[Mission 2023] QUED ( Questions from Editorials ) 17 February 2023

Solution: d)

The awards are given in certain select categories which include Art, Social Work, Public Affairs, Science & Engineering, Trade & Industry, Medicine, Literature & Education, Civil Service and Sports. Awards are also given for propagation of Indian culture, protection of human rights, wildlife protection among others.

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• The Deputy Speaker is elected by the Lok Sabha from amongst its members right after the election of the Speaker has taken place.
• The date of election of the Deputy Speaker is fixed by the Speaker (date of election of the Speaker is fixed by the President).
• In the absence of the Speaker, the Deputy Speaker serves as the Speaker and wields the full powers of the Speaker.

Refer: https://www.insightsonindia.com/2023/02/15/the-missing-deputy-speaker-the-post-and-what-the-constitution-says/

Solution: b)

After China, India became the second country in the world to start the ‘trade-plus-one’ (T+1) settlement cycle in top listed securities.

What’s the T+1 settlement plan?

The T+1 settlement cycle means that trade-related settlements must be done within a day, or 24 hours, of the completion of a transaction. For example, under T+1, if a customer bought shares on Wednesday, they would be credited to the customer’s demat account on Thursday. This is different from T+2, where they will be settled on Friday. As many as 256 large-cap and top mid-cap stocks, including Nifty and Sensex stocks, will come under the T+1 settlement from Friday.

Until 2001, stock markets had a weekly settlement system. The markets then moved to a rolling settlement system of T+3, and then to T+2 in 2003. T+1 is being implemented despite opposition from foreign investors. The United States, United Kingdom and Eurozone markets are yet to move to the T+1 system.

And what are the benefits of T+1?

In the T+1 format, if an investor sells a share, she will get the money within a day, and the buyer will get the shares in her demat account also within a day.

This will also help investors in reducing the overall capital requirements with the margins getting released on T+1 day, and in getting the funds in the bank account within 24 hours of the sale of shares. The shift will boost operational efficiency as the rolling of funds and stocks will be faster.

A shortened settlement cycle also reduces the number of outstanding unsettled trades at any point of time, and thus decreases the unsettled exposure to Clearing Corporation by 50 per cent. The narrower the settlement cycle, the narrower the time window for a counterparty insolvency/ bankruptcy to impact the settlement of a trade.

Why are foreign investors opposed?

Foreign investors were against SEBI’s T+1 proposal, and had written to the regulator and the Finance Ministry about the operational issues faced by them, as they operate from different geographies. Among the issues raised by them were time zone differences, information flow processes, and foreign exchange problems.

Foreign investors said they would also find it difficult to hedge their net India exposure in dollar terms at the end of the day under the T+1 system. In 2020, Sebi deferred the plan to halve the trade settlement cycle to one day (T+1) following opposition from foreign investors.

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Solution: c)

“Buy low, sell high” is the traditional investment strategy in which one buys a stock or security at a particular price and then sells it when the price is higher, thereby booking a profit. This is referred to as a “long position”, and is based on the view that the price of the stock or security will appreciate with time.

Short selling, or shorting, on the other hand, is a trading strategy based on the expectation that the price of the security will fall. While fundamentally it is based on the “buy low, sell high” approach, the sequence of transactions is reversed in short selling — to sell high first and buy low later. Also, in short selling, the trader usually does not own the securities he sells, but merely borrows them.

In the stock market, traders usually short stocks by selling shares they have borrowed from others through brokerages. When the price of the shares falls to the expected levels, the trader would purchase the shares at the lower price and return them to the owner, booking a profit in the process. If, however, the price of the shares appreciates instead of falling, the trader will be forced to buy shares at a higher price to return to the owner, thereby booking a loss.

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Solution: c)

Solution: d)