19.05.2009

Politics & the Nation 

• It's political news all the way today
• With so much happening on the political front and the markets gyrating like there is no tomorrow the news channels are full of political news.
• Sample these: Manmohan elected Congress Parliamentary Party leader, Sonia remains Chairperson; Chamling submits resignation only to stake government formation in Sikkim, Rajasekhar Reddy to be sworn in tomorrow, Navin Patnaik set to be re-elected as CM, Orissa; Advani agrees to be leader of Opposition; Lalu's chances of retaining cabinet berth remote...
• India successfully test-fired its nuclear-capable 'Agni-II' missile with a strike range of upto 3,000 kms from a launch pad off Orissa's coast, today.
  
• The test was carried out from a mobile launcher of Integrated Test Range at Wheelers Island near Dhamra, about 80 kms from Orissa. 
  
• The state-owned Bharat Dynamics Ltd is the nodal agency for production of Agni-I and Agni-II missiles.
  
• The indigenously built surface-to-surface Agni-I missile has a strike range of 1500 km, while Agni-II missile has capability of hitting targets at ranges between 2500 to 3000 kms with a 1000 kg pay-load.

Finance & Economy

• Stock indices hit the roof; as expected.
  
• Investors scrambled to buy stocks as if there was no tomorrow, almost certain that the emergence of a stable government at the Centre would solve all the ills dogging the economy. In the mad rush, circuit breakers on the upside were triggered, and trading had to be halted from 12 noon onwards. This is the first time that trading has been suspended after the upper circuit breakers were breached. 
  
• What is a circuit breaker? 
  
• A circuit breaker helps check abnormal movement in indices, and also stock manipulation. The breaker is applied in three stages of movement — 10%, 15% and 20% — either up or down. 
  
• How’s the circuit limit fixed? 
  
• A circuit limit is fixed on the basis of the indices’ closing values at the end of the previous quarter. Monday’s limits were based on the closing values of the Sensex and the Nifty on March 31, 2009.
  
• The FCCB redemption story takes a turn for the better now
  
• With the markets now hitting circuit breakers the story on the FCCB front is going to pan out better for Indian companies.
  
• Riding on the strength of easy liquidity and the resultant equity boom a couple of years ago, Indian corporates were one of the largest issuers of such convertible bond offerings in the Asian region. FCCBs worth over $11 billion are outstanding for Indian companies with the redemption amount for 2009 estimated to be $186 million. 
  
• Over the last year, with the economic slowdown taking a toll on many companies, issuers have been finding it tough to find resources to redeem these bonds as investors shun conversion of these bonds into equity given the wide difference between the conversion price struck at the time of issuance and the current market price. The rally in the markets could now kindle hopes of such conversion especially with the Indian currency also strengthening. 
  
• Until just a couple of weeks ago, several issuers faced the prospect of managing the huge pile up of debt on their balance sheet in case investors were to exercise the option to redeem these bonds. It would also meant a substantial outgo on interest on interest payments.
  
• A very good recap of the circuit breakers in stock markets yesterday
  
• How does circuit breaker impact trading? 
  
• Trading is halted for an hour after an index moves 10% intra-day. In case of 15% movement, it is halted for two hours. If the index hits the 20% limit, trading is suspended for the rest of the day. 
• What happened on Monday? 
  
• Within a few seconds after markets opened at 9.55 am, the Sensex and the Nifty vaulted 1,789.9 points and 531.7 points, respectively, thereby breaching the circuit limits of 1,450 points (15%) and 450 points (15%) for the two indices. Consequently, trading in both equity and derivatives segments was halted for two hours till 11.55 a.m. Within seconds after resuming trading, the indices soared 2,110.8 points and 651.5 points, respectively, prompting the exchanges to apply the 20% circuit breaker, and suspend trading for the rest of the day.

Language lessons

• flub: verb
• Make a mess of, destroy or ruin
  
• eg: But the one part of America's foreign policy that Obama can be argued to have flubbed so far is its relations with India...
• excoriate: verb
• Express strong disapproval of; Tear or wear off the skin or make sore by abrading
  
• ... kills enterprise, excoriates the most bleedingheart of welfare schemes, stunts the minds and bodies of India’s young in its ill-run schools and hospitals and undermines the future.