After stocks and mutual funds, now you can also hold your insurance policy in an electronic form - demat form. The insurance regulator - IRDA (Insurance Regulatory and Development Authority) has unveiled guidelines for issuing insurance policies in a demat form, whereby a repository will be incepted on lines of NSDL (National Securities Depository limited) or CDSL (Central Depository Services Limited)
The repository will compile and store data about policyholders on behalf of insurance companies and also ensure privacy of the data and transactions by putting in place appropriate measures. For account opening, repository will make it mandatory for policy holders to comply with the KYC (Know Your Client) norms and names of beneficiary, nominee and assignee too would be mentioned. To provide convenience to policyholders, login ID and password will also be provided to policyholders whereby they can view their account statements online (which in turn would reflect details of policy maturity, surrender and lapses). Moreover, it is expected that the repository will also provide facilities online payment of insurance premium and also cater to grievance redressal.
Thus now with the new guidelines in force, you can buy your life insurance, health insurance and pension policies in an electronic form. But the sweeping changes may be witnessed in terms of reduction in transaction costs along with some swift modification in insurance policies.
We believe that the concept of e-insurance will be a boon to the policyholders as it would infuse efficiency, transparency and help in holding insurance policies in a convenient way. But enough vigilance needs to be kept so that multiple e-insurance accounts aren't opened by the same policyholders. Insurance companies however in our opinion, may face the risk of losing their existing clients as their client data may be tracked by their rivals.
We also think that to achieve a widespread success for e-insurance, the IRDA needs to create adequate awareness about the benefits of e-insurance and how it would make their (policyholder's) life simple. Also, the IRDA needs to keep in place adequate checks and controls in order to monitor the success as well as mis-selling of insurance. Also, to make this initiative of e-insurance a success in the rural areas, where there are loads of un-insured or under-insured people, IRDA should take concrete steps to bring about technological up-gradation in these areas.
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The Government is planning to extend the retirement age of Central Government employees by 2 years, from the present age of 60 years to 62 years. A formal announcement to this is expected this year itself.
The last time the centre extended the retirement age for Central Government employees was in 1998. It was also a two-year extension from 58 to 60, and subsequently all State Governments too followed the suit (by extending their retirement age by two years).
The decision to extend the retirement age is well-timed both politically and economically.
At a time when the ruling government (UPA) has been scam tainted, the extension of the retirement age will go down well with the middle classes. Economically also, the move makes sense because by deferring payment of lump sum retirement benefits for a large number of employees by two years, the government would be able to manage its finances better. As per a study conducted by the government, the future pension outgo for the existing Central and State government employees is estimated at a staggering Rs 1,735,527 crore or 55.88% of GDP at market prices of 2004-05.
In our opinion this is a smart move by the government to manage its finances better. Moreover going forward, we may also see the State Governments following the centre's footsteps, by increasing the retirement age by two years, thus making at 62 years.
But we believe the flip side to it is that, average age profile of civil servants may increase and may be unfair for those who are seeking jobs in the Government.
(Source :ACE MF, PersonalFN Research)
The precious yellow metal has time and again shown that it remains one of the most sought after investment destination during turbulent times. When analysed over a 1 year period too, the prices of Gold (price per 10g of gold) have shot up to Rs 22,350 as compared to Rs 17,180 a year ago, thus giving an absolute return of whooping 30.0% in a year's time frame.
Hence, if one were to invest a sum of Rs 10,000 each in gold a year ago, the same would have appreciated to Rs 13,009, whereas the same investment in the BSE Sensex would have yielded a sum of Rs 10,661.
Moreover, the graph above has distinctly revealed how gold and equity have expressed a inverse relationship, thus reflecting how gold becomes a safe haven during turbulence of the equity markets. Remember even central banks across the globe take shelter under gold investments stay afloat during turbulent times.
In our opinion gold will continue to be the safe haven not only for investors but also for central banks across the globe. While investing in gold one has to stagger his or her investments in a prudent manner and buy with a long-term horizon of 10 to 20 years. Ideally you should be allocating 5% - 10% of total investible amount to gold. Today numerous options (such as bars, coins, jewellery, e-gold, gold ETFs, gold savings funds) are available while investing in gold; but in our opinion Gold ETFs and Gold Savings Funds are the best options.
Remember the precious yellow metal safeguards you against economic risks (such as turbulence of equity markets, economic slowdown, inflation, etc) as well as political risks.
|Weekly Facts |
|Close ||Change ||%Change |
|BSE Sensex* || 18,518.81 ||(617.1) ||-3.23% |
|Re/US$ ||44.76 ||(0.3) ||-0.74% |
|Gold/10g || 21,905.00 ||(225.0) ||-1.02% |
|Crude ($/barrel) ||120.62 || (5.1) ||-4.02% |
|FD Rates (1-Yr) || 7.00% - 9.25% |
Weekly change as on May 05, 2011
*BSE Sensex as on May 06, 2011
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In an interview with Economic Times, Mr. Sukumar Rajah, Managing Director and Chief Investment Officer - Asian Equities at Franklin Templeton (FT) Investments shared his views on Q4 earnings, liquidity situation and investing in stocks.
Mr. Rajah believes that there may be some earning downgrades as we move ahead with the Q4 earnings declaration by the companies. He senses some deceleration in earnings for the next 12 months and probably even over the next 24 months. Further he added by saying that, "If you are assuming 18-20 per cent type of earning's CAGR, we should look at slightly lower, may be 2-4 per cent lower compared to the earlier expectations because inflation and a lot of related issues are definitely going to affect growth and margins in quite a few cases. That should lead to some downgrades."
On the liquidity situation front, Mr. Rajah said that, "I would not assume that liquidity will get substantially tighter immediately. I do not think there is going to be substantial tightening because core inflation in many other developed countries is not high, and unemployment numbers are pretty high. I would not like to come to that conclusion too soon." Moreover, Mr. Rajah also thinks that the Indian market could possibly underperform, but that would not bother FT Investments as they bet on 30 or 40 or 50 quality stocks that have upside potential.
Mr. Rajah is of the opinion that the margin of safety while investing in stocks directly has to be evaluated in terms of the ability of the company to sustain growth, using internally generated cash. According to him, companies which are able to continue to grow without external funding are some of the better companies. Further he explains that, "For those companies, one you can do a second-cut analysis as to how much you are paying in relation to the cash that they are generating. It is a two-pronged approach: first, eliminate companies which cannot sustain growth without constant infusion of cash, and second is within the companies which can grow without constant infusion of cash. Then you can look at the quality issues and the valuation."
Repository: A repository is a collection of databases that can be accessed to retrieve relevant information for further use.
QUOTE OF THE WEEK
"Be sure that, as you scramble up the ladder of success, it is leaning against the right building."
- Stephen Covey