10.11.2008

Finance & Economy

• CDs and CPs
• CDs are certificates of deposit. These are what their name says. They certify that the holder of the CD is having a deposit with the issuing bank. This CD can be presented before any other financial institution to raise loans. Normally for an institution that is considering giving a loan based on the CDs, it is the viability / reputation of the issuing bank that matters. In the recent credit turmoil, many of the Indian PSU banks refused to give loans to Mutual Funds based on CDs issued by private and foreign banks.
• CPs on the other hand stand for Commercial Paper. These are short-term, tradeable instruments that companies issue to raise working capital. It is the credit rating of the issuing company that matters for investors in buying these CPs. The pricing for CPs would be on the basis of rates periodically announced by the Fixed Income Money Market And Derivatives Association (Fimmda). As on Friday, the benchmark three-month CP rate was 13.4%.
• M&A deals at record lows
• In the past two years, on an average, there were 40-60 M&A deals in India per month. And the number of PE & VC (Private Equity and Venture Capital) transactions has averaged from 30 to 35. But in October, the number plunged to just 26 M&As and 12 PE/VC deals. Last month, the number of PE/VC transactions was equal to the level last recorded in January 2006.
• Payment and Settlement Systems Act, 2007
• Among the umpteen number of Acts that are there on the statute book, this is one which I read about for the first time today. It is an Act to provide for the regulation and supervision of payment systems in India and to designate the Reserve Bank of India as the authority for that purpose.
• The RBI appears to have set sights on regulating the prepaid cards. What are prepaid cards? RBI has described prepaid cards as payment cards which include smart cards, magnetic strip cards, internet accounts, internet wallets, internet purse, mobile accounts, mobile wallets, mobile purse and paper vouchers.
• It is the Payment and Settlement Systems Act that gives RBI the power to do so.
• With some of the issuers of prepaid card booking sales as income, these do pose some tricky issues to the monetary and financial authorities. While large payment systems, which are unregulated, present risks to the stability of the financial systems, unauthorised retail payment systems without proper management and operational structures can undermine public confidence in the efficacy of the payment systems as a whole.
• RBI now proposes that all non-banking entities issuing these cards maintain the proceeds in an escrow account with a bank.
• This is a very good article that explains how India has benefited by a share larger than its due in the recent capital inflows into emerging markets and how the very same factors that helped it there, would possibly see it become the worst sufferer when capital inflows dry up.
• It also shows with a graph that the trend for capital inflows into emerging markets has been dependent on global risk appetite, which has been driven by liquidity and growth environment in the developed world.

Stock markets

• What were the contributing factors to the current bearish phase in our markets?
• This is a very good read for all my stock market friends. As many of them are in low spirits nowadays, a reading of this article will, I am sure, pep up their outlook.
• For those who are academically inclined to know just the reasons for the current volatility and bear phase, a look at these figures gives some solid reasons:
• An analysis of the institutional funds flow into the Indian equity market over the last three years highlights the current tenuous state of the market. Net foreign portfolio inflows of $8 billion, coupled with domestic institutional flows of around $3 billion in 2006 took the sensex up by 47% during the year. In 2007, the sensex appreciated by another 47% on the back of FII net inflows of around $17 billion and domestic institutional flows of another $2 billion. Till the end of October in 2008, the sensex has corrected by 52% aided by an FII outflow of around $13 billion, despite the domestic institutions pumping in more than $3 billion into the market.
• The assets of the domestic mutual fund industry contracted by about a fifth in October on account of unprecedented redemption pressures.
• The pool of foreign portfolio investments in India that was worth around $200 billion at one time has been significantly eroded by recent sales, a falling market and the depreciating rupee and is now estimated to be worth less than $50 billion.
• So what is the expert opinion? There is a feeling that the bear market has already travelled some distance. It is not wise to be unduly bearish when market valuations are so low.
  

Defence

• Accident in Russian submarine (INS Chakra) kills 20
  
• Surprised as to how a Russian submarine has an Indian name to it? It was to be christened INS Chakra and leased to India for 10 years.
• Read the news story here.

Telecom

• What is the 2G licensing issue that has drawn flak of late?
• India followed a first-cum-first-served policy in 2G licences for telecom operators. But some of those who have garnered licences have not made any investments nor started any operations. Two of such companies who have acquired licences but did not start any operations are Swan Telecom and Unitech. Recently two foreign telecom operators viz., Etisalat and Telenor have made an indirect entry into the Indian telecom market by paying a hefty price for acquiring a stake in these two companies respecitvely.
  
• While the market price of a pan-India telecome licence is discovered (through the auction route for the 4th operator) to be about Rs. 1,651 crores, allowing licence garners to walk away with riches is what has come in for severe criticism.
  
• Etisalat (Emirates Telecommunications Corp ETEL.AD) has bought a 45 percent stake in Swan Telecom for around $900 million, in September 2008.
  
• Norway based Telenor has bought 60% stake in Unitech Wireless by paying Rs 6,120 crore. This deal was announced in October end.

Trade with Japan

• India Japan trade pact hits road block
• THE comprehensive economic partnership agreement (CEPA) being negotiated between India and Japan has hit a roadblock with the latter proposing that five of its banks be given qualified full banking (QFB) status by India. On its part, though, Japan is not keen on offering similar status to Indian banks on the ground that they don’t measure up to Japanese standards. The country has also not shown any interest in working on India’s suggestion that its pharmaceutical sector be opened up for Indian companies.
• The bilateral CEPA would cover both agricultural and industrial goods, services and investment. Both sides want to increase bilateral trade to $20 billion from the existing $7.5 billion by 2010.

Governance

• Attempts at targeted subsidy deliveries
• THE government is planning to issue a unique identification (ID) to every citizen from December 2009, which would help it in better governance, including targeting kerosene, cooking gas, food, fertiliser, education and electricity subsidies. The task of creating the database may soon be entrusted to the proposed agency — UID Authority of India (UIDAI).
• A committee of secretaries (CoS) has proposed to set up UIDAI by December 2008.
• The subsidy amount would be directly credited to the individual smart card owners and that could be redeemed at authorised suppliers like fair price shops, kerosene or cooking gas (LPG) dealers or fertiliser outlets. The move is on the lines of the Eleventh Five Year Plan (2007-12). According to the Plan document, the smart card would have a memory partitioned into distinct modules representing different entitlement groups for which free services or implicit/explicit subsidies are given. These include food and nutrition, energy (kerosene, LPG, electricity), education services, health services, civic amenities and services (drinking water, toilets/sanitation), employment (National Rural Employment Guarantee) and economic/farming (fertiliser, irrigation water, MSP).

Science & Technology in Defence

• The art of camouflage
• Lot of research is going on this subject. Most of it goes on in defense research labs & universities in the West - especially the US and Europe. It is fashion to find a name or acronym for everything and anything that we come across; isn't it?
  
• Clutter metrics is the study of how well observers locate and identify objects.
• One type of “Adaptive” camouflage that changes rapidly in response to the environment is using thin, textile-like plastic sheets embedded with light-emitting diodes (LEDs). Scientis are saying that its performance is formidable. A tank draped with the sheeting and parked in front of a grassy slope displays an image of grass on its exposed side, for example. Thus making it virtually invisible.
• Another kind of adaptive camouflage is based on flexible plastic decals (Either a design that is fixed to some surface or a paper bearing the design which is to be transferred to the surface). A small camera, powered by a solar cell, senses the colours and patterns of the surroundings. The surface of the decal is a crude computer display which then replicates these colours and patterns. The US Army wants to use this approach to wrap artillery and munitions containers.
• Yet another area in which research is going on is preventing detection of thermal signatures. This is usually achieved by inventing special fabrics. One way to block body-heat signature detection is to use particles called cenospheres—tiny hollow spheres of aluminium and silica that can be woven into fabrics.
• FOPEN (Folio Penetration) is a radar system that will see whatever man made under a leafy triple canopy, or under netting designed to foil conventional radar systems.