There are two aspects to the news- knowing the headline and understanding the intricacies of it. We at The Connectere focus on both. While The First Forum edition gives a brief about the headlines, The Weekly Analysis Edition is meant to educate the reader on what do various news mean and what are their intricacies. This initiative is meant to educate the reader on how to understand the important news. In the Twenty-Seventh Edition we are covering the following news:
- Russia to sell 100 million doses of Covid-19 vaccine to India
- SEBI’s move on the reallocation of MultiCap Mutual Funds
- India’s long overdue maritime awakening
- The historic deal between UAE-Bahrain and Israel
- Why are the farmers in angst?
Russia’s sovereign wealth fund has made a deal to supply 100 million doses of its coronavirus vaccine, Sputnik-V, to Indian drug company Dr Reddy’s Laboratories, the fund said on Wednesday, as Moscow speeds up plans to distribute its shot abroad.
The deal comes after the Russian Direct Investment Fund (RDIF) reached agreements with Indian manufacturers to produce 300 million doses of the vaccine in India, which is a major consumer of Russian oils and arms.
Dr Reddy’s, one of India’s top pharmaceutical companies, will carry out Phase III clinical trials of the vaccine in India, pending regulatory approval, RDIF said in a statement. Deliveries to India could begin in late 2020, it said, adding this was subject to completion of trials and the vaccine’s registration by regulatory authorities in India.
Russia was the first country to license a novel coronavirus vaccine before large-scale Phase III trials were complete, stirring concern among scientists and doctors about the safety and efficacy of the shot. The Phase I and II results had shown promise, GV Prasad, co-chairman of Dr Reddy’s was cited in the RDIF statement as saying.
Sputnik V vaccine could provide a credible option in our fight against COVID-19 in India. This comes as a result when India has crossed 5 million cases of COVID-19. India is the second country to cross this grim milestone and this puts pressure on the government to examine and release vaccine with utmost safety at the earliest possible.
India plans to distribute vaccine first to its old generation and high-risk areas such as areas of Maharashtra, Karnataka, Delhi and Tamil Nadu.
Dr Reddy’s share jumped more than 4% on this news and made the overall Nifty Pharma index to rise by 2%.
The share is trading at around Rs. 4700 and has a target of 5150 according to some big stock houses.
Sebi issued a circular on 11 September guiding new portfolio allocation rules for multi-cap mutual fund schemes where a multi-cap fund has to invest at least 25% each in large-cap, mid-cap and small-cap stocks. Later, Sebi issued another circular to make clarifications regarding the initial circular. Sebi, in its clarification circular, allowed flexibility to mutual funds to comply with the new rules. It said, ” Apart from rebalancing the portfolio, mutual fund houses can facilitate the switch to other schemes by the unit holders or, merge their multi-cap scheme with their large-cap scheme or convert their multi-cap scheme to another scheme category for an instance, large cum mid-cap scheme.
The Association of Mutual Funds in India (AMFI) welcomed the step and fund managers took on to Twitter to calm investors. Nilesh Shah, Chairman Amfi and Managing Director, Kotak Mahindra Mutual Fund expressed his gratitude to Sebi for issuing clarification and advised investors not to make any investment decision in haste.
Nilesh Shah wrote on Twitter, “Immense gratitude to SEBI for issuing clarification on a Sunday evening. We will ensure compliance with SEBI Regulations in the letter as well as spirit & optimize risk-adjusted return for our Investors.”
Kotak Mutual Fund’s Standard Multicap Fund is the largest fund in the respective category holding assets under management (AUM) over ₹29,000 crores. The Mutual Fund has maintained its large-cap allocation to around 70%.
Rajeev Thakkar, CIO, PPFAS Mutual Fund, managing the best performing multi-cap Fund – Parag Parikh Long Term Equity Fund also asked investors to stay calm. He wrote on Twitter, “All will be fine, no knee jerk reactions please.”
Parag Parikh Long Term Equity Fund apart from domestic equities invest over 28% in international equities. The scheme has outperformed its peers with 15% annualised returns both in 3-year SIP and 5-year SIP.
Overall if we look at the top 5 Mutual Fund houses of India by AUM(Asset Under Management), they’ve invested an average 73% in Large-cap stocks, 22 % in Mid-cap stocks and 5% in small-cap stocks.
This means that a minimum 23% outflow from Large-cap funds will go towards the mid-cap and small-cap stocks majorly(20% of total) being towards small-cap.
The total movement of funds is just 1.22% of the total traded value in the stock market and hence investors need not worry about this reallocation. Rather there are few negative drivers placed in the coming months such as the US Presidential Elections, COVID impacted Q2 results and border tension between India and China.
With an overall battle-force of 350 ships and submarines, including 130 major surface combatants, the PLA Navy is the largest in the world and has overtaken the US Navy. China has never bothered to provide a rationale for its ever-increasing military muscle and it is very concerning especially in the light of its recent tension with India.
The PLA Navy has strategically grown over the years and the factors that bear on its growing strength may include China’s 14,500 km littoral, its objective of “reunifying” Taiwan and advocating maritime claims in the South and East China Seas. India, on the other hand, maintains status quo power and has sought military force-levels adequate only to safeguard its sovereignty and territorial integrity. It may be technologically and professionally competent but with the Indian Navy at sixth or seventh in the international pecking order, there is obviously a significant disparity between two. This growing gap is stark proof of the fact that it would be foolish of India to attempt an arms-race with China, but investing in maritime power would pay dividends in the long-run.
It is a long time now that India stands up to its hegemonic neighbour; regardless of economic asymmetry, India does have the military competence to answer Chinese adventurism both in the mountains and at sea. However, as the nation cheers the army’s tactical moves in Ladakh, there are misgivings about a strategic void in New Delhi. In this context, the US Congress believes that effective strategy-making defines national interests, objectives, and policies, along with the defence capabilities (and budgetary support) necessary to deter threats. The process provides a shared vision for all agencies and reviews every four years.
Where China is concerned, its political leadership has, since 1995, been issuing a defence white paper every two years. These clearly articulated China’s vital interests as well as national security aims, objectives and challenges. On the other hand, India has erred shockingly by its disregard for national security. No government has formulated a strategy or doctrine so far; nor has Parliament ever demanded a defence review, a direct consequence of which is that “surprise” and “intelligence failure” have become a repeat occurrence in most of India’s post-independence conflicts. Our defence-planning has remained ad-hoc and under-funded, resulting in confused, fumbling responses and panicked arms purchases in every new crisis. The PLAN has achieved significant strength because the Communist Party providing steadfast political support. Owing to such leadership, today China is the world leader in ship-building and it also fields the largest coast-guard that protects the world’s biggest fishing fleet.
As we watch the situation in Ladakh unfold, it becomes increasingly obvious that a military resolution might be improbable. The answer lies in extended negotiations at the highest political and diplomatic levels. India’s attraction as a partner for the US, Japan or Australia, lies in its navy’s reach and ability to project maritime power. In the approaching era of fiscal stringency, a sharper focus on its neglected maritime domain would garner immense benefits for India.
On 15th September, declaring “the dawn of a new Middle East,” President Trump presided over the signing of historic diplomatic pacts between Israel and two Gulf Arab nations, UAE and Bahrain. The agreements do not address the Israeli-Palestinian conflict. While the UAE, Bahrain and other Arab countries support the Palestinians, the Trump administration has persuaded the two countries not to let that conflict keep them from having normal relations with Israel.
Sceptics caution against raising hopes too high. The momentum behind the normalisation of ties between Israel and the Gulf kingdoms, may not necessarily lead to broader peace in the Middle East. Although it appears that the US initiatives in Afghanistan and Arabia are driven by President Donald Trump’s quest for diplomatic victories weeks before the election, in all fairness, President Trump has been eager, through the last four years, to redeem his pledge in the 2016 presidential elections to put an end to America’s “endless wars” in the greater Middle East. Even the harshest critics have admitted that the agreements could usher in a major shift in the region should other Arab nations follow suit. Irrespective of the motivations of Trump’s policy, his actions have political consequences for other states.
The signed documents released hours later, while making several sweeping promises left many crucial questions unanswered. The “Abraham Accords” declaration offers to pursue a “vision of peace, security and prosperity in the region,” and Bahrain’s deal with Israel holds out little beyond an agreement to establish diplomatic ties.
Among questions that remain is whether Israel will formally commit to pausing the annexation of parts of the West Bank. Israeli Prime Minister’s threats to push forward on taking disputed territory helped accelerate the deal as the UAE offered diplomatic recognition in exchange for setting annexation aside – at least for now. Other lingering questions are the degree to which the UAE’s demand for next-generation American F-35 jets played a role in its willingness to sign an accord and what promises the U.S. The deals do signal to shift Mideast politics. The question is whether the newfound unity will deter Iran or lead it to accelerate its nuclear program, provoking greater tension in the region.
Why are the farmers in angst?
If you have been reading the newspapers diligently, you might have come across the pallbearers of the Indian economy, the farmers in angst, on the roads, protesting, you get a feeling of a déjà vu when you read about them but fear not this has happened before. But why would they risk their lives in the middle of the pandemic? What coerced them to come out in the streets? In this entire fiasco, what might catch your attention is the fact that the prices of onions have almost doubled, a great cause of concern.
Going ahead, farmers are protesting against three ordinances passed by the centre, labelling them as anti-farmer. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020, and the Essential Commodities (Amendment) Ordinance, 2020 are the ordinances passed by the government. The farmers are more concerned with the first one – The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020. The ordinance seeks to “provide for barrier-free trade of farmers’ produce outside the markets notified under the various state agricultural produce market laws (state APMC Acts). The Ordinance will prevail over state APMC Acts.” Farmers fear that this ordinance will end the Mandi system of selling of agricultural products and will lead to the sale of their products below the Minimum Support Price or the MSP. This fear has no basis. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, which is to be approved in the current Parliament session, merely provides an additional marketing channel. Farmers, if they choose, can now sell directly to processors, retailers or exporters. They can, of course, still take their produce to mandis. Government agencies, too, can continue to procure grain from these state-regulated market yards. The ordinance only dismantles the monopoly of the APMCs.
Further exacerbating the problem, the centre imposed a complete ban on the export of onions from the country. The quantities involved aren’t small. In 2019-20, India exported 11.50 lakh tonnes (lt) of the bulb, which fetched Rs 2,320.70 crore. These numbers stood even higher, at 21.84l t and Rs 3,468.87 crore in the preceding fiscal. In previous episodes of price increase, the government used to not hit the brakes immediately. It would initially impose a minimum export price below which shipments weren’t allowed and then raise this gradually in order to discourage any sales outside the country. An outright ban would typically come as a last resort when domestic prices continued to rise. This was due to a low supply of onion in the market because of the damage to the Kharif crop due to the excessive august rains.
What is important in times like these, where the government is faced with a myriad of problems whacking it from all sides is that each party involved understand the other party’s dilemma and arrive at a solution that benefits each. The government must work keeping in mind the welfare of all the stakeholders and the population in general, it is hence a tacit understanding that placing unremitting demands is unacceptable. It is important that the spread of misinformation is controlled and that you do not succumb to such spread of misinformation.