Bullion Market & Indian Bullion Market - An Overview

A valuable metal is a rare metallic chemical element of high economic value. Chemically the valuable metals are less reactive than most elements, have high luster, are softer or more yielding, and have higher melting points than other metals. In the past, valuable metals were important as currency, but are now regard mainly as investment and industrial commodities. Gold, silver, platinum, and palladium each have an ISO 4217 currency code.

The best-known precious metals are gold and silver. As both have industrial uses, they are better known for their uses in art, jeweler and coinage. Other valuable metals contain the platinum group metals: ruthenium, rhodium, palladium, osmium, iridium, and platinum, of which platinum is most widely traded.

The demand for precious metals is driven not only by their sensible use, but also by their role as investments and a store of value. Historically precious metals have commanded much advanced prices than common industrial metals. In the early part of the 21st century, valuable metal prices rose considerably and recycling precious metals became more and more attractive.

 

Bullion

A metal is deemed to be precious if it is rare. The discovery of new sources of ore or improvements in mining or refining processes may cause the value of a precious metal to diminish. The status of a precious metal can also be determined by high demand or market value. Precious metals in bulk form are known as bullion and are traded on commodity markets. Bullion metals may be cast into ingots or minted into coins. The important quality of bullion is that it is valued by its mass and purity rather than by a face value as money.

Many nations issue bullion coins, of which the most famous is probably the gold South African Krugerrand. Though nominally issued as legal tender, these coins' face value as currency is far below that of their value as bullion. For instance, Canada issues a gold bullion coin (the Gold Maple Leaf) at a face value of $50 containing one troy ounce (31.1035 g) of gold, this coin is worth about $737 as bullion. Bullion coins' issuing by national governments gives them some numismatic value in addition to their bullion value, as well as certifying their purity.

The level of purity varies from issue to issue. 99.9% purity is common. The purest mass-produced bullion coins are in the Canadian Gold Maple Leaf series which go up to 99.999% purity. Note that 100% pure bullion is not possible as absolute purity in extracted and sophisticated metals can only be asymptotically approached. Many bullion coins contain a stated quantity such as one troy ounce (31.1035 g) of the marginally-impure alloy. In contrast the Krugerrand is one of many historic and modern bullion coins of 22 Kt Crown gold, with a stated content of "fine gold", with the other component(s) of the alloy making the coin heavier than one little in total. Still more bullion coins (for example: British Sovereign) state neither the purity nor the fine-gold weight on the coin but are known and reliable in their work, and many historically stated a quantity in currency (example: American Double Eagle).

One of the largest bullion coins in the world is the 10,000 dollar Australian Gold Nugget coin minted in Australia which consists of a full kilogram of 99.9% pure gold. There have been a small number of larger bullion coins but they are impractical to handle and not created in mass quantities. China has produced coins in very limited quantities (less than 20 pieces) that exceed 260 troy ounces (8 kg) of gold. Austria has issued a coin containing 31 kg of gold.

Gold and silver are often seen as hedges against both inflation and financial downturn. Silver coins have become popular with collectors due to their relative affordability and unlike most gold and platinum issues which are respected based upon the markets, silver issues are more often valued as collectables, far higher than their actual bullion value.

Precious metal economics

An interesting case of a precious metal that is now common is that of aluminum. Even though aluminum is one of the most commonly occurring elements on globe it was at one time found to be extremely difficult to win from its various ores. This made the little obtainable pure aluminum which had been sophisticated at great expense, more valuable than gold. Bars of aluminum were exhibited alongside the French crown jewels at the Exposition Universally in 1855, and Napoleon III's most important guests were given aluminum plates, while those less worthy dined with mere silver. In addition, the pyramidal top to the Washington Monument is made of pure aluminum. At the time of the monument's construction, aluminum was as expensive as silver, however the price of the metal has dropped, the invention of the Hall-Héroult procedure in 1886 caused the high value of aluminum to permanently collapse.

Bullion coin

A bullion coin is a coin struck from valuable metal and kept as a store of value or an investment rather than used in day-to-day business. Examples include Krugerrands, the American eagle series and the Canadian Maple Leaf series. Other examples include the Mexican Libertad, The Chinese Panda bear, The Austrian Philharmoniker and the British Britannia.

Bullion coins are presented in Gold and Silver, with the exception of the Krugerrand which is only available in Gold. The American eagle series is available in Gold, Silver and Platinum and the Canadian Maple Leaf series is available in Gold, Silver, Platinum and also Palladium. Bullion coins are also naturally available in different weights. These are generally multiples or fractions of 1 Troy little but some Bullion Coins are shaped in very limited quantities in Kilograms and even heavier.

Bullion coins sell for a premium over the market value of the metal on the Commodities Exchanges. This is due to their comparative small size and the costs connected with manufacture, storage and distribution. The edge that is paid varies depending on what type of coin it is, the weight of the coin, and the valuable metal. The premium also is affected by current demand.

Indian Bullion Market

In Indian Bullion Market, we can define bullion as a precious metal primarily ’gold ' that can be cast into ' ingots ' or minted into ' coins '. The important characteristic of bullion is that it is valued by its mass and purity rather than by its face price as in the case of money. In short, the amount of bullion owned by a nation is exactly the inherent valuation of the amount of gold treasury that a country has. It is used as an indicator of the wealth possessed by a nation. It is needless to say that the market is under the strict management of the Central Government.

Until 1990, the Gold Control Act banned its citizens from possessing gold bars. The investment in smuggled bars was also limited and was done before willingly converting them into jewelers by the families that were financially sound when supplies arise at times of wedding or other social occasions.

Though the scenario changed in the period post 90s when investment in small bars both imported and locally made that had proliferated from local refineries had increased considerably. During the mid 90s, Gold began to be used as a method of masking riches when the local rupee value had experienced a stable rise. Such an increase in investment in gold was uninterrupted in 1998 when over 40 tones of gold from bonds that were initially issued by the Reserve Bank of India (RBI) were restored back to the public.

Even though in cities gold is having to compete with investment in stock market, industries, and a wide variety of durable consumer goods, the rural people till date prefer to invest in 22 carat jewelers. In order to tap this hoarding of gold privately the Government announced a new scheme in its budget for the year 99-2000. It allowed the commercial banks to take deposits in terms of gold bars, coins or jewelers against the payment of interest.

In present day situation, the following statements hold true:

• Gold is being appreciated in India as a secondary source of investment after bank deposits.
• India is the major investor in gold jewelers.
• Domestic consumption is sensitive to monsoon, harvest and marriage seasons.
• Indian jewelers off take is sensitive to price increases and more so to instability.

Therefore the Bullion Market in India even after undergoing several corrections has retained its status of being a familiar index highlighting the financial growth of the nation in recent times.

Inflation & Monetary Policy Mechanism

Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. Inflation can also be described as a decline in the real value of money—a loss of purchasing power in the medium of exchange which is also the monetary unit of account and the monetary store of wealth. When the general price level rises, each unit of currency buys fewer goods and services. A chief measure of price inflation is the inflation rate, which is the percentage change in a price index over time.

When I was a kid my grandparents used to tell me – "Son, in our time we use to take money (paisa) in pockets and carry goods to home in bags. But in your age you will carry money (rupees) in bags and carry goods to home in your pocket". He was so right! This is inflation –which reduces the purchasing power of common man.

Measuring Inflation

In major economies, inflation is measured by CPI, which is Consumer Price Index. CPI is a measure of the average price of consumer goods and services purchased by households. The percent change in the CPI is a measure of inflation. Two basic types of data are needed to construct the CPI: price data and weighting data. The price data are collected for a sample of goods and services from a sample of sales outlets in a sample of locations for a sample of times. The weighting data are estimates of the shares of the different types of expenditure as fractions of the total expenditure covered by the index. These weights are usually based upon expenditure data obtained for sampled periods from a sample of households.

In other words, Inflation is calculated as percentage change in CPI in two periods. Hence,

Inflation (%) = (CPI2- CPI1)*100/CPI1

Where, CPI1 = CPI in the previous period and CPI2 = CPI in the current period.

India uses a different price index called the Wholesale Price Index (WPI) to calculate the rate of inflation in our economy. It is quite similar to Consumer Price Index, but uses whole sale prices instead of retail consumer prices. WPI is the index used to measure changes in the average price levels in the wholesale market. Data on 435 commodities is tracked through WPI, in India, which is an indicator of movement in prices. I share the common view of other economists who believe WPI, as a measure of inflation, is flawed. India should switch to CPI, which has been adopted by most developed countries.

There are several other ways of measuring inflation as well. They are GDP price deflator, Producer Price Indices and Commodity Price Indices. However, they are not commonly used.

Flaws of WPI

Former RBI governor once explained why India does not use CPI as a measure of inflation. The CPI data is not released as frequently as WPI data. WPI data is released almost weekly and sometimes at most biweekly, where as CPI data is released once in a month. There is also a lot of lag in collating all the CPI data. There is another problem with the CPI data in India. We don't have a single CPI data, but four different CPI figures relating to agriculture goods, urban manual labor and non-urban labor etc. There is no discipline in when these different figures are released and with what frequency. So government of India has a genuine reason in not going for CPI based inflation.

WPI based calculation is full of flaws. WPI is supposed to measure impact of prices on business. But we use it to measure the impact on consumers. The WPI that was constituted in 1993-94 has virtually remained unchanged since then, and it has lost quite a bit of its relevance while calculating inflation. Some of the WPI commodities include coarse grains that go into making of livestock feed but they continue to be considered while measuring inflation. The sole reason why many unimportant commodities continue to remain included is possibly because data on their prices was available!

Causes of Inflation

Let's get back to our discussion on the fundamentals of inflation. Economists believe that inflation is a monetary phenomenon. However, in the short and medium term inflation may be affected by supply and demand pressures in the economy, and influenced by the relative elasticity of wages, prices and interest rates.

1. Over-expansion of money supply i.e. excess liquidity in the economy leads to inflation because "too many money would be chasing too few goods".

2. Expansion of Bank Credit Rapid expansion of bank credit is also responsible for the inflationary trend in a country.

3. Deficit Financing: The high doses of deficit financing which may cause reckless spending, may also contribute to the growth of the inflationary spiral in a country.

4. A high population growth leads to increase in demand and money income and cause a high price rise.

5. Excessive increase in the price of fuel or food products due to political, economic or natural reasons will lead toinflation for short- as well as long-term.

For example – We all remember that price of crude went up from $50 to $140 within two years. Almost every industry including agriculture, transportation and manufacturing depends on crude for its operation. Any excessive increase in the price of crude leads to increase in cost of good and services i.e. inflation.

Another example – China and India consist of almost 34% of the world's population. As the economy in these two countries are growing at a rate of over 9%, people are consuming more and more goods due to increased income and better life. Demand for those goods and services has led to a high inflationary environment in these countries.

States of Inflation

There are different states of inflation which is characterized based on its value as well as variation from the previous value.

1. Hyperinflation – It is a very high rate of inflation, usually a rate in excess of 50%. History has some excellent examples of hyperinflation. In Germany, inflation exceeded 1 million % in 1923. It was said that a horse cart full of money would not buy even a newspaper. Right now, Zimbabwe is having an inflation of 1 million %. They have to issue currency of $500 Million dollar (I am not kidding!!) which could only buy a lunch at McDonalds.

2. Deflation – It is the decrease in the general price level of goods and services only when annual inflation is below 0% resulting in the real value of money. Hence, it is sometimes called "negative inflation". Japan suffered from deflation for almost a decade in 1990s. To control recession and Central Bank of Japan was forced to have a negative interest rate on deposit for over a decade.

3. Disinflation – It refers to a time when the rate of change of prices is falling while the inflation rate is positive. For example – if the inflation rate comes down from 3% to 2%, we would say it is disinflation. In India, we have a disinflation because inflation has come down from a high of 13% to 6% and it is still dropping.

4. Stagflation – It is an economic situation in which inflation and economic stagnation occur simultaneously and remain unchecked for a period of time. Stagflation can result when an economy is slowed by an unfavorable supply shock, such as an increase in the price of oil in an oil importing country, which tends to raise prices at the same time that it slows the economy by making production less profitable.

Effects of Inflation on economy

As we know Inflation is the increase in the price of general goods and service. Thus, food, commodities and other services become expensive for consumption. Inflation can cause both short-term and long-term damages to the economy; most importantly it causes slow down in the economy.

1. People start consuming or buying less of these goods and services as their income is limited. This leads to slowdown not only in consumption but also production. This is because manufactures will produce fewer goods due to high costs and anticipated lower demand.

2. Banks will increase interest rates as inflation increases otherwise real interest rate will be negative. (Real interest ~ Nominal interest rate – inflation). This makes borrowing costly for both consumers and corporate. Thus people will buy fewer automobiles, houses and other goods. Industries will not borrow money from banks to invest in capacity expansion because borrowing rates are high.

3. Higher interest rates lead to slowdown in the economy. This leads to increase in unemployment because companies start focusing on cost cutting and reduces hiring. Remember Jet Airways lay off over 1000 employees to save cost.

4. Rising inflation can prompt trade unions to demand higher wages, to keep up with consumer prices. Rising wages in turn can help fuel inflation.

5. Inflation affects the productivity of companies. They add inefficiencies in the market, and make it difficult for companies to budget or plan long-term. Inflation can act as a drag on productivity as companies are forced to shift resources away from products and services in order to focus on profit and losses from currency inflation.

Inflation Targeting

There are various ways of controlling inflation in an economy. I will discuss two main ways of doing so:

Monetary Policy

The most important and commonly used method is monetary policy. Most central banks use high interest rates and slow growth of the money supply as the traditional ways to fight or prevent inflation. RBI raised CRR, Repo rate and Reverse repo rate to reduce money supply in the economy to fight inflation which was hovering in double digit. High interest rates make borrowing expensive and hence, people as well as corporate borrow less money from banks. This reduced the demand for goods and services such as real estate, automobiles and others.

1. Repo (Repurchase) Rate 2. Reverse Repo Rate 3. Bank Rate 4. Call Rate 5. CRR 6. SLR 1. Repo (Repurchase) Rate

Repo rate is the rate at which banks borrow funds from the RBI to meet the gap between the demands they are facing for money (loans) and how much they have on hand to lend. If the RBI wants to make it more expensive for the banks to borrow money, it increases the repo rate; similarly, if it wants to make it cheaper for banks to borrow money, it reduces the repo rate. Hence, if repo rate is increased, banks would hesitate to borrow money from RBI. Hence, there would be less cash and less liquidity in the market. 2. Reverse Repo Rate This is the exact opposite of repo rate. The rate at which RBI borrows money from the banks (or banks lend money to the RBI) is termed the reverse repo rate. The RBI uses this tool when it feels there is too much money floating in the banking system. If the reverse repo rate is increased, it means the RBI will borrow money from the bank and offer them a lucrative rate of interest. As a result, banks would prefer to keep their money with the RBI (which is absolutely risk free) instead of lending it out (this option comes with a certain amount of risk). Consequently, banks would have lesser funds to lend to their customers. This helps stem the flow of excess money into the economy. Reverse repo rate signifies the rate at which the central bank absorbs liquidity from the banks, while repo signifies the rate at which liquidity is injected. 3. Bank Rate This is the rate at which RBI lends money to other banks or financial institutions. The bank rate signals the central bank's long-term outlook on interest rates. If the bank rate moves up, long-term interest rates also tend to move up, and vice-versa. Banks make a profit by borrowing at a lower rate and lending the same funds at a higher rate of interest. If the RBI hikes the bank rate (this is currently 6 per cent), the interest that a bank pays for borrowing money (banks borrow money either from each other or from the RBI) increases. It, in turn, hikes its own lending rates to ensure it continues to make a profit. 4. Call Rate Call rate is the interest rate paid by the banks for lending and borrowing for daily fund requirement. Since banks need funds on a daily basis, they lend to and borrow from other banks according to their daily or short-term requirements on a regular basis. A lower call rate means banks frequently borrow money from other banks. A lower call also shows health and confidence of the economy and banking system. 5. CRR Also called the cash reserve ratio, refers to a portion of deposits (as cash) which banks have to keep/maintain with the RBI. This serves two purposes. It ensures that a portion of bank deposits is totally risk-free and secondly it enables that RBI control liquidity in the system, and thereby, inflation by tying their hands in lending money. 6. SLR Besides the CRR, banks are required to invest a portion of their deposits in government securities as a part of their statutory liquidity ratio (SLR) requirements. What SLR does is again restrict the bank's leverage in pumping more money into the economy.

Fixed Interest Rate

As we know high inflation reduced the value of money. A number of smaller countries who do not have sophisticated banking system rely on tying their currency with that of a developed country. Under a fixed exchange rate currency regime, a country's currency is tied in value to another single currency or to a basket of other currencies (or sometimes to another measure of value, such as gold). A fixed exchange rate is usually used to stabilize the value of a currency, vis-à-vis the currency it is pegged to.

Government Measures

Apart from these two broad methods, government takes some protectionist measures as well to fight inflation. Government may ban export of essential items such as pulses, cereals and oils to support the domestic consumption and hence reduced their prices. Also, government may lower duties on the import of similar items which are having less supply in the economy.

Positive side of inflation

You may be wondering how come inflation is good for economy. A little bit of inflation is not a bad thing. It implies the possibility of higher prices and profits in the future. To the worker, a little bit of inflation may imply rising wages in the future. What I am trying to say is that they are based more on "psychology" than "economics".

THE REAL STORY OF INFOSYS

PART 1

It was probably the April of 1974. Bangalore was getting warm and gulmohars were blooming at the IISc campus. I was the only girl in my postgraduate department and was staying at the ladies' hostel. Other girls were pursuing research in different departments of Science. I was looking forward to going abroad to complete a doctorate in computer science. I had been offered scholarships from Universities in the US. I had not thought of taking up a job in India.
One day, while on the way to my hostel from our lecture-hall complex, I saw an advertisement on the notice board. It was a standard job-requirement notice from the famous automobile company Telco (now Tata Motors). It stated that the company required young, bright engineers, hardworking and with an excellent academic background, etc.At the bottom was a small line: "Lady Candidates need not apply."
I read it and was very upset. For the first time in my life I was up against gender discrimination. Though I was not keen on taking up the job, I saw it as a challenge. I had done extremely well in academics, better than most of my male peers. Little did I know then that in real life academic excellence is not enough to be successful? After reading the notice I went fuming to my room.
I decided to inform the topmost person in Telco's management about the injustice the company was perpetrating. I got a postcard and started to write, but there was a problem: I did not know who headed Telco.
I thought it must be one of the Tatas. I knew JRD Tata was the head of the Tata Group; I had seen his pictures in newspapers (actually, Sumant Moolgaokar was the company's chairman then). I took the card, addressed it to JRD and started writing. To this day I remember clearly what I wrote. "The great Tatas have always been pioneers.
They are the people who started the basic infrastructure industries in India, such as iron and steel, chemicals, textiles and locomotives. They have cared for higher education in India since 1900 and they were responsible for the establishment of the Indian Institute of Science. Fortunately, I study there. But I am surprised how a company such as Telco is discriminating on the basis of gender."
I posted the letter and forgot about it. Less than 10 days later, I received a telegram stating that I had to appear for an interview at Telco's Pune facility at the company's expense. I was taken aback by the telegram.
My hostel mate told me I should use the opportunity to go to Pune free of cost and buy them the famous Pune saris for cheap! I collected Rs.30 each from everyone who wanted a sari. When I look back, I feel like laughing at the reasons for my going, but back then they seemed good enough to make the trip.
It was my first visit to Pune and I immediately fell in love with the city. To this day it remains dear to me. I feel as much at home in Pune as I do in Hubli, my hometown. The place changed my life in so many ways. As directed, I went to Telco's Pimpri office for the interview. There were six people on the panel and I realised then that this was serious business."This is the girl who wrote to JRD," I heard somebody whisper as soon as I entered the room. By then I knew for sure that I would not get the job. The realisation abolished all fear from my mind, so I was rather cool while the interview was being conducted.
Even before the interview started, I reckoned the panel was biased, so I told them, rather impolitely, "I hope this is only a technical interview."
They were taken aback by my rudeness, and even today I am ashamed about my attitude. The panel asked me technical questions and I answered all of them.

Then an elderly gentleman with an affectionate voice told me, "Do you know why we said lady Candidates need not apply? The reason is that we have never employed any ladies on the shop floor. This is not a co-ed college; this is a factory.
When it comes to academics, you are a first ranker throughout. We appreciate that, but people like you should work in research laboratories." I was a young girl from small-town Hubli. My world had been a limited place. I did not know the ways of large corporate houses and their difficulties, so I answered, "But you must start somewhere, otherwise no woman will ever be able to work in your factories."
Finally, after a long interview, I was told I had been successful. So this was what the future had in store for me. Never had I thought I would take up a job in Pune. I met a shy young man from Karnataka there, we became good friends and we got married.

It was only after joining Telco that I realized who JRD was: the uncrowned king of Indian industry. Now I was scared, but I did not get to meet him till I was transferred to Bombay. One day I had toshow some reports to Mr. Moolgaokar, our chairman, who we all knew as SM.I was in his office on the first floor of Bombay House (the Tata Headquarters) when, suddenly JRD walked in that was the first time I saw "appro JRD". Appro means "our" in Gujarati.

This was the affectionate term by which people at Bombay House called him.I was feeling very nervous, remembering my postcard episode. SM introduced me nicely, "Jeh (that's what his close associates called him), this young woman is an engineer and that too a postgraduate.

She is the first woman to work on the Telco shop floor." JRD looked at me.
I was praying he would not ask me any questions about my interview (or the postcard that preceded it).

Thankfully, he didn't. Instead, he remarked. "It is nice that girls are getting into engineering in our country. By the way, what is your name?"
"When I joined Telco I was Sudha Kulkarni, Sir," I replied. "Now I am Sudha Murthy." He smiled and kindly smile and started a discussion with SM. As for me, I almost ran out of the room. After that I used to see JRD on and off. He was the Tata Group chairman and I was merely an engineer. There was nothing that we had in common. I was in awe of him. One day I was waiting for Murthy, my husband, to pick me up after office hours. To my surprise I saw JRD standing next to me. I did not know how to react. Yet again I started worrying about that postcard. Looking back, I realise JRD had forgotten about it.

It must have been a small incident for him, but not so for me. "Young lady, why are you here?" he asked. "Office time is over." I said, "Sir, I'm waiting for my husband to come and pick me up." JRD said, "It is getting dark and there's no one in the Corridor. I'll wait with you till your husband comes." I was quite used to waiting for Murthy, but having JRD waiting alongside made me extremely uncomfortable. I was nervous. Out of the corner of my eye I looked at him. He wore a simple white pant and shirt. He was old, yet his face was glowing. There wasn't any air of superiority about him. I was thinking, "Look at this person. He is a chairman, a well-respected man in our country and he is waiting for the sake of an ordinary employee." Then I saw Murthy and I rushed out. JRD called and said, "Young lady, tell your husband never to make his wife wait again." In 1982 I had to resign from my job at Telco. I was reluctant to go, but I really did not have a choice. I was coming down the steps of Bombay House after wrapping up my final settlement when I saw JRD coming up. He was absorbed in thought. I wanted to say goodbye to him, so I stopped. He saw me and paused.Gently, he said, "So what are you doing, Mrs. Kulkarni?" (That was the way he always addressed me.) "Sir, I am leaving Telco."
"Where are you going?" he asked. "Pune, Sir. My husband is starting a company called Infosys and I'm shifting to Pune."

"Oh! And what will you do when you are successful." "Sir, I don't know whether we will be successful." "Never start with diffidence," he advised me. "Always start with confidence. When you are successful you must give back to society. Society gives us so much; we must reciprocate. I wish you all the best." Then JRD continued walking up the stairs. I stood there for what seemed like a millennium. That was the last time I saw him alive. Many years later I met Ratan Tata in the same Bombay House, occupying the chair JRD once did. I told him of my many sweet memories of working with Telco. Later, he wrote to me, "It was nice hearing about Jeh from you. The sad part is that he's not alive to see you today."

I consider JRD a great man because, despite being an extremely busy person, he valued one postcard written by a young girl seeking justice. He must have received thousands of letters everyday. He could have thrown mine away, but he didn't do that. He respected the intentions of that unknown girl, who had neither influence nor money, and gave her an opportunity in his company. He did not merely give her a job; he changed her life and mindset forever. Close to 50 per cent of the students in today's engineering colleges are girls. And there are women on the shop floor in many industry segments. I see these changes and I think of JRD.
If at all time stops and asks me what I want from life, I would say I wish JRD were alive today to see how the company we started has grown. He would have enjoyed it wholeheartedly.
My love and respect for the House of Tata remains undiminished by the passage of time. I always looked up to JRD. I saw him as a role model for his simplicity, his generosity, his kindness and the care he took of his employees. Those blue eyes always reminded me of the sky; they had the same vastness and magnificence.
*(Sudha Murthy is a widely published writer and chairperson of the Infosys Foundation involved in a number of social development initiatives. Infosys chairman Narayan Murthy is her husband.) *

Article sourced from: Lasting Legacies (Tata Review- Special Commemorative Issue 2004), brought out by the house of Tatas to commemorate the 100th birth anniversary of JRD Tata on July 29, 2004


Part 2

This article is written by Sudha the wife of the Chairman (Murthy) of the largest IT Company INFOSYSin India.

(Infosys is a multi billion company now) Murthy & his wife are famous for their simplicity!! Article is simply humbling & too inspiring!!

AUTHOR AND WIFE OF INFOSYS CHAIRMAN NARAYANA MURTHY, TELLS THE STORY OF HOW INFOSYS WAS BORN AND HOW HER LIFE HAS CHANGED...YET REMAINED VERY MUCH THE SAME
I was in Pune when I met Narayana Murthy through my friend Prasanna, who is now the Wipro chief, who was also training in Telco. Murthy was shy, bespectacled and an introvert. When he invited us for dinner, I was a bit taken aback... I refused since I was the only girl in the group. But Murthy was relentless and we all decided to meet or dinner the next day at 7.30PM at Green Fields Hotel on Pune's Main Road.
The next day, I went there at seven since I had to go to the tailor near the hotel. And what do I see? Mr Murthy waiting in front of the hotel and it was only seven.

Till today, Murthy maintains that I had mentioned (consciously!) that I would be going to the tailor at seven, so that I could meet him... And I maintain that I did not say any such thing, consciously or subconsciously, because I did not think of Murthy as anything other than a friend at that stage. We have agreed to disagree on this matter. Soon, we became friends. Our conversations were filled with Murthy's experiences abroad and the books that he had read. My friends insisted that Murthy was trying to impress me because he was interested in me. I kept denying it till one day,after dinner, Murthy said, I want to tell you something. I knew this was it. It was coming. He said, I am 5'4" tall. I come from a lower middleclass family. I can never become rich. You are beautiful, bright, intelligent and you can get anyone you want. But will you marry me?

I asked him to give me some time...

When I went to Hubli, I told my parents about Murthy and his proposal. My mother was positive since Murthy was also from Karnataka, seemed intelligent and came from a good family. But my father asked: What's his job, his salary, his qualifications, etc? Murthy was working as a research assistant and earning less than me. He was willing to go Dutch with me on our outings.

My parents agreed to meet him in Pune on a particular day at 10 am sharp. Murthy did not turn up. How can I trust a man to take care of my daughter if he cannot keep an appointment, asked my father. At 12 noon, Murthy turned up in a bright red shirt! He had gone on work to Bombay , got stuck in a traffic jam in the ghats, so he hired a taxi (though it was very expensive for him) to meet his would-be father-in-law.
Father was unimpressed. He asked Murthy what he wanted to become in life. Murthy said he wanted to become a politician in the Communist Party and wanted to open an orphanage. My father gave his verdict. No. I don't want my daughter to marry somebody who wants to become a communist and then open an orphanage when he himself doesn't have money to support his family...

By this time, I realised I had developed a liking towards Murthy, which could only be termed as love. I wanted to marry him because he was an honest man. I promised my father that I would not marry Murthy without his blessings, though at the same time, I would not marry anybody else. My father said he would agree if Murthy promised to take up a steady job. But Murthy refused, saying he would not do things in life because somebody wanted him to. I was caught between the two most important people in my life. The stalemate continued for three years, during which our courtship took us to every restaurant and cinema hall in Pune. Murthy was always broke. (Ironically, today, he manages Infosys Technologies Ltd, one of the world's most reputed companies.) He always owed me money. We used to go for dinner and he would say, I don t have money with me, you pay my share, will return it to you later. For three years, I maintained a book of Murthy's debts to me. No, he never returned the money and I finally tore it up after our wedding. The amount was a little over Rs 4,000.
During this period, Murthy quit his job as a research assistant and started his own software business... Towards the late'70s computers were entering India in a big way. At the fag end of 1977, Murthy decided to take up a job as General Manager at Patni Computers in Bombay.But before he joined the company, he wanted to marry me since he was to go on training to the US afterjoining.

My father gave in as he was happy Murthy had a decent job, now. We were married in Murthy's house in Bangalore on February 10, 1978, with only our two families present. I got my first silk sari. The wedding expenses came to only Rs 800, with Murthy and I pooling in Rs 400 each. I went to the US with Murthy after marriage. He enouraged me to see America on my own, because I loved travelling. I toured America for three months with a backpack.

In 1981, Murthy wanted to start Infosys. Initially, I was very apprehensive about him getting into business. We were living a comfortable life in Bombay with a regular paycheck and I didn't want to rock the boat. But Murthy was passionate about creating good quality software. I decided to support him. Typically for Murthy, he had a dream and no money. So I gave him Rs 10,000 which I had saved for a rainy day without his knowledge and told him, this is all I have. Take it. I will take care of the financial needs of our house. You go and chase your dreams. But you have only three years!

Murthy and his six colleagues started Infosys in 1981.In 1982, I left Telco and moved to Pune with Murthy. We bought a small house on loan, which also became the Infosys office. I was a clerk-cum-cook- cum-programmer. I also took up a job as Senior Systems Analyst with the Walchand group of Industries to support the house.

In'83, Infosys got their first client, MICO, in Bangalore . Murthy moved to Bangalore and stayed with his mother, while I went to Hubli to deliver my second child, Rohan. Ten days after my son was born, Murthy left for the US on project work. I saw him only after a year - my son had infantile eczema. It was only after Rohan received all his vaccinations that I came to Bangalore where we rented a small house in Jayanagar and rented another house as Infosys headquarters. Nandan Nilekani and his wife Rohini stayed with us. While Rohini babysat my son, I wrote programmes for Infosys. There was no car, no phone, just two kids and a bunch of us working hard, juggling our lives and having fun while Infosys was taking shape. The wives of other partners too, gave their unstinting support. We all knew that our men were trying to build something good.

Murthy made it very clear that it would either be me or him working at Infosys. Never the two of us together. He did not want a husband and wife team at Infosys. I was shocked since I had the relevant experience and technical qualifications. He said, Sudha if you want to work with Infosys, I will withdraw, happily I was pained to know that I would not be involved in the company my husband was building and that I would have to give up a job that I was qualified to do and loved doing... Then, I realised that to make Infosys a success, one had to give 100 per cent. One had to be focused on it alone, with no other distractions. If the two of us had to give 100per cent to Infosys, what would happen to our home and our children? I opted to be a homemaker; after all, Infosys was Murthy's dream. It was a big sacrifice, but it was one that had to be made. Even today, Murthy says,Sudha, I stepped on your career to make mine. You are responsible for my success. I might have given up my career for my husband's sake, but that does not make me a doormat... Isn't freedom about living your life the way you want it? What is right for one person might be wrong for another. It is up to the individual to make a choice that is effective in her life. I believe that when a woman gives up her right to choose for herself, that is when she crosses over from being an individual to a doormat.

Murthy's dreams encompassed not only himself, but a generation of people. It was about creating something worthy, exemplary and honourable. It was about creation and distribution of wealth. His dreams were grander than my career plans, in all aspects. So, when I had to choose between Murthy's career and mine, I opted for what I thought was the right choice. We had a home and two little children. Somebody had to take care of it all. Somebody had to stay behind to create a home base that would be fertile for healthy growth, happiness, and more dreams to dream. I became that somebody willingly I can confidently say that if I had had a dream like Infosys,Murthy would have given me his unstinted support. The roles would have been reversed. We are not bound by the archaic rules of marriage. He does not intrude into my time, especially when I am writing my novels. He does not interfere in my work at the Infosys Foundation and I don't interfere with the running of Infosys.

I teach computer science to MBA and MCA students at Christ College for a few hours every week and I earn around Rs 50,000 a year. I value this financial independence greatly, though there is no need for me to pursue a career. Murthy respects that. I travel the world without him, because he hates travelling. We trust each other implicitly. We have another understanding too. While he earns the money, I spend it mostly through charity. The Infosys Foundation was born in 1997 with the sole objective of uplifting the less-privileged sections of society. In the past three years,we have built hospitals, orphanages, rehabilitation centres, school buildings, science centres and more than 3,500 libraries. Our work is mainly in the rural areas amongst women and children. I am one of the trustees of the Foundation, and our activities span six states. I travel to around 800 villages constantly. Every year, we donate around Rs 5-6 crores. We run Infosys Foundation the way Murthy runs Infosys - in a professional and scientific way. Philanthropy is a profession and an art. It can be used or misused. Every year, we receive more than 10,000 applications for donations. Every day, I receive more than 120 calls. Amongst these, there are those who genuinely need help and there are hoodwinkers too. Over the years, I have learnt to differentiate the wheat from the chaff, though I still give all the cases a patient hearing. Sometimes, I feel I have lost the ability to trust people. I have become shrewder to avoid being conned. I think that is the price that I have to pay for the position I am in now.

The greatest difficulty in having money is to teach your children its value... Bringing up children in a moneyed atmosphere is a difficult task.
Even today, I think twice if I have to spend Rs 10 on an auto when I can walk to my house. I cannot expect my children to do the same. They have seen money from the time they were born. But we can lead by example. When they see Murthy wash his own plate after eating and clean the two toilets in the house every day, they realise that no work is demeaning, irrespective of how rich you are. This doesn't mean we expect our children to live an austere life. My children buy what they want, go where they want, but they have to follow certain rules. They have to show me bills for whatever they buy: My daughter can buy five new outfits, but she has to give away five old ones. My son can go out with his friends for lunch or dinner, but we discourage him from going to a five star hotel.Or we accompany him. My children haven't given me any heartbreak. My daughter is studying abroad, my son in Bangalore. They don t use their father's name in vain. They only say that his name is Murthy and that he works for Infosys.

They don't want to be recognised and appreciated because of their father or me, but for themselves.

I don't feel guilty about having money, for we have worked hard for it. But I don't feel comfortable flaunting it. It is a conscious decision on our part to live a simple, so-called middle class life. We live in the same two-bedroom, sparsely furnished house we lived in before Infosys became a success. Our only extravagance is buying books and CDs. My house has no lockers for I have no jewels. I wear a pair of stone earrings which I bought in Bombay for Rs 100. I don, t even wear my `mangalsutra` unless I need to attend some family functions or when I am with my mother-in-law.

Five years ago, I went to Kashi, where tradition demands that you give something up. I gave up shopping. Since then, I haven't bought myself a sari or gone shopping. I don't carry a purse and neither does Murthy, most of the time. I borrow money from my secretary or my driver if I need cash.

They know my habit, so they always carry extra cash with them. But I settle the accounts every evening. Murthy and I are very comfortable with our lifestyle and we don't see the need to change it now that we have money.

Murthy and I are two opposites that complement each other. Murthy is sensitive and romantic in his own way. He always gifts me books addressed 'From Me to You. Or'To the person I most admire, etc. We both love books. I am an extrovert and he is an introvert. I love watching movies and listening to classical music. Murthy loves listening to English classical music. I go out for movies with my students and secretary every other week.

I am still young at heart. I really enjoyed watching 'Kaho Na Pyaar Hai'; I'm a Hrithik Roshan fan. It has been more than 20 years since Murthy and I went for a movie. My daughter once gave us a surprise by booking tickets for 'Titanic'. Since I had a prior engagement that day, Murthy went for the movie with his secretary Pandu. I love travelling, whereas Murthy loves spending time at home. Friends come and go with the share prices. Even in my dreams, I did not expect Infosys to grow the way it has. After Infosys went public in 1993, we became what people would call rich, moneyed people. Suddenly, you see and hear about so much money: people talk about you. It was all new to me. Have I lost my identity as a woman, in Murthy's shadow? No, I might be Mrs Narayana Murthy. I might be Akshata and Rohan's mother. I might be the
trustee of Infosys Foundation. But I am still Sudha. Like all women, I play different roles. That doesn't mean we don't have our own identity.
Women have that extra quality of adaptability and learn to fit into different shoes. But we are our own selves still. And we have to exact our freedom by making the right choices in our lives, dictated by us and not by the world.

Dow to fall 90%? Yes, says Elliott Wave International's Prechter

With the stock market lurching again, plenty of investors are nervous, and some are downright bearish. Then there’s Robert Prechter, the market forecaster and social theorist, who is in another league entirely. 

Prechter is convinced we have entered a market decline of staggering proportions – perhaps the biggest of the last 300 years. 

In a series of phone conversations and e-mail exchanges last week, he said that no other forecaster was likely to accept his reasoning, which is based on his version of the Elliott Wave theory – a technical approach to market analysis that he embraces with evangelical fervor. 

Originating in the writings of Ralph Nelson Elliott, an obscure accountant who found repetitive patterns, or "fractals," in the stock market of the 1930s and '40s, the theory suggests that an epic downswing is underway, Prechter said. But he argued that even skeptical investors should take his advice seriously. 

"I’m saying: ‘Winter is coming. Buy a coat,’" he said. "Other people are advising people to stay naked. If I’m wrong, you’re not hurt. If they’re wrong, you’re dead. It’s pretty benign advice to opt for safety for a while." 

His advice: Individual investors should move completely out of the market and hold cash and cash equivalents, like Treasury bills, for years to come. (For traders with a fair amount of skill and willingness to embrace risk, he suggests other alternatives, like shorting the market or making bets on volatility.) But ultimately, "the decline will lead to one of the best investment opportunities ever," he said. 

Buy-and-hold stock investors will be devastated in a crash much worse than the declines of 2008 and early 2009 or the worst years of the Great Depression or the Panic of 1873, he predicted. 

For a rough parallel, he said, go all the way back to England and the collapse of the South Sea Bubble in 1720, a crash that deterred people "from buying stocks for 100 years," he said. This time, he said, "If I’m right, it will be such a shock that people will be telling their grandkids many years from now, ‘Don’t touch stocks.'" 

The Dow, which now stands at 9,686.48, is likely to fall well below 1,000 over perhaps five or six years as a grand market cycle comes to an end, he said. That unraveling, combined with a depression and deflation, will make anyone holding cash "extremely grateful for their prudence." 

Prechter is hardly the only market hand to advocate prudence now, but nearly everyone else foresees a much rosier future once current difficulties are past. For example, Ralph J. Acampora, a market analyst with more than 40 years of experience, said he moved entirely out of stocks and into cash late last month. Now a partner at Alverita, a wealth management firm in New York, he said recent setbacks suggested that the market would drop another 10 or 15 percent, probably until September or October, before resuming another "meaningful rally." 

Over the next several years Acampora expects an "old normal market," characterized by relatively short-lived swings that will provide many opportunities for smart investors – one that resembles the markets of the 1960s and 70s. "I’ve lived through it," he said. 

Like Prechter, he is a past president of the Market Technicians Association, the leading organization of technical market analysts, and he said that his colleague has done "some very good work." But Acampora doesn’t agree with Prechter’s long-term theories, either intellectually or emotionally.

The "mathematics don’t work," Acampora said, because such a big decline would imply that individual stocks would need to trade at unrealistically low levels. Furthermore, he said, "I don’t want to agree with him, because if he’s right, we’ve basically got to go to the mountains with a gun and some soup cans, because it’s all over."

Still, on a "near-term" basis, he said, "We’re probably saying the same thing."

Similarly, Larry Berman, who co-founded ETF Capital Management in Toronto and recently ended his term as the president of the technicians association, says he sees a "classic" short-term negative market trend developing now. But he doesn’t use the Elliott Wave theory, saying Prechter is trying to "measure the market in decades, which is too long a time frame for practical trading purposes or for risk management."

Prechter, 61, lives in Gainesville, Ga., where he runs Elliott Wave International, a forecasting and publishing firm. He graduated from Yale University as a psychology major in 1971, dabbled as a singer, drummer and songwriter in a rock band and became a technical analyst for Merrill Lynch.

Prechter became fascinated by Elliott’s writings, which suggest that the market moves in predictable if complex patterns. Along with A.J. Frost, Prechter wrote "Elliott Wave Principle," a 1978 book that predicted the emergence of a great bull market – a forecast that was largely fulfilled. By 1987, he was widely regarded as an expert in technical analysis. Articles in The New York Times said he was known as "the market’s leading technical guru" – and more. An article in October that year said he had "emerged as both prophet and deity, an adviser whose advice reaches so many investors that he tends to pull the market the way he has predicted it will move."

He has far less day-to-day influence now, after years spent developing a theory he calls "socionomics," which holds "social moods" as the cause not only of market cycles but also of economic and political events. A grand cycle is ending, he says, and the time for reckoning is near.

In 2002, he published "Conquer the Crash," which predicted misery ahead. Even so, he said in 2008 that the market would soon rally sharply – then said late last year that stocks were about to fall and that the great decline would resume.

Since 1980, the advice in his investing newsletters, when converted into a portfolio, has slightly underperformed the overall stock market but has been much less risky, losing money in only one calendar year, according to calculations by The Hulbert Financial Digest. Prechter said he disagreed with the methodology used in these measurements, but offers none of his own.

For his part, Acampora says that the Elliott Wave has some validity as an indicator but that "it’s only part of the story" of technical market analysis, which also needs to be buttressed by economic and fundamental research.

Prechter says his unifying theory, socionomics, is a "young science."

"We’re quantifying it," he said. "We’re working on it." In the meantime, he contends, it has enabled him to "look around the corner" and prepare for a dangerous future.