Current Affairs for IAS Exams - 26 March 2017

Current Affairs for IAS Exams - 26 March 2017

:: National ::

FIIs were quite bearish, both in debt and equity last year

  • If the period between the last quarter of 2016 and early 2017 was anything to go by, FIIs were quite bearish, both in debt and equity.

  • Between October 2016 and end-January 2017, FIIs were net sellers in the debt and equity segments at Rs. 48,406 crore and Rs. 31,903 crore, as per data from the National Securities Depository (NSDL).

  • There was some amount of profit booking in the equity segment on account of demonetisation as well, which is expected to dent corporate earnings over the next few quarters.

  • FIIs have been the prime drivers of every bull run in the Indian equity market. They have been attracted by the handsome returns and the robust regulatory and trading mechanisms of the country for long.

  • Data on foreign flows in the Indian equity and debt segments are available from 1992-93, and since then, they have invested Rs. 8.51 lakh crore in equities and Rs. 2.82 lakh crore in debt.

  • Interestingly, between 1992-93 and 2015-16, there have been only three financial years (1998-99, 2008-09, 2015-16) when FIIs ended the fiscal period as net sellers of equity. In the debt segment, they were net sellers on five occasions.

  • Going by the data for the past two months, it seems the outflows have stabilised for now. Data show that foreign investors have been net buyers of Indian debt at Rs. 17,630 crore in February and March.

  • In equities, they have been all the more bullish, putting in a cumulative amount of Rs. 30,863 crore in this period.

  • But a section of market analysts feels that it is too early to conclude that the trends have changed as the past two months have seen a reversal in flows across all emerging markets, not just India.

  • For instance, while India has seen inflows of $4.6 billion in the current calendar year, as per Bloomberg data, South Korea and Taiwan have also seen inflows in excess of $4 billion.

  • Further, Indonesia and Malaysia have seen inflows of $455 million and $961 million respectively.

  • There is a view that the flows started reversing by January-end on increasing expectations that growth in the U.S. would accelerate, which would have a ripple effect on the emerging markets too.

  • Historically, a strong growth acceleration in the developed markets has led to emerging markets being significant beneficiaries.

  • Based on parameters like price earnings and price to book returns, India looks about 40-50% higher than the regional average.

  • Finally, corporate earnings would also be an important factor to decide the course of foreign flows.

  • Currently, there is hardly a bullish view on earnings growth as many are expecting a hit from demonetisation and global economic momentum is yet to decisively strengthen.

  • Incidentally, the recent surge has entirely been due to liquidity as investors have been betting on equity on the back of a strong mandate for the ruling political party.

  • So, from an economic point of view, a combination of slightly cheaper valuations and consensus growth in earnings are the key to continued foreign flows.

National Security Adviser and his U.S counterpart committed to work together

  • National Security Adviser Ajit Doval and his U.S counterpart, H.R. McMaster, committed to work together to “combat the full spectrum terrorist threats”, a U.S administration official said after a meeting between the two.

  • The focus of Mr. Doval’s meetings was terrorism, but the security situation in India’s neighbourhood, including Afghanistan and maritime security issues in the Indian Ocean, were also discussed, Indian officials said.

  • Tensions in South China Sea also figured. The officials spoke on broad objectives and areas of common of interests between the two countries, and according to Indian assessment, there is continuity on all fronts of cooperation between the two countries.

  • India, meanwhile, has asked the U.S. to provide details of the 271 undocumented migrants Washington wants New Delhi to take back.

  • Earlier, ahead of the meeting with Mr. Doval, Mr. Mattis said that no relationship can stay static as it either declines or grows.

Centre rejects claim that it has carved out larger Nagaland state (Register and Login to read Full News)

Anushree Pareek has become the first woman combat officer in BSF (Register and Login to read Full News)

:: International ::

President Donald Trump faced the biggest blow yet to his young presidency

  • President Donald Trump faced the biggest blow yet to his young presidency as his bid to repeal Obamacare went down in flames at the hands of rebel Republican lawmakers.

  • Barely two months into his term, Mr. Trump was forced to withdraw an embattled Republican health care bill, moments before a vote, leaving his campaign pledge to dismantle his predecessor’s health care reforms unfulfilled.

  • The defeat showed the limits of Mr. Trump’s power to deliver on an ambitious legislative agenda despite Republican control of both houses of Congress.

  • On Mr. Trump’s agenda are a major overhaul of the tax system and a bill to upgrade infrastructure like roads and bridges.

  • Mr. Trump had thrown his full political weight behind the measure, spending days arm-twisting recalcitrant Republicans, and he declared himself “disappointed” by the defeat.

  • The bill’s defeat marked a second major policy setback for the new President, who has seen his attempt to curb travel from Muslim-majority countries twice frozen by the courts.

:: Business and Economy ::

Changes in the small savings schemes

  • On April 1, rates on small savings schemes offered by the post office are due for their next quarterly revision. There is a good possibility that this revision, to be effective from April to June 2017, will see rates being cut.

  • But there is a window of opportunity until March 31 to lock into the prevalent high rates. This, you can do by investing in those small savings schemes in which the rate at the time of investment stays till maturity.

  • Effective April 2016, the government changed the rate reset frequency on small savings schemes to every quarter. Earlier, rates were being reset on an annual basis.

  • This change in the reset mechanism was meant to align rates on small savings schemes more dynamically with market-linked rates — that is, in sync with rate changes on government securities (G-Secs).

  • This was to narrow their wide rate gap over bank deposits which were ostensibly denting the latter’s inflows.

  • The first quarterly reset saw rates on small savings schemes being cut sharply (0.4 to 1.3 percentage points) in the April-June 2016 quarter.

  • With G-Sec yields going rapidly downhill over much of the last year, the government should have slashed the rates on these schemes further.

  • But it has also upped the chances of the government going for sharp cuts now. The case for a rate cut is aided by a few factors. One, key state elections which may have held the government’s hand so far are now over, and with largely favourable results for the ruling party.

  • This could give the government adequate political leeway to cut rates. Sure, banks, flush with funds after the demonetisation exercise, may not be nudging the government now to cut rates on small savings schemes.

  • But the government would still want to cut these rates and reduce its borrowing cost — proceeds from small savings schemes form part of the government’s debt.

  • Next, despite G-Sec rates staging a comeback from December 2016, they are still far below the rates in April 2016 when small savings rates were last cut sharply.

  • From about 7.4 per cent last April, the 10-year G-Sec yield crashed to about 6.2 per cent in December and has since then rallied to about 6.9 per cent.

  • Still, G-Sec yields are about 0.5 percentage points lower than in April, giving the government room and reason to cut rates on small savings schemes.

  • Even if it does not cut rates, the possibility of the government increasing rates on small savings schemes seems remote, given their wide disparity with market rates.

  • Ergo: it makes sense to lock into the prevalent high rates being offered by the post office. These investments are as safe as they get, being guaranteed by the government.

  • Also, the rates are superior to those being offered by comparably safe options such as bank fixed deposits (about 6.5 per cent to 7 cent currently). But you have to pick and choose from among the various small savings schemes.

  • Choose from fixed rate schemes offered by the post office. In these schemes, new rates announced each quarter apply only to investments made in the quarter and hold till maturity.

  • This category comprises the National Savings Certificate (NSC), Senior Citizen Savings Scheme (SCSS), Kisan Vikas Patra (KVP), Post office monthly income scheme (POMIS) and post office time and recurring deposits.

  • Despite the rate cuts since April, most of these schemes, except one to three-year time deposits, remain attractive, offering higher rates than comparable options.

  • The best choices are the NSC (8 per cent currently) — a five-year cumulative scheme open to all investors, SCSS (8.5 per cent) – a five-year quarterly payout scheme open to senior citizens and five-year time deposits (7.8 per cent) — an annual payout scheme open to all investors.

  • These investments also enjoy tax breaks under Section 80C of the Income Tax Act; this pegs up their effective returns.

  • On the other hand, the Public Provident Fund (PPF) and Sukanya Samriddhi Scheme are variable rate products in which rates keep changing throughout the tenure.

Charges introduced by the banks (Register and Login to read Full News)

:: Science and technology ::

Indian researchers found a new target that can be used for new antibiotics

  • Indian researchers have found a new target that can potentially be used for developing new antibiotics that will be effective against many bacteria.

  • The new target is made of two proteins, which form a complex that is responsible for the formation of biofilm, that perform very important functions and are critical for bacterial ability to successfully infect humans.

  • Bacteria form biofilms, a kind of matrix, during infection in plants and animals. The biofilm shields the bacteria from antibiotics and helps bacteria survive harsh conditions such as extreme temperature or stress.

  • Now a study by Indian researchers has found the molecular signalling events that play a crucial role in biofilm formation in Bacillus anthracis, the causative agent of anthrax.

  • Till now, all attention has been on developing antibiotics that target disease-causing bacteria and not the biofilm itself.

  • One of the basic questions that scientists have been trying to answer is how and when bacteria decide to form biofilms.

A protein “switch” within the tiny capillaries of the brain controls the blood flow (Register and Login to read Full News)

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