Current Affairs - 9 January 2016

General Affairs 

BSP Open To Alliance With Congress For 2017 Punjab Assembly Elections

• JALANDHAR, PUNJAB:  The Bahujan Samaj Party (BSP) may forge an alliance with Congress in Punjab if it gets a "good proposal" from the party in the run up to Assembly elections next year, state BSP chief said today.
  
  Punjab BSP chief Avtar Singh Karimpuri claimed that Bahujan Samaj Party is working with the sole agenda of uprooting the ruling SAD-BJP alliance from state politics and could come on board with Congress.
  
  

  "Punjab Congress Chief Capt Amarinder Singh had recently said that they would want to join hands with BSP. If we receive a good proposal from them, we can definitely form an alliance with them," the former Rajya Sabha member said.
  
  He said BSP party has already started work to boot out the "anti-farmer, anti-dalit" government of Shiromani Akali Dal (SAD)-BJP.
  
  "We have a sole aim of dethroning the corrupt, anti-people, anti-farmer and anti-dalit government from power. Even people have become aware that till the time the current government is in power, no good will come to them," Mr Karimpuri said.
  
  The Punjab BSP chief said that all parties have started strengthening their ranks in the run up to elections next year and it would be too early to comment on forming coalitions and the possibility of a fourth front coming up.
  
  "Anything is possible in the realm of politics. It would not be wise to comment on the possibility of the formation of a fourth front at this moment," he said, adding that BSP will ally with any party which brings them a good proposal.
  
  Presently, the party's main concern is to strengthen its presence on the ground level and improve their position in the state, Mr Karimpuri said.
  
  He dodged the issue of seat-sharing by stating that BSP would demand seats on the basis of the proposal brought to them.
  
  The Punjab BSP chief also ruled out any possibility of an alliance with SAD by asserting, "Our agenda is to bring down the ruling SAD-BJP out of power in the state. In such a scenario, there is no possibility of an alliance with the SAD."
  
  Noting that Aam Aadmi Party (AAP) might act as a third contender in the political realm of Punjab, Mr Karimpuri said that the party has no strong basis and only engages in making noise.

Odd-Even Scheme Proves AAP Can Govern: Arvind Kejriwal

• KOLKATA:  Hailing Delhiites for contributing in the successful implementation of the odd-even scheme in the national capital, Delhi Chief Minister Arvind Kejriwal today said it has proved that Aam Aadmi Party (AAP) can "govern" and provide leadership to the people.
  
  He said if there is proper leadership, the people of the country can do wonders.
  
  

  "When we first took up the idea of odd-even scheme, lot of critics said this scheme is totally impossible. But now you can see that how successfully the scheme is running. Actually if you provide proper leadership, the people will act in a disciplined way. There is no doubt about it," the Chief Minister said.
  
  "The successful implementation has also proved that AAP government can provide leadership and govern properly, contrary to what critics used to say that we can only demonstrate but not govern," Mr Kejriwal said while addressing the inaugural session ofBengal Global Business Summit.
  
  "The problem is with the system. Earlier people used to say that common people of India are not disciplined but people of London, Singapore are very disciplined. I never agreed with that," he said.
  
  I think if there is a proper leadership in this country and proper system and proper engagement with the masses, the people of India can do wonders," Mr Kejriwal said.
  
  In his address, he also said that he is aware how much tough it is to conduct business in India due to corruption and complex structure of the Indian system.
  
  Mr Kejriwal also said he had saved money in construction on Mohalla Clinics in Delhi. "Out biggest priority is health and education. Earlier it used to cost rupees five crore for constructing a Mohalla Clinic now I have made those clinics at a cost of Rs. 20 lakh only," he said.

New Year Has Started On A Challenging Note, Says Arun Jaitley

• KOLKATA:  Stating that 2016 has started on a challenging note for the world, Union Finance Minister Arun Jaitley today said economic volatility manifested in the oil price collapse and the Chinese crisis have become the norm.
  
  "The new year 2016 has started for the world as a whole on a very challenging note. I have been repeatedly saying that there was a time and period in the past where challenges and crisis used to emerge occasionally... once in a decade.
  
  "But with the global economy so critically integrated, volatility is the new rule, it's the new norm. We have seen in last few days price of oil collapsed. We have seen the currency crisis currently on in china. And obviously the Global slowdown," Mr Jaitley said addressing the inaugural session of the Bengal Global Business Summit in Kolkata.
  
  He also referred to the World Bank on Thursday downgrading global growth rate at 2.9 per cent in 2016.
  
  Turning to the national scenario, he said there were still many challenges.
  
  The minister said though the service sector has significantly improved and remained more or less consistent, now green shoots were visible in the manufacturing sector, which after some period of slowdown is now picking up.
  
  However, Mr Jaitley said back to back less than normal monsoon has brought down the agricultural growth rate.
  
  "But we have had two continuous less than normal monsoons, which pulled down the agricultural growth rate, which in fact impacted purchasing power in the rural area," he added.

Pathankot Attack: Cop Who Was Car-Jacked May Take Lie-Detector Test

• NEW DELHI:  The police officer who says his car was hijacked by terrorists in Punjab has been summoned to Delhi for questioning by the National Investigation Agency (NIA).
  
  Salvinder Singh has been interrogated already in Punjab, but his statements have revealed inconsistencies, sources have said.  Mr Singh may be asked to take lie detector test in Delhi, they added.
  
  Mr Singh says he was driving with his cook and a jeweller friend on the night of December 31 when men wearing fatigues and armed with AK-47s stopped his car. The men then took his car, abandoning his cook and him, gagged and bound, on the road. The throat of the jeweler, who was taken by the terrorists, was slashed; he has recovered from his injuries.
  
  

  Mr Singh's car was used by the terrorists from Pakistan to approach the 2000-acre air force base at Pathankot, which they reportedly entered by scaling a 10-foot high wall with a rope. The attack, conducted by them and another pair of terrorists, commenced pre-dawn on Saturday.  Seven military men were martyred and 20 injured before the base was secured nearly 80 hours later.
   Mr Singh has denied reports that links to the booming cross-border drug trade in Punjab may have brought him into contacts with the terrorists, believed to be from the Pakistan-based Jaish-e-Mohammed, which says it is fighting for Kashmir's independence.
  
  After he managed to free himself, Mr Singh's phone call to his superiors, alerting them to his car-jacking, was treated for hours as a case of armed robbery - a major security lapse.
  
  Interrogators say that Mr Singh's details of his encounter with the terrorists are at odds with those offered by his cook and the jeweller, a man named Rajesh Verma.
  
  Officials also say that Mr Singh has not offered  a satisfactory explanation for the three-hour gap between his leaving the shrine that he had visited with his companions and when they were attacked.

Railway Budget's 110 Commitments Fulfilled, Says Suresh Prabhu

• KOLKATA:  Harping on the railways' commitment towards better passenger services, Railway Minister Suresh Prabhu today said that 110 Railway Budget commitments have been fulfilled by the ministry.
  
  Mr Prabhu, who flagged off several new trains from the Howrah station, also said the much delayed East-West Metro Railway project would be completed in the next two and a half years.
  
  "As a part of offering better customer service, we have been working on a few initiatives. There were many initiatives taken and I am very happy to say that at least 110 of Budget commitments have been fulfilled," Mr Prabhu told the media persons.
  
  The minister said one of the areas where the railways made progress was ticketing by improving the website of the IRCTC for online bookings, including for daily and monthly tickets.
  
  He also stressed on the cleanliness drive in the trains and added that mechanised laundries have helped immensely.
  
  "With collaboration, we can make railways more clean. We have also started mechanised laundries wherever possible. It has helped us immensely in the cleaning process. And our idea is to have more of such laundries," the minister said.
  
  "We have also started on-board cleanliness services. If you feel your place is unclean, you have to send us a SMS and the railway staff will be there in sometime to clean it up," he added.
  
  Mr Prabhu also said new coaches are being brought in to replace the old ones and it would change the travelling experience.
  
  "Other issues that people face are about the train's interiors. It has not undergone change for some time. The new coaches that have come are really far superior to the ones we have. You will feel like air travel while travelling in a train," he said.
  
  "I know, it is a small beginning as there are thousands of coaches and changing all of them would need some time and money," the minister said.
  
  "If someone wants to have rasogolla in Delhi, it will be delivered to him from the counter. Customers have been, therefore, given a choice about the type of food they want," he added.

Business Affairs 

Sensex ends 82 points up, but below 25,000, Nifty holds 7,600

• Snapping four-day long losing streak, the S&P BSE Sensex rose 82 points, but ended below its crucial psychological level of 25,000 in trade on Friday, while broader CNX Nifty closed just a tad above its key support level of 7,600.

  The headline indices gained tracking positive trend seen in Asian markets as Chinese shares rallied in volatile trading after the government suspended the stock market "circuit breaker" mechanism and the central bank moved to stabilize the yuan with its reference rate.

  The 30-share index ended at 24,934.33, up 82.50 points, while broad-based 50-share index quoted 7,601.35, up 33.05 points at close.

  Market breadth turned positive with 17 of the 30 Sensex components ending the day in green.

  Tata Motors was the best performer on Sensex and gained over 3 per cent.
  

  The domestic markets fell more than 2 per cent on Thursday, hitting its lowest level in over one-and-a-half years after China accelerated the depreciation of the yuan, triggering a domino effect in global equity and currency markets.

  The gains will help soothe frayed nerves back home going into earnings season next week when Tata Consultancy Services and Infosys report quarterly results.

  "Next week we have numbers (corporate earnings) coming in thick and thin so markets will look for cues from there," Gaurang Shah, vice president at Geojit BNP Paribas said.

  Among Asian markets, China's Shanghai Composite settled 1.97 per cent up, while Hong Kong's Hang Seng index gained 0.59 per cent. Japan's Nikkei bucked the trend and ended 0.39 per cent down.

  Meanwhile, Dow futures wer trading over 200 points up indicating a higher opening on Wall Street. 

  A lowdown on markets today

  12:42 pm

  Sensex at 24,977.22, up 125.39 points

  Nifty at 7,606.35 points, up 38.05 points

  11:00 am

  Sensex at 24,922.57, up 71 points

  Nifty at 7,587.80, up 20 points
  

  9:20 am

  Sensex at 25,057.83, up 206.00 points

  Nifty at 7,624.30 points, up 56.00 points

Oil options lurch closer to Goldman Sachs' doomsday forecast of $20

• When US investment bank Goldman Sachs said last year that oil could fall as low as $20 per barrel, it assigned a fairly low probability to that scenario.

  Fast-forward five months and in some parts of the world the forecast has already proved correct. Canadian physical crude has been selling this week at below $20 per barrel, less than it costs to extract and transport. Traders in the options market, meanwhile, are taking protection against prices falling below $25.

  The developments reflect growing concerns that a market already awash in too much oil is now suffering the double-whammy of a sharp slowdown in US and Chinese demand.

  For the past 18 months, oversupply has been the main factor responsible for dragging down prices by two-thirds, after Saudi Arabia pushed OPEC to ramp up exports to fight for market share with higher-cost producers such as US shale firms.

  Low prices spurred global demand to multi-year highs, saving oil from a further collapse and encouraging producers to hope that the market might recover later in 2016.

  But just as Saudi Arabia was about to start celebrating its first tactical victories, with US output declining under pressure from low prices, signs are emerging that demand in the United States, China and Europe is much weaker than anticipated.

  Estimated demand from China, the world's second largest consumer and the engine of global economic growth since the commodities boom started in the early 2000s, fell in both September and November, compared to the same months of 2014.

  US demand, the world's largest, began falling from October, according to the latest available data, despite low gasoline prices, while US distillate demand slid to its lowest for more than a decade towards the end of 2015.

  Demand in the European Union turned flat in October, having surprised on the upside throughout most of the year.

  "2015 started off with a spectacular growth in demand. But in the last quarter of 2015, things seem to have changed," said Abhishek Deshpande, an analyst at banking and investment group Natixis.

  "SUPPORTS CRUMBLING"

  Goldman's drastic scenario was based on the logic that the market might have to undergo a $20 per barrel price shock in order to force an acceleration in the shutdown of unprofitable production.

  That no longer seems fanciful.

  "Oil has been under pressure as of late, and downside risks of a dip into the $20s have grown," Bank of America Merrill Lynch said on Thursday.

  The same day, Brent and WTI futures fell briefly to their lowest levels since 2004, near $32 per barrel, as a sliding yuan and an emergency halt in Chinese stockmarket trading left Asian markets in turmoil.

  For oil prices to fall as much as 5 per cent in early and usually calm Asian trading hours is very rare, and even veteran chart-watchers are now struggling to draw a line under the biggest rout in decades.

  "The supports are crumbling... There is not a winning long in the market - maximum pain is lower. It is not advised to be long," said Robin Bieber of brokers PVM.

  He said there would not be much to stop oil falling into the mid-$20s if WTI crude fell below the $32.40 a barrel support level. Minutes later, WTI fell as low as $32.10, although prices slightly recovered towards $34 per barrel later in the day.

  NEGATIVE OIL

  Over the past year, the world has been producing 1.5 million bpd more oil than it consumes. OPEC and the International Energy Agency expect global demand growth to slow in 2016 to around 1.20-1.25 million barrels per day from a very high 1.8 million bpd in 2015.

  That means that for most of 2016 the world will still be producing more than it can consume, adding to record stockpiles already exceeding 3 billion barrels.

  The options market is showing that fears are indeed on the rise that futures could fall further. The Chicago Board Options Exchange's oil volatility index has risen 20 per cent so far this year.

  Implied volatility in ICE Brent options - including the $30/barrel and $25/barrel Feb 16 option - has spiked in recent weeks. Some investors are protecting themselves by acquiring put options giving them the right to sell at $25, anticipating that Brent will fall below that.

  "There has been more interest in buying options like $25 puts and open interest has increased. Volatility has been rallying. The action that we have seen shows that people have a bearish slant," said a senior options trader at a major bank.

  But while the futures market is only preparing for a dip below $30 per barrel, prices in the physical markets - where oil producers sell and refiners buy actual barrels - have already fallen much further.

  The price of an OPEC basket of 13 crude grades fell to $29.71 a barrel on Wednesday, according to calculations from the cartel.

  Most shocking was the outright price of Canadian heavy crude, which dropped below $20 a barrel.

  Northern Alberta's vast oil sands hold the world's third-largest crude reserves but carry some of the highest production costs globally -- up to $50 a barrel -- because of the energy-intensive production process.

  Most Canadian and US companies will likely keep producing to pay bills and loans, even if the crude price does not cover cash operating costs such as extraction, blending and transportation.

  "There is a high risk a lot of these companies could fold, but really speaking we are looking at more consolidation and potential restructuring," Natixis analyst Deshpande said.

Azim Premji most generous Indian for third year: Report

• Azim Premji, who donated Rs 27,514 crore for education is the Most Generous Indian for the third year running followed by Nandan Nilekani and Narayana Murthy in the second and third place, respectively.

  As per the Hurun India Philanthropy List, which is a ranking of the most generous individuals from India, 70-year old Azim Hashim Premji was named as the most generous Indian as he donated Rs 27,514 crore for education.

  The Azim Premji foundation is working for empowering education in India. The foundation works in eight states and has more than 3,50,000 schools.

  Nandan, Rohini Nilekani and family came in second with a donation of Rs 2,404 crore, towards the cause of urban governance, public policy and education while Narayana Murthy and family donated Rs 1,322 crore for encouraging entrepreneurship, social development and education.

  Meanwhile, Mukesh Ambani of Reliance Industries is sixth in Hurun India Philanthropy List.

  Ambani, the richest man in India, donated Rs 345 crore towards healthcare, the report said.

  Others in the top ten include, K Dinesh ranked fourth, who donated Rs 1,238 crore, followed by Shiv Nadar at 5th spot with Rs 535 crore in donations, Sunny Varkey & Family (7th, Rs 326 crore), Ronnie Screwvala (8th, Rs 158 crore), Rahul Bajaj & Family (9th, Rs 139 crore) and Pallonji Mistry (10th, Rs 96 crore).

  The donations were measured by the value of their cash or cash equivalent from November 1, 2014 to October 31, 2015.

  As per Hurun Research, there were 36 individuals, down from 50 in 2014, who donated Rs 10 crore or more. Interestingly, there were 12 new entrants and 26 drop outs.

  With a donation of Rs 35 crore, Rohan Murthy (32) of Infosys is the youngest philanthropist on the list; oldest being Pallonji Mistry (86) of Shapoorji Pallonji who donated Rs 96 crore. According to Charity Aid Foundation UK, as per the World Giving Index, India came down in its ranking from 93rd in 2013 to 106 in 2014, demonstrating an overall reduction in Indian philanthropy.

  Despite weak corporate earnings in 2015 compared to last year, the increasing speed of wealth creation seems to promise a bright future for Indian philanthropy, Hurun Report India Business Head Anas Rahman Junaid said. 

Govt should relax on fiscal gap, keep target at 3.9%: BofAML

• The government should relax the fiscal consolidation roadmap in the face of challenge posed by the 7th Pay Commission by budgeting for wider gap of 3.9 per cent for 2016-17, which will help push GDP growth, says a report.

  "Relaxing the fiscal deficit (is the) key" because of the implementation of the pay panel's proposals which are likely to set a 0.7 per cent hole in the government finances, foreign brokerage Bank of America Merill Lynch said on Friday.

  Finance Minister Arun Jaitley is slated to present the Budget for financial year 2016-17 next month.

  "We expect the 0.7 per cent of GDP stimulus from the 7th Pay Commission to boost consumption from the second quarter of 2016. It's pre-condition that Jaitley relaxes the FY17 fiscal deficit target to 3.9 per cent of GDP same as FY16's from the pre-committed 3.5 per cent," it said.

  Under a medium-term fiscal consolidation plan, the government is committed to get the fiscal deficit down to 3 per cent by 2017-18. It had already taken a relaxation for 2015-16 to support growth and under the revised plan, it has to achieve 3.5 per cent in 2016-17.

  The fiscal deficit stokes inflation and also crowds out private investment, and hence, is a key number monitored by both the RBI as well as the international rating agencies.

  BofAML sought to downplay the negative effects, saying the gap is "well below" the medium term average of 4.8 per cent since FY2000.

  The stimulus received from the 7th Pay Commission, along with lending rate cuts and a rollover of foreign deposits taken in 2013, will help the GDP growth to accelerate to 7.7 per cent in FY17, it said. The government had last month cut its FY16 growth estimate to 7-7.5 per cent.

  RBI Governor will not cut by more than 0.25 per cent at the upcoming policy review on February 2, the note said, adding that it expects another 0.50 per cent in cuts in April-September 2016 to support growth.

  It said the fears of the government crowding out private sector are also "overdone", adding that it will have to increase borrowing by 13.6 per cent to Rs 5,530 billion in 2016-17.

  There is "undue stress" on reforms for pushing growth, it said, adding that it supports GDP expansion over a longer 5-10 year period, whereas the current challenge is a cyclical recovery.

PSU bank employees on strike, operations hit partially

• Banking operations were hit partially today as a section of public sector banks' employees went on a strike across the country to protest violation of bilateral settlement agreement by associate banks of SBI.

  Some of the services, like cash handling at branch level and clearing of checks were affected in the banks where presence of All India Bank Employees' Association (AIBEA) is strong.

  Private sector banks and country's largest lender SBI continues to function normally.

  As precautionary measures, most of the banks, including United Bank of India, had issued advisory to their customers saying they will take all necessary steps in terms of existing guidelines for smooth functioning of branches or offices on the day of strike, in the event it materialises on January 8.

  The strike call was given on December 28 to protest violation of the bilateral settlement by five associate banks of the SBI and their attempt to force unilateral service conditions on the employees, AIBEA general secretary C H Venkatachalam had said.

  Five subsidiaries of SBI are State Bank of Travancore, State Bank of Mysore, State Bank of Patiala, State Bank of Hyderabad and State Bank of Bikaner and Jaipur.

General Awareness

FINANCIAL TERMS

• • 1) Type of assets

    The assets portfolio of the banks is required to be classified as
    

    (1) standard assets(2) sub-standard assets(3) doubtful assets and(4) loss assets.Standard asset is one that does not disclose any problems and which does not carry more than normal risk attached to the business .An asset which has been classified as NPA for a period not exceeding 12 months is considered as sub-standard asset.Doubtful asset is one which has remained NPA for a period exceeding 12 months.An asset which is considered uncollectible and loss has been identified by the bank or internal or external auditors or the RBI inspection and the loss has not been written off is regarded as loss asset. 

    
    

    2) Core Banking Solutions (CBS)

    Core Banking Solutions is a buzz word in Indian banking at present, where branches of the bank are connected to a central host and the customers of connected branches can do banking at any breach with core banking facility.

    
    

    3) Prime Lending Rate

    The minimum short-term interest rate charged by commercial banks to their most creditworthy clients. It is a reference interest rate used by banks for its lending purposes.

    
    

    4) Parties of a Cheque:

    There are three parties to the cheque

    
    

    1-Drawer or Maker

    
    

    2-The bank (Drawee) - on whom the cheque is drawn (i.e. the bank with whom the account is maintained by the drawer)

    3- Payee – Payee is the person whose name is mentioned on the cheque to whom or to whose order the money is directed to be paid.

    
    

    5) Special Drawing Rights (SDRs)

    It is a reserve asset (known as ‘Paper Gold’) created within the framework of the International Monetary Fund in an attempt to increase international liquidity, and now forming a part of countries official forex reserves along with gold, reserve positions in the IMF and convertible foreign currencies.

    
    

    6) Negotiated Dealing System

    The Negotiated Dealing System (NDS) for electronic dealing and reporting of transactions in government securities was introduced in February 2002. It facilitates the members to submit electronically, bids or applications for primary issuance of Government Securities when auctions are conducted. NDS also provides an interface to the Securities Settlement System (SSS) of the Public Debt Office, RBI, Mumbai thereby facilitating settlement of transactions in Government Securities (both outright and repos) conducted in the secondary market.

    
    

    7) NDS OM (Order Match)

    In August, 2005, RBI introduced an anonymous screen based order matching module on NDS, called NDS-OM. This is an order driven electronic system, where the participants can trade anonymously by placing their orders on the system or accepting the orders already placed by other participants. NDS-OM is operated by the Clearing Corporation of India Ltd. (CCIL) on behalf of the RBI.

    
    

    8) What is Asset Management Companies?

    A company that invests its clients' pooled fund into securities that match its declared financial objectives. Asset management companies provide investors with more diversification and investing options than they would have by themselves. Mutual funds, hedge funds and pension plans are all run by asset management companies. These companies earn income by charging service fees to their clients.

    
    

    9) "Soiled Note:" means a note which, has become dirty due to usage and also includes a two piece note pasted together wherein both the pieces presented belong to the same note, and form the entire note.

    (ii) Mutilated banknote is a banknote, of which a portion is missing or which is composed of more than two pieces.

    
    

    
    

    10) Imperfect banknote means any banknote, which is wholly or partially, obliterated, shrunk, washed, altered or indecipherable but does not include a mutilated banknote.