Category Daily Digest

Bond Market – RBI

RBI’s G-SAP led to the yield on the benchmark 10-year bond falling below 6%. Movements in yields, which depend on trends in interest rates, can result in capital gains or losses for investors. Drop in bond yield would benefit the investor as the price of the bond will rise, generating capital gains. Though decline in US Treasury yields or the economic uncertainty caused by Covid-19, the most important driver of the bond market was RBI interventions by launching the G-SAP programme. A decline in yield is also better for the equity markets because money starts flowing out of debt investments to equity investments. The RBI has been aiming to keep yields lower as that reduces borrowing costs for the government and also reduces lending rates of banks.

Reflect:

• What is G-SAP program and its aims?
• What is bond yield? How does it impact market and investors?

FTA – EU, India

In 2007, EU and India launched the FTA talks. It hit a roadblock in 2013 as both sides failed to bridge substantial gaps on crucial issues, including tariff, data security status for the IT sector and market access. Now again both are planning to resume FTA talks. The free trade agreement package will include an investment protection pact as well as a framework on geographical indication. The two sides are also likely to announce a connectivity partnership, aimed at boosting cooperation in sectors like railway, maritime and aviation as well as in the digital domain to bring people of the two sides closer to each other.

Reflect:

• What is the current status of trade relations between EU and India?
• What is the impact of Brexit in the entire scenario? 

G7 Summit

G7 perceives Russia, China and Covid as the biggest current threats. The G7 said it would bolster collective efforts to stop China’s “coercive economic policies” and to counter Russian disinformation. In the latest summit, they expressed support for Taiwan and Ukraine. They supported Taiwan’s participation in World Health Organization forums and the World Health Assembly. They expressed concerns about “any unilateral actions that could escalate tensions” in the Taiwan Strait. On the coronavirus pandemic, the G7 pledged to work with industry to expand the production of affordable COVID-19 vaccines.  

Reflect:

• What are the fundamental differences between the West and the Russian and China?
• What is Group of Seven and their agenda?

Social Stock Exchanges

The Securities and Exchange Board of India (SEBI) has constituted a technical group on Social Stock Exchanges (SSEs). The technical group report has recommended that political and religious organisations, trade organisations as well as corporate foundations should not be allowed to raise funds through SSEs. It said both For Profit Enterprise (FPE) and Not for Profit Organisation (NPO) will be eligible to tap the SSE if they are able to show their primary goals are social intent and impact. It also said that entities listed on SSE will have to disclose their social impact report on an annual basis. This report should cover aspects such as “strategic intent and planning, approach, impact score card”. The report has also made a list of eligible activities that social enterprises can engage in such as eradicating hunger, poverty malnutrition and inequality among others.

Reflect:

• What is a social stock exchange? What are the benefits of it?
• What is the role and significance of SEBI in the capital market?

DD 10-09-20