Trump – Clinton face-off- Effect on Economies worldwide

By Isha Varma

While the result of the Trump-Clinton face-off is unknown as yet, the speculations regarding the same are at its peak.

From Clinton’s email controversy to Trump’s comment on nuclear weapons, there has been a lot to fathom about the US Presidential elections 2016.  One major feature of the Presidential election is the uncertainty and that is exactly what the financial markets don’t like. It creates an atmosphere of risk and fear of financial loss which is dangerous for businesses. Furthermore, the markets will have to adjust with the new ideology and personality of the new President.

According to a report by Merrill Lynch, on an average the first year of a new presidential term witnesses a rise in markets by 6% which is below the normal 7.5% average of all years since 1928. The markets seem to be quiet volatile at present. Political environment affects everyone’s investment behavior. There is conflict of interest between Democratic and Republican supporting investors. Some investors even hold on to the money or make limited investments so as to judge how the markets are reacting to the change and then invest accordingly. Some financial advisors and experienced investors are making strong statements which in turn might influence the investing decisions of the retail investors.

Donald Trump is expected to cut taxes by a large margin. Also, his strong remarks on countries like Mexico might affect the trade relations with these nations under his leadership. Hillary Clinton on the other hand has endorsed regulatory reforms which will prevent Wall Street from taking excessive risk. It has been experienced that the presence of Democrat Presidents has been good for stocks while Republicans are supposedly more business friendly. Also, a Republican President is likely to bring about more changes in policies and hence US financial markets could expect more fluctuations in case Donald Trump wins the elections.

With Trump leading in 168 states as against Clinton who is leading in 131 states, the markets around the globe have been tumbling. Japan’s Nikkei 225 Index dropped 2.4%, Hong Kong’s Hang Seng plunged 1.7%, South Korea’s Kospi Index fell 1.4%, Australia’s S&P ASX/200 lost 1.2%, Dow futures nosedived over 600 points, and the SENSEX crashes 1600 points. The US dollar sank against the Japanese Yen, a condition that will be unfavorable to Japanese exporters, and the Mexican peso plunged nearly 10% to record low versus USD.

However, the fact that stocks have gained under every President only except Nixon and Bush 43, should be a relief. Also it is known that investments in stock markets are usually good in the long run. Change in the economies in the coming months is inevitable. The consolation here is that the change might actually prove to be good.

Episode 2- CCC

With a tinge of the learnings from Leo Tolstoy and the tales of Shale Oil Bubble and Japan’s Real estate bubble, we presented Episode-2 of Coffee,Cookies and Conversations a.k.a C^3.
It began with a paper presentation on the research paper “The Role of Interest Rate in Inflating Asset Bubble” by Astha Mehta & Nayan Saraf. The presenter, Nayan Saraf (BKFS,PGP-2) touched upon the numerous factors which led to the economic crisis of 2008. After an enriching insight, Harshal Sharma gave us a sneak peek into his MIP experience to the junior batch.
We would like to thank both the presenters and the audience for a successful session.

Episode 1-CCC

Cookies and Conversations a.k.a. C^3, began with a brief note from our faculty adviser-
Prof. Madhu Veeraraghavan who laid out what C^3 is all about and what is in store as the days would unfold.

The session was later taken over by PGP2 who gave a sneak peek into their MIP experiences to students who look forward to pursue their internships in similar firms. We would like to thank Niladri Chakraborty, Bidisha Mandal, Dilip Mallya,Tanuj Gupta and Shreya Sanyal for the same.

Impact of The Insolvency and Bankruptcy Code,2016

By Aditya Alamuri

With the Insolvency and Bankruptcy Code 2016, Indians can finally go legally broke. The new code will step into the shoes of existing bankruptcy laws and cover individuals, companies, LLP’s, and partnership firms. The code will repair laws including those mentioned in the Companies Act, to become an overall legislation to deal with corporate insolvency. The bill now has renewed teeth to recover loans at a quicker rate.

The Bankruptcy bill has come in at a time when banks are crippled with rising NPA’s. The new code will ensure the creation of a repository of unfaltering defaulters and will result in time bound settlement of solvency.

The bill proposes the following activities to improve the banking sector:

• Creation of a database of debtors to track serial defaulters

• Usage of existing infrastructure of debt recovery and NCL tribunals, to settle individual and corporate insolvency

• Create & train a new class of insolvency professionals who will specialize in assisting sick companies

• Setting up an Insolvency and Bankruptcy Board of India, to step in as a regulator of these information utilities and professionals.

Bankruptcy code also contains provisions to deal with cross-border bungles by way of bilateral agreements with other countries. It urges shorter & aggressive intervals for every step during insolvency process.

The code also ensures that the money due to employees and workers from the 3 funds i.e. (Pension, Gratuity & Provident) is not included in the domain of either the individual or the company. Furthermore, the salaries of employees will get 1st priority up to 24 months in case of liquidation of assets of company – earlier than secured creditors.

The Bill will lead to key transformations which will ensure ease of doing business in India. Currently, as per the World Bank records, it takes more than 4 years to solve a bankruptcy case. The new code seeks to cut it down to less than a year.

The Insolvency and Bankruptcy Code 2016, on the whole, proposes a comprehensive changeover in the current Indian banking system & the way corporates function today. However, it is easier said than done. The implementation of such a vast plan will take time and we will have to wait in order to see the upshot of the same.