Current Affairs - 13 February 2016

General Affairs 

Indian, Israeli Companies Join Hands For 'Make In India'

• NEW DELHI:  More than 25 Indian and over 100 Israeli companies will gather later this month for a business seminar on defence and security in Israel, it was announced here on Friday.
  
  The seminar organised jointly by SIBAT, the Israel ministry of defence international defense cooperation directorate, and FICCI will take place on February 21-25 and will mainly focus on increasing collaborations and joint ventures between micro, small and medium enterprises on both sides, said a press communique by the Eembassy of Israel.
  
  The seminar will highlight the huge potential to cooperate under Prime Minister Narendra Modi's 'Make in India' initiative and will deal with the new expected Defence Procurement Procedure (DPP) 2016 with a special focus on JVs between industries in Israel and in India.
  
  

  More than 500 B2B meetings are expected to take place during the seminar.
  
  Another seminar is expected to take place in Chennai later this year, dedicated to armoured vehicles.
  
  Ambassador Daniel Carmon said: "Our growing relations with India range on a wide spectrum of sectors from defence to water, agriculture IT, R&D...In the field of defence, Israel has proven more than once in the past as a reliable strategic partner and that we are open for the concept of transfer of advanced technology and joint development."

JNU Students' Union President Arrested On Charges Of Sedition

• A student union leader at the Jawaharlal Nehru University (JNU) has been arrested for sedition and more are being searched and questioned in a swoop by the police after a controversial protest in support of Parliament attack convict Afzal Guru, who was hanged in 2013.
  
  JNU students' union president Kanhaiya Kumar was arrested on charges of sedition over the event on Tuesday, where anti-India slogans were allegedly raised in protest against the execution of Afzal Guru.
  
  Titled "The country without a post office", the event also featured an exhibition to mark the execution of Afzal Guru on February 9, 2013.
  
  JNU claims they cancelled permission for the protest, which was allegedly pitched as a cultural function. Vice-Chancellor Jagdeesh Kumar has called it an act of indiscipline.
  
  The police arrived at JNU in Delhi in the middle of protests against the controversial event. They searched the sprawling campus for more students suspected to be involved. The arrest came hours after Home Minister Rajnath Singh warned of "stringent action" against the organisers of the event. "Anyone who raises anti-India slogans or tries to put a question mark on nation's unity and integrity will not be spared," the home minister tweeted.
  
  Stating that the government would not tolerate any anti-national activity in the country, the home minister said he had instructed the police to take strongest possible action.
  
  Education Minister Smriti Irani also condemned the incident and said: "The nation can never tolerate any insult to mother India."
  
  The BJP's student wing Akhil Bharatiya Vidyarthi Parishad and a lawmaker of the ruling party, Mahesh Guru, had complained to the police against the organisers.
  
  This is not the first time that JNU, one of the country's top academic institutions, has witnessed events in support of Afzal Guru.

David Headley Praises Ajmal Kasab During Testimony In Mumbai Court

• MUMBAI:  Terrorist David Coleman Headley today identified Ajmal Kasab, the lone 26/11 attacker captured alive and hanged three years ago, and praised him during his testimony in a Mumbai court.
  
  "Ajmal Kasab, Rahmatullah Alaih (May Allah's mercy be on him)," Headley said when special public prosecutor Ujjwal Nikam asked him to identify the photo of the Pakistani terrorist.
  
  "It is an honorific phrase used for a great soul. The person saying it seeks blessings or mercy for him," explained Mumbai-based Islamic scholar Zeenat Shaukat Ali.
  
  Asked if it could be used as a generic term for someone who had died, Mr Ali categorically refused. "It cannot be used for Kasab unless someone believes he has done something great."
  
  Headley, a Lashkar-e-Taiba terrorist, has been cold and remorseless as he has detailed his role in the 26/11 Mumbai attacks in which Kasab and nine other Pakistani terrorists sneaked into Mumbai and attacked the city's landmarks in pairs killing 166 people.
  
  He told the court today how his wife had congratulated him on email after the deadly terror strike. "Yaar you did great," Headley said his wife wrote to him, and also, "Congratulations on your graduation, the ceremony was great."
  
  Headley said he wrote back, "Thank you Jaanu (dear). I studied hard to get good grades."
  
  David Headley is testifying via video link in a Mumbai court after turning approver or witness for the prosecution. Over four days he has made chilling revelations about how the Mumbai attack was planned and executed by the Pakistan-based Lashkar with the active collaboration of Pakistan's spy agency, the ISI.
  
  Headley, who is a US national, has said he visited Mumbai seven times before the attack on a fake passport and surveyed sensitive installations like a Naval base and the Bhabha atomic research centre, apart from the sites that the terrorists attacked on November 26, 2008.
  
  Ajmal Kasab, who attacked the Chattrapati Shivaji Terminus or CST, was the only terrorist captured alive and was hanged in 2012.
  
  David Headley is serving a 35-year jail term in the US for his role in the Mumbai attacks. He is deposing in the Mumbai court via video link from an undisclosed location in the US.

Stephen Hawking Hails Gravitational Wave Discovery

• LONDON:  The discovery of gravitational waves, or ripples in space-time, could "revolutionise astronomy", according to renowned UK physicist Stephen Hawking who congratulated scientists on their groundbreaking work. Mr Hawking said the breakthrough tallied with predictions he made more than 40 years ago at Cambridge University.
  
  In a landmark discovery for physics and astronomy, scientists yesterday said they have glimpsed the first direct evidence of gravitational waves, ripples in the fabric of space-time that Albert Einstein predicted a century ago.
  
  "Gravitational waves provide a completely new way of looking at the universe. The ability to detect them has the potential to revolutionise astronomy. This discovery is the first detection of a black hole binary system and the first observation of black holes merging," Mr Hawking told BBC News.
  
  

  "The observed properties of this system is consistent with predictions about black holes that I made in 1970 here in Cambridge," Mr Hawking, research director at Cambridge University's Department of Applied Mathematics and Theoretical Physics, said.
  
  "The area of the final black hole is greater than the sum of the areas of the initial black holes as predicted by my black hole area theorem," he said.
  
  "Apart from testing general relativity, we could hope to see black holes throughout the history of the universe. We may even see relics of the very early universe during the Big Bang at the most extreme energies possible," Mr Hawking added.

'Time To Say Goodbye' To Comet Probe Philae: Space Agency

• PARIS, FRANCE:  Ground controllers said today they would stop sending commands to comet probe Philae, announcing it was "time to say goodbye" to the tiny lab resting after a captivating science mission.
  
  "There is indeed little hope to still get a signal from the lander," said Philae project manager Stephan Ulamec of the German Aerospace Center DLR, which issued a statement entitled: "A slow farewell -- Time to say goodbye to Philae".
  

Business Affairs 

Sensex closes below 23-K; Nifty below 7K: Key takeaways

• The stock market on Friday closed flat with BSE 34.29 points higher at 22,986.12 and Nifty 4.60 points up at 6,980.95. BSE closed below the 23K-level while Nifty below the 7,000-mark.

  1. The stock markets on the last trading day of the week were marked by a volatile trade with the benchmark BSE Sensex and Nifty drifting back and forth in red and green during the day.
  2. Hit by slowdown in global markets, including in the European markets; and weak Q3 of Indian firms, led by the banking and automobile sector, is said to have taken a toll on the Indian stock exchanges. A week-long Lunar New Year holiday in the Chinese markets along with the US Fed uncertainty also added to the pressure. Finance Minister Arun Jaitley on Friday said major sell-off in global markets created a chain reaction impacting the markets world over including in India.
  3. Despite recovering from the four-day losing streak at close, the markets logged the biggest weekly fall since July 2009.
  4. Top gainers: Tata Motors turned out to be the top gainer with its stocks rising 8.34 per cent in an otherwise uneventful trade.
  5. Top losers: The losses were many with oil and gas and capital stocks taking the worst hit. BHEL lost over 13 per cent in stock value on Friday.

  Here's how the stock markets flip-flopped on Friday:
  

  • The benchmark index of Indian equities markets, the 30-scrip Sensitive Index (Sensex) opened above the 23K-level at the start of the trade.
  • The markets soon shed its early gains to trade in deep red in noon trade with BSE losing over 100 points.
  • In the afternoon session, the BSE and the wider 50-scrip Nifty of the National Stock Exchange (NSE) returned to green on value-buying of blue chip stocks.
  • Towards the close of the markets, BSE and Nifty traded flat with the both the indices in red.
  • The stock market closed flat, in the green, BSE 34.29 points higher at 22,986.12 in volatile trade. Nifty inched up by 4.60 points to 6,980.95 at close.

Raghuram Rajan's external hiring mission at RBI abandoned?

• The RBI Governor Raghuram Rajan in 2014 had decided to go on the offensive for overhaul of the apex bank to improve the quality of research at the 81-year-old central bank.

  Rajan, himself an external hire, believes it is the hiring of external talented candidates that can work wonders at the central bank. Unlike most previous RBI governors who have come from civil servant backgrounds, Rajan was previously working as the chief economic adviser to the Congress-led government that was voted out in 2014.

  In a video conference in mid-2014, Reserve Bank of India(RBI) governor Raghuram Rajan told employees that he wanted to hire talented external candidates and improve the quality of research at the 81-year-old central bank.

  The proposals, described to Reuters by three officials who heard Rajan speak, would hardly seem out of place in any major institution on the planet.

  But since then, Rajan has only hired one permanent staff externally. It is not clear what role, if any, opposition from the rank-and-file RBI staff played in the low number of external hires.

  The RBI declined to comment for this story.

  In the storied halls of the RBI, where staff have to pass comprehensive examinations to join public service and spend decades slowly moving through its ranks, Rajan's ideas were seen by some staff as controversial, the sources said.

  "(The) entire process is being hurried up," a protest letter written United Forum of Reserve Bank Officers and Employees, the central bank's staff union, read, according to a copy seen by Reuters at the time.

  "There is a need for better clarity, communication - both internal and external, consensus and fairness to all stakeholders," he said.

  Rajan did not formally respond to the letter, according to several sources.

  Rajan's calls for out-of-the-box thinking were reiterated in a memo last month, seen by Reuters, which urged increased accountability and performance and was described by a half dozen mid-level officials as toughly worded, sparking similar misgivings among some in the bank's rank-and-file.

  Such reactions highlight what has probably been one of the hardest fights of his tenure: transforming what many see as a slow-moving and bureaucratic RBI of 17,000 staff into a modern, nimble central bank.

  Rajan said he also wants to improve training for staff, through initiatives such as sending them to other central banks for short stints, creating scholarships, and emphasising research, while also strategically bringing in outside expertise.

  "In general, I am not trying to swamp the place," Rajan told reporters last week in response to questions about external hires at a press event following the RBI's monetary policy announcement.

  "When outsiders come in they have to show that they can actually deliver as advertised. It shouldn't be seen as a privileged position just because they got a foreign degree," he said.

  At stake are both Rajan's legacy and wider confidence in India's ambitious reform agenda, which seeks to make its economy and markets more robust and globally integrated. His tenure expires in September and central bank watchers say he may only be able to finish the job if he is appointed to a second term.

  Domenico Lombardi, an economist who has served on the boards of both the World Bank and the IMF, said it is vital for Rajan to persuade sceptics within the RBI and the government to integrate India into the world economy.

  "Central banks are very conservative environments, and it takes far more than a three-year stint to change their culture," Lombardi said.

  Since taking over as governor in 2013 in the midst of India's worst currency turmoil in two decades, Rajan, 53, has overcome several challenges to steer some of the biggest changes in the central bank's history.

  These include introducing inflation targeting, tackling crony capitalism and successfully asserting the RBI's independence with New Delhi. Government sources say he has struck a personal relationship with Prime Minister Narendra Modi, even though he was appointed by a rival administration.

  The former International Monetary Fund chief economist has also become a source of confidence for those investing in India and a leading voice for emerging markets on global economic policy issues.

  "There is no alternative to officials like Rajan if India wants to signal that it is serious in its reform process," said Lombardi.

  QUICK CHANGES

  Rajan, who likes to start his day with an 8:30 breakfast, early by Indian government standards, is seen by many RBI employees as fast and decisive.

  On his very first day at work in September 2013 and as the rupee INR=D2 was still near record lows, Rajan announced a slew of initiatives to stabilise markets.

  Barely four months later, he set about reshaping monetary policy, shifting the bank's inflation target to consumer prices away from wholesale prices, the biggest central bank change since the country began economic liberalisation in 1991.

  Rajan also streamlined operations, scaling back scheduled policy reviews to six from eight per year. One RBI official said he ended dated practices, such as an RBI official hand-delivering copies of monetary policy statements to government officials. Statements are now directly uploaded to the web site.

  Such rapid change, however, has brushed against the bank's slow and deliberative style, one that prizes consensus-building among stakeholders, though some changes have been welcomed.

  EASY GOING

  People who work closely with Rajan describe him as genial and easy-going, compared with the more formal interactions favoured by past governors.

  Upon his arrival, for example, four officials said Rajan reached out to younger staff, especially researchers, to hear their views and have lunch with them, stepping away from the 18th floor executive dining area with its expansive view of Mumbai.

  At the same time, Rajan remains an exacting boss.

  One senior official described a recent initiative to research the direct impact interest rates have on inflation and growth using econometric models, a much more demanding level of economic analysis than was requested by previous governors.

  As Rajan put it in a speech in July last year: "The kind of economics we need is based on rigorous fundamentals - blood, sweat, tears, and toil."

What's behind the global stock market selloff?

• Global stock markets are on their shakiest footing in years.

  Investors are fleeing stocks and running to safe-havens like bonds and gold, driven by concerns about economic growth and the effectiveness of central banks' policies.

  At the same time, tumbling energy prices are upending the economies of oil-producing countries, further slicing into global economic growth.

  Only six weeks ago cheap oil prices were still expected to cushion the global economy, and the Federal Reserve's decision in December to raise interest rates for the first time since the end of the financial crisis in 2008 was widely seen as a vote of confidence in the world's largest economy.

  In addition to the fall in U.S. stock markets, major stock indexes worldwide have also been hit hard, despite efforts by the Bank of Japan and the European Central Bank to spur growth through lower interest rates.

  Large institutions and sovereign wealth funds, who borrowed in euro and yen, have been selling riskier assets, and are now buying back those currencies, undermining central bank efforts.

  With Thursday's decline, the S&P 500 stock index has lost 10.5 percent so far in 2016, its worst start to a year in history, according to Bespoke Investment Group, an investment advisory in Harrison, New York. The 10-year note's yield has fallen to 1.63 percent, its lowest closing level since May 2013.

  Here are some of the chief issues weighing on the market now.

  WHAT IS THE BIGGEST REASON FOR THE SELLOFF?

  The slump in equity prices which began late last year has deepened as banks grapple with negative interest rates in parts of Europe and Japan and the flattening of the U.S. Treasury yield curve.

  "One of the new themes in markets is that (quantitative easing) has damaged the banks and that therefore it exacerbates the risk-off environment," said Steve Englander, managing director and global head of G10 FX strategy at Citigroup in New York.   

  Negative interest rates on central bank deposits and on government bond yields undermine the traditional ability of banks to profit from the difference between borrowing costs and lending returns.

  With a decline of 18 percent on the year, S&P 500 financials are by far the worst performing sector in 2016.

  While the Federal Reserve has avoided introducing negative rates on reserves, in Congressional testimony on Thursday, Fed Chair Janet Yellen told lawmakers that the Fed would look into negative interest rates if needed.

  "I wouldn't take those off the table," she said.
  
  WASN'T ENERGY THE PROBLEM?

  Higher levels of U.S. oil output, thanks to fracking technology, along with over-production by Saudi Arabia, contributed to a world-wide oil glut, sparking a steep fall in energy and other commodity prices at the start of last year.

  At $27 a barrel, oil prices are now near 13-year lows and some analysts say they expect to see prices drop further.

  Tumbling oil prices resulted in sharp contractions in the economies of oil-producing countries, and pushed up yields on corporate debt, leading to defaults in the energy sector.

  "Investors whose livelihood revolve around oil and gas and commodities are liquidating because they need the cash," said Stephen Massocca, chief investment officer at Wedbush Equity Management in San Francisco.

  WHAT'S NEXT FOR THE FED?

  Markets now do not expect the Fed to go ahead with its planned interest rate rises this year. The federal funds futures market now shows traders are not expecting the Fed to raise rates until at least February of next year. At one point on Thursday, futures contracts were even pricing in a slight chance of a rate cut this year, and investors said some of the rally in gold prices resulted from the possibility of a rate cut.

  The move in fed funds futures has been accompanied by a rapid decline in the spread between short-dated and long-dated U.S. Treasury securities. The difference between the 2-year Treasury note yield and 10-year note yield has narrowed to 0.95 percentage points, the tightest it has been since December 2007. The flattening of the yield curve has often preceded recessions in the past.

  The narrowing yield curve spread shows investors are less confident of economic growth, even though Yellen told Congress on Wednesday that U.S. economy looks strong enough that Fed may stick to its plan to gradually raise interest rates.

  "Part of the problem is that the Fed is in a no-man's land right now: not dovish enough for the doves and not hawkish enough for the hawks, so it's not satisfying any point of view in the investment markets," said Terri Spath, chief investment officer at Santa Monica-based Sierra Investment Management.

  WHEN WILL THE FALL IN STOCKS END ?
  There are few signs yet that investors are dumping their holdings wholesale, typically a mark of a market bottom, said Alan Gayle, director of asset allocation at RidgeWorth Investments in Atlanta.

  "It still seems to be focused on specific issues, whether it's credit or it's oil. But clearly there is a more defensive tone that the market is taking and we're watching for signs of capitulation," he said.

  Similarly, Credit Suisse noted that hedge funds have been selling in February, but the scope of that selling "lacks the much anticipated capitulation trade that would signal a bottom."

  Credit Suisse also noted that macro-focused hedge funds have built up large U.S. equity short positions which have been a decent indicator of market direction in the past.

  Even if the severity of the selling tapers off, 2016 will likely continue to be a bad year for stocks, said Mohannad Aama, managing director at Beam Capital Management in New York. The S&P 500 stock index is down approximately 10.3 percent for the year to date, while the Nasdaq Composite is down more than 15 percent over the same time.

  "Although we've being seeing good job numbers, the general feeling is that the U.S. economy is nearing a peak and there is not much left as far as trends to be talked about," Aama said.

Gold eyes best week in 4 years as market turmoil boosts haven appeal

• Gold on Friday clung to sharp overnight gains that pushed the metal to a one-year high, and looked set to post its best week in over four years as stock market turmoil stoked safe haven demand.

  Stock markets fell worldwide on Thursday on fears over the health of the global economy and the banking sector, with MSCI's global stock index closing more than 20 percent below its all-time high.

  Safe-haven assets shone across the board. US 10-year Treasury yields hit their lowest since 2012, while the Japanese yen climbed to its highest in 15 months against the dollar.

  Spot gold rose to $1,260.60 on Thursday, its highest in a year, before paring some gains to close up 4 percent in its biggest daily gain in about 2-1/2 years. On Friday, it eased 0.8 percent to $1,236.60 by 0042 GMT.

  "The risk-off sentiment that pervaded markets overnight saw gold briefly push above $1,260 amid rising safe haven buying, making it the best performing commodity in 2016," ANZ analysts said in a note.

  For the week, spot gold is up 5.5 percent, the biggest weekly gain since October 2011.

  Tracking spot prices, US gold futures are set to post a gain of 7 percent for the week, the biggest such gain since 2008.

  Also helping gold was dovish comments from Federal Reserve Chair Janet Yellen.

  Testifying for a second day before US lawmakers, Yellen again stressed that the US central bank was not on a "pre-set" path to return policy to "normal" amid a worsening meltdown in global stock markets.

  Yellen said she still expects the Fed will gradually raise interest rates this year, given a strong US labor market and steady economic growth.

  That, however, did not deter investors from piling on to gold, a non-interest paying asset, as expectations grow that the Fed would not be able raise rates this year.

  Assets in SPDR Gold Trust, the world's top gold-backed exchange-traded fund, rose 1.99 percent to 716.01 tonnes on Thursday, the biggest inflow in two months.

  Jeffrey Gundlach, the co-founder and chief executive officer of DoubleLine Capital, said on Thursday that gold prices are likely to reach $1,400 an ounce as investors lose faith in central banks.

Indian market being dragged into global turmoil: BofA-ML

• The Indian equity market is being dragged into the global turmoil and there is little end in sight as the Union Budget is unlikely to be a meaningful catalyst for the markets, says a Bank of America Merrill Lynch (BofA-ML) report.

  The findings of the report came a day after the benchmark Sensex crashed 807 points to drop below 23,000-mark yesterday.

  The index closed 34 points higher at 22,986 today.

  Referring to the ongoing correction, the global financial services firm said Indian market is being dragged into the global turmoil.

  "While it is most likely impossible to catch the bottom, we believe the ongoing correction provides a good opportunity to add equity in India," BofA-ML said in a research note.

  There is heightened anticipation in the market for the Budget 2016-17, as the external environment is weak and corporate earnings growth is muted.

  "In our view, the Budget for 2016 is unlikely to be a meaningful catalyst for the markets," the report said, adding that the limited spending headroom and the imperative to support the rural economy means the Budget is unlikely to provide any substantial boost to economy.

  Meanwhile, Asian markets ended weak yesterday following US Federal Reserve Janet Yellen's testimony which suggested that the bank is likely to continue on the gradual rate hike path.

  European shares were also lower with indices in France, Germany and the UK staring at losses of up to 4 per cent as global sell-off intensified.

  Finance Minister Arun Jaitley today said there was no need for "exaggerated panic" and investors should keep the economy's inherent strength in mind while investing.

  The minister said major sell-off in global markets created a chain reaction impacting the markets world over including in India.

General Awareness

“International IP Index” showed India’s sombre side: Ranked 2nd last

• • In accordance with the US Chamber of Commerce‘s 4threport on “International IP Index”, India has showed its gloomy side as it was ranked at second last position.

    • The index was released by Global Intellectual Property Center (GIPC) which measured the IP environment of 38 economies where India sat at 37th rank with a score of 05 as compared to 7.23 in the previous edition.

    The index was premised on the 30 criteria including innovation, patent, copyright, trademark protections, enforcement and engagement in international treaties.

    Top 5 countries

    Country	Scores
    Unites States	28.6
    United Kingdom	27.5
    Germany	27.4
    France	27.2
    Sweden	27.1

    Reason behind the low rank of India:
    

    • Patent protection in India kicked out from international best practices.
    • Poor application and enforcement of civil remedies and criminal penalties.
    • Regulatory data and patent term restoration is not available.
    • Not a contracting party to international IP treaties.
    • There is lack of specific IP rights for the life sciences sector.

    About Global Intellectual Property Center (GIPC)
    Established in 2007, GIPC is the principal institution of the United States Chamber of Commerce handling issues relating to intellectual property.

    • It aims to strengthen the protection and enforcement of IP rights in the US and abroad.
    • It promotes and defends the system of IP rights and norms in the United States, key countries and multilateral forums.

    CEO – Thomas J. Donohue