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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:


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.


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.


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

One Percent versus Ninety Nine Percent: A Debate


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

सियासती खेल

एक अरसे के बाद कांग्रेस पार्टी को सियासती खेल खेलते देखा. पिछली बार तो लगा था की कांग्रेसी नेताओं में सौदा (दिमाग) नहीं है I अमूमन तो कोई भी मजहबी अतिवादी या ऐसी ओर्गानैजेसन के मेम्बरान इतने हलके धमाके नहीं करते की वो जिस साइकिल पर वो बोम्ब रखा था उन्हें भी ख़ास नुक्सान नहीं हुआ I दहशतगर्द इतना तो ख़याल रखते ही हैं की इन धमाकों से अगर इंसान कम भी मरें, तो भी किसी भी हाल में जख्मी होने वालों की संख्या ज्यादा से ज्यादा हो I

मजहबी अतिवादी या ऐसी ओर्गानैजेसन के मेम्बरान बेकार में ही ऐसा जोखिम नहीं उठाते I इसका मतलब है की ये धमाके सियासती तोहफा थे, और मीडिया मैनेजमेंट काबिले तारीफ़ था की इन धमाकों की चर्चा मीडिया में भी ज्यादा न होकर बमुश्किल दो दिनों में ही ख़त्म हो गयी I इसके पहले भी तीन ग्रिडों का फेल होना महज इत्तेफाक नहीं हो सकता, और गर हुआ भी हो तो वह ४ – ६ घंटों में दुरुस्त नहीं किया जा सकता I अबकी कांग्रेसी सरकार ने अरविन्द केजरीवाल और टीम को सियासती दावों से मात दे दी I इतने ज्यादा और इतने सनसनीखेज इवेंट्स में मीडिया इनके इन्कलाब को तरजीह नहीं दे पाई I

खैर अछ्छा है की अरविन्द केजरीवाल, मनीष सिसोदिया, और किरण बेदी को समझ में आ गया होगा की, सियासत क्लर्क की नौकरी (जिससे उन्हों ने इस्तीफा दिया है) जितनी आसान नहीं है; वर्ना हर क्लर्क, क्लर्क बनने के बजाय मंत्री या बादशाह बनता I ये विचार मैंने किसी सियासती या मजहबी ओर्गानैजेसन के खिलाफ या सपोर्ट में नहीं, बल्कि सियासती चालों की समीक्षा के मायने से लिखे है

Always Yours — as Usual — Saurabh Singh

State of the World Economy

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.


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:


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.



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.



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.



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.



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.



  • 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.



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


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.


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.

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

Food Price Shock May be in Wings


Consumers awoke this morning to a sharp rise in the price of gasoline. By next month, they may also be facing higher prices for two other everyday items – imported cooking oil and pulses – because of the weakness of the rupee.

India, the world’s largest importer of edible oil, has so far not felt the pinch as a fall in international prices for oil has largely offset the impact of the weakening currency. (A weak rupee means it takes more rupees to buy the oil, which is sold in dollars.)

However, with the rupee expected to slide further, analysts say it is just a matter of time before importers either hold off increasing imports even though the coming months are a time of peak consumption. They could even slow their imports, a move that would further tighten domestic supply. Either way, prices are likely to rise.

The rupee’s weakness “is definitely hitting us as it has increased our cost,” said B.V Mehta, executive director of the Solvent Extractors’ Association of India, a trade body for the edible oil industry. “Everybody will wait for the dust to settle on the rupee before increasing their imports.”

The total cost of cooking oil imports is expected to rise to about 500 billion rupees ($8.9 billion) in the year that began April 1, from 400 billion rupees in the previous 12 months, largely because of the fall in rupee value. Those higher costs are likely to be passed on to consumers.

A flattening or reduction of edible oil imports would be a sharp reversal. In the first six months of the marketing year that began Nov. 1, edible oil imports rose 31% from the same period a year earlier to 4.6 million tons.

Consumers also may be paying more for pulses, the main source of protein for a majority of the population, because of a similar dynamic.

“We have absorbed most the rising import costs so far, but if the rupee’s free fall continues we may have to stop imports or raise the prices,” said Bimal Kothari, vice president of the India Pulses and Grains Association.

The country imports around 3 million tons of the protein staple annually.

Prices of milk and poultry are also expected to rise because of a 50% jump in the cost of feed material.

One possible plus for consumers is that the monsoon rains are expected to be normal and that has brightened the crop prospects for other staples such as rice, oilseeds, sugar and domestically-grown pulses.

“The overall scenario doesn’t look too good in the coming months especially for the imported food items like edible oil and pulses,” said Naveen Mathur, associate director for commodities and currencies at Angel Broking. “The food prices may escalate further. It may go through the roof. [Compiled from DJ Reprints]

Always Yours — As Usual— Saurabh Singh


……..and Markets Came Tumbling Down …… attempt to explore the Cause..

……..and  Markets Came Tumbling After

Perhaps, both Dr. Manmohan Singh as Leader of Ruling Party in Power and Mr. Pranab Mukherjee, as Finance Minister went up there, this budget session, to specially put the Indian GDP in higher growth trajectory. Probably all went in vein. All accepted; but then what could be the reason at the route of it? Is anyone interested and involved in finding out the route cause or all are merely trying to make the smart, logical and rational guesses.

Many experts have been found blaming it on the variety of issues, and the sum of these issues is much larger number than all the experts giving their opinion put together. It signals an impression that now a doctoral thesis should be presented on ways of identifying that the individual, who is well dressed and has somehow made it to a position of power and claiming to be expert of domain, is really an expert or a garbage vomiting biological machine.

Pictorial Representation Market Crash

Market Crash of Two Different Centuries     1930 — &–2008

The reasons forwarded by expert for any wanted or unwanted oscillation in the national economy has as much probability of being found in few phrases mentioned below, as much is for any oscillation happening in mood of markets, in next day trading session.

An Attempt:

1. Probably this is an outcome of policy paralysis at the level of Government…

2. It is due to fear being felt by FIIs due to the possible provisions of GAAR on P- Notes…..

3. This is being reflected as the Rupee is getting weaker……

4. It is due stubbornness being shown by RBI Governor by not easing interest rate…

5. It is an outcome of inflationary pressure…..

6. Because European markets opened on lower side…

7. Euro zone crisis is having its impact felt… as all the economies are networked these days….

8. Prices of Crude Oil are moving northwards due to possible stance of USA on Iran’s nuclear issue..

9. The monsoon has cracked a joke on us….

10. The quarter -1 , 2, 3, 4 data for industrial output were not promising….

11. There is a growth being noticed in unemployment rate in USA….

12. Forecast of Chinese economy has taken the fizz out of the market….

13. All this is due to the nation’s money lying in the tax heavens abroad….

14. The growing fiscal deficit is responsible for it….

15. It is the burden of subsidy that is killing the government…..

16. Investors’ are fearful of risky assets and they going for Cash or preferring cash..

17. The Greece crisis has taken its toll….

18. The Spaniards are going uncontrolled……

19. It is due to the Vodafone issue..Where FM wants to put a tax with Retrospective effect..

20. Rupee falters on rupee outflow fear…..

21. Now markets are waiting for first signal of Mr. Hollande, the new President of France.….











N. The grocery seller was saying that Fed is in for an interest rate hike…..

N+1. I heard my taxi driver telling to someone that it is being stage managed by the government…

N+2. There is a foul smell of some foreign hands behind it…….

This is not the end of the list, and therefore just an illustrative one has been put up. Please feel free to add your suggestions. The names will be sent to Nobel Committee which supposed to announce the Current Years’ Nobel Prize Winner in Economics by conducting a free and fair lucky draw from it…..

                                                                                                                     Always Yours— As Usual —– Saurabh Singh



Perhaps, since Mr. Pranab Mukherjee, the present Finance Minister of UPA government (2009 – 2014) has presented his finance bill on March 16, 2012, the Term “P – Notes [Participatory Notes]” has transformed or metamorphosed in an instrument of mass massacre at Indian capital markets. Probably in current era we do not have Black Friday but probably a new kind of day, i.e., P – Note day, though the common term “Black Monday” is associated with these P – Notes. Even a rumor on the issue of GAAR and P – Note is good enough to create an epic blood bath in Indian Capital Markets these days.

The class of investors suffering maximum burnt are ‘the new breed of retail investors’, and I feel this to be the worst impact of the event, as this phenomenon may turn the retail investors chary and scary both. Consequently the flow of money to capital markets may decline significantly, rather it may get once again get diverted to safe heavens, i.e., to nationalized bank in India, out of which majority are in cash plus state. This mean the capital that was meant for capital markets will get locked into banks and simultaneously these banks will have to shell out more amount as interest on these deposits; without getting any returns on them (as there are no borrowers available in market, who may love to pick money from bank in the regime of sky rocketing interest rates).

Participatory notes can be found making it to news headlines every alternate day, but due to all bad reasons. They have been in the root of biggest fall witnessed at capital markets in current era. The apex regulatory bodies of Capital Market and Money Market,, i.e., SEBI and RBI are also making it to the headlines of pink paper these days, as they are found issuing notices and warnings to the parties using this instrument.

The financial analysts and experts dealing in or related to Capital Markets are neither concerned nor worried about this instrument, as Indian Investors do not and cannot use this instrument. At the same time they do not have a say in the issue, as it is the government which is supposed decide the fate of Participatory Notes. The P – Notes come into prominence when the deliberations are regarding or related to Foreign Institutional Investors [FIIs].

But what are Participatory Notes [P – Notes]

This as question is circulating in the conscious or sub-conscious part of mind of every individual or retail investor. They are a confused lot due to probably two reasons. First being that till a few months ago they had neither heard about any such instrument nor had they thought that something unknown may throw all their investments plans hay ware. Whereas, the second reason is their failure to comprehend that why it is they, who are paying the cost for something not known, and why the government and market regulators are working towards saving their interests.

An Attempt to Explain what P-Notes Are:

Just like any other derivative ‘Participatory Notes’ too are simply ‘derivative instruments’ that is used by investors not registered in India or Mauritius to trade in Indian markets

Numerous FIIs, which are neither registered nor they wish to get registered with SEBI, but are interested in getting exposure to Indian Securities, place their orders through brokerage houses that have Mauritius-based FII accounts.

These ‘P-Notes’ are generated as a consequence of the action of brokers who buy or sell securities on behalf of their clients on their proprietary account and as a result of the transaction, issue ‘notes’ in favor of such foreign investors. It is these notes which are called in profession of securities trading as “Participatory Notes”. The brokerage houses then repatriate the dividends and capital gains back to these entities, which are generated as a consequence of such trade. In this case, the broker acts like an exchange: it executes the trade and uses its internal accounts to settle the trade. They keep the investor’s name anonymous.

Somehow, anonymous investors are not liked by the regulators of Capital Markets. The recently out, Lahiri Committee Report, also lays emphasis on participatory notes, its role and functioning.

 Functioning of Participatory Notes Depicted Diagramatically

Exhibit – 1: Functioning of Participatory Notes

P-Notes, down the line exhibit properties of Hedge Funds. Although SEBI, as a regulator had issued KYC (Know Your Client) guidelines, which include that, FIIs must know all the requisites details about their client and be able to furnish the details of the same, as and when demanded or asked by the regulator, to which there should be strict compliance, failing which the regulator may sentence them to very harsh punishments or even capital punishments, as was done by SEBI in case of UBS Securities. SEBI barred UBS Securities from trading in Indian markets on this premise only as they could not succeed in furnish the information regarding their clients. Though, finally SAT reversed the SEBI’s order.

The Bigger Issue

The bigger question needs to address the debate on hedge funds and why regulators like SEBI and RBI are wary of them….. ? That will be another topic of discussion with some other headline. For the time being the deliberations stop here.

Photograph of Author or Compiler of this Post


Always Yours — As Usual — Saurabh Singh

Has the Track been cleared …….for Policy Decisions, A Must for Economic Growth & Development

The counting of ballots and consequent declaration of results of Assembly General Elections 2012 held in five states of India on March 06, 2012 completed an important event in the process of Governance. Simultaneously, it also emphasized the importance of concept of Federalism for modern day democracy. On the other side of these developments, an increasing demand world over could be seen, India included, to incorporate or bring about a transformational change in the context to the ‘Governance’ issue.

It seems to be an apt time for revisiting to ensure that ‘Democracy’ as a system of governance adheres to its core attributes and the ‘Institutions’ erected to ensure its real spirit are capable of not alone performing the task, but also of representing the diversity, culture and socioeconomic issues and facets of the people, who have adopted such a system of governance.

It’s being expected by all concerned, that with culmination of Assembly General Elections 2012 of five states, functioning of Union Government would turn more efficient. Union government may now get free from the clutches of ‘Policy – Paralysis’ or ‘Stymied Decision Making Process’, which seemed to have become integral process of decision making by Union Government in Financial Year 2011 – 2012.    

Numerous issues of urgent importance, which were supposed to have been approved or rejected, are still there in cupboards of ministries, either awaiting their turn for being tabled in parliament, or are there in roll back mode awaiting the creation of elusive ‘consensus’. The post Assembly General Elections 2012 picture may not be pleasant to ruling coalition as Union Government, but it has certainly succeeded in putting an end to chaos, confusion or dilemmas born out of various presumptions and  self-fulfilling interests of a number of political parties.

The words, such as ‘Urgent’, ’Important’, ’Immediate’, ’Today ’and ‘Top Priority’ etc. have turned meaningless when seen in context of number of issues to be tabled, discussed and cleared or rejected by both the houses of Parliament, and also in the context of quantum of delay that has already occurred. Some issues out of them may be put, for purpose of illustration, as ‘FDI in Retail Sector’, ‘Direct Tax Reforms’, ‘Entry of Foreign Equity in Indian Airlines Industry’, ‘Issue of 4G Spectrum’, ‘Issue of Telangana’, ‘Creation of NCTC’, ‘Proposal on RPF’, ‘Issue of Inflation in Food Items’, ‘Deregulation of Prices of Petroleum Products’, ‘Land Leasing Bill or even Land Reforms Bills’, ‘Transforming Education in to Business’ and many more of the similar type.

The comments on issues are knowingly being avoided, as every single issue is important and also a subject matter to be covered in numerous articles, debates and deliberations. Certainly the same will be done, but the purpose here was to highlight the important issues pending approval of the parliament and also the evolution of Indian Political System and Governance as on date.


Always Yours —– As Usual —— Saurabh Singh

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