What made Morgan Stanley Capital International (MSCI), act on Adani stocks? (GS Paper 3, Economy)
Why in news?
- Morgan Stanley Capital International (MSCI), a global index provider for financial markets, recently announced on that it will reduce the free float designations for four Adani Group companies in multiple indices.
- These companies had a combined 0.4% weighting in the MSCI Emerging Markets Index.
- The decision follows MSCI’s decision to review the free float status of companies belonging to the Adani Group following investor concerns.
- Apart from Adani Enterprises, the MSCI will cut the free floats assigned to Adani Total Gas, Adani Transmission, and ACC. These changes will come into effect from March 1.
What is free float?
- Free float refers to the proportion of the total outstanding shares of a publicly listed company that is readily available for trading in the market. Shares held by promoters and large institutional investors are normally not freely traded in the market.
- The free float of a company can sometimes give investors a rough idea about the likely liquidity of the company's shares in the public market. The weightage given to a company’s stock in certain indices is based on the company’s market capitalisation.
- A company’s market capitalisation is calculated based on the free float of the company and also the market price of the company’s stock. So, a drop in the number of freely floating shares of a company can cause a drop in its market capitalisation and reduce its weightage in indices.
What led to the MSCI’s decision?
- The decision to reduce the free float assigned to the Adani stocks comes in the wake of a report released by Hindenburg Research, a U.S.-based investment research firm and short seller.
- Hindenburg had alleged that more than 75% of the outstanding shares of various companies of the Adani Group were owned by their promoters.
- Indian market regulations stipulate that non-promoter public shareholders should own at least 25% of the total outstanding shares of a company. This rule hopes to prevent manipulation of stock prices by promoters who could influence the price of the stock by trading among themselves when they hold an outsized portion of the outstanding shares.
- In particular, Hindenburg alleged that the Adani Group used offshore shell entities to hide holdings by members of Chairman Gautam Adani’s family. If true, this would reduce the float or the proportion of outstanding shares readily available for trade in the market.
- MSCI’s decision to cut the weights assigned to the Adani stocks in its indices going forward, however, may not be solely due to concerns over the free float of these stocks. Shares of the Adani Group’s companies have fallen steeply over the last few weeks, thus affecting the market cap of these companies.
- In fact, the Adani Group has lost about $110 billion of its market cap since the release of the Hindenburg report.
What will be the impact?
- MSCI’s decision will adversely affect the amount of capital flowing into the Adani stocks. Many passive investors invest in the indices that are constructed by bodies such as the MSCI.
- So, a cut in the weightage of the four Adani stocks in the Emerging Markets Index will likely reduce the amount of money flowing into these stocks.
- In fact, Goldman Sachs believes that India’s weight in the MSCI’s emerging markets index itself could drop by 20-30 basis points following the resultant reduction in weight of Adani stocks.
Mammalian spread of H5N1 and its pandemic potential
(GS Paper 3, Science and Tech)
Why in news?
- Recent reports of H5N1 spread between mammals raise concerns about its potential to cause a human pandemic if it were to spill over and become transmissible among humans.
Avian influenza:
- Avian influenza, or bird flu, is a highly contagious viral infection that primarily affects birds. Infrequently, the virus can infect mammals from birds, a phenomenon called spillover, and rarely can spread between mammals.
- There are several different subtypes of avian influenza viruses, ranging from low pathogenic to highly pathogenic types.
- H5N1 is a highly pathogenic subtype of avian influenza that causes severe disease and death in birds. This subtype has caused a number of human infections through close contact with infected birds or contaminated environments, and is often fatal.
Cause for concern:
- The H5N1 subtype has the potential to spill over to other mammals such as minks, ferrets, seals and domestic cats when the animals come in contact with infected birds or their feces or consume carcasses of infected birds and further serve as reservoirs.
- Recently, scientists have been investigating a potential mammalian spillover event after a mass mortality event which killed over 700 seals along Russia’s Caspian Sea coast where a H5N1 variant was detected in wild birds a few months ago.
- In February 2023, Peru reported cases of H5N1 in sea lions and a dolphin, and a lion dying from H5N1 in a zoo. The U.K. has also reported deaths of otters and foxes due to infection by H5N1 subtype.
- However, the only recorded incidents of intra-mammal transmission of the virus have been among mink in captivity at a farm in Spain, in 2022.
Human transmission of Influenza H5N1:
- If the H5N1 variant of avian flu has evolved to be transmitted between mammals, there is a rare possibility of another evolutionary jump resulting in human transmission and outbreaks.
- The H5N1 avian influenza virus was first detected in 1996 on a goose farm in China. Subsequently, a major outbreak was reported in 1997 among poultry in Hong Kong, also leading to human infections of H5N1, which left 6 people dead and 18 infected.
- In 2004, H5N1 was reported in several countries in Asia, and further a global outbreak which continues to date. In 2013 and 2014, many countries in Europe and Asia reported H5N1 in poultry.
- Over the years the virus has caused outbreaks across the world, predominantly spread by migratory birds. Till date, over 800 cases of human H5N1 infections have also been reported, with a high fatality of 53%.
New strain of H5N1:
- A new strain of H5N1, named 2.3.4.4b, emerged in 2020 and rapidly spread across Asia, Africa and Europe and subsequently to North and South America by 2021 and 2022, respectively.
- Many mammals were also infected in these outbreaks, including human infections.
- H5N1 sequenced from the mink farm in Spain also show several mutations, including (T271A) that enhances viral replication in mammalian tissues.
- The impact of this mutation in helping the virus spread to and among humans, therefore, remains unknown. Influenza H5N1 can rarely infect humans through direct contact with animals, but often causes severe disease and death.
What can be done?
- Preventing H5N1 spillovers and outbreaks requires a combination of measures including vaccination of poultry, safe disposal of dead birds, quarantine and culling of affected animals, wearing personal protective equipment when handling birds, and improved surveillance and monitoring of H5N1 in birds and other animals.
- Human vaccines against H5N1 avian influenza have been designed to protect against the most severe forms of the disease. However, the highly mutable nature of the H5N1 virus could potentially decrease vaccine efficacy over time. Therefore, molecular surveillance of H5N1 and its subtypes is essential in understanding and responding to outbreaks.
- Genome sequencing can be employed to monitor the emergence of new subtypes, and keep a close watch on mutations and virulence factors that may increase the ability to infect humans.
Conclusion & Way Forward:
- Although the risk of H5N1 to infect and spread among humans has been evaluated as low, disease and genomic surveillance as an integrated approach to controlling avian influenza are needed to keep a close watch on the outbreak.
- As learned from the COVID-19 outbreak, monitoring the evolution of the virus can add to the preparedness against a potential pandemic.
SC steps in for undertrial prisoners unable to furnish surety, bail bonds
(GS Paper 2, Judiciary)
Why in news?
- Recently, the Supreme Court has issued a slew of directions to ensure that undertrial prisoners who have got bail, but are too poor to furnish surety and bail bonds, are released within seven days.
- The court has even suggested granting “temporary bail” to undertrial prisoners so that they can go out and arrange for bail bonds and sureties.
Background:
- The order by a Bench led by Justice Sanjay Kishan Kaul came in the wake of a National Legal Services Authority (NALSA) report in January that nearly 5,000 undertrial prisoners were in jail in the country despite courts granting them bail.
- They were either accused in multiple cases, or were simply too impoverished to comply with the bail conditions.
Key highlights of judgement:
- The Bench directed that courts should send soft copies of bail orders to the prison authorities on the same or the next day.
- The jail superintendent should record the date of the bail in the e-prisons software.
- The prison authorities should then inform the district legal services authorities (DLSA) concerned if an undertrial prisoner is not released within seven days of the grant of bail.
- The DLSA would depute a volunteer or an advocate to visit the jail and “assist the prisoner in all ways possible for his release”.
Temporary bail:
- The NIC would “make attempts” to create separate fields in the e-prison software to record the date of grant of bail and the date of release.
- An automatic mail should be sent to the Secretary, DLSA, if a prisoner is not released in seven days.
- Paralegal volunteers or probation officers will enquire into the economic condition of such prisoners and place it before the courts with a request to relax bail conditions.
- The Bench directed that courts, in appropriate cases, could grant prisoners “temporary bail” so that they could arrange for sureties and bail bonds.
Suo motu action:
- The Bench further said that in cases in which bail bonds were not furnished within one month of granting the bail, the court concerned “may suo motu take up the case and consider whether the conditions of bail require modification/relaxation”.
- The courts need not insist on local sureties, as ready availability of them have often been a cause of delay in releasing bailed prisoners.
