Impact 
The Securities and Exchange Board of India (SEBI), in order to revive the country's primary market and make it more efficient is planning to set up a committee. The panel is expected to:
- Find out ways to reduce transaction costs that currently reach a prohibitive 10% for issues below Rs 50 crore ;
- Review quotas for various investor categories;
- Study the role of merchant bankers selling an IPO; and
- Reduce the gap between closing an issue and listing the stock.
Further SEBI wants to reduce the time gap between issue closing and stock listing to 3 days from 12 days at present. It is noteworthy that this gap was 22 days until May 1, 2010, when it was first reduced. Moreover, online applications and payments is also intended to be encouraged in order to reduce the paper processing time.
In our opinion SEBI is thinking in the right direction to make the primary market more efficient and encourage more and more retail participation in the equity markets. This will not only improve the depth of our equity markets but will also shield them from the vagaries of FII flows due to greater retail participation.
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Impact
In order to safeguard the interest of policyholders', the Insurance Regulatory and Development Authority (IRDA) has reduced the illustration rates to 4% and 8%.
Insurance agents provide prospective clients with an illustration which helps them to understand a policy better. At present while explaining clients through an illustration showing returns assuming interest rate of 6% and 10% it becomes difficult for the customer to resist while buying an insurance policy.
This has become a matter for concern for the regulator, which has considered altering the assumed rates to make the illustrations more conservative. In fact as a step towards putting this theory in practice, the new guidelines on pension plans have reduced the illustration rates to 4% and 8%. Commenting on the same Mr. J. Hari Narayan, Chairman of IRDA said, "The rates used for illustrative purposes are pitched too high and the fear is that these projected returns when seen on a piece of paper may cause some sort of an illusion in the minds of the customers, who will believe the assumed rates as the real return of the policy. Therefore, the rates of return need to be a little conservative."
We believe that the above change in the assumed rate of return while explaining prospective clients in the form an illustration, will help reducing the illusion in the mind of clients. Moreover, mis-selling would also be curtailed, as some insurance agent project a very high rate of return while explaining clients in an attempt to woo prospective clients.
However we think, the above directive should be implemented on an immediate basis and should not be prolonged to safeguard the interests' of the insurers and insurance agents.
| | Impact
The equity markets have been reeling under pressures ever since the start of the calendar year 2011. Global factors like the Euro zone debt crisis, ballooning fiscal deficit of the world's largest economy - the United States, along with domestic factors like spiralling inflation, political uncertainty due to unearthing of scams, unmanageable fiscal deficit, etc. are still adding to the woes of the equity markets.
(Source :ACE MF, PersonalFN Research)
But in the midst of this, the classic asset class - Gold has taken the centre stage due to its trait of being "safe haven" during times of economic and political uncertainties, and has also expressed an inverse relationship with equity as an asset class. The graph above reveals that, if one were to invest Rs 10,000 each in BSE Sensex and Gold-India on January 03, 2011 then the same would have been worth Rs 8,545 and Rs 13,834. respectively as on November 08, 2011. Thus at one end equity has lost 14.55% on an absolute basis, while gold has gained 38.35% on an absolute basis.
We believe that equity and gold are both an integral part of one's portfolio as the two asset classes show inverse relationship between each which in turn helps to balance out the investment portfolio. Hence, if there are losses on the equity side, the upswing in gold helps minimize the losses and vice versa.
Remember 5% to 10% of your portfolio assets must be allocated towards gold and that too for a period of 10 to 15 years, as this acts insurance during times of economic and political uncertainty.
| | | | Weekly Facts |
| Close | Change | %Change | | BSE Sensex* | 17,192.82 | (369.8) | -2.11% | | Re/US$ | 50.18 | (1.0) | -2.10% | Gold /10g | 28,765.00 | 1,105.0  | 3.99% | | Crude ($/barrel) | 112.22 | 2.7 | 2.46% | | FD Rates (1-Yr) | 7.25% - 9.40% | Weekly change as on November 10, 2011
*BSE Sensex as on November 11, 2011 | | | | This Week's Poll !!!
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In an interview with the Economic Times, Mr. Paolo Romani, Minister for Economic Development, Italy shared his views on Italy's economic health and the adverse effects of bailout packages on Italy.
Mr. Romani believes that the Italian economy's fundamentals are very strong. Italy's only problem according to Mr. Romani is its debt which is 180% of its Gross Domestic Product (GDP). "But it is not a problem of today or yesterday. It is a problem of day before yesterday and dates back to the nineteen nineties. So, all this speculation in the market about Italy is not justified. The crisis is related to the paper economy, and we have a real solid economy. But this does not mean that the strong real economy of Italy cannot support this kind of stress," he said.
As far as adverse effects of bailout packages (for Greece) on Italy are concerned, Mr. Romani is of the view that there is no impact on Italian economy at all. He says, Italy is one of the founders of EU and the fourth largest economy of Europe, so a speculation against Italy is a speculation against Europe. Explaining further he said, "Last Wednesday, we sent a 15 pages letter to Europe describing what we are going to do in the next eight months. Europe says that they agree with our plan and with this kind of premise the European central bank is going to sustain buying our treasury bonds. So there is no problem about contagion from Portugal or Greece to our country."
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Capital Adequacy Ratio:A measure of a bank's capital. It is expressed as a percentage of a bank's risk weighted credit exposures.
(Source: Investopedia) | | | QUOTE OF THE WEEK
"Value is not intrinsic; it is not in things. It is within us; it is the way in which man reacts to the conditions of his environment."
- Ludwig von Mises | | |