27.07.2010

Politics & the Nation

• On Pakistani complicity in terror
• Take a look at this lead story. It reports as to how a six year archive of classified military documents has revealed that Pakistan’s rogue spy agency ISI is running riot in Afghanistan, aiding the Taliban and other terror commanders.
• Though America may be red faced and seething with anger, what options does it have? It looks like as if it is in a quagmire of its own when it comes to dealing with Pakistan. It cannot love it; but it cannot hate it either.
• Kasab’s case heads for Bombay HC
• Take a look at this story. We all know that Kasab was given death penalty by the Special Court. Now the Bombay HC has to confirm the sentence, as it is a death penalty.

Finance & Economy

• We missed out on the Indian Rupee symbol
• Look at this story that appeared on July 15. The Indian Rupee now has a distinct symbol of its own designed by one Mr. Uday Kumar, an IIT alumnus.
• It is a combination of the devanagiri ‘Ra’ and the English alphabet ‘R’.
• We can perhaps see the new symbol making its appearance on computer keyboards in the next year or so.
• Sebi wants PSUs to follow holding norm
• The Securities & Exchange Board of India has told the government that it is against a special dispensation for state-owned firms when it comes to complying with the new rules on public holding.
• The new rules, announced in June, make it mandatory for all companies to have a minimum public holding of at least 25%. Companies, which have higher promoter holdings, will have to pare them in a phased manner over the next few years.
• The Securities Contract Regulation Act, which stipulates the mandatory level of public holding in a listed entity, is administered by the government. The finance ministry can take the final call on this issue.
• The new rules, which have come into force following an announcement by finance minister Pranab Mukherjee in this year’s budget, specify that firms in which promoters own more than threefourths of the shares should increase the public float by at least 5% annually or in other words offer more shares to local investors. This is aimed at boosting liquidity in many stocks with a low percentage of public float and thus reduce the scope for manipulating stock prices.
• A recent study by Crisil Equities said there are at least 179 companies listed on the stock exchanges where the public float is less than 25%.
• Moody’s upgrades India’s sovereign currency rating
• Global ratings agency Moody’s Investors Service on Monday raised India’s sovereign currency rating one notch citing the economy’s resilience and the country’s commitment to fiscal reforms.
• Economists expects the ratings upgrade to galvanise more foreign investments into Asia’s third largest economy even though the revised ‘Ba1’ rating is still a level below investment grade.
• On the importance of capital inflows
• Take a look at this op-ed on the subject. Worth a read. Some excerpts on how capital inflows influence the macro environment:
• First, India remains dependent on capital inflows to fund its current account deficit. During the 12 months ended March 2010, current account deficit was $38.4 billion (2.9% of GDP). If capital inflows slow down significantly or turn into outflows, exchange rate will depreciate significantly and domestic liquidity environment will tighten. While the Reserve Bank of India (RBI) does respond with measures to offset decline in forex reserves by injecting liquidity, its response, by its very nature, has to be reactive with some damage to financial market confidence being inevitable.
• Second, capital inflows into India tend to be in nature of high-risk capital. Indirectly, this large source of risk capital acts as a catalyst to private corporate capital expenditure.
• Third, domestic risk capital allocation behaviour tends to be highly correlated to global markets. The domestic stock market, which is another major source of high-risk capital, is highly correlated to developed world equity markets. Foreigners own about 17% of the domestic equity market and about half of the free float available to them. Their decisions to sell domestic equity stocks tend to have a very large price impact.
• Fourth, net external surplus — capital inflows in excess of current account deficit — tends to keep real rates low. When inflows spike up, it tends to influence the overall cost of capital in the country. For instance, when capital inflows spiked up to $107 billion (8.7% of GDP) during 12 months ended March 2008, it made it difficult for the RBI to increase effective cost of capital in order to slow the aggregate demand growth. In other words, even if RBI were to sterilise the increase in liquidity — by forex intervention: buy dollars, sell rupees — the positive impact in the form of lower risk premia in domestic funding markets remains.
• Some high funda stuff know? That's why reading and re-reading the article is a must. That too it is not for faint-hearted.
• What is the best regulatory approach to regulate MFIs?
• In this very interesting article, this subject is discussed. It identifies 4 broad methods:
• Convert MFIs into banking correspondents (BC)
• Create a separate regulator for financial inclusion
• Regulate MFIs by encouraging greater competition in rural areas
• Regulate by size
• What's best from among the four? The article argues that any regulatory framework chosen must check corporate misgovernance and ensure microfinance doesn’t degenerate into predatory lending. The first option (banking correspondents) is not viable for the MFIs. When it comes to monitoring lending practices, the second and fourth options will face the same problems as the RBI. The third option, while enabling borrowers to choose their financial services provider, hinges on whether banks, etc, want to lend in rural areas.
• The alternative is to flank country-level regulation — which lays down principles to check more dubious practices by the industry — with state moneylending acts. If need be, interest caps defined in these acts can be tweaked to better accommodate the industry’s economics.
• All about capital adequacy ratio
• Take a look at this ET in the Classroom column for this.

Technology

• On black hats, white hats and gray hats
• These are from the world of hackers. “Black hats” break into corporate computer systems for fun and profit, taking credit card numbers and e-mail addresses to sell and trade with other hackers, while the “white hats” help companies stop their disruptive counterparts.
• The “gray hats,” surreptitiously break into corporate computers to find security weaknesses. They then choose whether to notify the company and stay silent until the hole has been patched or embarrass the company by exposing the problem.

International

• Oldest couple to get married at 97 and 87
• Take a look at this “Suddenly something” column. An interesting aside.
• On tent-pole movies
• In Hollywood parlance such movies are big budget, big risk, big potential payoff types.

Sport

• About Bobby Fischer
• This Chess legend died in 2008 at the age of 64, leaving behind him a legacy as well as some controversy. Take a look at this story.

Language Lessons

• quagmire: Noun
• A soft wet area of low-lying land that sinks underfoot
• prime the pump (mainly American): idiom
• to do something in order to make something succeed, especially to spend money
• eg: By the time the movie arrives in theaters on Dec. 17, Walt Disney Studios will have spent 3 1/2 years priming the audience pump.