Qualified Institutional Placement

Qualified institutional placement (QIP) is simply the means whereby a listed company can issue equity shares, fully and partly convertible debentures, or any securities other than warrants which are convertible to equity shares to a Qualified Institutional Buyer (QIB).

Apart from preferential allotment, this is the only other method of private placement. However, it scores over other methods, as it does not involve many of the common procedural requirements such as the submission of pre-issue filings to the market regulator. 

Why was it introduced? 

The Securities and Exchange Board of India (Sebi) introduced the QIP process in 2006, to prevent listed companies in India from developing an excessive dependence on foreign capital. 

The complications associated with raising capital in the domestic markets had led many companies to look at tapping the overseas markets via Foreign Currency Convertible Bonds (FCCB) and Global Depository Receipts (GDR) to fulfil their needs. To keep a check on this process and to give a push to the domestic markets, QIPs were launched. 

QIP in the news lately 

The latest company which adopted the QIP route to raising capital is the cash-strapped real estate major Unitech. While Unitech has managed to garner Rs 1620 crore through QIP, the promoter holding has now come down to 51%.

There are also reports that LIC Housing Finance is mulling over a QIP where it is expected to issue shares of the value of up to 10% of its total paid up capital.

 

 

Brain Drain

A slang term for a significant emigration of educated or talented individuals.It is also referred as human capital flight

This cause countries to lose valuable professionals i.e. departure of doctors, scientists, engineers or financial professionals who seek a better standard of living or who gets a better professioal opportunity outside their home country. When the intellect capital leaves, the home country is harmed in two ways. 

• First, expertise is lost with each emigrant, diminishing the supply of that profession. 
  
• Second, the  economy is effected as each  professional represents surplus spending units.
  

 As they earn large salaries, so their departure results in  significant decline in consumer spending in the nation.Counteracting the emigration of highly skilled personnel remains a key pursuit. But while some countries suffer the consequences of the so-called "brain drain", others are beginning to reap its potential benefits

An opposite situation, in which many trained and talented individuals seek entrance into a country, is called a brain gain; this may create a brain drain in the nations that the individuals are leaving.This is sometimes referred to as a 'brain transplant'.It  occurs when there is a large-scale immigration of technically qualified persons.

Swine flu and sectors to get HIT or LIFT

There’s a lot of uncertainty around the swine flu situation.Again, these are just some of the possible short-term effects we could see resulting from the swine flu epidemic news. Further, it’s worth remembering that at this point, even the authorities have limited information on and predictive power over the swine flu situation. Lets see the sectors which will be effected by the spread of swine flu.(Source:etfdb.com)

Sectors That Could Be Hit Hard

• Transportation sector: Travel advisories and recommendations to stay home won’t help transportation stocks.

• Energy: Fewer people flying and traveling in general could cause weaker overall demand for energy and crude oil funds.

• Equities in general: As we’ve seen in the past six months, a little bit of uncertainty can go a long way towards causing equities to tank.

Sectors That Could Get a Lift

• Pharma and Healthcare sectors: In anticipation of demand for vaccines and health services, shares of pharmaceutical and healthcare companies could appreciate.

• Gold and Commodities: In the last year precious metal ETFs have been popular buys on days when panic seemed to set in.

• Treasuries: Similarly, a flight to safety away from equities could make for inflows in bond funds thought to be very secure.

Swine Flu depresses the market

The stock market had to absorb a number of unsettling headlines on financial and economic matters over the past several months. But it was news of an event outside the realm of finance—an outbreak of swine flu in Mexico and other countries—that rattled the market on Apr. 27.The outbreak of swine flu in Mexico and its spread to other countries has inevitably raised questions about the broader economic and market implications.The worst-case scenario is the sort of global flu pandemic that the World Bank estimated last year might eventually cost up to 4.8% of world gross domestic product (more than $3 trillion).

The positive sentiment in the market has been badly hit by this flu scare. Mexico is the epicentre of the crisis and the Mexican Peso has fallen in thin Asian trading, with the threat of bigger falls ahead.While the White House down plays swine flu as to not disrupt the financial system which has been seen as stabilizing over the last month it could back fire with dramatic consequences. A weak banking system who just underwent a stress test never anticipated an epidemic much less a pandemic.  A sheer drop off in spending by consumers might spell doom for retailers that have struggled to survive until now.

In a reprise of what happened with the SARS panic, airline and tourism stocks are under pressure in early European trading on fears that the swine flu pandemic will curtail travel.

This will deepen the global recession and will probably have a contagion effect on export-led economies in Asia such as South Korea, Thailand, Indonesia, Malaysia, China. All of them depend on the U.S. economy to recover. The stock market will suffer, but the bond market will not be affected that much.The swine flu is undermining confidence and contributing to risk aversion in an array of assets,This is going to hurt at a time when we've had a pickup in stock markets. On the other hand, it could just be an excuse for people to take money off the table.Hence,the market rises or falls according to its own cycle of fear and greed, not the history books.

Aspirin Count Theory

This is one of the interesting thoeries which I came across.I found it fascinating as it directly relates to human behaviour. It is a market theory that states stock prices and aspirin production are inversely related. The term arises from the belief that as stock prices fall people are more likely to consume medication such as Aspirin. Investopedia explains Aspirin Count Theory :As stock prices fall, more and more people need pain relievers to get through the day.

For example the Aspirin count theory would predict that as aspirin sales increase, the stock market's value decreases and vice versa. The Aspirin count theory is a lagging indicator and actually hasn't been formally tested, so it is more a humorous hypothesis than a theory.

Recession :Impact on unemployment

As we know,the economic downturn has brought to the fore some stark realities, at least on the jobs front. 'Cost cutting' and 'downsizing' have become the new buzzwords.The eruption of the crisis has caused companies to compel underperformers to either pull up their socks or leave.
A recession is defined as a period of general economic decline; specifically, a decline in the country's GDP for two or more consecutive quarters.During a recession the company would either:

1. reduce unnecessary expenditure (cost optimization) and/or

2. reduce unnecessary work force (resource optimization).

Both the situations would ultimately result in unemployment. Similarly, the company would not be in a position to expand its operations. Hence the number of fresh employment positions that would be created by the company would also take a hit. This would also cause unemployment.

Recessions are often associated with downturns in the gross domestic product (GDP) of countries. The current recession, which affects most of the world, was sparked by events in Asia, but has since included many other nations in its effects. Many companies are finding that they are caught between the benefits of the recession (lower prices for components) and the problems associated with the recession (lower prices for competing products).Certainly, a sufficient proportion of the world's economies are current in recession to warrant an assessment of the potential of this situation to affect future employment levels.

Just as there are different types of employment - with their various impacts on the economy - so, too, does unemployment vary. So, do the economic theories differ in their interpretations of the character of unemployment and, more importantly, in their responses to unemployment.
There are three basic forms of unemployment:

• Frictional unemployment arises from the "normal" process of turnover in the labor market: as new workers enter the market , and as existing workers quit the jobs.
• Cyclical unemployment is that which varies with business conditions; for example, workers are laid off when business is bad - then rehired when conditions improve.
• Structural unemployment caused by imperfect labor-market adjustment, i.e. workers and resources do not move freely to places where they are needed.

A recession in 2008 would raise the national unemployment rate by between 2.1 and 3.8 percentage points. According to Cepr, the unemployment rate and the number of unemployed - based on the historical pattern - would continue to increase through 2010 (to 6.7 percent in the case of a mild-to-moderate recession) or 2011 (to 8.4 percent in the case of a more severe economic downturn).

The last few weeks have seen a remarkable degree of consensus across most of the economics profession around the need for a sharp short-term stimulus to the economy. The goal is to avoid a recession or, in the likely event that that isn’t possible, to make the recession shorter and more shallow. By one rule of thumb, the unemployment rate has now risen enough to send a reliable signal of recession.

The nations are held at the binary decision of are we or aren’t we in recession which is a meaningless exercise, as they are not in a position to realise the fact that the unemployment rate has risen meaningfully and is apt to continue going up which implies that the economic environment is weak.All the industries irrespective of its quarter performance have rung the bells for the unemployment rate to increase significantly and the same would continue to rise in the coming 2 years ahead.

Best Employer in India-2009

According to a recent study by Hewitt Associates, its sixth 'Best Employer in India Study 2009' in partnership with magazine Outlook Business, has enlisted the top 10 companies which provide the best working environment for employees. 

The study states that despite wide variance in industries and company profiles, the firms share some common winning traits.

Here we take a look at the nation’s 10 best employers

1)HCL Technologies

2)Hindustan Zinc Limited

3)Taj Hotels Resorts and Palaces

4)Cisco Systems

5)ITC -- Welcomgroup

6)Intuit Technology Services Pvt Ltd 

7)Eureka Forbes Ltd  

8)LG Electronics India Pvt Ltd 

9)Domino's Pizza India Ltd  

10)Marriott Hotels India Pvt Ltd 

To know more, Continue reading..