IIP numbers roar at 17.6% in April   Jun 18, 2010

Weekly Facts
	Close	Change	%Change
BSE Sensex	17,616.69	694.6	4.10%
Re/US$	46.31	0.7	1.41%
Gold Rs/10g	18,690.00	35.0	0.19%
Crude ($/barrel)	77.02	3.6	4.90%
FD Rates (1-Yr)	5.00%-6.50%

Impact

India's largest insurer, Life Insurance Corporation of India (LIC) plans to make a foray into the "reverse mortgage" space. As per a senior official of the company, LIC is presently in initial discussions with the housing finance regulator – National Housing Bank (NHB), for introducing this service to its clients. The senior official of the LIC also mentioned that once they get clearance from within the organisation, they will explore opportunities with other banks and start offering this service.

LIC intends to provide payments in the form of annuity to policy holders. "Once the assessed value of the house and the loan amount to be disbursed is decided, LIC will start making payments till the policy holder survives," the senior official said. The role of the bank here will be to make full payment of the total loan amount to LIC once the policy starts; which the insurer can invest as per the LIC's investment guidelines.

LIC's real estate finance arm, LIC Housing Finance (LICHF), is already offering the reverse mortgage scheme and now the main purpose of the insurer (LIC) to offer this scheme is to create synergy and explore linkages. "We can explore the linkages between the two companies. Since LICHF already has the product there is existing synergy," a LICHF official said. Moreover, the housing finance regulator has also written to the finance ministry lobbying for tax exemption for clients.

We believe that LIC's entry in this segment is significant, as the life insurer has a huge base of policy holders. But so far, interestingly reverse mortgage scheme has met with little success in India. And in our opinion, this is on account of the emotional values which we Indian's carry in our heart, when we talk about our homes.

• The Finance Minster, expressed concerns about WPI inflation breaching the psychological mark of 10%. However, he expects food prices to ease after mid- July and therefore is not in favour of altering interest rates immediately. Meanwhile, the Deputy Governor of RBI – Dr. K.C. Chakrabarty said, "RBI will take decisive monetary action if inflation does not ease within two months". He also mentioned that RBI will wait, watch and move in a gradual manner.
   
• Mediclaim policy holders, who are dissatisfied with the service of their existing service providers, will soon be able to switch to another insurer without any change in their premium amount. To begin with, this facility will be available for those policy holders who are insured for a sum of Rs 1 lakh and above.
   
• SEBI wants mandatory demat account for mutual fund investors and has sought suggestion from the industry body - Association of Mutual Funds in India (AMFI). But the distributors have already expressed their dissent on this issue.
  
  In our opinion the move is intended to provide a fillip to the poor trading volumes of mutual funds on both the exchanges.

• The finance ministry is likely to recommend the freezing and closure of bank accounts found suspicious during the current exercise of the banks to collect information under the 'Know Your Customer' (KYC) norms. Presently banks in both the public and private sector are undertaking a one-time exercise to ensure total compliance with KYC norms from all old and new customers.
   
• Finance Secretary Mr. Ashok Chawla said, India might be able to reduce its fiscal deficit to 4.5% of GDP by March 2011, on account of revenues from 3G auctions and robust economic growth.
   
• Chief Economic Advisor, Mr. Kaushik Basu, said that the Indian economy will clock a near-9% growth in Q1 of the year 2010-11.

• ICICI Prudential Mutual Fund launched an open ended index fund named "ICICI Prudential Nifty Junior Index Fund". As per the offer document, the fund is mandated to invest 90% - 95% of the collected corpus, in stocks covered by the CNX Nifty Junior Index, as well as derivatives linked to the CNX Nifty Junior Index. Its investments in debt and money market instruments will be restricted to 10%.
  
  As per the offer document, the investment objective of the scheme is "to invest in companies whose securities are included in Nifty Junior Index and to endeavor to achieve the returns of the above index as closely as possible. The fund intends to track only 90% - 95% of the Index i.e. it will always keep cash balance between 5% - 10% of the net assets to meet the redemptions and other liquidity requirements. However, as and when the liquidity in the Index improves the fund intends to track upto100% of the Index".
  
  The New Fund Offer (NFO) is open for subscription from June 10, 2010 to June 21, 2010.
   
• Peerless Mutual Fund launched an open ended debt fund named "Peerless Income Plus Fund". As per the offer document, the fund is mandated to invest 80% - 98% of the collected corpus, in debt and money market instruments, and the remaining 2% - 20% in equity and equity related instruments.
  
  As per the offer document, the investment objective of the scheme is "to generate regular income through a portfolio of predominantly high quality fixed income securities and with a marginal exposure to equity and equity related instruments. However, there is no assurance or guarantee that the investment objective of the Scheme will be achieved. The Scheme does not assure or guarantee any returns."
  
  The New Fund Offer (NFO) is open for subscription from June 9, 2010 to July 8, 2010