UPSC Key | Equity options, Bishkek violence, chir pine, and more

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Economy

Equity options boom: Retail frenzy a growing bugbear for regulators

UPSC Syllabus:

Preliminary Examination: Economic and Social Development

Mains Examination: GS-III: Economy

What’s the ongoing story- A frenzied growth in India’s equity options market, which clocked a record 85 billion trades last year and accounted for 84 percent of all equity option contracts traded in 2023, is unnerving policymakers and regulators.

Prerequisites: 

— What are equity index options?

— What is futures and options (F&O) trading?

— What is a derivative contract?

Key takeaways: 

— The worries for policymakers are twin-pronged: (i) the most traded equity-index options in India are risky short-dated contracts

(ii) retail investors now make up over 35 percent of options trades, undeterred by the fact that 9 out of 10 individual traders in the equity futures and options (F&O) segment are recorded to have incurred losses.

—  Index options, for instance, are generally used to wager bets on the future direction of a benchmark index, such as the NSE, for a small fee. Equity-index options give the holder the right to buy an index at a specified price, called the strike price, when the contract expires at a future data.

— The exponential growth is evident in the numbers, with Stock options contracts surging 138 percent in turnover in three years and index options up 425 percent. 

— Enablers for this exponential growth: changes made to the contract structures over the last few years, alongside easier onboarding and interface of the new generation trading apps, has triggered a “gamification of this market”. 

— This, in tandem with what he called a “sachetisation” of options, has attracted a younger demographic as well as clients from Tier II and III cities. A band of so-called finfluencers are on an overdrive to lure investors to the risky and complex options trading.

— Though the NSE cautioned investors not to subscribe to any such scheme/product offered by any person offering indicative/ assured/ guaranteed returns in the stock market as the same is prohibited by law, investors are still being lured by false promises

For Your Information: 

— While options trading, a form of a derivative contract that gives buyers of the contracts (the option holders) the right (but not the obligation) to buy or sell a stock or index at a predetermined price at some point in the future, is generally seen as a safer form of investment where upside risks are capped, the complexity of derivative instruments such as options and futures make it somewhat unsuitable for general retail investment.

Points to Ponder: 

— Why regulators are concerned about going retail frenzy on equity options?

— What are the components and structure of the Capital market?

— What is the role of SEBI in regulating stock exchanges in India?

Post Read Question:

What steps need to be taken to educate investors about the risks and benefits associated with the stock market?

Other Important Articles Covering the same topic:

Surge in retail trading in futures and options: Froth and risk

Industry must gear up for lower tariffs, looking at further easing of FDI norms

UPSC Syllabus:

Preliminary Examination: Economic and Social Development

Mains Examination: GS-III: Economy

What’s the ongoing story- With a whole bunch of free trade agreements (FTA) under discussion, India could shed its conservative approach and look to lower tariffs and ease Foreign Direct Investment norms going forward, Department for Promotion of Industry and Internal Trade (DPIIT) Secretary Rajesh Kumar Singh said on Saturday.

Prerequisites: 

— What is a free trade agreement (FTA)?

— What is the ease of doing business?

— What are inverted duty structures?

Key takeaways: 

— India’s share in global trade is currently at 8 percent despite being home to the world’s 17 percent of the population.

— Average tariffs in India jumped to 18.1 percent in 2022 from 13 percent eight years ago in 2014 which resulted in uncompetitiveness among the Indian industry compared to countries such as Vietnam, Thailand, and Mexico.

— On semiconductors, the secretary said, critics point out that the industry is capital intensive in nature but they ignore the fact that the purpose is strategic in nature.

For Your Information: 

— India signed a trade agreement with the four-nation European Free Trade Association (EFTA) on March 10, 2024, an intergovernmental grouping of Iceland, Liechtenstein, Norway and Switzerland. The deal brings in $100 billion in investment over 15 years, with the EFTA looking at joint ventures that will help India diversify imports away from China.

Points to Ponder: 

— India has signed FTAs with which nations?

— What are the issues in India’s foreign trade policy?

— What is the significance of FTAs?

Post Read Question:

Consider the following countries:

1. Sri Lanka

2. UK

3. Iceland

4. Japan

With how many of the above countries, India has signed a free trade agreement as on April 2024?

(a) Only one

(b) Only two

(c) Only three

(d) All four

Other Important Articles Covering the same topic:

India signs trade agreement with EFTA: What is the significance of the deal?

Why BSE, NSE conducted special live trading sessions?

UPSC Syllabus:

Preliminary Examination: Economy

Mains Examination: GS-III: Indian Economy and issues relating to planning, mobilisation of resources, growth, and development.

What’s the ongoing story- Domestic stock markets were open on Saturday, as the BSE and NSE conducted special live trading sessions to check their preparedness to handle any glitches or disruptions. 

Prerequisites: 

— What is the stock market?

— What is SEBI? What are its functions and powers?

— Read about the capital market, BSE, and NSE. 

Key takeaways: 

— The special trading sessions were conducted as part of the Securities and Exchange Board of India’s (SEBI’s) framework for the Business Continuity Plan (BCP) and Disaster Recovery Site (DRS) of Market Infrastructure Institutions (MII).

— In March 2019, the market regulator SEBI laid a framework for the stock exchanges, clearing corporations and depositories (collectively referred to MIIs) to have in place BCP and DRS to maintain data and transaction integrity.

— The stock exchanges from time to time evaluate their preparedness to deal with any major disruptions, and for that, they conduct special trading sessions. They make an intraday switch over from the Primary Site (PS) to DRS.

— DRS is a place where a stock exchange, in case of any disruptions, can temporarily relocate its operations. Shifting to DRS ensures continuity of trading operations, and also to help in maintaining data and transaction integrity.

For Your Information: 

— As per the SEBI’s framework, the DRS should preferably be set up in different seismic zones and in case due to certain reasons such as operational constraints, change of seismic zones, etc., a minimum distance of 500 kilometer shall be ensured between Primary Data Centre (PDC) and DRS, so that both DRS and PDC are not affected by the same disaster.

Points to Ponder: 

— What are derivatives? What are the different types of derivatives?

— What is SEBI’s framework for the BCP?

— Significance and concerns related to stock market regulation.

Post Read Question:

Which of the following is issued by registered foreign portfolio investors to overseas investors who want to be part of the Indian stock market without registering themselves directly? (UPSC CSE 2019)

(a) Certificate of Deposit

(b) Commercial Paper

(c) Promissory Note

(d) Participatory Note

Other Important Articles Covering the same topic:

Place mechanism to curb frauds: Sebi to fund houses

 

Opinion

Growing up with pines & needles in Uttarakhand

UPSC Syllabus:

Preliminary Examination: General issues on Environmental Ecology, Biodiversity, and Climate Change- that do not require subject specialisation, Geography.

Mains Examination: GS-III: Biodiversity and Environment 

What’s the ongoing story- Devyani Onial writes-“A conifer that can grow up to a height of about 30 metres, the chir pine covers almost 16.5 per cent of Uttarakhand’s total forested area. It owes its scientific name, Pinus roxburghii, to William Roxburgh, a Scottish doctor and naturalist, who went on to become superintendent of the East India Company’s botanic garden at Calcutta and who is widely regarded as the father of Indian botany.”

Prerequisites: 

— In which type of forest are the chir-type trees generally found?

— What are the characteristics of Chir Pine?

— What is the conservation status of Chir Pine (Pinus Roxburghii)?

Key takeaways: 

— “Native to the Himalayas, chir pine or the longleaf Indian pine, was not introduced to the Himalayas by the British, as is often believed, though they certainly gave it preference for its commercial use, mainly lumber and resin.”

— “Found all over the Western Himalayas at an elevation between 1,000 and 2,000 metres, it covers large parts of Garhwal and Kumaon where it can be seen growing on steep slopes and can be identified by its three needles and its round cone (unlike the elongated cones of other pines).”

— “Chir pine has been here for centuries but during the British period, it was promoted for tapping its resin. For a long period in the middle hills, oak forests were cut mainly to make coal and wood charcoal and that allowed the chir pine to expand more,” says Dr G S Rawat, emeritus scientist, Uttarakhand Council for Science and Technology.

— Historian and environmentalist Shekhar Pathak says, “In the days before artificial resin, turpentine was made from resin from pine. In fact, in the colonial period, the first industry was a leesa (resin) factory in Kashipur around 200 years ago,” says Pathak. Since the chir is hardy and fast growing, says Pathak.”

— “While its needles tend to catch fire easily because of their high resin content, the bark of the tree doesn’t catch fire easily since it has a very high ignition temperature — which is why blacksmiths use the bark of the chir pine in their furnaces to melt metal.”

— “A few years ago, the Uttarakhand government had considered cutting pine trees to combat forest fires, an idea it later abandoned.”

— “For the short-term and long-term management of the forests in Uttarakhand, the dense chir pine forest, more like monocultures, must be converted into mixed forests. More broad-leaf species should be promoted and the dense chir pine forests should be effectively managed and their wood used. The state could effectively manage the chir forests and earn some revenue as well as local people can be given some areas under Van panchayats,” says Rawat. 

Points to Ponder: 

— What are the concerns associated with the chir pine?

— What are pine needle power projects?

Post Read Question:

If you travel through the Himalayas, you are likely to see which of the following plants naturally growing there? (UPSC CSE 2014)

1. Oak

2. Rhododendron

3. Sandalwood

Select the correct answer using the code given below:

(a) 1 and 2 only

(b) 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

 

Express Network 

Drugs, liquor, freebies worth nearly Rs 9,000 crore seized in elections so far, says EC

UPSC Syllabus:

Preliminary Examination: Indian polity and Governance- Constitution, Political System. 

Mains Examination: GS-II: Governance, Constitution, Polity, Salient features of the Representation of People’s Act.

What’s the ongoing story- With three phases of polling still left, the Election Commission on Saturday said it had seized nearly Rs.9,000 crore worth of cash, liquor, drugs, precious metals and other freebies since March 1.

Prerequisites: 

— What is cVigil app?

— What is the model code of conduct?

— What are freebies or ‘revdi’ culture?

— Read Article 324 of the Indian Constitution and learn about the Election Commission of India.

Key takeaways: 

— As per the data released by the EC, Gujarat had the highest seizures of drugs (Rs.1,187.80 crore), followed by Punjab (Rs.665.67 crore), Delhi (Rs.358.42 crore) and Tamil Nadu (Rs.330.91 crore).

— In another statement on Saturday, the EC said its cVigil app has received 4.24 lakh complaints about Model Code of Conduct violations across the country so far.

— The app allows users to upload photos of illegal campaign materials, distribution of freebies, and other MCC violations.

Points to Ponder: 

— What are the arguments in favour and against the freebies?

— What is the role of the Election Commission in conducting free and fair elections?

— How did drugs and liquors become a menace during the electoral poll?

Post Read Question:

What initiatives have been taken by the EC to curb the menace of drugs, liquor, and freebies during the election in India? What are the challenges associated with it?

Other Important Articles Covering the same topic:

The 360° UPSC Debate | Are Freebies a Gateway to Financial Disaster?

Stay indoors: Govt to Indian students amid Bishkek violence

UPSC Syllabus:

Preliminary Examination:

Mains Examination: GS-I, II: World Geography; Government policies and interventions

What’s the ongoing story- The government on Saturday urged Indian citizens in Kyrgyzstan to stay indoors amid reports of attacks on foreign students and protests by local residents in Bishkek on Friday night over concerns about “growing numbers of migrants from Pakistan, Bangladesh, India, Egypt and other countries.”

Prerequisites: 

— Location of Bishkek on World Map

— What are the various missions sent by the Indian government to resume Indian civilians in war-torn countries?

Key takeaways: 

— Around 15,000 Indian students are estimated to be in Kyrgyzstan, mostly enrolled in medical colleges and universities. As per reports, an altercation took place between some local students and foreign students at a hostel on May 13, after which people started gathering on Friday to protest what they called was “lax treatment of foreigners involved in the fight”.

— Kyrgyzstan is among the favoured destinations for students from South Asian nations for top-notch medical training. As per the Migration Data Portal, Kyrgyzstan hosted the highest number of international students (61,418) in 2021 among the five Central Asian countries. There are about 14,500 Indian and 10,000 Pakistani students in the country, as per estimates.

Points to Ponder: 

— What is Operation Ganga?

— What is Operation Kaveri?

— Geography of Kyrgyzstan

— What is the Bishkek declaration?

(Thought Process: It was in the news to raise awareness on the conservation and protection of snow leopards.)

Post Read Question:

‘Operation Ganga’ is related to which of the following nations?

(a) Ukraine

(b) Kyrgyzstan

(c) Sudan

(d) Nepal

Other Important Articles Covering the same topic:

Operation Ganga

Manthan at Cannes – Amul model is India’s gift to the world

UPSC Syllabus:

Preliminary Examination: Economic and Social Development

Mains Examination: GS-II: Government Policies & Interventions, Non-Governmental Organisations (NGOs).

What’s the ongoing story- The screening of the restored 4K version of the 1976 Smita Patil starrer Shyam Benegal classic ‘Manthan’ at Salle Bunuel in the 77th edition of the Cannes Film Festival on Friday marked a milestone not only for the film, based on the pioneering milk cooperative movement of Dr Varghese Kurien but also propped up the Gujarat Cooperative Milk Marketing Federation (GCMMF), which markets its products under the Amul brand, on the international platform that it is looking to tap as part of White Revolution 2.0.

Prerequisites: 

— What is the Cannes film festival?

— What is the White Revolution?

— Who was Dr. Varghese Kurien?

Key takeaways: 

— The film is based on Gujarat’s milk cooperative movement helmed by the Gujarat Gujarat Cooperative Milk Marketing Federation (GCMMF), which made Amul not just a brand nationally but also gave it international recognition.

— GCMMF MD Jayen Mehta said, “The film has a large impact even today… The story continues to be relevant in terms of the fight of farmers to get right to procurement and market versus the private competition continues…it shows the success of a cooperative model in how it helped farmers to come together with the right intervention and inputs, providing the tools of development in their own hands…”

For Your Information: 

— The government’s latest Household Consumption Expenditure Survey (HCES) for 2022-23 shows milk emerging as India’s top food spend item, both in rural and urban areas.

— To sustain high consumer demand and ensure a good income for farmers, the focus needs to shift from hiking procurement prices to lowering production costs at the farm gate.

Points to Ponder: 

— What is the role of cooperatives in economic development?

— What was the impact of the white revolution on India?

— What are the other examples of successful cooperatives in India?

— What are the major challenges faced by cooperatives in India?

Post Read Question:

Prelims

‘Operation Flood’ is also popularly known as

(a) Yellow revolution

(b) White revolution

(c) Green revolution

(d) Blue revolution

Mains

What is the significance of cooperatives in a developing nation like India? Enumerate the challenges and suggest solutions for the same.

Other Important Articles Covering the same topic:

Union code 0001: How a village seeded India’s White Revolution

How to bring about White Revolution 2.0

Cooperatives to play key role in nation’s economic development: Amit Shah

Quality concerns: Nepal bans sale of Indian spice-mix products

UPSC Syllabus:

Preliminary Examination: Current events of national importance.

Mains Examination: GS-II, GS-III: Issues Relating to development and management of Social Sector/Services relating to Health.

What’s the ongoing story- After Singapore and Hong Kong, Nepal has also banned the sale and import of certain spice-mix products manufactured by popular Indian brands over quality concerns.

Prerequisites: 

— What is ethylene oxide?

— How can ethylene oxide impact health?

Key takeaways: 

— Four spice-mix products by MDH and Everest have been banned in Nepal with immediate effect due to suspected ethylene oxide or EtO contamination, according to the Department of Food Technology and Quality Control here.

— “As residue contents of ethylene oxide are found to be exceeding the prescribed limit in these four products, the import and sale of these products are banned within the country as per Article 19 of the Food Regulation 2027 B.S.,” the department said in a notice issued on Friday.

For Your Information: 

— “Ethylene oxide is a pesticide that has been classified as a Group 1 carcinogen by the International Agency for Research on Cancer, meaning there is sufficient evidence from human studies that it can cause cancer,” says Kanika Narang, nutritionist at Indraprastha Apollo Hospitals, New Delhi.

— It is used by the spice industry as a fumigant to reduce microbial contamination, such as E. coli and Salmonella. It is a colourless, highly flammable and very reactive gas that kills bacteria, viruses and fungi. It is an industrial chemical.

Points to Ponder: 

— Where else is ethylene oxide banned?

— What are the challenges associated with food safety in India?

— What is the significance of ensuring food safety? 

Post Read Question:

Consider the following statements with regard to ethylene oxide?

1. It is a colourless, highly flammable and very reactive gas that kills bacteria and viruses only.

2. It is a  pesticide that has been classified as a Group 1 carcinogen.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) Both 1 and 2

(d) None

Other Important Articles Covering the same topic:

UPSC Issue at a Glance | Food Safety : 5 Key Questions You Must Know for Prelims and Mains

Explained: MDH masalas in US have tested positive for Salmonella. What is it?

 

The City

Red alert issued for Delhi today, brace for heatwave next week

UPSC Syllabus:

Preliminary Examination: General issues on Environmental Ecology, and Climate Change – that do not require subject specialisation.

Mains Examination: GS-I, GS-II, GS-III: Important Geophysical Phenomena, Climate Change Environmental Pollution & Degradation, Government Policies & Interventions.

What’s the ongoing story- As Delhi continues to experience heatwave conditions, the India Meteorological Department (IMD) issued a ‘red’ alert for the national capital on Sunday.

Prerequisites: 

— What are heatwaves?

— What are the criteria for declaring heatwaves?

— What causes heatwaves?

Key takeaways: 

— A ‘red’ alert is issued when the expected weather consequences are extreme such as a “very high likelihood of developing heat illness or stroke” as well as “serious health concerns for vulnerable people” including the elderly, infants and those with chronic diseases. 

— The IMD declares a heatwave when the maximum temperature is recorded at 45 degree Celsius or above.

For Your Information: 

— According to the Indian Meteorological Department (IMD)- “A heatwave is a period of abnormally high temperatures, more than the normal maximum temperature that occurs during the summer season in the North-Western parts of India. Heatwaves typically occur between March and June, and in some rare cases even extend till July. The extreme temperatures and resultant atmospheric conditions adversely affect people living in these regions as they cause physiological stress, sometimes resulting in death.”

Points to Ponder: 

— What are heatwave conditions in India?

— What are the impacts of heatwaves?

— What measures should be taken to mitigate the impacts of heatwaves?

Post Read Question:

 Consider the following statements:

1. Heatwaves typically occur between March and June, and in some rare cases even extend till July.

2. Heatwaves need not be considered till the maximum temperature of a station reaches at least 40°C for Plains and at least 30°C for Hilly regions.

3. A severe heatwave is declared when the departure from normal is more than 6.4 degrees Celsius.

How many of the statements given above is/are correct?

(a) Only 1

(b) Only 2

(c) All three

(d) None

Other Important Articles Covering the same topic:

UPSC Issue at a Glance | Heatwaves: 5 Key Questions You Must Know for Prelims and Mains

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