 | | Jan 8, 2010 | | Weekly Facts | | | Close | Change | %Change | | BSE Sensex | 17,615.72 | 150.9  | 0.86% | | Re/US$ | 45.68 | 0.9 | 0.45% | | Gold Rs/10g | 1.83% | 105.0 | 0.63% | | Crude ($/barrel) | 81.97 | 4.5 | 5.77% | | FD Rates (1-Yr) | 5.00%-6.50% | Weekly change as on Jan 07, 2010  Impact
The year 2009, was eventful and brought
joy for investors. Both equity and gold had a rather smooth run-up and delivered
good returns. However, investment in the US Dollar saw wealth erosion on account
of dollar depreciation. (Source:Crisil Fund Analyser, Bloomberg,
Reuters) (Note: Gold Prices taken of
MCX Spot Mkt) The above chart depicts that Rs 100 invested in
BSE Sensex, gold and the USD respectively, would have yielded an absolute
returns of +76% on the BSE Sensex, +23% in gold and -5% in the US
Dollar. We advocate
that investors should adopt the practice of long-term investing in order to
fetch better returns and also reduce risk.
Impact
 Life insurance companies will see more financial stability in their business as
the Insurance Regulatory & Development Authority (IRDA) has set a solvency
mandate which will link the amount of capital that the insurance companies need
to earmark for their business in accordance with economic cycles. Thus the proposed
framework known as ‘dynamic-solvency requirement’, will allow insurers to
allocate less capital during a bust and more capital during a boom. Such a
measure will ensure:
At present, the prescribed solvency margin (which is the excess of assets held
by the insurer in the interest of policy holders) is 150%. Which means, the
total assets must be 1.5 times the liabilities. IRDA has also asked all life
insurance companies to disclose economic capital (risk based solvency
requirement) in their balance sheets for 2009-10 in line with the Basel II norm
for the banking sector. Life insurance companies have also been lobbying with
IRDA to allow hybrid capital and subordinated debt for the purpose of solvency
margins, since at present insurers can meet their solvency margin requirements
only through equity.
We believe that the solvency mandate will make
insurers save for a rainy day, thus helping them to tide over tough times and
also protect the interest of policy
holders.
Impact  The Association of
Mutual Funds in India (AMFI) has banned 4 mutual fund distributors for
mis-selling mutual funds to the investors. The AMFI Chairman, Mr. A.P. Kurien
said “some distributors were carrying on fraudulent activities due to which
investors were suffering losses. After seeking explanation from the
distributors, we immediately suspended them”. However, the names of these
entities were not available.
Investors have also lodged complaints
regarding misappropriation of money by the erring
entities.
AMFI has also directed mutual fund houses not to deal with the 4
mutual fund distributors allegedly involved in corrupt malpractices. It has also
asked fund houses to suspend payment of commission and incentives to some
distributors.
We believe that the
move taken by AMFI is pro- investor, since it will discourage mis-selling and
also infuse ethical sales and distribution practices in the mutual fund
industry. A strong signal indeed!
In an interview with the Economic Times, Dr. Mark Mobius, the Executive Chairman
of Templeton Asset Management shared his views on emerging market equities. He
believes that emerging market equities seem likely to hit new highs as we go
forward. He said that “emerging economies are forecast to grow approximately
four times faster than developed economies”.
On the valuation front he
stated that valuation in the emerging markets are still lower than those of
Europe and US because majority of the investors still tend to discount emerging
markets, regarding them as too risky. However, this is now changing as
governments around the world, from US and Europe to China, have substantially
increased the level of money supply to prevent deflation. However, he also
mentioned that valuations are no longer as cheap as they were at the end of 2008
and believes that current valuations are around the middle of their historical
10- year range.
On the sectoral front, Dr. Mobius believes that commodity
stocks look good because he expects global demand for commodities to continue
its long-term growth. He also favours consumer stocks, since there is a rise in
per-capita income and strong demand for consumer goods and services in the
emerging markets. In India, he sees opportunities in materials, financial sector
and information technology.
-
The year 2010 started
with an early opening for the Indian equity markets and positive note as the BSE
Sensex hit a 20-month high on Jan 4, 2009 closing up by 93.9 points at
17,558.73. However, the early opening did not have any impact on trading volume.
-
Concerned with food
inflation of 19.83%, the Chairman of the Prime Minister’s Economic Advisory
Council (PMEAC) and the former Governor of the Reserve Bank of India (RBI), Mr
C. Rangarajan wants the RBI to remove excess money from the system by taking
appropriate monetary steps. -
Max New York Life
Insurance launched four new products under its Unit Linked Insurance Plan (ULIP)
product portfolio. The products launched are – Max New York Life Fortune
Builder, Max New York Life Unit Builder Plus, Smart Invest Pension Super and
Smart Xpress. -
Deputy Governor of
Reserve Bank of India (RBI), Ms. Shyamala Gopinath expressed no concerns on
capital inflows saying “we don’t look at the levels (of the rupee), only the
volatility. There have been no concerns on inflows”. -
BSE has decided to
revamp the BSE mid-cap index by including 25 scrips with effect from January 11,
2010. BSE plans to add Bombay Dyeing, CMC, Core Projects & Tech, Cox and
Kings, Den Networks, Eicher Motors, Emami, Firstsource in the mid-cap index,
among others. -
Pension Fund
Regulatory and Development Authority (PFRDA) will launch low-cost pension
schemes on April 1, 2010 to provide social security cover to the economically
backward section such as rickshaw pullers, barbers, and daily-wage labourer.
Under this scheme, a subscriber will have to initially pay Rs 105 and thereafter
Rs 70 every year.
| IN THIS ISSUE  Think you know someone that will enjoy this email? Why not send it to a friend? Solvency Ratio: One of many ratios used to measure a company's ability to meet long-term obligations. The solvency ratio measures the size of a company's after-tax income, excluding non-cash depreciation expenses, as compared to the firm's total debt obligations. It provides a measurement of how likely a company will be to continue meeting its debt obligations.
(Source: www.investopedia.com) QUOTE OF THE WEEK Quote: “The time of maximum pessimism is the best time
to buy and the time of maximum optimism is the best time to sell”.
- John Templeton ATTENTION WOMEN!
************
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