INSIGHT, IIT-BOMBAY PRESENTS : THE INTERNSHIPS LIVE BLOG

Introduction

The London School of Economics (LSE) offers certified summer courses in various subjects ranging from economics and finance to management and law, for a period of three weeks. The summer school, which begins in the first week of July, has around 5000 students from various parts of the world, majorly from India, China and the US. The application procedure and other details can be found on its website: http://www2.lse.ac.uk/summerSchool/Home.aspx.

In Class

There are three levels of courses, which run in the same way as full semester ones. Most 1st and 2nd level courses do not require any major prerequisites. The teaching pattern is similar to ours. But with three hour lectures, supplemented with one hour tutorial sessions daily, each day represents a week of lectures at IIT. Professors are generally good and provide a enjoyable learning experience. This city campus is not very big but is still well-equipped, especially the library. Apart from classes, LSE also organizes public lectures delivered by renowned speakers. The course tuition fee is 1,100 pounds.

Outside Class

Major hangout spots include two pubs within the campus itself. LSE, located in central London, is at walking distance from the River Thames and close to many major landmarks of the city. LSE also has its own accommodation facilities with walking distance from the campus. Other accommodation options in London can also be availed. There are student union disco parties every Friday night on campus LSE also organizes a River Boat Disco party on the River Thames. Apart from that, London and its famous nightlife provide a lot of scope for having fun.

Overall

Insightful interactions with students from various backgrounds and countries, an enjoyable in-class experience and the life in the city itself, make the overall LSE experience simply awesome.

On finding that none of my contacts were fruitful in ensuring an internship at a Tech company, and on receiving a few no-fund replies from foreign universities, I decided to give the IIMs a shot. I was happily accepted at IIM Bangalore for a marketing research internship.

The IIM Bangalore Campus:

The campus is very small but has better per capita infrastructure than our Institute. No two place are more than 5 minutes away on foot. The hostels are quite decent with cozy, single occupancy rooms, 24 hour LAN, washing machines and internal phones on each floor. The atmosphere is really peaceful and the surroundings green and clean. The only problem is the lack of a proper canteen! They have Amul, Tata Tea and CCD outlets but you can’t have sandwiches at Amul everyday — although that’s what we had to do for two months! (yes, there were 5 others from the Institute at IIM-B). And dinner was always at some roadside restaurant outside campus. Seriously I would have been bored to death had it not been for our weekend “lukkhas” with others from the Insti doing their interns all over Bangalore. Other than Bangalore we had covered Ooty, Mysore, Pondicherry and Hogenakkal, each on separate weekends.

The Work:

I was supposed to be working on a case study on Aptech’s business strategies which was supposed to be completed in 8 weeks but due to Aptech’s other commitments it got delayed. So basically I was left doing “arbit” and random stuff. Most of the time was spent on reading subject matter and writing summaries. This wasn’t bad because it definitely gave me a good exposure towards marketing but there wasn’t any tangible gain.

Overall, it was a nice experience especially because of the weekend outings and I got a feel of what management was all about.

BACKGROUND

This summer, I completed an internship at a firm known as “Nomura” as part of the Change Management Team (CMT). Before I get into the details of what the CMT is and, I’d like to provide some background on the company itself. Primarily operating in Japan, Nomura is an Investment Bank that came to the global forefront after its acquisition of the European and Asian Operations of Lehman Brothers, the Investment Bank that went bankrupt in September, 2008. Lehman operated a Captive Unit in Powai, Mumbai which mainly serviced the European and Indian Front Office Operations of the Firm. Under this deal, the Powai entity was also to be taken over by Nomura. Nomura themselves had no presence in India prior to this.

To service their large, not to mention very profitable front offices, such companies set up Operations Divisions consisting of Middle and Back Offices, Finance and IT, which execute processes that are continuously running behind the scenes. Captive units opened in developing countries such as India represent a major cost arbitrage to these Firms, who can save as much as 50% by simply moving (read outsourcing) their operations here. The Powai Office itself has a strength of 2500 Full Time Employees (FTEs). Note that apart from the above mentioned support divisions, Powai also has an Investment Banking Centre, where one can find Front Office Investment Bank work outsourced, a Global Markets centre, where one can find Equity Research, Equity & Fixed Income Quants, Structuring Teams (as those mentioned by Pupun & Rohit). For that matter, these are the teams which guys from the IITs and IIMs join. Lehman also had an India Front Office in Worli mainly dealing with Indian Investment Banking and Trading/Sales. I am not aware of any person from an IIT who worked there immediately after graduation.

THE ROLE OF CMT

Now given the scale of these operations, the split of work between the Regional & India offices, the continuous new stream of work being migrated, there exists a clear business case for the CMT. Who are parts of CMT and what do they do? CMT has three sub-divisions - Transitions, Business Analytics and Quality. Transitions, deals with deciding which new processes are to be “transitioned” from the Region to the Powai Office and also seeing these through till they are performed in Powai as Business as Usual. Business Analytics assists operations with the implentation of any Process Improvement projects. Quality (which is the team I was part of), deals with understanding processes, their core & auxiliary aspects, and identifying areas of improvement. In other words, CMT is essentially an inhouse consulting group comprising of Six Sigma Master Black Belts (the highest formal educational qualification in consulting) and Business graduates (MBAs) who are substitutes for large consulting firms like Opera, Deloitte and the like. Essentially, CMT is the in-house consulting group with different functions of the Operations division as its clients. Also notice the similarity between Manufacturing Processes and Financial Processes. The entire concept of a Quality team is borrowed from the Manufacturing Industry. And, as it turns out so are most of the people. You can find ex-ITC, ex-P&G and ex-GE people working in this team after having performed similar tasks in the manufacturing sector.

What does CMT do? Due to the very scale and split of operations/IT, there exist many situations, where improvements maybe possible, either in the processes itself or in systems. CMTs role is to identify these opportunties by in-depth studies, suggest changes and lead any initiatives which are begun as a result. As it turns out, most of these projects require specialized knowledge – they cannot be done without knowledge of the process which only comes with having worked on the process first hand. As a result CMT also has to drive participation of line managers in these initiatives, without which, they cannot be done. In management lingo, this is what is known as “Project Management”. For the same reason, it is strongly advised to join a role in a quality team after one has gained some experience in the field, the requisite people skills and analytical mindset. In an ideal world, one would not need a CMT. But as it turns out, Process Managers in Operations tend to be very occupied (to say the least) in their day to day routines. In absence of strong leadership and mandates, they fail to devote time to activities such as this, to the extent that they don’t perceive value in the initiatives at all. Thus, the CMT comes into being. It tends to be a team leveraged by Senior Management to drive large scale changes in parts of the organization.

IN CONCLUSION

However, the criticisms of CMT are similar to those of consulting – lack of understanding of the practicalities of the business, theoretical improvement schemes, not practically implementable and the like. But in the right company, having the right mandates and senior management support, the work can be a great value addition.

This summer I worked in the research wing of a hedge funds firm. The job description was simple: find new formulae to predict the movements of stocks. Sounds interesting? Well it is, until you run out of ideas.

Before the intern, my idea was that we would be taught methods of predicting movements of prices of various stocks in this intern and that people do this all the time and earn a lot of money. Well, that’s not how it works in that one cannot actually predict the stock price, but one can earn a lot of money here and that takes skill. What actually is done is you design some indicators that give you a “hint” as to which way the prices are going to move. Some simple examples are intuitive enough to understand like if the price steadily increased for many days, chances are high that it will go down the next day. Things like that and more. So you try to use the data that you already have and try to find such directions in which the market is headed and use it to your advantage. Only difference being that instead of people interpreting these indicators, it was the computer that was supposed to take decisions of buying and selling, of course based on what you have told it to do, but on thousands of stocks. So here’s what my intern looked like.

All of this starts with getting familiar with the terms used. There aren’t too many terms and most of them are very logical so there is no problem in grasping them. Others are statistical tools that gauge your performance. The most important one that I used for was the Sharpe ratio and the information ratio. After that came the indicators. The first week generally goes into understanding the basics and all. It’s not that it takes that long to understand it but it does take a while to actively apply them. What we basically did was get familiar to the most popular of the indicators and how they are used to judge the prices.

The second week went in understanding the basics behind the indicators. It’s easy to make one but it is essential to understand the working especially if you want to improve the indicator, which is what we are looking for. Any one indicator cannot be trusted all the time, especially in the markets today that tend to go in one particular direction…down. Indicators are generally best in a steady or “sideways” market, where there is not clear trend. If there is any direction, it’s a different story.

Next comes using these indicators to actually buy stocks of appropriate companies. What I did was deal with 3000 stocks in the US and occasionally in other countries like Japan and European markets and came up with what is called an alpha for each of the stocks. Alpha in simple terms is relative probability of each stock to go up (or down). Relative to what?? Well… each other. It’s easy to talk in terms of 2 stocks but when 3000 stocks are to be considered, things are not as simple. You give each a number, indicative of how much probability that stock will have of going up. Someone else may be assigned a higher or lower number, which means that between the two, the higher numbered has a higher probability of going up. It looks simple enough but coming up with a simple formula can be a tough job, and boring too sometimes.

In the next week, we graduated to looking at blogs and articles on such things. By the end of 2nd week, I had taken to looking at chart patterns which I continued in the third week too. Chart patterns are basically formed by price vs. time graphs of a stock that are a direct effect of the psychology of humans. The “drive” that people get of buying and selling when someone like Harshad Mehta deals in a stock is a very good example of such a tendency. These are the factors that have nothing to do with the company or its performance or its expectation of doing good or bad. It’s just the herd mentality that we essentially have as traders. And analysing such patterns can be real fun.

Analyzing such patterns, I tried to make some of my own indicators, but landed up remaking a lesser known indicator. But it was great kick finding out that I was on the right track.

This went on for another week and by the end of it, I was begging my mentor for a change. So next week we took a break from this routine to do a small programming project. It involved making the best strategy for a famous casino game. Turns out even the simple games where you think casino can lose are made so that they never lose. The rules of the game ensure that. And doesn’t matter if the player wins or loses, at the end of the day the casino always wins. Unfortunately it took me a long time to realise that there was nothing wrong with the results I was getting in the simulations. I was meant to lose; I just had to reduce the loss. Once we were done with this in a couple of weeks, we got back to our previous task.

The next week I tried to combine more than one indicator, something that a trader usually does. Mostly, one would look at as many indicators as possible before one takes a decision. But doing this for thousands of stocks would take an insane amount of time or traders. However, if one can instruct a computer how to handle them correctly, one can trade at a higher frequency and for many stocks. The best multiple indicators for combining would be those based on completely different principles - things that do not have a common source of change. And if both of their predictions agree, then we would have a much stronger indication of an apparent trend. That being said, I really began to appreciate what our eyes can analyze in one glance because programming for just two indicators together was a pain. Only in the last week was I successfully able to combine two to make a useful formula.

In the end, I think I met most of the goals of the internship. I needed to make atleast 4 good formulae which I did, found out for myself that Bangalore IS expensive and got to know fellows from iit-d. It was a great learning experience.

Well to start of I’m a Meta DD and my intern has nothing to do with metallurgy. I actually interned at a consultancy firm called Illumine Knowledge Resources Ltd. which is a well established firm with several high profile clients like SBI, BPCL and so on. The kind of consulting they do is what you call Transformational Consulting or Knowledge Consulting or some other fancy word you can make up (just remember to add consulting after that, you see it adds gravity).

• The Work Involved:

Ok lets get serious. They basically analyse a company’s organistional structure & the different employee profiles, after which they design and conduct ‘Interventions’. These Inteventions are basically workshops for emplyoees in which they are trained to function more efficiently (now you see why SBI is a client). Apart from being very very expensive (read: 9 figure consultancy fees) these are very well designed with trainers, videos, tool kits etc.
Now to what I did. I was part of a illustrious (read: IIM MBAs :P) team working on a ‘Career Design’ website for an European Investor. I cant for several reasons reveal details about the website but what I can do is descibe my experience. To be honest the two most important things you need to do well as a consultant is “Googling & Powerpointing”. Well what I mean is you have to know how to mine data, analyse it & present it effectively. When you communicate with clients you don’t have to use fancy english but you need to be very lucid i.e. you should literally be able to put your thoughts into bullet points & when you talk to consultants you’ll also notice they often use figures and flowcharts as well.
The work hours are as flexible as they get. 5 working days a week is a myth, hell you might have to work sundays as well if you are a full time employee. The intern was a lot of fun because of the company I had in terms of the team I was working with & overall it was a very wholesome experience.