Jan 1, 2010
|Weekly Facts |
|Close ||Change ||%Change |
|BSE Sensex ||17,464.81
||104.2 ||0.60% |
|Re/US$ ||46.53 ||0.1 ||0.28% |
|Gold Rs/10g ||16,690.00
||70.0 ||0.42% |
|Crude ($/barrel) ||77.50 ||3.0 ||3.96% |
|FD Rates (1-Yr) ||4.75%-6.50%
Weekly change as on Dec 31, 2009
The year 2009 saw the following key
milestones in the journey of the equity markets:
- Satyam Scam dragged the Sensex
from 10,000 levels to 8,100 levels during the quarter Jan to March 2009
- Bottom fishing took place in
March 9, 2009 and the bull run began. Foreign Institutional Investors (FIIs) and
mutual funds too turned net buyers
- Lok Sabha election results
cheered the Indian equity markets, as the Indians voted for stability and
the Congress came into power. The equity markets hit the upper circuit on this
- The Union Budget was not market
inspiring - no impact!
- Dubai Debt Trap - Dubai World's
announcement, asking for a standstill on the repayment of USD 59 billion worth
of debt till May 2010, sent initial shock waves through stock markets globally,
but the impact of the “desert storm” seems to have blown over.
The above chart depicts that over a
period of time the negatives events have been ironed out and now the markets are
in a bull run. Infact for the period Jan 1, 2009 to Dec 31, 2009, the BSE Sensex
clocked a return of 76%. Thus Rs 100 invested in the BSE Sensex would have
yielded Rs 176.
Volatility will always be an
integral parts of the equity markets and therefore we opine that investors stay
invested for the long term and diversify their investments in order to reduce
|In 2007, with the Sensex at 20,000 levels, we
In 2008, with the Sensex at 8,000 levels, we recommended
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The Insurance Regulatory &
Development Authority (IRDA) has allowed insurers to combine pure term life
insurance cover offered by life insurance companies and health insurance
policies offered by non-life companies. Hence now, non-life insurance companies
can offer products which combine pure term Life insurance cover along with a
health insurance policy. The combined product will be called Health Plus Life
The product is expected to be
launched in a couple of
months and will be offered jointly by a non-life insurance company and a
insurance company. The liability of settling the claims will vest with
respective insurance companies.
The product would be offered both as
an individual insurance policy and on a group insurance basis. However in
respect of health insurance floater policies, the pure term life insurance
coverage is allowed on the life of one of the earning members of the family, who
is also the proposer on the health insurance policy.
We believe that such an umbrella
product will be good for the investors’ as it takes care of their life insurance
needs as well as their health insurance needs.
The Insurance Regulatory & Development Authority
(IRDA) has capped the fund management charges for the Unit Linked Insurance
Plans (ULIPs). All insurance companies will have to comply with this directive
from Jan 1, 2010, and the new caps are:
|Insurance Contract Tenor ||Fund Management
<= 10 Years
The difference between
gross yield and net yield shall not exceed 300 bps, of which, fund management
charges shall not exceed 150 bps
> 10 Years
The difference between gross yield and
net yield shall not exceed 225 bps, of which, fund management shall not exceed
Circular No: 20/IRDA/Actl/ULIP/09-10)
This will thus make ULIPs more remunerative for
investors. This is because the reduction in fund management charges will result
in an increase in yields, all else being equal. Insurance companies will
therefore have to live with thinner margins and will pay lower commissions to
Existing policyholders will also be
able to switch to a new fund which has lower charges. IRDA has specified that no
charges should be levied for such a switch. However, this option will not be
available if the insurance provider has chosen to stop selling the old compliant
The measure taken by IRDA, is definitely in the
interest of the investors’, but we opine investors’ should look at their
indemnity needs only and therefore invest only in pure term insurance plans and
In an interview with the Mint,
Chairman of HDFC Ltd, Mr Deepak Parekh, expressed his views on the India’s real
Mr. Parekh believes that the demand
for commercial real estate will not pick up in the near future. He also said
that “HDFC will not fund any developer in the commercial real estate segment
because there is huge amount of surplus space”.
On residential real estate, he is of the view that,
there is huge shortage and every family in India wants to own a house and also
wants to upgrade over a period of time. There is therefore a huge demand in this
segment, which he believes will continue for the next 10 years.
The prices in the real estate market
will continue to increase, depending on demand and supply. “If more land is
given in the city and more developers start constructing then prices won’t go
up”, he said. On the price rise he said, “there will be resistance; the builders
will try, but if they want to sell their stock, they (builders) should not go
for a hike as they won’t get the buyers”.
Mr. Parekh also said that “I have
been always advocating that we need to have a regulator in real estate. It’s the
largest purchase any family makes”. He is of the view that the regulator should
classify developers, evaluate them, grade them and bring in some code of
He believes that teaser rates (which
are 8.00 - 8.25% for the first two years and thereafter floating rate) currently
prevailing in the markets, are not a very healthy way of lending and is a
marketing gimmick. It can create problems since many borrowers may not have the
capacity to service loans later at higher rates.
- Domestic Stock Exchanges have announced that they
will open 55 minutes earlier i.e. at 9 am from Monday onwards,despite the
agitation from the Association of National Exchange Members of India (ANMI)
- After the private nuclear plants became a possibility
in India, following the Indo-US nuclear deal, the Insurance Regulatory &
Development Authority (IRDA) is deliberating on insurance companies to cover
liabilities arising out of nuclear accidents.
- The Registrar and Transfer Agents (RTAs), Karvy and
Computer Age Management Services (CAMS) launched their web-based platform
‘Finnet’ to help mutual fund distributors to provide services in a
cost-effective manner by transacting on an integrated system. Finnet will
facilitate order placement, execution and customer services on an integrated
- Vodafone, the cellular service provider
launched an unlimited SMS offer for its prepaid and post paid customers in
Mumbai. Prepaid investors can avail of the offer by buying a bonus card of Rs
89, which will have a validity of 30 days. The post paid customers can enjoy
15,000 SMS anywhere in India per billing cycle, for Rs 149.
- The mobile tariff war intensified further after MTS
(brand of Sistema Shyam Teleservices Ltd.), the new mobile telephony service
provider launched its half a paisa per second per call offer.
- Mr. R. Ravimohan, the man credited with
building India’s largest credit rating agency Crisil, passed away on Monday
following a massive heart attack. He was recently inducted onto the board of
Reliance Industries Ltd.
- Concerned with the food inflation, spreading to the
other sectors, Deputy Governor of Reserve Bank of India (RBI), Shyamala
Gopinath said that the near term policy challenges will depend on the evolving
growth –inflation conditions.
IN THIS ISSUE
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Health Insurance:A type of insurance coverage that pays for medical and surgical expenses that are incurred by the insured. Health insurance can either reimburse the insured for expenses incurred from illness or injury or pay the care provider directly. Health insurance is often included in employer’s benefit packages as a means of enticing quality employees.
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