Impact 
In a bid to safeguard the interests’ of the policyholders, the Insurance Regulatory and Development Authority (IRDA) is mulling ways to ban misleading products (which are confusing for the policyholders) and change the pattern of distributing commissions to agents.
Insurance companies, bitten by the slump in sales after new rules curbing the Unit Linked Insurance Policies (ULIPs), are peddling many policies that on close scrutiny could be termed deceptive. And one such promise (rather a famous one) is the promise of highest Net Asset Value (NAV). The policyholders are often kept in the dark by insurers not publishing the calculation behind the highest NAV. These policies also charge 25 to 75 basis points as additional fees which further reduces the premium allocated towards investment.
Mr. J. Hari Narayan, Chairman of IRDA said, "Suppose a company had Tata in its portfolio, over time it may change. At the time of maturity which highest NAV are you talking about - the portfolio, or Tata. One of the major problems with the product is that how do you communicate to the policyholder. He may be thinking of the highest NAV of the Sensex. So, this is the whole issue."
We believe that sooner the clouds of uncertainty are removed over such complicated products better it would be for the policyholders. Also, IRDA is right in planning to stagger the commissions paid to insurance agents so that they remain committed towards servicing policyholders throughout the tenure of the policy.
Remember to go in for a pure term insurance policy for your "protection" needs and for "investment" needs please consider various investment avenues (other than life insurance policy) by taking into consideration the benefits provided by them.
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Impact
The National Housing Bank (NHB), the umbrella body governing all housing finance companies has finally issued a directive which will now refrain housing finance companies from charging a penalty from home loan borrowers for pre-closure of their home loans, subject to certain conditions. Moreover the NHB has also said that home loan borrowers under the floating rate scheme opting to prepay their loan, can do so from any source of income, unlike the earlier practice where prepayment could have be done only from "own source of income".
For home loan borrower under the fixed rate scheme, the NHB has said they too can prepay their loans provided it’s being done through own sources.
NHB has also asked housing finance companies (HFCs) to maintain equal stature in case of floating rate home loans given out to old as well as new customers.
Despite the RBI earlier mentioning that home loan buyers under the floating rate home loan scheme should not be levied a penalty for prepayment, in our opinion this directive from NHB was much needed as a co-ordinated effort in the long-term interests’ of the borrowers. Moreover now since home loan borrowers can pre-close their home loans (as and when they have surplus funds), housing finance companies would not face an adverse situation of asset-liability. We believe this move will not only boost the home loan market but will also make things easier for the borrowers when they wish to pay off their loans.
| | Impact 
Government had raised the limit of investment by Foreign Institutional Investors (FIIs) in the debt market by $5 billion (Rs 22,800 crore) each in government and corporate bonds. This move will take the total FIIs limit, in the debt market at any time to $30 billion - $10 billion in government and $20 billion in corporate bonds. However, the extended limit can only be invested in securities from infrastructure companies that have a minimum remaining maturity of five years.
(Source :ACE MF, PersonalFN Research)
Citing the above move by the Government, the FIIs are now finding debt instruments more attractive than the equity ones. At the same time equity markets have failed to woo the FIIs due to high interest rates, high inflation, uncertainty in the global markets, etc. In the calendar year 2011 (year-to-date upto October 24, 2011) FIIs have pumped in net Rs 20,968.80 crore in the debt market and during the same period they (FIIs) pumped out net Rs 1,575.90 crore from the equity markets.
We believe that the FIIs aren’t long term players when it comes to investment as compared to the Foreign Direct Investment (FDI). FIIs are like migratory birds that shift bases according to favourable season elsewhere. Our country needs more of FDI which is more stable and long term in nature and hence the Government should encourage more of FDI rather than the FIIs. | | | | Weekly Facts |
| Close | Change | %Change | | BSE Sensex* | 17,804.80 | 1,019.2  | 6.07% | | Re/US$ | 49.00 | 0.8 | 1.63% | Gold /10g | 27,600.00 | 1,400.0  | 5.34% | | Crude ($/barrel) | 112.00 | 2.3 | 2.14% | | FD Rates (1-Yr) | 7.25% - 9.40% | Weekly change as on October 27, 2011
*BSE Sensex as on October 28, 2011 | | | | This Week's Poll !!!
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In an interview with Mr. Robert Parker, Senior Adivser at Credit Suisse Asset Management shared his views on global equity markets and Indian equity markets.
According to Mr. Robert Parker, the equity market rally in the global markets will probably extend for at least another three weeks, possibly one month, as we go into late November. "However, is this the start of a two- to three-year rally? the answer to that is definitely No. We have still got a number of major obstacles to overcome. First, the European crisis needs to be resolved, all the indications at the moment are that the EU (European Union) led by France and Germany are close to formulating a final plan to deal with the three problems of Europe, i.e., the extent of the Greek write off, minimizing contagion risk on to Italy and recapitalizing the banks. However, as the German government has said recently, it may well be early next year when the final details are agreed (upon). So there is some scope, I think, for disappointment over the euro zone plan. The next problem is, in late November, the super committee in America has got to come up with budget cuts of $1.2 trillion."
Mr. Parker believes that the Indian market faced a number of problems at the beginning of the calendar year. The valuation of the market too, according to him at the beginning of this year was high, relative to the other emerging markets. He also pointed out that the tighter monetary policy had a negative impact on valuations in India. "Now as we go in to 2012, obviously valuations now are looking more attractive for the Indian market. I also think that the extent of the growth slowdown in India will be fairly minor and, I think, that growth in a range of 7% to 8% is likely. So that macro environment is positive and, what we may see on the market consensus is that we may see one final round of interest rate increases and we have yet to see any improvement in inflation as we go into early next year. I think that we will see the inflation numbers start to improve, given monetary tightening and also as the upward pressure on food prices starts to subside. Therefore, I think that in the first half of 2012, we could see an easier monetary environment which would be market supportive," he said.
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Information Ratio: A ratio of portfolio returns above the returns of a benchmark (usually an index) to the volatility of those returns. The information ratio (IR) measures a portfolio manager's ability to generate excess returns relative to a benchmark, but also attempts to identify the consistency of the investor. This ratio will identify if a manager has beaten the benchmark by a lot in a few months or a little every month. The higher the IR the more consistent a manager is and consistency is an ideal trait.
(Source: Investopedia) | | | QUOTE OF THE WEEK
"You must master your time rather than becoming a slave to the constant flow of events and demands on your time. And you must organize your life to achieve balance, harmony, and inner peace."
- Brian Tracy | | |