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Category Archives: Administrative Sciences

CHINDIA – AS I SEE

The news of Chinese Army PLA moving, 19 kilometers deep, inside the Indian territory is old one. Now the new and important development is that since 1930 Hrs IST they started vacating their positions and till now (i.e., when you may be reading this article) would have nearly vacated.

I was always certain and specially turned more confident of my views on CHINDIA since 2001 onwards.  I saw the fact as if it were the destiny that were conspiring to keeps these two nations on the same side.

Though, I am not going to write much, so I am just attaching three separate comments and analysis I presented in response to two news items published 11 days ago, and one just 03 days ago. I knew that masses will not agree with my view point, but then this has been a history now. On the other side masses have never agreed with any one individuals. My comments/ analysis are serially numbered (in the way they were posted) at news sight:

 1.

Sometimes I doubt that Chinese army really has any bad intentions towards India, as this is something that will prove costly and lasting adventure for PLA. As India despite of lack of very good connectivity to borders via road and rail has the capacity to surprise Chinese Forces by its huge number alone, though cost of transportation may be higher for Indian when compared with that of China. The important aspect and insight that I am getting is, is that Chinese now want to block the infiltration of Uyghers and other trained militants from Pakistan. If this is the case then they should take Indian authorities into confidence and ask for a safe passage to execute its intentions. Any kind of mis-understanding would not alone dent Chinese Might (roughly 2/3 of India) and USA and Pakistan will stand to gain from it. If the issue is something else then I need to analyze further. Consequently one of its allies North Korea too will be slaughtered by South Korean Forces with various kind of aid from USA. Chinese should try to considered the border pact that too place between Indians and then Chinese Emperor in 1840 (approx). Hope Chinese are not deaf and idiots at same time. If they are then they should have an emergency plan (in case their forces engage with India) to take care of democratic revolt that would get a unfettered access and control at Tianmaan Square.

 2.

The militants trained by Pakistan after having turned Frankenstein monster for them, have also attempted to threaten Chinese sovereignty, specially vides on an ancient trade route connecting Ladakh to Yarkand in Xinjiang, China. Now its better for China to seek India’s co-operation in controlling the religion of terrorism and militancy, than thinking itself to be almighty to do what they want. Those 50 malnourished men of PLA are not being made to land in Jails in India for ever ( I do not suggest shooting those 50) due to patience and also due to it being a responsible power. As Chinese army (approx 8.5 in number) is no match for India’s (approx 16 soldiers). Anyway I do not want to talk this language till all the options are not exhausted, as even sacrifice of our one soldiers life is much costlier to their 50 and is no match in value terms. Chinese may be fed up with their population but Indians are not. I suggest them to recall preachings of their scholar who earned knowledge from Nalanda and Takshshila besides preachings of Prince Mahendra and Princess Sanghmitra about Buddhist ways of life.

 3.

Though it would be better for the Government of India starts considering bilateral relations between India and China in present context. If required Salman Khurshid should cancel his proposed visit citing the posture of PLA as reason. Government may further consider about not allowing the Chinese Premier enter into Indian Airspace or Ground Location based on such developments. It would be better to communicate it to Chinese at earliest time. Please do not use force immediately, as tensions between India and China on border issues will give USA Army and Navy a good advantage in case when it comes to tackling by North Korea, creating advantageous position in Yellow Sea, beside providing them with opportunity to promote and protect the heirs of Chinese Emperor (who was forced to flee by PLA in 1948) and provide them with all the support required to take control at least of Taiwan and Hong Kong. This would be in addition to funding of support required to be extended to Democratic Movement in China. China will automatically learn that how international diplomacy is handled.

I would love to hear the comments from audiences…

 

                                                                                                             …………… Always Yours — as Usual — — Saurabh Singh

General Beliefs and Re- Discovering Man

Rediscovering Man: A Research Study finds that What is Seen is not Always True 

UCLA’s Anderson School of Management Professor Corinne Bendersky who conducted Two experiments says, on based on the findings of experiments, that “Our intuition about the kind of people who make good teammates, which are often based on their personalities, are actually wrong”. The study further reveals that “highly neurotic people, while initially not inspiring confidence, often defy expectations among teammates. On the flip side, the extroverts in the office, usually seen as strong leaders among peers, tend to disappoint”.

In research, published in the “Academy of Management Journal” this month, Corinne Bendersky “compared MBA team members’ ratings of each other before and after weeks of collaboration”.

The second study was similar, but researchers gauged perceptions by providing subjects with personality profiles of made-up colleagues.

The findings again were surprising, as due to being provided with ‘Personality Profiles’ of the Colleagues prior to asking them to work together, it was seen that “at start participants had bad impressions of their neurotic colleagues, predicting they would have low contribution and low status within the group” on the other hand “those with extroverted personalities were given high status ratings by others. Collaborators thought that their enthusiasm and energy was going to be a boon for the team, and that they would be positive contributors”.

This probably can be attributed to individuals capability of creating an artificial and biased perception about other individuals without even attempting to learn issues like ‘how such individuals react’ and ‘ the way they respond to numerous variables that come to play teams’ work climate.

A very common perception that prevails in society and also with co – workers about neurotic people or neurotic employees is that their volatility and negativity is going to make them a drag on the team. As per research Bendersky and her co-researcher, Neha Shah state that “What people don’t appreciate is that an aspect of that ‘neurotic personality is really an anxiety of not wanting to disappoint our peers and our colleagues’. Neurotics can actually be motivated to work really hard especially in collaborative situations”. It further states that extroverts tend to be less receptive to other people’s input, which makes them more difficult to work with. The studies being referred here found that contributions from extroverts were less impressive than expected.

Study further states that “the core of the extrovert’s personality really wants to be the center of attention”. Thus they give or say they are found doing a lot of self-presentation that is well received and in majority cases it creates a positive first impression. It is their ambition/ drive to be the center of attention which actually turns fairly disruptive in collaborative situations.”

Adrian Furnham, a psychology professor at the University College London opines that regardless of the finding that neurotics work better in teams, they are still considered to be at a disadvantage in the workplace overall. Argument offered by Furnham to support the opinion given is that “neurotics tend to be unstable, they’re insecure, they worry a lot, they’re moody — which are really difficult traits to deal with. He believes that while neuroticism makes people more sensitive to the reactions of other people, “by and large it’s not good news. High neuroticism is not associated with success in the workplace.”

Whereas, when it comes to opine on other part of the study that extrovert actually turn fairly disruptive in collaborative situations, Adrian Furnham seems to be in agreement with the finding to some degree. He agrees that he does not think highly extroverted people make for the best employees either. He has a very different opinion and that is “rather moderate outgoingness makes individual ideal for teamwork”.

Again it is worth mentioning that people who are high on the neuroticism scale need not be disappointed; what they actually need is to find the right job. As per Spencer Lord, a human resources specialist with the Britain-based firm Organic HR, says highly neurotic people are often strong in roles that require attention to detail, like positions in finance or compliance.

He says so as he finds that “neurotic people are more predisposed to worry about the consequences of mistakes and therefore put more effort into avoiding them.” “Due to their natural caution, they can also be very effective in assessing risk.” While the stereotypical job for more neurotic people is technical, back-office work, Spencer Lord believes that the best leadership groups often include someone highly neurotic in the mix. He cites an example to support his argument by saying that “on one board of directors he works with, the most important person, the financial director, has just such a personality”. Probably in this case of (in the example given by Spencer Lord) it seems that the Financial Director is a lady, as he further states that “her risk aversion, need for precision and near-obsessive attention to detail don’t make her the most popular member of the leadership team at times — she often shoots down ideas from her fellow directors — but she is utterly indispensable”.

When it comes to extroverts, its found that they are good at building relationships and getting themselves noticed, but they need to be able to show they have a good base of other skills, too, or risk being thought of as “style over substance.” Spencer Lord believes that “when it comes to hiring, it is important that companies think about how candidates’ personalities may help them fit into the organization or on teams. The individual can have all the skills, qualifications and experience in the world, but if he/ she cannot gel with your people, then the hire will not be successful.

      —————— Always Yours — As Usual — Saurabh Singh
Source: The study can be found at portal http://www.viewsnext.com

Two Issues: Tihar Jail’s Misadministration –&– Legitimacy of Death Sentence

It seems better to start by letting the audiences of this post know that, this write up is  neither going to focus on Delhi Moving Bus Gang rape Issue nor on Progress made in the case, though it deals with the death of one of the accused of Delhi Moving Bus Gang rape . The focus here is on administration of Tihar Jail. The write up then turns towards another aspect of issue, which is the demand by some of activists to government and judiciary of country the rape convicts should be condemned and executed. The write up simply raises the issue that can execution be any kind of punishment. It is normal understanding that when one talks of punishment, then in the process of punishment the individual being punished, does not lose his life from the very to the very end of the process. Such punishment where an individual has to lose his life is also against the very spirit of the Constitution of Indian Republic that provides Right to Life as Fundamental Right of any individual.

 The people from media, and through them others, were aware that all accused in case were on suicide watch and such prisoners are never left alone. In such a scenario how can one of the accused (Ram Singh) commit suicide without being noticed by Jail Administration or even his three cell mates? This is a question of administration and security inside India’s fortress-like Tihar Jail, the nation’s largest such facility.

 Can the mysterious death of Delhi gang-rape prime accused be taken at face value? It is an unbelievable suicide case, if taken on face value, as this requires the person committing suicide to possess gymnastic dexterity and phantom-like stealth. Even if one is ready to buy this story, then what are circumstances due to which, the rest four accused of infamous Delhi rape case when produced in front of fast track court (which is listening case), pleaded with folded hands said ‘Shoot us, but don’t send us back there’(Source). This aspect again stops the people from buying the story as narrated Prison staff.  .

This makes it necessary for the people, living outside the Tihar Jail, to learn what transpires inside the Tihar Jail, or to say how the inmates are dealt with inside the Tihar Jail. The other important issue is that how the jail administration communicates of incidents happening inside, while addressing/ informing the people living outside the Tihar Jail.

 The suicide (murder) by (of) accuse Ram Singh occurred despite of the fact that, two months ago, Delhi Police allegedly intercepted calls from a Tihar Jail inmate, who was illegally using the phone of a jail employee. In one conversation the inmate, say sources, hinted that there could be an attack on the five men accused of brutally gang-raping a medical student on a bus in Delhi. Sources said that in the conversation allegedly intercepted by the police, the inmate indicated that the rape accused could be attacked while on their way to the Saket fast track court for daily hearings. Tihar jail officials were reportedly briefed about this specific threat and security for the five men was increased. Lately, about 20 to 30 gun-toting policemen would escort them to the court and inside it. The Tihar Jail authorities are yet to submit a preliminary report on Ram Singh’s death, the circumstances of which have raised many questions (Source).

To get an understanding of what transpires inside Tihar Jail, you need to talk to someone who has stayed there for considerable time. The best would be the individual who has stayed in Tihar as under trail. Probably a serious will to learn the situation inside made one of the correspondents (Mr. Vicky Nanjappa) (Source) to have some dialogues with Professor S. A. R. Geelani (who spent several years in Tihar Jail). S A R Geelani, a Delhi University Professor who was acquitted in the 2001 Parliament attack case, spent a considerable amount of time in Tihar.

 FIRST ISSUE – THE ADMINISTRATION IN SIDE TIHAR JAIL

It all started with mysterious death of Ram Singh, the prime accused in the December 16, 2012 Delhi gang-rape case, inside Tihar Jail on Monday has raised doubts about security at the high-profile prison.

 Professor S. A. R. Geelani’s first person account of an inmate’s life inside Tihar Jail:

 The moment you enter this prison, you feel as though you are going back to the 13th century.

Based on what I have heard of other jails and when I compare that to my own experience in Tihar Jail, this prison appears to be the worst in the country.

The problem begins with the authorities. The prisoners are made to feel like slaves and each one is at the mercy of the authorities. I assure you that no untoward incident can ever take place inside Tihar without the knowledge of at least one jail staff member.

The other thing I noticed was the differential treatment among prisoners. If you are an ordinary citizen, you can expect the worst. But if you are well-connected politically or have a lot of money, then you can buy your way through to comforts. I have seen several well-connected people get their way easily in Tihar.

It is hard to believe the kind of gang wars that take place there. Very often, members of rival gangs are lodged in the same cell. Very often, the authorities turn a blind eye to fights between gangs, which is quite a disgusting sight. I have witnessed it several times.

 Security in Tihar is tight. Each prisoner is under constant watch. The militants are imprisoned in high-security areas and there is not much communication with them. Their cells are very well guarded. There is ample security for the other inmates as well, and that is why I say nothing untoward can happen without the knowledge of the authorities.

There also exists a communal sentiment inside Tihar Jail. It can get communally charged at times. In my observation, it is the jail authorities who ignite such feelings. I find it hard to believe that Ram Singh hanged himself. He was under suicide watch and such prisoners are not left alone, even for a moment. It is therefore impossible for him to have committed suicide. I also fail to understand how Singh could have hung himself from the ceiling. Every cell in Tihar has a very high ceiling and it is impossible to reach it.

 Let us assume that he managed to reach the ceiling with great difficulty. There would have been a lot of noise and this would have drawn the attention of the authorities. There were three other inmates with him in that cell. I am sure he could not have killed himself without waking up them up.

 Observations

 Some of the inferences that can be deduced from the first person account provide above, is that this suicide makes an issue for serious thinking and dialogue. It is courts who send people to jail for keeping law and order situation under control outside the Jail. Inside the jails, it’s assumed that due to availability of law and order enforcing personnel, i.e., people of Police Services, people inside the jail would not have to suffer violation of law and order in any way and their fundamental rights would be ensured.

Somehow, if the scenario is same as told by S A R Geelani, then Hon’ble Judges delivering the judgments need to think thrice, before sentencing anyone to Jail. It’s further expected that the Courts of Law take a serious note of such an issue, i.e., loss of life occurring inside Jail of an inmate, not condemned by law after following full procedure. Even if the jail inmate has been condemned by the courts, then too till the time individual is alive should be permitted to live in a dignified manner and should also be permitted to take recourse to all the legal options available there forth. When and as all the options available have been exhausted and individual has not been provided any relief by any of them, then too, only the legal process as described in the Jail manual should be for execute the condemned person.

 SECOND ISSUE – VALIDITY OF DEATH SENTENCE AS PUNISHMENT

The author in his personal opinion does not favor the provisions of capital punishment. If an individual has committed any crime leading to loss of life of any member of the society, and as a punishment hangs him, then probably there is no difference between that individual and the society. This is being argued for the reasons that if death happens to be one of the forms of punishment, the individual, who has been sentenced to death, may also have executed an individual with the intention of punishing him for his deeds, meaning thereby, that individual too had followed the same process as has been followed by the society. Now who will hang the society or the individuals who ordered and committed the execution, and even if any authority can get this done, then where this process will end?

 If any individual argues that such a provision works as deterrent for people who think of repeating those kinds of heinous acts, then too, I do not find any sanity in this argument and request to authorities that such individuals be lodged in reform homes under careful supervision of specialists.

 Loss of life has neither worked nor will ever work as deterrent to anyone except cowards. Let me put two extreme but non – related observations:

1. If loss of life would have worked as deterrent, then you would have got none to join the armed forces of nation. As securing the nation and advancing in enemy territory, both are expected to start with sacrificing the life. This means there exist motives and emotions which makes an individual feel that achieving the objective being pursued by him/ her is many times valuable than his own life. Or can I expect that someone will offer a different reason for individuals turning them into Fedayeen’s (living and moving Human Bomb)?

 2. If the execution of a condemned person works as deterrent for people who think of repeating those kinds of heinous acts, then probably after execution of Mr. Nathuram Godse, for his act of killing Mr. Gandhi, there would not had occurred any incident involving the assignations of top political leaders in the country. Somehow such acts have only increased in number as can be seen in the cases of Mrs. Indira Gandhi, Mr. Rajiv Gandhi, Mr Baint Singh and some more political personalities.

 I am halting this deliberation here, and if required, may proceed further. Till then happy reading and Good Luck,

                                                                                                      ——————–Always Yours, as Usual — Saurabh Singh

India and Italy – Taking a New Shape

Italian foreign ministry’s announcement on Monday, March 11, 2013, that the two individuals belonging to its marine corps (Massimiliano Latorre and Salvatore Girone, who had shot dead two unarmed Indian Fishermen in Cold – Blood perhaps for adventure  and were facing trail in India Court on the Charges of Murder) would not return to India once their leave expires in view of a “formal international controversy” between the two countries. This is a response to a humane and goodwill gesture shown by Indian Court, which permitted them a leave so that they can go to their country to cast their vote. Indian court had at an earlier occasion permitted the duo to visit their home for Christmas Celebration, after availing which they reported back.

Italian Government and its citizen have always been found grossly lacking in integrity and morality. This can be inferred from a  number of instance where Indian authorities were deceived and cheated by them. If one starts from issues, that probably one that could be easily recalled by masses, one can start with role of Italian businessman Ottavio Quattrocchi during Bofors gun contract in 1990  where kickbacks were paid to earn the contract, the same was followed by a recent deal in which Chief Executive and Chairman Giuseppe Orsi of Italian defence group Finmeccanica has been found to have paid kickbacks worth $68 million to secure the contract for the sale of 12 Agusta Westland choppers to India in 2010.  This has been followed by a very serious breach of integrity by act of Government of Italy, where the government of Italy has back tracked from its own guarantee or promise that it made to Indian Supreme Court in present case where its two mariners were being tried for murder committed by them of two unarmed Indian fishermen in coastal waters of India.

Probably – Indian authorities and Public too, would have learned till now that any and every kind of interaction with Italy has, irrespective of being business or political has caused a great deal of embarrassment to the country. So why do they repeat it? Italian Government and Citizens (as Government represents them) both lack seriously on the scale of integrity. Such country needs be socially politically and economically outcast by world community. One can understand when Terror Groups back track on their promise, but here this Country is behaving worse than terrorists. Now I comprehend why Roman Empire got lost into oblivion. I expect that Consequences as told prime minister will turn visible both to Indian Citizen as well as International Community. “Our government has insisted that Italian authorities… respect the undertaking they have given to the Supreme Court and return the two accused persons to stand trial in India,” Mr. Singh said in Parliament on Wednesday. “If they do not keep their word, there will be consequences for our relations with Italy,” he added, as lawmakers cheered.

At some points I feel that Indian Constitution by the way of providing Three Pillars for having Check and Balance over each other’s powers was really a very well thought of work, at least till time Indira Gandhi had not succeeded in snatching all the powers of decision making from The President of India or to say before turning the office in just a rubber stamp which needs to be put on legislation to accord them status of being Act. But then it were, the citizens, who permitted her to do this by giving her a majority of more than two – third.

Now as a consequence of legislature being fragment it’s the Judiciary that has got some breather to act in an independent manner. They are luckily not failing in their duty and are showing the courage to let the national and international community learn that it’s the constitution that is supreme in India and promises made by any authority are meant to be kept and not broken, meaning thereby that breach will not be tolerated.

The Supreme Court of India sought to restrain Italy’s ambassador from leaving the country in response to Rome’s declaration that two Italian marines will not return to India to stand trial on murder charges. The pair are accused of shooting and killing two Indian fishermen off the coastal state Kerala last year. They deny they committed murder. Italy and India disagree over where they should stand trial, an issue that has triggered a diplomatic dispute and polarized public opinion in both countries

In January, India’s Supreme Court said the two men, Massimiliano Latorre and Salvatore Girone, will face trial in a special court in Delhi. A month later, the court agreed to an Italian government request to allow the two men to leave India and travel to Italy for four weeks to vote in elections. At the time, Mr. Mancini, the Italian ambassador to New Delhi, guaranteed to the court the marines would come back to India.

In a notice, the court said Italian Ambassador Daniele Mancini is not allowed to leave India without its permission, said India’s attorney general, Goolam E. Vahanvati, in an interview. Some individuals doubt the court’s move to be compatible with the terms of the Vienna Convention on Diplomatic Relations, an international treaty that grants diplomats immunity from criminal, civil and administrative jurisdiction in the country that hosts them.

But the case here is very different. It is Mr. Daniele Mancini (who somehow happens to be Italian Ambassador to India) who stood in court as Guarantee to the court regarding the marines returning back to India after casting their votes. There court has asked Mr. Daniele Mancini to stay put in country till mariners do not return to stand the trail as he stood the guarantee. Court never wants’ the Italian Ambassador to India stay put. But certainly court is not interested in allowing Mr. Daniele Mancini to use his position of being Italian Ambassador to India to work as camouflage in escaping from his promise by forwarding the Vienna Convention in his defense. In fact there is no need to be worried about Vienna Agreement as Italy has itself by its act of not standing to promise made has violated more than a single international pact. If Indian Government feels like, it has all the freedom to launch a military offensive on Italy, as India needs to make sure that in and around Asian continent, rogue states and elements do not dare to raise their heads. Though I am not recommending a military action on Italy, here I am just talking about the rights of India to deal with a Rouge Government or a Government which fails in keeping its promise

Any way Diplomatic immunity is for crimes punishable with fine like parking, not for crimes punishable with jail terms. So there is no diplomatic immunity for the Italian ambassador in the Italian marine bail application. By subjecting himself to the Indian court jurisdiction Mr. Ambassador loses his stand as ambassador and has a role only as a foreign citizen.

                                                                                                                  ————— Always Yours — As Usual — Saurabh Singh

Source:[Website]

Venezuela in transition: What Next after Hugo Chavez

“Chavismo” – Its Meaning and Interpretation

During the fourteen years of Hugo Chavez’s Presidency, Valenzuela was country driven by his personality more than his policies. This gave birth to a term called “Chavismo”, normally used by political commentators and contemporary historians.

In attempt to describe the meaning contained in word “Chavismo”, I would say that Chavismo didn’t encompass the political machine alone , but also a leftist ideology that, prioritized the redistribution of oil wealth to the marginalized and valued, sovereignty as something to be protected from “imperialist” powers.

Now which path will “Chavismo'” will tread can not be predicted with certainty. This is not for the first time that a powerful leader has departed. History of serious geographies are full the incidents in history. As per the testimony of History, it can be inferred, that as many other powerful leaders who departed creating a vacuum have seen their ideologies live on, though not without change.

Professor Javier Corrales, a professor of political science at Amherst College who studies Venezuela expresses his opinion with words as in quotes ahead “there is a trade-off between the degree to which a government centers, on one person, and the strength of that country’s institutions. ” Perhaps due to it being a complete sum, i.e., one, the stronger the central figure will turn, the weaker will be the fortunes of institution. It has been observed over the years, in history of nations, that any society or nation lands in crisis if it were being ruled (or governed) more by the personality of the leader than his policies and ideologies.

Hugo Chavez, a democratically elected, had to face the accusation of being authoritarianism, as his style of governance made his opponents feel that he is attempting to consolidate all the power in the presidency.

Hugo Chavez’s transformation into Everlasting Personality

The world has seen many able and honest administrations and rulers (some elected democratically, some princely in origin, some who took power with coercion, and many more of the kind ), but not all of them achieve a status of hero or legend. Such leaders are rare, but once they are there, the people do not let them go in their life time. This is irrespective of the policies adopted by such rulers.

Policies of such leader may not stand the test time, economy, prudence and other such words; despite of this such leaders have longer reigns (tenure) as compared to rulers whose policies may best fit the tests mentioned at the start of this sentence.

Perhaps, it were one of his most criticized policy by economists, who went even to the level of dubbing it as unsustainable, that earned him the status of Hero and further metamorphosed in what is now known as “Chavismo”.

It was Chavez’s dedication to putting the nation’s poor at the forefront of his policies, which made him a hero among a large sector of the population. His opponents criticized him for his freewheeling spending of oil wealth of the nations, but Venezuela’s poor saw results and elevated Chavez to hero status.

Millions of poor saw and found hope in Hugo Chavez, as they believed that this man can make earn a decent life. This hope and expectation of million of people of Venezuela is looking into the void that has resulted due to departure of their most cherished leader.

The issue haunting the ruling class, opposition and others in Venezuela most is: 1) that who will appropriate his image, 2) how his image can be used beneficially. Probably it seems that the Venezuela’s opposition may attempt to retain some aspects of legacy that has been left by Chavez and claim it to be their own. This inference is being drawn based the way opposition designed it’s last year’s electoral campaign where they promised that social missions initiated by Hugo Chavez will not be undone, they will just be fine tuned to make them more efficient and effective.

One can also deduce the same if (s)he has monitored or followed the tweets from Luis Vicente Leon, Director, Daranalisi (a polling firm). He too predicted similar thing in his tweets even prior to Hugo Chavez’s Death.

Such status, specially in Latin America means a lot. It is something that never disappears with the person who has earned such status but lasts much longer due to the weight it carries. Often it has been seen that politicians normally manipulate memories of such individual leaders, to serve their political purposes and benefits, and same may turn out the fate of Hugo Chavez too in very near future. What ever may be the fate of legacy earned and left behind by Hugo Chavez, but his memory would be a lasting one in the hearts and minds of people of Venezuela.

Two other individuals (leaders) who earned such Status in Latin America. though are no more but they are still present in the memories of people and also in expressed ideologies of some political parties (may be for their own political benefit than anything else).

Sandinismo: Augusto Sandino was the leader of a rebellion in the late 1920s and early 1930s against an American occupation. Years after Sandino was killed, Nicaraguans used his image as a symbol in their own rebellion to overthrow a dictatorship. A movement, the Sandinista National Liberation Front, was born. The current Sandinista president uses the same symbol and movement, though it has been manipulated from earlier Sandinismo.The Sandinistas are in power even today in Nicaragua, under President Daniel Ortega, though the movement has little to do with its origins. it can be inferred that this movement in Nicaragua has survived over the years and is still in vogue.

Peronism: Peronism is a movement named after Argentine President Juan Peron. Juan Peron was one of Former Presidents of Argentine. His legacy has been claimed and manipulated over the years by parties both on the political right and left.

Fidel Castro: Change in Cuba was more subtle after the passing of the torch from Fidel Castro to his brother Raul Castro. The Castros share their communist views, but after the younger Castro took office, he purged some men and has since pursued policies to somewhat open up Cuba.

It seems that in the Popularity of Hugo Chavez combined with the outpouring of tributes in the wake of his death, make a Chavista victory likely in the new elections that must be called. Maduro was named by Chavez as his preferred successor and could easily win the election, but he will have to put the movement’s unity as his priority.

There are divisions within Chavismo that have come to light as Chavez’s health faded. Some stand behind Maduro, who is close with the Cuban regime, while others side with Diosdado Cabello, the National Assembly president who is more of a nationalist. Because Chavez was never sworn in for his latest terms, there is even a debate Maduroover which of the two, constitutionally, should be the interim president.

Indian Presence at the State Funeral of Hugo Chavez: India was represented by Mr. Sachin Pilot, Union Corporate Affairs Minister at Caracas.

Probably this too is one of things that make world go round………….

                                                                                                                      ————— Always Yours — As Usual — Saurabh Singh

Source: ViewsNext.Com

One Percent versus Ninety Nine Percent: A Debate

INDIA DOESN’T NEED FDI IN RETAIL TO GROW — Joseph Stiglitz

Nobel Laureate of 2001 in Economic Joseph Stiglitz (who shared it with two more), presently Professor at University of Columbia, is  credited with starting the “1% versus 99%” debate. The Columbia University professor talks about his latest book, “The Price of Inequality”, in which he argues that economic inequality leads to instability

• The title of the book reflects a view that counters the right-wing argument that inequality may be a bad thing but to do anything about inequality is to kill the goose that lays golden eggs. Inequality is bad for economy, democracy and society. Much of the inequality in the US arises out of rent-seeking —monopoly, exploitive practices by banks and corporate exploitation of public resources. In the Indian context, you will call it corruption but we call it corruption American style, where you give away natural resources below market prices. India is doing it now but America has a long history of doing this.

There is a clear association between inequality and instability. People at the top don’t spend too much, they save a lot but people at the bottom spend everything. So you redistribute income from the bottom to the top and demand goes down. That makes an economy weak. That is what happened in the US. We would have had a weaker economy, but the Feds stepped in by creating a bubble that created more demand to offset the demand that was going down. Of course, creating a bubble was creating instability.

• Stiglitz confessed that both the IMF and the UN commission that I chaired came to the conclusion that inequality was one of the major causes for the crisis. It is not the direct, precipitating cause that bad lending was, but bad lending was a result of deregulation and the interest rates that were itself a result of inequality. If we don’t improve inequality and don’t do something else, it is going to be hard to get back to robust growth and prosperity. We are likely to have another housing bubble.

• He further opines, that in the presidential debates none of the candidates have mentioned the word ‘inequality’ as American politics is money-intensive and money-driven. Each of the candidates is expected to spend a billion dollars. When you spend so much, you have to go where the money is, and money in America is at the top. Therefore it is not a surprise that in the campaign you don’t hear a lot of discussion about inequality and the 1%. You don’t bite the hand that is feeding you in the middle of an election.

• He say that this debate may last or  may remain a phrase, he is not sure of, but it will be a part of America unless the problem of inequality gets addressed. It is just not that the top 1% get three to four times more that what they got in the 1980s, but the middle class today is worse off. When you have this degree of stagnation in the middle, there will be an expression through the political process.

• Stiglitz feels that GDP is not a real measure (or say per capita income) of development. he says that, I haven’t looked at India exactly, but it has strong implication for every country. In the case of China, if you take into account the environmental degradation and resource depletion, growth is much less than what it seems. You need that debate in India. Your GDP is going up, you have per capita highest number of billionaires but at the same time you have many people in poverty. So the GDP per capita doesn’t capture what is happening. In India, the progress in the middle and at the bottom has been less than what GDP in itself would like you to believe.

• When asked about the current issue in Indian Economy, that is FDI in retail, he puts it this way.  The advocates of FDI have probably put too much emphasis on it. India is in a different position than a small, developing country. You have a large pool of entrepreneurs. They are globally savvy, have access to global technology and they have a lot of wealth. So, if there were large returns to large-scale supermarkets, the domestic industry would have supplied it. Not having access to FDI is not an impediment in India. Wal-Mart is able to procure many goods at lower prices than others because of the huge buying power they have and will use that power to bring Chinese goods to India to displace Indian production. So the worry is not so much about the displacement of the small retail store but displacement further down the supply chain.

When an argument that ‘But big chains may create more jobs’; he told that  some of the profits of companies like Wal-Mart come from free riding on our society. They don’t provide healthcare benefits and assume that the spouses of the workers get healthcare benefits from their other employees or through some other mechanism. They might not be a good employer.

Always Yours — As Usual —- Saurabh Singh

Source: TOI

Probably Character and Integrity of Committee and it’s Members is Reflected in Decisions Made by It

Every one probably learns from the very childhood that actions speak louder than words and man is known by the company he keeps. The decisions, made by a committee, in context of previous sentence, should represent the character and integrity of the members of the committee. The two decisions made by a committee are provided here under, which will clearly let anyone understand that, what the main criterion behind such decision was. The Committee that took this decision is as detailed ahead:

The search-cum-selection committee was headed by HRD Minister Mr. Kapil Sibal and consists of chairpersons of UGC; AICTE; Mr. Shiv Nadar, chairperson of IIT Kharagpur, and Mr. Kris Gopalakrishnan of Infosys as members

(1)Choices of panel headed by Kapil Sibbal for Selecting Directors of IITs have already caused an embarrassment to ministry when the panel selected AK Bhowmick, for heading IIT Patna, as his name was not cleared by vigilance cell due to him being indicted by the CBI in the coal net scam.

(2)This time also, this panel has selected PP Chakrabarti as its first choice for heading the IIT Kharagpur. It’s known to all that CBI had recommended penalty against him in the coal net scam and even the CAG had pointed out gross violations. Probably it will be another embarrassment for HRD Ministry, if his name is not cleared again by vigilance.

Now you can decide on character and integrity of the committee members, as I have nothing to say further.

Always Yours — As Usual – Saurabh Singh

Source: Times of India & Indian Education Review

RETIREMENT AGE DE-LINKED FROM SIXTH PAY COMMISSION RECOMMENDATION GIVEN BY UGC

In yet another move to keep states happy about their autonomous status, the Center on Thursday is likely to clear the proposal of allowing them to decide on fixing the retirement age (maximum 65 years) of lecturers in colleges and universities run by state governments. Earlier, the UPA was insistent that states should enhance the lecturers’ retirement to 65 years to enable them to get 80% of the arrears burden of state governments. The arrears — at least Rs 9,000 crore —went up since the Center had asked the states in 2008 to follow the Sixth Pay Commission scales that centrally- funded institutes introduced in the same year, with retrospective effect from January 1, 2006. The Center had said it would bear 80% of the increased arrears for the first four-year period — between April 1, 2006, and March 31, 2010 — if states followed its order. Now, the government plans to foot this sum only in the form of reimbursements in “two-three” installments. This is likely to benefit around four lakh teachers across the country. The ministry cleared this proposal after a committee of secretaries, headed by cabinet secretary, supported the state governments’ demand. Sources said that there could be political reasons for states to push the need for greater autonomy as far as fixing the retirement age is concerned. “Some states might want to fix 60 or 62 years for retirement so that fresh batch of qualified people can apply for jobs, and this will also increase the scope of promotion for many lecturers,” said a senior government official. The sixth pay package for teachers, based on which the scales of centrally-funded institutes were revised, has a provision that requires increasing the retirement age to 65 years. At present, the retirement age of teachers varies across states – from 58 to 60 years.

————————–Always Yours —-  As Usual —– Saurabh Singh

 

 

 

State of the World Economy

Backdrop
The IMF believes that global prospects are gradually strengthening after the setback during 2011, though downside risks remain.  This is mainly due to improved economic activity in USA during the second half of

2011 and pursuance of more effective policies in the euro area which have reduced the threat of a sharp global  slowdown. Accordingly it is expected that there will be a weak recovery in the major advanced economies  while  there  will  be  relatively  more  solid  support  from  most  emerging  and  developing economies.

Fundamentals

Global growth is projected to drop from 4% in 2011 to 3.5% in 2012 because of weak activity during the second half of 2011 and the first half of 2012. However, growth is expected to revert to the 2011 level in

2013 when hopefully the pending issues are ironed out successfully especially by the developed nations. Policy  has  played  an  important  role  in  lowering  systemic  risk  such  as  ECB’s  three-year  longer-term refinancing operations (LTROs), aggressive fiscal adjustment programs, and the launch of major product and labor market  reforms. This has to an extent helped to stabilize conditions in the euro area thus relieving pressure on banks and sovereigns.

The euro area is still projected to go into a mild recession in 2012 as a result of the

o  sovereign debt crisis and a general loss of confidence,

o  effects of bank deleveraging on the real economy, and,

o  pressure of fiscal consolidation in response to market pressures.

Overall growth is expected to turnaround in 2013, while 2012 will remain a year of cautious uncertainty given the risk factors involved. Advanced economies as a group would expand by about 1.5% in 2012 and by 2% in 2013. This would be an improvement over the 2011 level too. Italy however, is expected to still be in the negative territory  with the recession getting protracted for another year. Japan on the other hand is to take lead in terms of growth in 2012 along with USA, but slowdown marginally in 2013.

Real GDP growth in the developing economies is projected to slowdown from 6.25% in 2011 to 5.75% in

2012 but recover to 6% in 2013, helped by easier macroeconomic policies and strengthening foreign demand. Both China and India are expected to slowdown in 2012 though the ASEAN group will continue to grow steadily in both 2012 and 2013.

Inflation  however,  is  expected  to  come  down  in  both  2012  and  2013  for  both  the  advanced  and developing nations, reflecting the tempering of commodity prices in the face of feeble economic growth  in 2012.

The recovery process

Markets have been worried about fiscal sustainability in Italy and Spain all through 2011 which led to a sharp increase in  sovereign yields. With the value of some of the banks’ assets in doubt there was apprehension on whether those banks would be able to convince investors to roll over their loans. This lead to freezing of credit which in turn resulted in erosion in confidence as activity slumped. Strong policy responses however turned things around. Elections in Spain and the  appointment of a new Prime Minister in Italy gave some reassurance to investors. The adoption of a fiscal compact showed the commitment of EU members to dealing with their deficits and debt. Most important, the provision of liquidity by the ECB removed short-term bank rollover risk, which in turn decreased pressure on sovereign bonds. Some of the reforms seen were:

o  The European Central Bank provided unlimited, collateralized three-year liquidity to banks which eased bank funding strains and contained the risk of illiquidity-driven bank failures.

o  Governments in several countries, notably Italy and Spain, worked to reduce fiscal deficits.

o  Ireland and Portugal made good progress in implementing their structural adjustment programs.

o  Greece came to a major agreement to restructure debt held by the private sector, and a successor program has been agreed with the European Commission, the European Central Bank (ECB), and the IMF, and approved by both euro area member states and the IMF.

o  Euro area banks are in the process of securing stronger capital positions under a European Banking

Authority (EBA)-coordinated initiative.

The concerns

There could however be two main brakes on growth: fiscal consolidation and bank deleveraging. While both are needed   today,  they  will  most  certainly  decrease  growth  in  the  short  term.  Fiscal  consolidation  is  being implemented in  most advanced economies while bank de-leveraging is affecting primarily Europe. While such de-leveraging does  not  necessarily  imply  lower  credit  to  the  private sector, the  evidence  suggests  that  it  is contributing to a tighter credit supply.

How about emerging economies?

Emerging economies are not immune to these developments even though it does appear that they are decoupled in terms of pace of growth. Low advanced economy growth has meant lower export growth for them. Further financial uncertainty, together with sharp shifts in risk appetite, has led to volatile capital flows impacting their balance of payments and  exchange rates. However, it has been observed that generally these countries had enough policy room to maintain stable growth. But, some countries need to watch overheating, while others still have a negative output gap and can use policy to sustain growth.

Major risks

Some of the risks that the global economy faces are quite different from the normal ones.

o  Geopolitical tension affecting the oil market is the obvious and known risk. An increase in these prices by about 50 % would lower global output by 1.25%.

o  Another acute crisis in Europe is an unknown one and given the developments that have taken place in

2011, can never be ruled out. Further escalation of the euro area crisis will cause output to decline by 2%

and 3.5% over a two-year horizon.

o  Balancing  the  adverse  short-term  effects  of  fiscal  consolidation  and  bank  deleveraging  versus  their favorable long-term effects. Excessive tight macroeconomic policies could push the major economies into sustained deflation or a prolonged period of very weak activity.

·    In the case of fiscal policy, the issue is complicated by the pressure from markets for immediate fiscal consolidation. Markets ask for fiscal consolidation but react badly when consolidation leads to lower growth.

·    Deleveraging can lead to a credit crunch, either at home or abroad. Partial public recapitalization of banks does not appear to be on the agenda anymore, but perhaps should be.

o  A latent risk could be the disruption in global bond and currency markets as a result of high budget deficits and debt in Japan and United States and rapidly slowing activity in some emerging economies.

Policy thrust

Measures should be taken to decrease the links between sovereigns and banks, creation of euro level deposit insurance,  bank crisis resolution, and introduction of limited forms of Eurobonds including the creation of a common euro bill market. These measures are urgently needed and can make a difference were another crisis to take place soon. In the euro area, the recent decision to combine the European Stability Mechanism (ESM) and the European Financial Stability Facility (EFSF) is a good pragmatic move which will strengthen the European crisis mechanism and support the IMF’s efforts to bolster the global firewall.

In the United States and Japan, sufficient fiscal adjustment is planned over the near term but there is still an urgent  need  for  strong,  sustainable  fiscal  consolidation  paths  over  the  medium  term.  Also,  given  very  low domestic inflation  pressure, further monetary easing may be needed in Japan to ensure that it achieves its inflation objective over the medium term.

How about the developing countries?

Developing  economies  continue  to  reap  the  benefits  of  strong  macroeconomic  and  structural  policies,  but domestic vulnerabilities have been gradually building. Growth has been supported by rapid credit growth and high commodity prices.  To  the extent that credit growth is a manifestation of financial deepening, this has been positive for growth. But in most economies, credit cannot continue to expand at its present pace without raising serious concerns about the quality of bank lending. Further, commodity prices are unlikely to grow at the elevated pace witnessed over the past decade, which means that fiscal and other policies have to adapt to lower potential output growth.

The challenges  are  to  counter  the  impact  of  downside  risks  from  advanced economies,  ensuring that  their economies  do not overheat, control credit growth, tackle volatile capital flows, and have policies in place to counter inflation.   Monetary policymakers need to be vigilant that oil price hikes do not translate into broader inflation pressure, and fiscal policy must contain damage to public sector balance sheets by targeting subsidies only to the most vulnerable households. This will hold in our own context too.

Fiscal indicators

The performance of governments across the world has become an important concern today in the light of the sovereign  debt crisis that pervaded the euro region. The genesis lay in high unsustainable debt levels of the government that could not be serviced.
The table below gives the Government debt to GDP ratios for a set of countries in both the advanced and developing nations groups.
Table Containing GDP Data
Debt levels remain at a higher level for the advanced countries relative to those of the developing nations. These levels are not expected to change significantly for the advanced nations while those for the developing nations would be tending to move downwards.

A similar picture is obtained also on the fiscal deficit side (ratio of government balances to GDP), where levels are higher  for  the  advanced  nations,  which  however,  are  expected  to  move  downwards  on  account  of  fiscal consolidation (in Table -3 above). India’s fiscal balance is on the higher side within the set of developed nations covered here and is comparable with that of USA, Japan and UK.

—-Compiled and Presented [from Respective Sources for wider non-commercial circulation].

——————————————-Always Yours — As Usual —- Saurabh Singh

An Introduction to Indian Stock Market Index(s) —- SENSEX & NIFTY

The time I invested since my student days, to Private Corporate Sector, and presently working with a public sector autonomous body, I got opportunity to interact with good number of individuals who either were aspiring to get into a B-School so that they can land up smoothly and get absorbed in the vacant Human Resource Positions/ existing Manpower Requirements of Corporate (Private or Public) Sector.

I met one more category of individuals [relevant to this write up], who were pursuing their Post Graduate Program at some institution or Master’s Degree Program at some University to earn their PG Diploma in Business Management or Master of Business Administration Degree.

Since at this level they happen to be very new, it is not expected of them to be expert enough to understand the complexity of Industrial and Corporate Sector. Often, I noticed that at this stage, they thought that Business Administration as probably something very near to (if, not synonymous to) knowledge domains called as Economics or Commerce.

The other component that they look as business is Stock Market Index [Sensex or NIFTY], as they often see numerous articles discussing the business scenario or economic scenario and relating these to Stock Market Index in or the other context. Specially, since 2008 onwards there has been so much volatility and lack of stability in markets that now they often make headlines in Political News Papers too.

I found them, often very curious, to learn what Stock Market Index is, how it is created, why it is there, how is it a reflection of economic scenario and many more questions of the similar kind.

The problem is that majority of such individuals, even after having earned their degree or diploma sometimes, are not aware of it. There is no use deliberating on issue that why it is so, as that is not the subject of this deliberation. So coming directly to the topic, and that is to explain the heads mentioned below:

1. History of BSE                             

2. Calculation Methodology                     

3. Scrip Selection Criteria                              

4. Free Float Methodology     

5. Definition of Free Float                           

6. Major Advantages of Free Float

7. History of NIFTY                    

8. Calculation Methodology                      

9. Scrip Selection Criteria

The same follows here onwards:

HISTORY OF BSE SENSEX

SENSEX, first compiled in 1986, was calculated on a ‘Market Capitalization-Weighted’ methodology of 30 component stocks representing large, well-established and financially sound companies across key sectors. The base year of SENSEX was taken as 1978-79. SENSEX today is widely reported in both domestic and international markets through print as well as electronic media. It is scientifically designed and is based on globally accepted construction and review methodology. Since September 1, 2003, SENSEX is being calculated on a free-float market capitalization methodology. The ‘free-float market capitalization-weighted’ methodology is a widely followed index construction methodology on which majority of global equity indices are based; all major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the free-float methodology.

The growth of the equity market in India has been phenomenal in the present decade. Right from early nineties, the stock market witnessed heightened activity in terms of various bull and bear runs. In the late nineties, the Indian market witnessed a huge frenzy in the ‘TMT’ sectors. More recently, real estate caught the fancy of the investors. SENSEX has captured all these happenings in the most judicious manner. One can identify the booms and busts of the Indian equity market through SENSEX. As the oldest index in the country, it provides the time series data over a fairly long period of time (from 1979 onwards). Small wonder, the SENSEX has become one of the most prominent brands in the country.

 

CALCULATION METHODOLOGY

SENSEX is calculated using the ‘Free-float Market Capitalization’ methodology, wherein, the level of index at any point of time reflects the free-float market value of 30 component stocks relative to a base period. The market capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company. This market capitalization is further multiplied by the free-float factor to determine the free-float market capitalization.

The base period of SENSEX is 1978-79 and the base value is 100 index points. This is often indicated by the notation 1978-79=100. The calculation of SENSEX involves dividing the free-float market capitalization of 30 companies in the Index by a number called the Index Divisor. The Divisor is the only link to the original base period value of the SENSEX. It keeps the Index comparable over time and is the adjustment point for all Index adjustments arising out of corporate actions, replacement of scrips etc. During market hours, prices of the index scrips, at which latest trades are executed, are used by the trading system to calculate SENSEX on a continuous basis.

 

SCRIP SELECTION CRITERIA

The general guidelines for selection of constituents in SENSEX are as follows:

  • Equities of companies listed on Bombay Stock Exchange Ltd. (excluding companies classified in Z group, listed mutual funds, scrip suspended on the last day of the month prior to review date, scrips objected by the Surveillance department of the Exchange and those that are traded under permitted category) shall be considered eligible.
  • Listing History: The scrip should have a listing history of at least three months at BSE. An exception may be granted to one month, if the average free-float market capitalization of a newly listed company ranks in the top 10 of all companies listed at BSE. In the event that a company is listed on account of a merger / demerger / amalgamation, a minimum listing history is not required.
  • The scrip should have been traded on each and every trading day in the last three months at BSE. Exceptions can be made for extreme reasons like scrip suspension etc.
  • Companies that have reported revenue in the latest four quarters from its core activity are considered eligible.
  • From the list of constituents selected through Steps 1-4, the top 75 companies based on free-float market capitalisation (avg. 3 months) are selected as well as any additional companies that are in the top 75 based on full market capitalization (avg. 3 months).
  • The filtered list of constituents selected through Step 5 (which can be greater than 75 companies) is then ranked on absolute turnover (avg. 3 months).
  • Any company in the filtered, sorted list created in Step 6 that has Cumulative Turnover of >98%, are excluded, so long as the remaining list has more than 30 scrips.
  • The filtered list calculated in Step 7 is then sorted by free float market capitalization. Any company having a weight within this filtered constituent list of <0.50% shall be excluded.
  • All remaining companies will be sorted on sector and sub-sorted in the descending order of rank on free-float market capitalization.
  • Industry/Sector Representation: Scrip selection will generally attempt to maintain index sectoral weights that are broadly in-line with the overall market.
  • Track Record: In the opinion of the BSE Index Committee, all companies included within the SENSEX should have an acceptable track record.

 

UNDERSTANDING FREE FLOAT METHODOLOGY

Free-float methodology refers to an index construction methodology that takes into consideration only the free-float market capitalization of a company for the purpose of index calculation and assigning weight to stocks in the index. Free-float market capitalization takes into consideration only those shares issued by the company that are readily available for trading in the market. It generally excludes promoters’ holding, government holding, strategic holding and other locked-in shares that will not come to the market for trading in the normal course. In other words, the market capitalization of each company in a free-float index is reduced to the extent of its readily available shares in the market.

Subsequently all BSE indices with the exception of BSE-PSU index have adopted the free-float methodology.

 

DEFINITION OF FREE FLOAT

Shareholding of investors that would not, in the normal course come into the open market for trading are treated as ‘Controlling/ Strategic Holdings’ and hence not included in free-float. Specifically, the following categories of holding are generally excluded from the definition of Free-float:

  • Shares held by founders/directors/ acquirers which has control element
  • Shares held by persons/ bodies with ‘Controlling Interest’
  • Shares held by Government as promoter/acquirer
  • Holdings through the FDI Route
  • Strategic stakes by private corporate bodies/ individuals
  • Equity held by associate/group companies (cross-holdings)
  • Equity held by Employee Welfare Trusts
  • Locked-in shares and shares which would not be sold in the open market in normal course.

 

MAJOR ADVANTAGES OF FREE FLOAT METHODOLOGY

  • A Free-float index reflects the market trends more rationally as it takes into consideration only those shares that are available for trading in the market.
  • Free-float Methodology makes the index more broad-based by reducing the concentration of top few companies in Index.
  • A Free-float index aids both active and passive investing styles. It aids active managers by enabling them to benchmark their fund returns vis-a -vis an investible index. This enables an apple-to-apple comparison thereby facilitating better evaluation of performance of active managers. Being a perfectly replicable portfolio of stocks, a Free-float adjusted index is best suited for the passive managers as it enables them to track the index with the least tracking error.
  • Free-float Methodology improves index flexibility in terms of including any stock from the universe of listed stocks. This improves market coverage and sector coverage of the index. For example, under a Full-market capitalization methodology, companies with large market capitalization and low free-float cannot generally be included in the Index because they tend to distort the index by having an undue influence on the index movement. However, under the Free-float Methodology, since only the free-float market capitalization of each company is considered for index calculation, it becomes possible to include such closely-held companies in the index while at the same time preventing their undue influence on the index movement.
  • Globally, the Free-float Methodology of index construction is considered to be an industry best practice and all major index providers like MSCI, FTSE, S&P and STOXX have adopted the same. MSCI, a leading global index provider, shifted all its indices to the Free-float Methodology in 2002. The MSCI India Standard Index, which is followed by Foreign Institutional Investors (FIIs) to track Indian equities, is also based on the Free-float Methodology. NASDAQ-100, the underlying index to the famous Exchange Traded Fund (ETF) – QQQ is based on the Free-float Methodology.

 

HISTORY OF NIFTY

S&P CNX Nifty is a well diversified 50 stock index accounting for 21 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds.

S&P CNX Nifty is owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India’s first specialised company focused upon the index as a core product. IISL has a Marketing and Licensing Agreement with Standard & Poor’s (S&P), who are world leaders in index services.

  1. Traded value for the last six months of all Nifty stocks is approximately 44.89% of the traded value of all stocks on the NSE
  2. Nifty stocks represent about 58.64% of the total market capitalization as on March 31, 2008.
  3. Impact cost of the S&P CNX Nifty for a portfolio size of Rs.2 crore is 0.15%
  4.  S&P CNX Nifty is professionally maintained and is ideal for derivatives trading

CALCULATION METHODOLOGY

S&P CNX Nifty is computed using market capitalization weighted method, wherein the level of the index reflects the total market value of all the stocks in the index relative to a particular base period. The method also takes into account constituent changes in the index and importantly corporate actions such as stock splits, rights, etc without affecting the index value.

SCRIP SELECTION CRITERIA

The constituents and the criteria for the selection judge the effectiveness of the index. Selection of the index set is based on the following criteria:

Liquidity (Impact Cost)

For inclusion in the index, the security should have traded at an average impact cost of 0.50% or less during the last six months for 90% of the observations for a basket size of Rs. 2 Crores.

Impact cost is cost of executing a transaction in a security in proportion to the weightage of its market capitalisation as against the index market capitalisation at any point of time. This is the percentage mark up suffered while buying / selling the desired quantity of a security compared to its ideal price (best buy + best sell) / 2

Floating Stock

Companies eligible for inclusion in S&P CNX Nifty should have at least 10% floating stock. For this purpose, floating stock shall mean stocks which are not held by the promoters and associated entities (where identifiable) of such companies.

Others
a) A company which comes out with a IPO will be eligible for inclusion in the index, if it fulfills the normal eligibility criteria for the index like impact cost, market capitalisation and floating stock, for a 3 month period instead of a 6 month period.

b) Replacement of Stock from the Index:

A stock may be replaced from an index for the following reasons:

i. Compulsory changes like corporate actions, delisting etc. In such a scenario, the stock having largest market capitalization and satisfying other requirements related to liquidity, turnover and free float will be considered for inclusion.

ii. When a better candidate is available in the replacement pool, which can replace the index stock i.e. the stock with the highest market capitalization in the replacement pool has at least twice the market capitalization of the index stock with the lowest market capitalization.

With respect to (2) above, a maximum of 10% of the index size (number of stocks in the index) may be changed in a calendar year. Changes carried out for (2) above are irrespective of changes, if any, carried out for (1) above.

Always Yours — AS Usual — Saurabh Singh

 Source: Money Control Portal

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