1. Consider the following statements regarding Futures and Options:
1. Futures and options are types of indexed derivatives whose values are derived from an underlying index.
2. A futures contract obliges its buyer to purchase the underlying asset at the predetermined price on a specified date.
3. An options contract allows its investor the right to buy or sell a particular asset at a preset price within a given period.
How many of the above statements are correct?
(a) One only
(b) Two only
(c) Three only
(d) Four only
Ans: (b) Two only
Explanation:
In News: Capital markets regulator, Securities and Exchange Board of India (SEBI) on Tuesday (July 30) proposed a series of measures to curtail speculative trading in the index derivatives segment.
Derivatives are essentially financial contracts that derive their value from the underlying asset, such as stocks, commodities, and currencies. Index derivatives therefore derive their value from the underlying index.
Futures and options contract:
Futures and options are two types of derivatives where investors, based on their expectation of future price movement, enter into a contract to buy or sell the asset in ‘lots’ or multiple units of the asset, by paying a small margin amount. Hence, Statement 1 is incorrect.
A futures contract obliges its buyer to purchase the underlying asset at the predetermined price on a specified date. In contrast, an options contract allows its investor the right but not the obligation to trade the underlying assets as stipulated at a specific price on the specified date. Hence, Statement 2 and 3 are correct.
- There are two main types of options: call options, which give the holder (buyer) the right to buy the underlying asset, and put options, which give the holder (buyer) the right to sell the underlying asset.
- Depending on your goals and risk tolerance, options contracts can be used for hedging, speculation, and generating income.
- The price of an option, known as the premium, is affected by the underlying asset’s price, the strike price, time until expiration, and market volatility.
- Options trading carries inherent risks, such as the potential for significant losses if the market moves against your position, and requires a thorough understanding of the mechanics and strategies involved.
What measures have the SEBI proposed?
- It has recommended to increase the minimum contract size for index derivatives contract between Rs 15 lakh to Rs 20 lakh. This, after six months, can be increased between the intervals of Rs 20 lakh to Rs 30 lakh.
- It has proposed that brokers can collect option premiums on an upfront basis from the clients.
- SEBI suggested that the position limits for index derivative contracts should be monitored by Market Infrastructure Institutions (MIIs) such as clearing corporations or stock exchanges on an intraday basis, with an appropriate short-term fix, and a glide path for full implementation.
- The market regulator has recommended providing weekly options contracts on a single benchmark index of an exchange.
- The strike price of an option is the price at which a put or call (buy or sell) option can be exercised. SEBI has also recommended that not more than 50 strikes should be introduced for an index derivatives contract at the time of contract launch.
These measures have been proposed in line with the Union Budget 2024-25, announcement that proposed to double the Securities Transaction Tax (STT) on F&O of securities, effective October 1, 2024. The STT, which is levied on transactions in specified securities, has been increased to 0.02 per cent and 0.1 per cent, respectively.
2. Which among the following is/are Market Infrastructure Institutions as declared by SEBI?
1. Stock exchanges
2. Clearing Corporations
3. Depositories
Select the correct answer from the codes given below:
(a) Only two
(b) Only one
(c) All three
(d) None of the above
Ans: (c) All three
Explanation:
In News: Capital markets regulator, Securities and Exchange Board of India (SEBI) on Tuesday (July 30) proposed a series of measures to curtail speculative trading in the index derivatives segment.
SEBI suggested that the position limits for index derivative contracts should be monitored by Market Infrastructure Institutions (MIIs) such as clearing corporations or stock exchanges on an intraday basis, with an appropriate short-term fix, and a glide path for full implementation.
A Market Infrastructure Institution is a financial entity that provides essential infrastructure for running the daily operations in the Stock Marke/Capital Market. Stock exchanges, Clearing Corporations and Depositories together constitute MIIs. Hence, all three are correct.
Stock exchange – Stock exchange is an institution which assists, regulates or controls the business of buying, selling or dealing in securities.
Clearing Corporation – Clearing Corporation is an institution which handles the activity of clearing and settlement of trades executed on the stock exchange platforms.
Depository – Depository is an institution which holds securities of investors in dematerialized form through a registered depository participant.
3. Consider the following countries:
1. Vietnam
2. Philippines
3. Malaysia
4. Cambodia
Which among the above share their border with South China sea?
a) 1, 2, and 3 only
b) 2, 3, and 4 only
c) 1, 2, and 4 only
d) 1, 2, 3, and 4
Ans: a) 1, 2, and 3 only
Explanation:
In News: Vietnamese President who has visited India along with Indian Prime Minister reiterated the two countries commitment in upholding freedom of navigation and overflight referring to the conflicts in South and East China sea.
South China Sea is an arm of western Pacific Ocean in Southeast Asia. It is south of China, east & south of Vietnam, west of the Philippines and north of the island of Borneo.
Bordering states & territories (clockwise from north): the People’s Republic of China, the Republic of China (Taiwan), the Philippines, Malaysia, Brunei, Indonesia, Singapore and Vietnam. Hence, Statements 1, 2, and 3 only are correct.
It is connected by Taiwan Strait with the East China Sea and by Luzon Strait with the Philippine Sea.
It contains numerous shoals, reefs, atolls and islands. The Paracel Islands, the Spratly Islands and the Scarborough Shoal are the most important.
Cambodia and Thailand share their borders with Gulf of Thailand. And Laos is the only landlocked country in the region. Hence, the Statement 4 is incorrect.
4. Consider the following with reference to the concept of Creamy Layer:
1. Indian constitution defines the criteria for defining the creamy layer.
2. It refers to the relatively affluent and better-educated members of all classes of society who are excluded from reservation benefits in government jobs and educational institutions.
Which among the above statements is/are correct?
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
Ans: d) Neither 1 nor 2
Explanation:
In News: A Constitution Bench of the Supreme Court on 1st, August called for the need to evolve a different set of criteria to exclude the creamy layer among the Scheduled Castes and Scheduled Tribes from reservation benefits.
In India, the ‘creamy layer’ refers to the relatively affluent and better-educated members of the OBCs who are excluded from reservation benefits in government jobs and educational institutions. This ensures that reservations benefit the genuinely underprivileged sections of OBCs.
The concept was introduced following the Supreme Court’s judgement in the Indra Sawhney case (1992), also known as the Mandal Commission case. The court ruled that the advanced sections among OBCs should not monopolise reservation benefits, which should be directed towards the genuinely needy.
Despite discussions on applying the ‘creamy layer’ criteria to SCs and STs, it has not been implemented, as these communities are generally seen as requiring continued support due to historical social and economic disadvantages.
The creamy layer as on now applies only to the OBCs and not to any other classes which receiving the benefits of reservation. Supreme Court in its judgment now has directed the government to evolve a different set of criteria for the SCs and STs. Hence, Statement 2 is incorrect.
The Constitution of India does not have a mention of “Creamy layer” and it is the central government that defines the criteria for the creamy layer. Hence, Statement 1 is incorrect.
5. Statement I: FCI sells surplus stocks of food grains at predetermined prices through e-auction in the open market from time to time.
Statement II: FCI’s policy objectives include Effective price support operations for safeguarding the interests of the farmers, distribution of foodgrains throughout the country for public distribution system and maintaining satisfactory level of operational and buffer stocks of foodgrains to ensure national food security.
Select the correct answer from the codes given below:
(a) Statement I and Statement II are correct and Statement II explains Statement I.
(b) Statement I and Statement II are correct and Statement II does not explain Statement I.
(c) Statement I is correct and Statement II is incorrect.
(d) Statement I is incorrect and Statement II is correct.
Ans: (a) Statement I and Statement II are correct and Statement II explains Statement I.
Explanation:
In News: Union Food and Consumer Affairs Minister announced on 1st, August that State Governments can directly purchase rice above the stipulated provision under the PM-GKAY from the Food Corporation of India under Open Market Sale Scheme (Domestic).
This decision was taken to reduce the huge surplus stocks ahead of the procurement after this Kharif season.
Open Market Sales Scheme:
The purpose of OMSS is to dispose of surplus stocks of wheat and rice held by FCI, and to regulate the prices of wheat in the open market. Hence, Statement I is correct.
FCI conducts weekly auctions for the OMSS for wheat on the platform of the National Commodity and Derivatives Exchange Limited (NCDEX).
NCDEX is a commodity exchange platform in India that provides a platform for trading in various agricultural and other commodities.
The FCI is a government-owned corporation that manages the food security system in India.
The Food Corporation of India was setup under the Food Corporation’s Act 1964, in order to fulfill following objectives of the Food Policy:
- Effective price support operations for safeguarding the interests of the farmers,
- distribution of foodgrains throughout the country for public distribution system and
- maintaining satisfactory level of operational and buffer stocks of foodgrains to ensure national food security. Hence, Statement II is correct and it also explains Statement I.
Since its inception, FCI has played a significant role in India’s success in transforming the crisis management-oriented food security into a stable security system.
6. Consider the following statements with respect PM Garib Kalyan Anna Yojana.
1. The scheme entails 5 kg free wheat or rice and 1 kg free whole chana per person per month of BPL families.
2. The families can opt for either rice or wheat every month when they receive the grains.
3. Beneficiaries are identified by the State Governments or Union Territories Administrations.
How many of the above statements is/are correct?
(a) One only
(b) Two only
(c) Three only
(d) None
Ans: (a) One only
Explanation:
In News: Union Food and Consumer Affairs Minister announced on 1st, August that State Governments can directly purchase rice above the stipulated provision under the PM-GKAY from the Food Corporation of India under Open Market Sale Scheme (Domestic).
Pradhan Mantri Garib Kalyan Anna Yojana (PM-GKAY):
Pradhan Mantri Garib Kalyan Anna Yojana (PM-GKAY) is a scheme as part of Atmanirbhar Bharat to supply free food grains to migrants and poor.
Phase-I and Phase-II of this scheme was operational from April to June, 2020 and July to November, 2020 respectively. Phase-III of the scheme was operational from May to June, 2021. Phase-IV of the scheme during July-November, 2021 and Phase V from December 2021 till March, 2022. The PMGKAY scheme for Phase VI was during April-September, 2022 with a further extension until December 2022. The scheme was extended until December 2023. PMGKAY has been extended for another five years from January 1, 2024 at an estimated cost of Rs. 11.80 lakh crore over a 5 year period.
More than 81.35 crore people will be provided 5 kg free wheat or rice per person per month along with 1 kg free whole chana to each family per month. Hence, Statement 1 is incorrect.
Wheat has been allocated to 6 States/UTs, – Punjab, Haryana, Rajasthan, Chandigarh, Delhi and Gujarat and rice has been provided to the remaining States/UTs. This is over and above the regular monthly entitlements under National Food Security Act, 2013 (NFSA). Hence, Statement 2 is incorrect.
Eligibility:
Families belonging to the Below Poverty Line – Antyodaya Anna Yojana (AAY) and Priority Households (PHH) categories will be eligible for the scheme.
PHH are to be identified by State Governments/Union Territory Administrations as per criteria evolved by them. AAY families are to be identified by States/UTs as per the criteria prescribed by the Central Government. Hence, Statement 3 is correct.
7. Which among the following organisation releases ‘World Development Report 2024’?
a) International Monetary Fund
b) World Economic Forum
c) World Bank
d) Organisation for Economic Cooperation and Development
Ans: c) World Bank
Explanation:
In News: India may be the fastest growing major economy, but it will take 75 years for its per capita income to reach a quarter of US income levels if current trends continue, the World Bank said in its ‘World Development Report 2024’.
The World Bank’s World Development Report, published annually since 1978, is an invaluable guide to the economic, social, and environmental state of the world today. Each report provides in-depth analysis and policy recommendations on a specific and important aspect of development—from agriculture, the role of the state, transition economies, and labor to infrastructure, health, the environment, and poverty. Hence, option (c) is correct.
The World Bank has expressed concerns regarding the potential challenges faced by 108 countries, notably including India and China, in their journey toward becoming high-income developed economies. The risk of getting ensnared in the middle-income trap poses a significant threat to these nations’ economic advancement, World Bank’s latest World Development Report 2024 stated.
8. Consider the following statements about Assam Rifles.
1. Combat role during Sino-India War 1962.
2. Part of the Indian Peace Keeping Force (IPKF) to Sri Lanka in 1987.
3. Peacekeeping role in the North-Eastern areas of India.
In which of the above operations did Assam Rifles was a part of?
a) 1 and 3 only
b) 1 and 2 only
c) 2 and 3 only
d) 1, 2, and 3
Ans: d) 1, 2, and 3
Explanation:
In News: CRPF to replace two battalions of Assam Rifles in Manipur.
The Central Reserve Police Force (CRPF) is all set to replace two battalions of Assam Rifles in the hill districts of Churachandpur and Kangpokpi in violence-hit Manipur. Around 2,000 personnel of the oldest paramilitary force will be moved to Jammu region that has seen a spate of terror attacks since 2021 after two decades of relative peace.
The primary responsibility of Assam Rifles is to guard the Myanmar border. In 2022, after a gap of 20 years, two battalions of Assam Rifles were deployed in Jammu and Kashmir. Troops will be drawn from Manipur, where the Central Reserve Police Force will take over the operational area of the Assam Rifles.
The Assam Rifles comes under the ministry of home affairs but operates under the operational control of the Indian Army. The force is staffed by Indian Army officials and is headed by a lieutenant general as the director general.
The Assam Rifles came into being in 1835, as a militia called the ‘Cachar Levy’. With approximately 750 men, this Force was formed to primarily protect British Tea estates and their settlements against tribal raids. Subsequently, all these Forces were reorganised and renamed as the ‘Frontier Force’ as their role was increased to conduct of punitive expeditions across the borders of Assam.
The Post-Independence role of the Assam Rifles continued to evolve ranging from conventional combat role during Sino-India War 1962, operating in foreign land as part of the Indian Peace Keeping Force (IPKF) to Sri Lanka in 1987 (Op Pawan) to peacekeeping role in the North-Eastern areas of India in the face of growing tribal unrest and insurgency wherein the maintenance of law and order, countering insurgency and reassuring the people of the region became important tasks for the Assam Rifles. Hence, all three statements are correct.
The Central Armed Police Forces (CAPF) refers to seven security forces in India under the authority of the Ministry of Home Affairs.
Assam Rifles (AR), Border Security Force (BSF), Central Industrial Security Force (CISF), Central Reserve Police Force (CRPF), Indo Tibetan Border Police (ITBP), National Security Guard (NSG), and Sashastra Seema Bal (SSB).
9. Consider the following statements with respect to the Places of Worship Act of 1991.
1. Prevents the conversion of a place of worship, from one religious’ denomination to another or within the same denomination.
2. The places of worship that were under dispute at the time of passage of this Act is exempted from the act.
3. The Act does not also apply to ancient and historical monuments, archaeological sites, and remains covered by the Ancient Monuments and Archaeological Sites and Remains Act, 1958.
How many of the above statements are incorrect?
(a) One only
(b) Two only
(c) Three only
(d) None
Ans: (a) One only
Explanation:
In News: Allahabad High Court dismissed the plea filed by Mathura based Shahi Idgah mosque committee, challenging the suits seeking removal of the mosque.
It was enacted to freeze the status of religious places of worship as they existed on August 15, 1947, and prohibits the conversion of any place of worship and ensures the maintenance of their religious character.
Features of the act:
- Prevents the conversion of a place of worship, whether in full or part, from one religious’ denomination to another or within the same denomination. Hence, Statement 1 is correct.
- Ensures that the religious identity of a place of worship remains the same as it was on August 15, 1947.
- Declares that any ongoing legal proceedings concerning the conversion of a place of worship’s religious character before August 15, 1947, will be terminated, and no new cases can be initiated. Hence, Statement 2 only is incorrect.
- The Act does not apply to ancient and historical monuments, archaeological sites, and remains covered by the Ancient Monuments and Archaeological Sites and Remains Act, 1958. Hence, Statement 3 is correct.
- It also excludes cases that have already been settled or resolved and disputes that have been resolved by mutual agreement or conversions that occurred before the Act came into effect.
- The Act does not extend to the specific place of worship known as Ram Janmabhoomi-Babri Masjid in Ayodhya, including any legal proceedings associated with it.
- Specifies penalties, including a maximum imprisonment term of three years and fines, for violating the Act.
10. Boko Haram, a militant Islamist group which has its presence in:
1. Chad
2. Niger
3. Sudan
4. Nigeria
Select the correct answer from the codes given below.
(a) One only
(b) Two only
(c) Three only
(d) All four
Ans: (c) Three only
Explanation:
In News: Bomb attack kills 19 in Borno state of Nigeria, where Boko Haram and Islamic State West Africa Province are active.
Boko Haram means “Western education is forbidden.” The group was founded in 2002. The group also refers to itself as Jama’atu Ahlis Sunna Lidda’awati Wal-Jihad, meaning “People Committed to the Propagation of the Prophet’s Teachings and Jihad.”
The group’s initial proclaimed intent was to uproot the corruption and injustice in Nigeria, which it blamed on Western influences, and to impose Sharīʿah, or Islamic law. It is also active in Chad, Niger, northern Cameroon, and Mali. Statements 1, 2, and 4 only are correct. Hence, option (c) is correct.