Impact 
The Insurance Regulatory and Development Authority (IRDA) is planning to scrap the “third party motor pool” from which claims of all accident victims are settled, possibly doubling the insurance premium for millions of automobile buyers.
New India Assurance (State-run insurance company) which dominates auto insurance with nearly half the market share, benefits from the pool as the liability is socialised. This is one segment where the regulator decides the tariff to ensure that millions of customers are not left without cover, which is mandated by law. Insurers would prefer not to provide cover since it is not profitable. The pool also requires more capital from the promoters. Higher third-party pool allocation reduces their solvency margins, the funds an insurance company sets aside for potential claims which is equivalent to capital adequacy for banks.
We believe that the policyholders should not be made to bear the brunt of not maintaining a “third party motor insurance pool”. Instead of dismantling the poll the IRDA along with all the insurers should come up with an amicable solution which stands to benefit both the insurer as well as the policyholder. Dismantling the pool merely since the insurers find it difficult to maintain the same, may not be a prudent way of handling the issue. Considering the impact on the end user (i.e. policyholders) is necessary.
| Multibagger Stock Ideas
Claim this Free & Exclusive Guide Today. Act Now!
CLICK HERE to know more... | | |
Impact
In order to further infuse transparency in the fee structure of the distributors selling mutual funds, the Securities and Exchange Board of India (SEBI) has asked mutual fund houses to publicly display the commission they pay to mutual fund distributors on their respective websites as well as the portal of mutual fund industry body - Association of Mutual Funds in India (AMFI).
The SEBI circular has made special reference to 529 large distributors, who collect more than a crore of rupees as commission per annum, as they handle large volume of business which warrants for more scrutiny.
We believe that while the move would infuse transparency in the way mutual fund industry operates, distributors and Independent Financial Advisors (IFAs) should co-operate and take this move in the right spirit by overcoming the anxiety of disclosing their earnings to the world.
| | Impact 
In the beginning of the calendar year 2011, the Foreign Institutional Investors (FIIs) remained cautious over taking exposure to India as the country was gripped with high inflation along with hardening of the interest rates due to anti-inflationary stance taken by the Reserve Bank of India (RBI).
(Source :ACE MF, PersonalFN Research)
In the next few months the FIIs activity remained subdued but picked up quite well in the months of April and May 2011 exuding confidence in the Indian equity markets. However, FIIs anxiety increased as Euro zone was experiencing a debt overhang along with the United States struggling to find a way out of its ballooning fiscal deficit. Moreover, the FIIs were cautious after the awakening anti-graft campaign promoted by Shri Anna Hazare, but the spotlight was on the Government in power with several scam stories unfolding. Interestingly, the benchmark index BSE Sensex has been seen treading along on the lines of the FII flows without much of divergence.
We believe that in the Indian markets, the FIIs have a major role to play as their activity is being closely watched and mimicked too by the investors as well as the traders in the equity markets. But please remember in order to benefit in the long run from the equity asset class you need to discipline yourself and continue investing in a staggered manner.
The optimal way to benefit from the equity asset class is to invest in diversified equity mutual funds by adopting the Systematic Investment Plan (SIP) route. Remember to invest in mutual funds having a good track record and with a time horizon of atleast 3 to 5 years. | | | | Weekly Facts |
| Close | Change | %Change | | BSE Sensex* | 17,562.61 | (242.2) | -1.36% | | Re/US$ | 49.15 | (0.1) | -0.31% | Gold /10g | 27,660.00 | 60.0  | 0.22% | | Crude ($/barrel) | 109.53 | (2.5) | -2.21% | | FD Rates (1-Yr) | 7.25% - 9.40% | Weekly change as on November 03, 2011
*BSE Sensex as on November 04, 2011 | | | | This Week's Poll !!!
************
Are you interested in knowing your agents’ commission? To Vote Now!
| |
In an interview with DNA Money, Mr. Satyajit Das, an eminent author on credit derivatives and credit linked notes, shared his views on the recent bail out packaged announced by the European Union and China's role in solving the Euro debt crisis.
Mr. Satyajit believes that the recently announced bailout package by the Euro zone is nothing but one of those cartoon guns where a banner comes out of the barrel with the words ‘Bang!' on it. “They have at last got the agenda items right. But it's too late, too little, too few detail. It would have worked in mid-2010, but I doubt whether it can do the job now. Also, there is no certainty that all the bits will be agreed and implemented,” he said. Explaining further he said, “A few things illustrate the problem with the deal. The write-down is actually around 30% when you do the numbers properly. Greece is still left with a debt-to-GDP of 120% and no access to market till 2021. They may need a much deeper write-down. The €106 billion recapitalisation is probably insufficient as it only factors in Greece. If you write down the holdings of other sovereigns based on current prices, then the amount is say €200-250 billion. Then, you have to factor in the effects of slower growth in the euro zone and the resulting bad debts.”
Regarding China's involvement in the attempting to help the Euro zone, Mr. Satyajit is of the view that China has not agreed to do anything but yet they have a role to play. “Europe is China's biggest trading partner. China has around $800-1,000 billion invested in euros and European government bonds. Continuation of the problems does not help them. At the same time, they are facing an internal political backlash and criticism for investing Chinese savings poorly. They are deep under water on their foreign investments. In addition, they have a number of serious domestic problems — inflation (partly as a result of the weak currency policies of the developed nations) and the attendant wage pressures, a serious bad debt problem in their banking system and pressure to accommodate the economic aspirations of an increasingly restive population. I am not sure how much flexibility they have to act,” he said
| |
Third Part Insurance: An insurance policy purchased for protection against the actions of another party. Third-party insurance is purchased by the insured (first party) from an insurance company (second party) for protection against another party's claims (third party).
(Source: Investopedia) | | | QUOTE OF THE WEEK
"A moderate addiction to money may not always be hurtful; but when taken in excess it is nearly always bad for the health."
- Clarence Day | | |