IIM K Interview Experience

I hadn't really planned on writing this down, but since one of the interviewers actually asked me if I would, I thought - 'Why not?' Yesterday was my first interview for an MBA admission, and it was for Indian Institute of Management Kozhikode. I have no inkling of what result the future holds for me, but I will just jot down my personal experiences here - I hope it can prove to be of help to someone else.

I entered the interview centre (HMATC, which will be a constant fixture for all IIM calls in Mumbai) at 1 pm, an hour early. I had been told by an alumnus of IIM-L that it helps in getting to know your group-mates before the GD starts. The atmosphere was quite somber and as the aspirants trickled in I found it quite tough to engage them in conversation, especially since almost all of them were busy reading up last minute details, glued to some journal or magazine. I did finally find a couple of guys to talk to, but as it turned out they were both not in my group come two o'clock, once the interviewers came in and split the waiting party into three different groups. So much for that theory.

The GD topic at IIM K is generally a short note (as explained by our panel members). We were given a small piece of paper which said (not even close to verbatim) : "The University Grants Commission has decided to include astrology as a science in the curriculum. There are two different lobbys, one in favour and one against. Those against argue that there is no scientific framework or logic behind astrology, and it is based more on belief than science."

The GD went on for fifteen minutes by the clock. I didn't get to start but I got in a few points, speaking atleast 4-5 times and interjecting, elaborating as required. One or two other speakers also contributed, one being my namesake from IIT-B. The GD was very peaceful and there was no room for a fish market to develop.

After the GD, they asked us all to move out and interviewed us according to our order of seating in the GD - I was lucky to be slated second (I was already calculating how soon I would be able to make it back to Pune once I was done). The first guy went in for about half an hour and I kept talking to people outside to keep my speaking muscles tuned - also kept sipping water every now and then as I waited.

I was called in for the interview at about 3.05 pm. There were two panelists, P1 and P2. Here's a transcript of what followed (to the best of my memory)

P2 - Give me your certificates (handed over my carefully sorted and marked folder)

P1 - So, do you have any skeletons in your closet?

I - No, sir (quite confused)

P1 - If you find someone to be too good to be true, what's the first thought that comes to your mind?

I - Perhaps there could be something wrong, that needs to be verified.

P1 - Precisely, so are there any skeletons in your closet?

I - No, there aren't any.

P1 - So are you an overachiever?

I - No, I wouldn't say that. I set certain goals for myself and try my best to achieve them.

(I realised now that I had been ignoring P2 all this while, who seemed to be going through my certificates. As I looked at him, he too looked back)

P2 - So which branch are you in? (trying to figure it out from the marksheets)

I - Computers, sir.

P2 - So why do you have all these subjects - Civil, Electrical?

I - Sir, those are first year subjects - common to all branches (hope rushed in as I realised that at least one of them was not from a Computer background)

P2 - Ok, so what's a computer?

I - Defined it saying meant for calculations earlier and now multiple functions and processes.

P1 - So would you call calculator a computer?

I - Initially, yes it was. But now its functions are too limited to be classified as a computer. (Both nod)

They go on to ask me about Microprocessors, RAM, ROM. I define it to the best of my knowledge.

P1 -So in a pen drive of 1 GB how much storage space do you get?

I - Sir you get less than that around 970 MB.

P2 - Why is that?

I - I spoke about additional memory and bootstrap facility required for running the drive (now i've read that it's about different perspectives of looking at memory - in PC it is the binary system, while hard-disk manufacturers use decimal system - so it's 1 GB according to them)

P1 - (Seemed convinced by my answer). Tell me, who's Shantanu in Mahabharat.

I - (My eyes light up - I love Mahabharat) Sir, he was the King of Hastinapur - he had two wives - Ganga and Satyavati.

P2 - Who was his first wife?

I - Ganga

P1 - Who was Satyavati's father?

I - Sir I can't recall his name, but he was a fisherman. He was the one to whom Bheeshm made his "pratigya"

P1 - Ok, so was Bheeshm her son?

I - No sir, he was Ganga's son.

P1 - So how many sons did Satyavati have?

I - Two sons sir - Chitrangad and Vichitravirya.

P1 - Are you sure?

I - (Oh, I forgot Vyasa) Not two - three sons sir. Ved Vyasa was also her son

P1 - Hmm. And who was his father? Shantanu?

I - No sir. Not Shantanu, but I don't know who was his father.

P1 - So Satyavati had another husband?

I - Not that I have heard of.

P1 - Oh you haven't heard the story of Parashar Muni and the mist on the river?

I - No, sir.

P1 - Which book did you read Mahabharat in?

I - Sir, my grandfather's book. He has the Kalyan series from the 1930's and 40's.

P1 - No wonder. He must have removed those pages before giving it to you to read - it's because he was born out of wedlock.

I - (Don't remember my reaction - perhaps an 'Oh' and a shrug. Plus I was beginning to sweat - the A/C had been switched off sometime between the GD and my interview, and there was no fan either- I don't take kindly to humid weather)

P1 - So what is your opinion on pre-marital sex? Right or wrong?

I - I think it's an individual's choice

P1 - What about suicide?

I - Sir, that's wrong

P1 - But that should also be an individual's choice.

I - I don't think it's right to take away life, even if it's your own

P2 - Ok, so how about extra-marital affairs?

I - Sir, that's also wrong. Marriage is a commitment to your spouse and to break that commitment would be wrong. For example, in Christian weddings, they say "in life and in death"

P1 - What about other religions? No commitment there?

I - In all religions, marriage is a sacrosanct act. Plus, extra-marital sex is unethical (ah! light bulb, they were questioning me on ethics - ala the Satyam fiasco). Suicide would also be unethical.

(Sweat starts trickling down my forehead now and I involuntarily raise a finger to wipe it. P2, who's generally been quiet, notices and asks me if I'm not comfortable. I mention I'm feeling hot since the A/C was off and I had heard that the place was centrally air-conditioned. He immediately goes to switch on the A/C)

P1 - (while P2 is away) Ok, so you must be good at developing logical algorithms (How wrong can you be!) If I give you two cities A, B and the distance between them, can you find the co-ordinates on the map?

I - (didn't want to give an impulsive answer) Can I think about it for a minute?

P1 - Sure (hands me a piece of paper).

I - (draw a graph and loudly tell him what I'm doing) If you take a graph where you take all the points on it to represent co-ordinates on the ground, you can get infinite solutions.

P1 - Ok, if there are three cities and distances given again.

I - Sir, still infinite solutions. Wait a second, these are straight line distances? Because if not, there will be different constraints to work with - waterbodies, ranges etc.

P1 - Ya, Straight lines.

I - Then, infinite solutions.

P1 - Ok, if there are 20 cities.

I - (try to think for some time)

P1 - You know how to calculate distance right - given the co-ordinates?

I - Yes, sir - root of sums of squares of differences in x and y co-ordinates (missed the clue here)

P1 - Right. So getting somewhere?

I - I still think there are infinite solutions.

P2 - (getting back into the conversation now) Can you prove it that there will be infinite solutions?

I - Sir, there will be too many variables and hardly any known values in comparison.

(I brainstormed with my friends later, and the answer came out from a senior in IIM-C (Georgie Sir) : Even at 3 cities, there will be only about hundred such instances and on 20, you can definitely get distinct cities since distances are given. I also realised the co-ordinates differences have to be perfect squares - Not so difficult when you think of it!)

P2 - Ok, leave that.

(turns to P1) That should be all, right? Oh wait, we didn't ask him about TCS.

(turns back to me) So why don't you join TCS right now and do an MBA later? (I had mentioned that as a fall-back plan in my alternative career option)

I - (rehearsed answer)

P2 - Ok, so which stream do you want to join?

I - Sir, since your institute offers generic management courses in the first year, I will make a more informed decision later. Right now I just want to learn the different nuances of management.

P2 didn't look entirely convinced, but turned towards P1. They thanked me and as I was leaving, P1 asked "You'll write about this?"

I said, "Perhaps".

"You'll blog right?"

"I think so"

"There is a solution to the co-ordinates problem"

"I will try to find it, sir"

"Right"

"Thank you, sir"

And, that was that. My job's done there - will not wonder about the result till it's declared. Over to the next one now.

Measures of the Nation's economy: GDP, GNP, NDP

Gross Domestic Product (GDP ) or Gross Domestic Income (GDI) refers to the value of all completed goods and services produced within the country in a year (or a stipulated time period).

GDP = consumption + gross investment + government spending + (exports − imports)

It is regarded as the sum of profits added at every level of production. India was ranked 12th in the world in 2007, as far as GDP is concerned. Gross domestic product per capita is the mean value of the output produced per person, which is also the mean income.

While calculating GDP, the depreciation of capital stock is not considered (this is known as "gross"). If the depreciation is taken into account and subtracted from the GDP, then the indicator is called the Net Domestic Product. The gap between these two should ideally be narrowing - indicating an improving condition of capital stock.

Gross National Product defines the value of all goods and services produced in a country in one year, plus income earned by its citizens abroad, minus income earned by foreigners in the country.

GDP is more popular than GNP as a large number of nationals work in countries abroad these days.

Gross National Income (GNI) refers to the country's GDP, together with the income it receives from other countries through interests and dividends, minus similar payments it makes to other countries.

GNI is similar to GNP, but while calculating GNI you deduct indirect business taxes as well.

In the news: Satyam nosedives as Raju admits fraud

Happy New Year to all the readers. I'd taken a week's break and now it's back to the posting board.

Today's airwaves are full of Satyam founder R. Raju's resignation after admitting a massive financial fraud. In a letter to the Board of Directors, Raju explains how there is a huge mistmatch in the actual operating profits and that reflected in the books - apparently inflated profits have been shown for the past several years. In fact, the deal with Maytas (which broke down as we all know) was a last-ditch attempt to bridge the gap with real assets instead of the fictitious ones. What's more none of the board members had an inkling of what was going on.

The consequences: Satyam shares plunged by 80% (!!) after market sentiments understandably turned bearish - the BSE is back at around the 9,500 mark after a good start to the year had seen the sensex rise upwards of 10k again. The Nifty is also down today - by over 7 percent. The Ministry of Corporate Governance will look into the matter along with SEBI, and things don't look bright for either Satyam or its founder. Ram Mynampati, who took over as Interim CEO of the company, has released a statement saying that they will explore all avenues to secure the future of the copmany and he also reaffirmed the company's commitment towards associates, customers and shareholders. We'll have to keep a tab on how this story unfurls.

Terms For Today: Repo Rate, CRR, Inflation

We saw in the previous post that inflation is down as RBI mulls over further reduction in repo rate and CRR. So let's understand what they mean.

Repo Rate

A Repurchase Agreement (or repo) allows a borrower to use a financial security as guarantee for cash loan at a fixed rate of interest. A repo is equivalent to a cash transaction combined with a forward contract, as the borrower has to later buy back the security from the lender at a fixed price.

In the Indian context, repo rate is the rate at which banks borrow money from Reserve Bank of India (RBI).

Reverse repo is the rate at which RBI borrows money from banks.

CRR or Cash Reserve Ratio is a bank regulation which defines the amount of funds that the banks have to keep with the RBI (for India; a central bank otherwise). An increase of the CRR implies that the banks have less money available.

Statutory Liquidity Ratio (SLR) is the amount a commercial bank has to maintain, before it can provide credit to its customers. SLR is also determined and maintained by RBI to keep tabs on expansion of bank credit.

Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. Inflation occurs when there are less goods (supply) and more buyers (demand), resulting in an increase in the price. Well, I'm sure we all learnt that in school, but it was important here as bank interest rates are connected to inflation.

Weekend Scoop : Satyam Chairman's Shares Mortgaged, Inflation Going Down, RPL Gains

The sensex was obviously closed over the weekend, so we'll just look at some of the financial effects of events earlier in the week.

The Satyam fiasco keeps getting gloomier; apparently Ramalinga Raju had mortgaged his shares (he and his family hold about 8.61% stake in the company) to institutional lenders, who might have sold them already. This has put added pressure on the board of directors, who were already under duress after academician Mangalam Srinivasan, an independent board member, had resigned on Dec 25.

Inflation is down to 6.61%; and with news of a possible reduction in repo rates, reverse repo rates and the CRR by RBI, experts predict that inflation can reach as low as 2% in March next year.

I had mentioned RIL's new venture in Jamnagar - Reliance Petroleum Limited (RPL) gained over 6 percent a day after the refinery started. Although Mukesh Ambani had to deal with the Petroleum Ministy's decision to turn down RPL's request to export LPG, citing that the country still has LPG deficit.

Also, business magnate Vijay Mallya announced that with approximately 500 crores turnover in December, Kingfisher airlines will break-even the losses it had sustained earlier.

Video Tutorials

Here's a link to some video tutorials on finance and the market.

http://vimeo.com/marketplace/videos/sort:date

A New List - Profit Booking, Investments, Mutual Funds et al

I've often used the word profit booking as being one of the reasons for the plumetting sensex over the past few days. So let's understand what that means first.

Profit booking means encashing or realising the profit or gain in a share by selling it - can be done by individuals or brokers or corporations.

Let's look at an example to understand.
If you buy a stock at about 100, which rises to 350 within two months. Then a week goes by and it only accounts to 355 or 360. Although it has risen in the past week, what's clear is that there is a slow-down. If you sell the stock now, you stand to take a profit from it - this is profit booking.

We now look at a few provisions which facilitate funding.

Investment is the choice by an individual to risk his savings with the hope of gain - in terms of a future return or interest from a deposit in the bank or a purchase made.

Private Equity consists of equity securities in operating companies which are not traded publicly on a stock exchange. A leveraged buyout, venture capital and growth capital are all categories of private equity investments.

Mutual Fund is a collective investment scheme which is professionally managed and pools in money from many different investors, and in turn invests the pooled money in stocks, bonds and other securities.

Hedge Funds is a private investment fund which is open to a limited range of investors and also permitted to undertake more activities than other investment funds. Hedge funds look to offset potential losses by 'hedging' (minimise exposure to risk) their investments using methods like 'short selling' (where you sell shares you don't own and repurchase, hoping to profit from a decline in the price).

Short selling can be best described by this pic I found on Wikipedia.

The opposite of this is 'going long', where a share is purchased with the expectation that its price will rise.

Maruti, TATA Motors incorporate production cuts, Oil Majors prepare for losses

The market is showing no signs of improving as the Sensex continued its slide for the third day in succession - 118 points down from yesterday's close. Profit bookings remain the major culprit, while hope festers for an improvement in the next earning season starting January 13.

The auto market is perhaps one of the worst hit from the recession. TATA Motors announced their 4th block closure of the year - from December 28th to 31st. This is because they have to match production with demand, and right now most people are postponing purchases due to the financial crunch.

Close on its heels follows Maruti - who had already taken a production cut of around 6% in November. If sales continue to fall as they are right now, Maruti is likely to go in for more production cuts this month-end, somewhere in the range of 5-7%.

The three major oil companies IOC, HPCL and BPCL are getting ready to receive net losses in the third quarter of this fiscal. After a bad first quarter where only IOC netted barely any profit and then huge losses in Q2 (especially where the IOC was badly hit), things are not looking up for the big three in the third quarter either. Even though crude oil prices have fallen to $35 a barrel, the irony is that these companies have the burden of still holding stocks which they had bought at over $100 a barrel, and which are depleting gradually - hopefully by January-end they'll have exhausted those stocks. Even if the fourth quarter does bring some respite, it'll not be enough and they'll have to deal with annual net losses for this fiscal - which will be a new experience for the three oil companies.

On a different note altogether, Reliance Industries Ltd began processing crude oil in a refinery in Jamnagar, Gujarat which will probably become the world's single biggest supplier of fuel - it also has an advantage over other export-oriented rivals in Europe and Asia.

Another list of terms - Assets, bonds, stocks and securities

We went through derivatives yesterday, so the focus is on assets, bonds and stock exchange today.

Assets are everything of value, owned by a person or company.

• Tangible Assets - financial and fixed assets including bonds, stocks, cash, building, equipment etc
• Intangible Assets - nonphysical resources and rights such as copyrights, trademarks, patents etc

Bond is simply a loan - in the form of a security wherein the issuer owes the holder a debt and has to repay the holder (along with interest) at a later date, known as maturity.

Securities are negotiable instruments representing financial value. Categorised into debt securities and equity securities.

Stocks is often looked at as a synonym of shares. The share of a stock means a share of ownership in a company. Stocks can also refer to different financial instruments such as government bonds or securities.

Stock Exchange or Securities Exchange or bourse (European) is a corporation or mutual organisation which provides trading facilities to exchange stocks and other securities.

In Today's News: Satyam going downhill

Satyam has felt the backlash of its controversial near deal with Maytas. Although the deal has been called off, investors have definitely lost their confidence in the company - resulting in a 14% plunge in the exchange market at the end of trade this Tuesday on the BSE. To add insult to injury, the World Bank debarred the company from doing business with it for eight years, on the charges of data theft. There's also rumours flying about a possible resignation from the Chairman, Ramalinga Raju.

In other news, the Bajaj brothers have finally reached a mutual agreement after six years of dispute. Rahul has agreed to give younger brother Shishir control of Bajaj Hindusthan, with a stake of 32.47% in the company.

Also, Wipro is all set to buy the technological arm of Citigroup Inc., i.e. Citi Technology Services Ltd (Citos). The deal has been reportedly fixed at $127 million - this would be a mutually beneficial acquisition, helping Wipro to get assured business of about half a billion dollars in software services and infrastructure management over the next six years, while Citigroup can focus on core business operations. This is similar to the deal that they had earlier inked with TCS - in Ocotber, TCS had acquired Citigroup Global Services Ltd (CGSL), the backoffice centre of Citigroup, for $505 million.

Today's List - Derivatives

Today I'll take a look at some terms which fall under the 'Derivatives Market'. I'd tried reading up on this in July, during the placement season (Torux!) and don't remember much of it now.

Derivatives are financial instruments (or contracts) which are derived from the value of an underlying, which can be an asset, an index or another derivative. The main types of derivatives: Forwards (Futures), Options and Swaps.

Forward contract is an agreement between two parties to buy or sell an asset at a specified time in future. Forwards are traded over-the-counter.

Futures are similar to forwards, but differ in two ways -

• Futures are standardised and are traded on an exchange
• Futures are margined, with significantly less credit risk

Option is a contract written by the seller which gives the buyer a right, but not an obligation, to buy (call option) or to sell (put option) a particular asset. The seller receives a premium in return for granting the option.

Swap is a derivative in which two counterparties agree to exchange one stream of cash flows against another stream - these streams are called the legs of the swap.

The Derivatives market is divided into two - a market for exchange traded derivatives (futures) and a market for over-the-counter derivatives.

Fall against the Dollar and Sensex below 10k

Monday turned out to be a bad day for the Indian market - the BSE's Sensex fell below the 10,000 mark to end the day at 9,928.35, down 171.56 points from Friday. The major factor responsible for this would be that the selling pressure intensified on heavyweights like Reliance Industries and ICICI. Traders resorted to profit booking in oil, gas and banking stocks in the last hour, which resulted in the tripping of indices. The Asian markets were also subdued, and the European market saw a weak opening.

The rupee also didn't have a field day on Monday - the Indian currency declined 1.6 per cent to 48.02 against the dollar. Apparently this happened as a result of importers stepping up purchases to meet their dollar needs. There has been an apparent spurt in demand from importers, including petroleum companies, who purchased dollars to meet their month-end payment requirements. Of course, The rupee has appreciated over 8 per cent from an all-time low of 50.615 on December 2.

In other news, the OECD (Organisation for Economic Co-operation and Development) has predicted that upto 25 million more people would become jobless by 2010, lending credence to International Labour Organisation's forecast that the total unemployed people at the end of 2009 would be around 210 million. Not a very exciting prospect.

First List of Terms

Well, let's begin.

First up, the term itself - Economics. It's derived from the Ancient Greek term oikonomia, which means the 'management of a household, administration' or in short, the rules of the household'.

I think by natural progression the next term to spring to mind would be Finance - it refers to the fields of time, money and risk along with how they are related.

Funding, or financing, means to provide capital - for short or long term purposes.

Capital refers to financial wealth, or the amount of wealth that a person controls or is capable of controlling. It can also be referred to as cash flow.

A credit rating assesses the credit worthiness of an individual, corporation, or even a country. Credit ratings are calculated from financial history and current assets and liabilities.

A New Venture

This blog is aimed at college students - as the name suggests, it's all about economics for collegians. Hopefully it'll help those who are looking to brush up their skills and knowledge if they haven't studied finance in college - neither have I.

If I can stay faithful to my resolve, from this day I'll be putting up a few new terms everyday and also a blog on a major financial story of the day. This is how I plan to go about learning bits and pieces of the financial world, with a focus on the Indian economy. I invite you to learn with me.