winds of the continuing global meltdown. Experts predict that the slowdown will last through the first half of 2009 in India, after which a slow revival will begin. As and when that happens, a lot will need to be done to adjust to the new circumstances.

When there is a boom, there is always a crash around the corner

These things happen to correct the balance in the financial system. It is a cycle. When there is a boom, there is always a crash around the corner.

Real estate prices became skyscrapers by themselves and the inevitable, a stabilization and correction of prices was bound to follow.

People whose lives have seen more than one recession have come to terms with it and have included it in their planning. It is best to go back to basics and plan ahead for it, but now that we are right in the middle of it, here some tips to help you cope with it.

Distribute your funds

Never hold your investments in a large chunk in very few areas. A good investment portfolio should be a mix of investment in different risk categories that provide good returns.

A high-risk investment should also yield high windfall returns over the long term. Hence, it is important to have a balanced fund distribution. For example, a good mixed portfolio could have investments in gold, public Provident Fund, stocks, fixed deposits, real estate, et cetera.

Shelve your credit cards

Refrain from using your credit cards and stay out of debt. Spend less than you earn and you will find you have a surplus of funds to tap into when an emergency creeps up.

Set your mind frame to re-use, recycle, repair and conserve

Learn to distinguish between wants and needs. Avoid indulging in luxuries and stick to basic comforts. If anything can be re-used do so, recycle paper and repair things that you use on a day to day basis instead of replacing them.

Here are some small lifestyle changes you can adapt to conserve:

Save on power

• Don't have the computer, the music system and the TV on all at once
• Run air-conditioning only till the room cools sufficiently in a closed room
• Switch off monitors during work breaks
• Switch off power sources in rooms that are not in use
• Raise the temperature of the refrigerator when too many things are not stacked
• Run the water heater just before it is required
• Set an alarm to switch off the motor, gas, etc. when in use to prevent waste of power and resources.

Cut down fuel costs

• Walk or use a bicycle, if you have one handy to nearby shops or places you need to visit
• If you are a couple, make trips together whenever possible, for either commuting to work or visiting areas near each other
• Take a bus or use a two-wheeler for a few days in a week, instead of a four-wheeler
• Set up a gas provision unit for your four-wheeler if it is feasible and makes economic sense

. . . you get the picture. Try this in every aspect of your lifestyle, you will find a significant change in the way you manage your resources and the expenses that go for your utilities.

Review your finances and start budgeting

Take stock of your finances, how they are invested, where they are invested, can they be liquidated in case of emergencies like a jobloss, how to start saving with the existing resources for such an emergency, which areas can be focused on possible cost cutting, etc.

Learn new skills

Take stock of your current career status and work towards upgrading your skills. Learn something relevant and new on your work front. Also, have some contingency plan to bank on, if things don't go as planned in your current assignment. It is good to be prepared for surprises.

Remember to hang in there!

As far as your stocks go, if they are in pretty bad shape, don't jump the gun and sell them off at the first possible instance. Statistics and experts suggest that to really reap the benefits of investing in stocks you need to stay invested for a long time, to the tune of 10-15 years.

Recession is not something that will last forever. The tide is bound to turn and the cycle will continue. So just be patient and wait for the good times. You could also buy low in quality stocks that might do well in the long run. Also, give a thought to future trends and choose your options strategically!

Satyam's fall: From Rs 542 per share to Rs 58

April 13, 2009 18:56 IST
Once quoted at a price of Rs 542 per share, Satyam Computer on Monday went under the hammer for Rs 58 a share, about one-tenth of the level the IT company enjoyed about a year-ago, when no one had any inkling about the scam being perpetuated there.

Tech Mahindra , which emerged as a winner in the race to acquire fraud-hit Satyam Computer, has bid the highest price of Rs 58 per share and would have to shell out an aggregate of about Rs 2,889 crore (rs 28.89 billion) for 51 per cent stake in the company.

Based on the bid price, market capitalisation of the expanded equity base of Satyam would be around Rs 5,600 crore (Rs 56 billion).

Months before the scam at Satyam had come to light with confessions of its founder and former chairman B Ramalinga Raju, the Satyam scrip had hit a 52-week high of Rs 542 in May last year. The IT firm's market capitalisation had been over Rs 36,600 crore (Rs 366 billion) at that time.

After the confession, the scrip had plunged to a low of Rs 6.30 on the National Stock Exchange on January 9.

The market valuation of the firm had fallen to a low of just Rs 404.33 crore (Rs 4.04 billion) based on the Rs 6.30 share price.

Besides, the current valuation of Satyam at the sale price of around Rs 5,600 crore (Rs 56 billion) is just about one-sixth of its last year's market capitalisation.

How he built a $100-million company

Innovation is the secret of their success. They believe a simple idea can transform lives. They dream big and are passionate about their goals. Here's a special series on India's best innovators and entrepreneurs, winners of the latest Nasscom Innovation Award 2008.

The Persistent Systems story

For business to happen, you need to have three things, 'N, B, A'. You should create a 'Need', the 'Budget' and have the 'Authority'. A founder's job is to sell new ideas to employees and customers," says Anand Deshpande, founder and chairman of Persistent Systems.

After working for a year at Hewlett-Packard in California, Deshpande headed back to India to start his own venture. Giving shape to his entrepreneurial dream was a big challenge at that time as the economy was going through difficult times. But the passion to start an enterprise and be successful kept him going.

"There has been a big change in the way technology was perceived then and today, right from the government policies to the number of market players everything has changed and so has the market dynamics," Deshpande explains.

A small venture with a few employees has grown substantially. Persistent crossed the $100 million revenue mark during FY08 and has delivered over 2,000 software products in the last five years.

He believes the foundation of any organisation must be trust. "Starting a business is not a risky proposition. You get to choose what you want to do, so it is very exciting. You need to have passion and believe in what you do," says Deshpande.

What are the features of the award-winning data processing solution? Persistent developed an innovative and comprehensive solution that enabled (tyre-maker) Bridgestone's dealers and service engineers to efficiently collect and update data from vehicles with a handheld device.

Bridgestone wanted a device which could detect the usage of tyres as it rents tyres to companies in Europe. As per the company's pay per use policy, transporters pay the company as per usage of the tyres instead of buying it.

The solution was targetted for deployment at 2,000 dealers (3,000-4,000 fleets) in more than 15 European countries. The device helped Bridgestone as there was no revenue loss due to incorrect or lost data. The device has improved the productivity of Bridgestone by 800 per cent.

How did the solution help Bridgestone? How challenging was the task?

Bridgestone's business requires their dealers and service engineers to undertake inspections of tyres on vehicles at various outdoor locations, often in difficult working conditions.

Data needs to be obtained regularly from thousands of vehicles across numerous fleets. The challenge was to capture the tyre usage data (millions of data points) on paper was inconvenient and messy due to the tough weather and working conditions, and often resulted in poor data quality.

Lost or incorrect data resulted in high operational costs and loss of revenue. The high cost of operation and risks involved resulted in poor acceptance of the tyre-as-a-service business model by dealers, creating a serious business challenge for the company. An efficient solution for easy and error-free data collection during inspections was desired.

How did you go about starting this company?

Starting Persistent Systems was a daunting task. In May 1990, when we started our work there was political uncertainty and the Indian economy was going through difficult times.

There has been a big change in the way technology was perceived then, and what we see today, right from the government policies to the number of market players everything has changed and so has the market dynamics.

One of the main reasons for getting customers was 'trust'. I firmly believe 'trust' should be the core foundation of any enterprise. Our first customer was O2 Technologies, who I had known while I was working with HP in the US. Our second customer was a fellow graduate student I had met during my academic years.

Our third customer was Microsoft, a customer that really helped us grow. Along the years I have learnt that network effect is an important sales tool.

For business to happen, you need to have three things, which I call the 'N B A' -- you should create a Need, the Budget and have the Authority. A founder's job is to sell to new employees and customers.

This role should not be delegated in the early stages of a company. Today, we are recognized as an award-winning technology company who pioneered the concept of outsourced software product development (OPD).

How many employees were there when you started and what is the strength now?

We were a handful people when we started and I am proud that today we are a big team of over 4,200 people and enjoy a presence in three continents.

What is the company's financial position? How are company's revenues growing?

Persistent crossed the $100-million revenue mark during FY08 (ending in March 2008) and has kept pace with its year over year revenue growth (CAGR) of over 59 per cent for the last 5 years.

The company has delivered over 2,000 software product releases to over 170 customers in the last five years.

What are the challenges that you face now?

The market is very volatile. The businesses are not growing fast. There is an uncertainty that affects business. But our business model is strong. We will work with customers and in tune with their needs.

What are the most important things an entrepreneur must have?

Starting a business is not a risky proposition. Of course, you get to choose what you want to do, so it is very exciting. . . But you need to have passion and need to believe in what you do.

Is education important for an entrepreneur to be successful?

It depends on the venture. Entrepreneurs need to solve real problems to be successful. India has a lot of talent, there is much more to be done to improve college education to make more people employable.

What are your views on innovation in India? How important is innovation for a company?

Indian companies are not leveraging innovation. (Oscar-winning film) Slumdog Millionaire is a good example of this. A R Rehman has done better music earlier. But he won the Oscar only for Slumdog. It was presented well through a good package. We have lot of innovations, but it is not promoted well.

Indian companies focus more on services than products. How important is a product-based innovation?

The relevance of product-based innovation is growing. In 5-7 years we will see more products coming from India. There is a huge market for products.

How do you see the growth of IT and BPO in India?

The short-term growth has definitely been hit. However, in the long term, IT will grow. It will be difficult to do without information technology.

What are your company's future plans?

We plan to be a leader in the outsourced product development.

How to keep a small business afloat

If you are a small business owner and sales are plummeting, the future might look bleak. What can you do to survive through stormy economic times?

Unfortunately, there is no playbook to follow to "right the ship". Every small business is different, and each one carries its own unique risks and rewards. Such differences make copying another company's turnaround strategy to the letter a bit unrealistic. Still, there are some general strategies business owners can follow to help you stop taking on water, and start bailing yourself out.

Tip 1: Look at the big picture

People have a tendency to attack the most obvious problems with vigor and without hesitation. That's understandable, and perhaps the approach makes good business sense in some situations. However, it is also advisable to look at the "big picture" to effectuate a positive and lasting change, comprehend the size and scope of the problem and understand a company's strengths and weaknesses.

For example, suppose that a small business owner discovers that two employees are consistently making mistakes with inventory that cause certain supplies to be over- or under-stocked. While an instinctive reaction may be to fire those employees, another approach might be to examine whether the manager who hired and supervises them has properly trained these employees, or if the manager is the real problem. Just like in investing, by looking at the issue from a top-down perspective it is possible to reduce or eliminate the chance that these problems will occur again.

Using the above example, a manager might fire the two error-prone employees, or perhaps even the manager, without a second thought. This might damage the business, however, if the manager's relationships with existing clientele have a history of bringing in repeat business and substantial revenue. Some simple training for that manager might be a better alternative than termination.

Taking a top-down approach and understanding the true problems that are holding your business back will help you understand the company's strengths as well as its weaknesses, and prevent change from adversely impacting future sales.

Tip 2: Take an inventory of the staff

Payroll is often one of the top costs a small business owner has, so making sure the money is well spent makes sense.

This may involve a thorough review of the staff - both when a problem arises, as well as during the normal course of business - to make sure the right people are on-board and doing their jobs effectively.

Both small business owners and large corporations tend to be "penny wise and pound foolish" when they hire the least expensive workers. Sometimes, the productivity of those workers may be suspect. Hiring one worker who costs 20 per cent more than the average worker but who works 40% more effectively makes sense, particularly during periods of crisis. By constantly seeking resumes and interviews from new people, business owners can make changes to staff when needed to increase efficiency.

Tip 3: Keep the money spigot open

Small business owners should take steps to ensure that the company has access to cash, particularly in periods of crisis. Visiting a bank loan officer and understanding what's required to obtain a loan is a good first step, as is opening a line of credit in advance to fund possible short-term cash flow problems.

Small business owners should have other potential sources of capital lined up as well. This might include tapping into savings, liquidating stock holdings, or borrowing from family members. A small business owner must have access to capital or have a creative way to obtain funds to make it through any lean times. There is no substitute for having cash at the ready.

Tip 4: Start sweating the small stuff

Although it is important to keep an eye on the big a picture, a small business owner should not overlook smaller things that may have an adverse impact on the business.

A large tree obstructing the public's view of the business or the company's signage, inadequate parking, lack of road/traffic access or ineffective advertising are examples of small problems that can put a big dent in a business's bottom line.

Considering and analyzing the numerous factors that bring customers in the door can help to identify some problems. Going through your quarterly expenses line-by-line may also help you isolate and identify problem areas. Owners should not be checking for one-time expenses here (as these items were most likely necessary charges), instead owners should look for small items that seem innocent, but are actually draining the accounts. For example, items like office supplies quickly get out of hand if ordered improperly. Similarly, if your supplier increases product prices, you should consider looking around for a cheaper supplier.

Tip 5: Don't sacrifice quality

If the problem is a product issue it makes sense to attack it head on. It also makes sense to stay on the offensive and get employees on board with changes that are being made. However, owners should be cognizant of not sacrificing quality when making these product changes.

Business owners seeking to improve their margins on a particular product should be wary of making dramatic changes to particular components. For example, if a pizzeria is going through a dry spell the owner could seek to expand margins per pie by purchasing cheaper cheese or sauce ingredients. However, the strategy could backfire if customers become dissatisfied with the taste (quality) of the pizza and sales decrease. The key is to make cost and other cuts, while retaining the quality of the finished product.

Floating a small business

Keeping a small business afloat in difficult times is often challenging. That's because there is no set playbook for an owner to follow, and because every business situation is different. But, because many small businesses also come with very passionate owners, some simple attention to detail can ensure that a business sails right on through to calmer and more prosperous economic times.

Inflation at 20-year low; will it hurt us?

Inflation in India drastically fell to a two-decade low of 0.44 per cent in the first week of March as food and fuel items turned cheaper, prompting analysts to say that rate of price rise would soon turn negative.

Wholesale price-based inflation declined by 1.99 percentage points from 2.43 per cent during the week ended February 28, fuelling expectations that the Reserve Bank of India would cut interest rates to spur the economic growth.

After a year of spiraling prices, rising inflation, India is now heading towards deflation. The Indian economy may go into deflation by April as inflation is likely to fall below zero per cent. So what is deflation and why is it bad?

What is deflation and why is it bad for the economy?

Deflation is a fall in the price of goods and services. Deflation occurs when the inflation rate falls below zero per cent. This is the opposite of inflation.

When the inflation rate is negative, the economy is in said to be in a deflationary period.

Why does deflation happen?

A fall in spending -- it could be personal spending or a cut in government expenditure -- leads to deflation. The decline in the supply of money and credit thus leads to deflation.

So, if money-supply decreases; supply of other goods increases, demand for money rises, and the demand for other goods slips, it is deflation.

What are the consequences of deflation?

Deflation leads to a lower level of demand in the economy. It increases the real value of money. It also increases unemployment.

In a deflationary environment, those sectors with a high proportion of variable costs are likely to benefit from falling input prices, according to Goldman Sachs.

What could happen if India slips in deflation?

India would see deflation or reduction in general price level from next month due to slackening demand, according to financial services firm Goldman Sachs said.

"We expect yearly headline WPI inflation to fall rapidly below 1 per cent in March. And enter a period of deflation beginning in April, which could last till end-2009 due to not only continuing demand destruction but also a sharp step-up in the base," it said in a research report.

"There will be negative inflation for a few weeks in the first quarter of next fiscal, driven largely by higher base effect but we do not expect a pronounced deflationary trend in the economy," Dun and Bradstreet chief operating officer Kaushal Sampat said recently.

Is deflation good for you as prices are falling?

A fall in the prices may sound good for consumers. But it is not actually good. The lack in demand may push companies to further lower prices.

This can lead to a situation where the prices of product fall bellow the cost of manufacturing a product. This in turn forces the companies to cut production, slash jobs and shut down business till demand picks up. This worsens the situation.

Is deflation here to stay?

Deflation is not likely to last long. The monetary and fiscal stimulus measures of the government is likely to boost demand in the long run. In 2010, however, Goldman Sachs expects inflation to come back due to both a gradual pick-up in demand, and conversely, a low base from 2009.

It further said that the Reserve Bank could slash cash reserve ratio (CRR) for banks by 150 basis points by mid-2009 to provide liquidity into the system.

A CEO at 16, now a millionaire!

Innovation is the secret of their success. They believe a simple idea can transform lives. They dream big and are passionate about their goals... Meet the young, ambitious, intelligent and enterprising architects of India. Here's a special series on India's best innovators and entrepreneurs, winners of the latest Nasscom Innovation Award 2008.

A gaming success mantra

It has been games, games and more games for 31-year-old millionaire entrepreneur Vishal Gondal. He flunked his BCom exams as he was devoted to games, a passion he pursued from the age of 13. Later, this passion led to a serious business when people offered him money to develop games.

In fact, Vishal was amused to see that people were ready to pay him for doing what he liked the most.

At the age of 16, he started his first company, FACT. Later, he received seed capital from Infinity and IL&FS. With an initial investment of Rs 3.25 crore (Rs 32.5 million), Indiagames was born in 1999.

The initial years were tough, especially during the dot-com bust, but they remained focussed and never gave up. Indiagames's products are now distributed to over 75 countries through partnerships with mobile operators.

From a humble beginning in a garage with just five employees, Indiagames has come a long way. Today, Vishal leads a team of over 300 employees and has offices in Mumbai, London, Los Angeles and Beijing. In 2006, UTV acquired 51 per cent stake in Indiagames.

Thinking 'out of the box' has kept Vishal Gondal ahead in this space. He believes that gaming will grow bigger than cricket and Bollywood in India.

"Entrepreneurs must have a clear focus. One must keep focusing on a single thing than trying to do many things at the same time. And copy cat ideas will not survive. One needs to be innovative and do unique things," he points out. However, he laments over the dismal state of innovation in India. "Indian companies had it very easy till now he says. They will be forced to innovate and do things differently."

The GOD service

What is the award winning online gaming process all about?

It is the largest and India's only paid games-on-demand (GOD) service. It is a subscription-based system where users can log in and choose from over 200 games. All a user needs to do is pay Rs 200 for downloading games for a month's unlimited service.

We found that there were many people who wanted to play games but did not know how to go about it. Users are scared to do something online and they needed help. The traditional call centres were not geared up for helping gaming enthusiasts. So we picked up 4 to 5 gamers and set up a call centre to guide people.

We call them GOD's doots. We have about 200 people in different call centres. These doots guide people, make sure they have no trouble playing their favourite games.

How successful is this system?

The system has been very effective. The users just need to make a call to get their queries answered by gaming experts. We already have about 32,000 users.

How has the work experience been so far? Did you ever feel a work pressure?

It all started with an interest in gaming. The best part is I never thought I was working. When people said they can pay me for developing games, I thought it was quite funny. I have always enjoyed doing this so there was no pressure on me.

An exciting experience

How did it feel to be a company CEO at such a young age?

It was exciting, I just kept myself focussed and went ahead. It was difficult to pull through the dot-com bust. Our funding blew up, but we did not give up. We got smart investors and went ahead with our plans.

How important is education to become a successful entrepreneur?

I went to college, opted for BCom so that I could spend more time on games. However, I flunked in the final year exams. While education is important, it is the passion for what you do that makes you a winner.

Every day is a new experience. In India, doing regular things like applying for a ration card, a passport, taking a railway ticket pass itself is a learning process. The day-to-day things teach you a lot.

Indian companies will be forced to innovate'

What are your views on innovation in India? How important is innovation for a company?

Indiagames won the innovation award competing with companies like Infosys, Wipro and Reliance ADAG's products.

While it is a huge achievement for us, this shows the dismal state of innovation in India. But so far Indian companies had it very easy. But as the times are getting tough, Indian companies will be forced to innovate and do things differently.

Indian companies focus more on services than products. How important is a product-based innovation?

Doing just services will not help. It is high time we stopped supplying engineers to big software companies and jumped to the next big league of product-making. India is a land of opportunities and we can do wonders if we think out of the box. Companies must think beyond making money and try to make products that can address real problems.

India needs more visionary entrepreneurs'

What are the challenges that you face now?

The biggest challenge is educating people. We are looking at extending the reach online gaming across India. Many people are keen on playing games but they do no know how to go about it.

Getting more people and guiding them to pursue their interest is what we are trying through the Games On Demand (GOD) service.

What are the 5 most important things an entrepreneur must have? Do you think India needs more entrepreneurs?

Entrepreneurs must have a clear focus. One must keep focusing on a single thing than trying too many things at the same time. One needs to have a good team. Copy cat ideas will not survive.

One needs to be innovative and do unique things. It should be a business of tomorrow and futuristic. It need not always be about technology. Finally, one must take risks to be successful. India needs more visionary entrepreneurs. Even if India gets 1,000 good entrepreneurs, we can achieve a lot.

Demand for gaming will boom'

What is the company's present market share? How do you see the demand for gaming growing in India?

Indiagames is th eleader in India. We grew by 150 per cent last year. It has been a steady growth. The demand for gaming will boom in India. In the last quarter, 26 per cent of UTV's revenues came from gaming.

How is mobile gaming doing?

Mobile gaming is getting every popular. We have tied up with mobile companies like Airtel, BSNL, Tata Indicom and MTNL.

How is the demand from abroad?

The demand from abroad is growing. Racing, action and cricket are among the popular games. Games like Batman, Harry Potter did very well.

Gaming will grow bigger than cricket'

What are your views on the economic recession?

Recession is here to stay and India will be hit by the crisis. We have not been affected by the recession so far. We need to have an eco system in India to create real business models. We grew by 150 per cent last year. These are challenging times and we will emerge stronger from the crisis. Layoff will force people to do something on their own.

What is the future of gaming? How will it grow?

In India, 70 per cent of people are under 35 years of age. So we see a great future in gaming. In terms of entertainment, gaming will grow bigger than cricket and Bollywood in India. Games based on racing, action, cricket, Bollywood and Hollywood do well. Even in countries like the United States, Japan, Korea, gaming is the biggest entertainment platform.

'India is the land of opportunities'

What are the reasons for your company's success?

Our focus on this segment, a great team and constant innovation has helped us come this far.

What would be your advice to entrepreneurs in India?

India is the land of opportunities. So you must spot and grab an opportunity. The opportunity may not always be in the technology space. Security is a big opportunity. Hotels are now spending crores (tens of millions) on security solutions. So people should look at other sectors as well.

The historic Tata Motors journey

The wait is finally coming to an end. Just a few hours from now, on March 23, Tata Motors will launch the world's cheapest car -- Nano -- in Mumbai. Many a company had pooh-poohed the Tata Motors claim that it would soon manufacture a Rs 1-lakh (Rs 100,000) car. Their constant refrain was 'it can't be done'.

But now the naysayers have been silenced. And the world has sat up to take notice of this car. Little wonder then that the launch promises to be a very high profile affair.

It has been a very long journey for Tata Motors -- the world's, fourth largest truck manufacturer, and second largest bus manufacturer.

Set up to manufacture locomotives and other engineering products, Tata Engineering and Locomotive Co Ltd, or TELCO, started its journey way back in 1945. Renamed as Tata Motors in 2002, today it is India's largest automobile company with revenues (2007-08) of Rs 35,651.48 crore ($8.8 billion) and 23,000 employees.

Over 40 lakh (4 million) Tata vehicles ply on Indian roads since the first one rolled out in 1954. The company's manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh) and Pantnagar (Uttarakhand).

The company is setting up two new plants: at Dharwad (Karnataka) and Sanand (Gujarat).

1954: Pact with Daimler Benz

Tata Motors (then known as TELCO) entered into a deal with Daimler Benz AG, West Germany (Germany at that time was divided into East and West), to manufacture medium commercial vehicles.

The first vehicle rolled out within 6 months of the contract.

1959: R&D

A research and development centre was set up at Jamshedpur.

1961: Exports begin

Exports began with the first truck being shipped to Sri Lanka, then called Ceylon.

1966-83: Commerical vehicles

The Engineering Research Centre was set up at Pune to provide impetus to automobile research and development.

The first commercial vehicle was manufactured in Pune in 1977 and in 1983, manufacture of heavy commercial vehicles commenced.

1986-89: LCVs

Production of first indigenously designed light commercial vehicle, Tata 407, started in 1986, followed by Tata 608.

In 1989 Tatamobile 206 - the 3rd LCV model was introduced.

1991-94: Passenger car

In 1991, TELCO launched Tata Sierra, the first indigenously passenger car. The same year the company also rolled out its millionth vehicle.

While in 1992 Tata Estate was launched, in 1994, Tata Sumo, the first multi-utility vehicle rolled out from the Tata Motors stable.

In 1993, the company entered into a joint venture agreement with Cummins Engine Co Inc for manufacturing high horsepower and emission friendly diesel engines.

A year later, it signed another JV, and this time with Daimler-Benz for manufacturing Mercedes Benz passenger cars in India.

1995-99: Tata Sumo

In 1995 Mercedes Benz E220 was launched.

1996: Tata Sumo deluxe was launched.

1997: Tata Sierra Turbo was launched. This very year the 100,000th Tata Sumo was rolled out.

1998 was a golden year for TELCO as both Indica, India's first fully indigenous passenger car and Tata Safari -- India's first sports utility vehicle were launched.

The company was rolled out the two millionth vehicle.

Within a week of its launch, 115,000 bookings for Indica were registered and commercial production of Indica commenced in full swing.

2000-02: The Indica

In 2000 First consignment of 160 Indicas were shipped to Malta.

Indica with Bharat Stage 2 (Euro II) compliant diesel engine launched.

Utility vehicles with Bharat 2 (Euro II) compliant engine launched.

The company also launched CNG buses the same year.

2001:

Indica V2 and CNG Indica launched.

100,000th Indica wheeled out.

Exits joint venture with Daimler Chrysler.

2002:

Unveiling of the Tata Sedan at Auto Expo 2002.

Petrol version of Indica V2 launched.

200,000th Indica rolled out.

500,000th passenger vehicle rolled out.

Launch of the Tata Sumo'+' Series

Tata Indigo is launched.

2003-04: Tata Indigo

In 2003, the Tata Indigo Station Wagon was unveiled at the Geneva Motor Show.

On 29th July, J R D Tata's birth anniversary, Tata Engineering becomes Tata Motors Limited.

Other key events that year included:

Three millionth vehicle produced.

First CityRover rolled out

2004:

Indigo Advent unveiled at Geneva Motor Show.

Tata Motors completes acquisition of Daewoo Commercial Vehicle Company

Tata Daewoo Commercial Vehicle Co Ltd launches the heavy duty truck Novus, in Korea

Sumo Victa, Indigo Marina launched

Tata Motors lists on the NYSE.

2005: Acquisitions

Tata Motors rolls out the 500,000th passenger car from its facility in Pune.

The Tata Xover unveiled at the 75th Geneva Motor Show.

Branded buses and coaches - Starbus and Globus - launched.

Tata Motors acquires 21 per cent stake in Hispano Carrocera SA, Spanish bus manufacturing Company

Tata Ace, India's first mini truck launched.

Tata Motors wins JRD QV award for business excellence.

Introduction of Indigo SX series - luxury variant of Tata Indigo.

Tata Motors launches Indica V2 Turbo Diesel.

One millionth passenger car produced and sold.

Inauguration of new factory at Jamshedpur for Novus.

Tata TL 4X4, India's first Sports Utility Truck (SUT) is launched.

2006: A million-plus!

Tata Motors' vehicle sales in India cross four million mark.

It unveils new long wheel base premium Indigo & X-over concept at Auto Expo 2006.

Indica V2 Xeta is launched.

Tata Motors and Marcopolo, Brazil, announce joint venture to manufacture fully built buses & coaches for India and markets abroad.

The company zeroes on West Bengal for setting up Nano plant.

It extends CNG options on its hatchback and estate range

Tata Motors and Fiat Group announce three additional cooperation agreements

2007: More vehicles launched

Construction of Small Car plant at Singur, West Bengal, begins on January 21.

New 2007 Indica V2 range is launched

Tata Motors launches the longwheel base Indigo XL, India's first stretch limousine

Tata-Fiat plant at Ranjangaon inaugurated

Launch of a new Upgraded range of its entry level utility vehicle offering, the Tata Spacio.

Launch of Magic, a comfortable, safe, four-wheeler public transportation mode, developed on the Ace platform.

Launch of Winger, India's only maxi-van.

Fiat Group and Tata Motors announce joint venture deal.

Tata Motors launches Indica V2 Turbo with dual airbags and ABS

Rollout of the one millionth passenger car off the Indica platform.

2008: Jaguar, Land Rover

Ratan Tata unveils Nano -- the Rs 100,00 'People's Car' at the 9th Auto Expo in New Delhi.

Ace plant at Pantnagar (Uttarakhand) begins production.

Indica Vista � the new generation Indica, is launched.

Agitation of Trinamool Congress leader Mamat Banerjee forces Ratan tata to abandon Singur. While many suitors wooed Tata, Gujarat chief mminister Narendra modi finally clinched the deal. Tatas decided to set up the nano plant at Sanand.

Xenon, 1-tonne pick-up truck, launched in Thailand.

Tata Motors completes acquisition of Jaguar -and Rover for $2.3 billion.

2008: The Nano

Tata Marcopolo Motors' Dharwad plant begins production.

AND. . .

Nano the world's cheapest car will be launched at 1930 hours in Mumbai on Monday, March 23.