Impact 
The Insurance Regulatory and Development Authority (IRDA) is planning to ease guidelines for selling general insurance products in the country and may allow monoline agents, who would sell only single product of one insurance company. These monoline agents may include of general stores or grocery shops, selling anything from household items to groceries.
At present the guidelines for monoline agents are not out as yet, but something concrete can be expected as the move is intended to scale-up premium collections, thereby aiming for financial inclusion in our country.
We believe that while the move may infuse ease in buying an insurance product, at present it can be extended only to plan vanilla products such as travel insurance or home insurance cover. Also while the intention of financial inclusion is good, a robust distribution model needs to be in place for tapping small cities and towns. Moreover, the knowledge resources of these monoline agents also have to evaluate before taking any decision in this direction; because they may be incapable of selling complex products. Moreover, one needs to recognise that unfortunately insurance has always been a push product, where intensive interaction between the agent and the customer is carried out.
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In order to tide over the downturn of the Indian equity markets; caused due to various domestic as well as global factors such as the ones mentioned below, domestic mutual funds are looking at international opportunities in order to help the investors to diversify their investment portfolios across nations.
- WPI inflation,
- Political uncertainty due to anti-corruption campaigns of Baba Ramdev and Anna Hazare
- Debt overhang situation in the Euro zone
- Buzz about suspension of QE II money by the U.S.
Leading fund houses, including DSP Blackrock, JP Morgan Mutual Fund, Deutsche Mutual Fund, and Franklin Templeton, have sought approval from the capital market regulator SEBI to launch international feeder funds.
An international fund is a fund that can invest in companies located anywhere outside its investors' country of residence. A feeder fund is one that invests through another fund called the master fund.
In the past one year international feeder funds in India have delivered average returns of 13% - 15%, as developed markets performed well. Also the emerging markets such as Brazil, China, Russia, Peru, South Africa, Nigeria, and Mexico performed better than Indian equities in the past one year, as rise in prices of commodities such as crude oil, coal, copper, aluminium, silver, and iron ore aided the upward rally.
We believe that the launch of such international funds is intended to gather more AUMs (Assets Under Management) in a situation where the domestic equity markets led by internal as well global economic factors are suffering the pain. However, investors should realise that this an opportune time to invest in Indian equity markets (through the mutual fund route) as valuations appear attractive and reasonable. Moreover, it is noteworthy that international funds - especially those focusing on the U.S. economy and China are exposed to greater risk.
In our opinion mutual fund houses should educate investors on investing in our domestic market (for the long-term synergy which it offers), and should not may make hay when the sun shines by betting on the short-term synergy offered by the international markets. | |
Impact   (Source :ACE MF, PersonalFN Research)
The year 2011, so far (upto June 20, 2011) has been a seesaw ride for the Indian equity markets (BSE Sensex). Foreign Institutional Investors' (FII) flows, as usual remained volatile as the headline inflation continued to be the cause of concern (WPI inflation for the month of May 2011 stood at 9.06%). The successive rate hikes too, by the Reserve Bank of India (RBI) to tame the spiralling inflation raised negative sentiments due to concerns of slow down. Index of Industrial Production (IIP) too, has displayed a patchy performance as it fell from 8.8% in March 2011 to 6.3% in April 2011.
The probable end to the Quantitative Easing II (QEII), adopted by the U.S. Government by June 2011 left the investors nervous. Speaking about the situation in the Euro zone, there too the debt overhang situation prevailed and failure of Greece to put its public finances in place, precluded investors from going long. To accentuate the negative sentiments further, the rumours over revision of the Double Taxation Avoidance Agreement (DTAA) between India and Mauritius, battered down the Sensex by 363.90 points to 17,506.63 on June 20, 2011. The cause concern over India-Mauritius DTAA was whether investments from Mauritius would attract capital gains tax in India.
We believe that though global factors have an important say in the India's growth story ahead, fundamentally there is nothing wrong with the economy. Yes, the political clout has tarnished India's image on a global platform. Reforms in these areas need to pick up fast in order to restore India's lost sheen.
But, long-term investors need not worry and can adopt the SIP route to mutual fund investments in order to tide over these times of uncertainty. Remember while investing in mutual funds select schemes which have track record and are from a stable fund house following prudent investment processes and systems. | | | Weekly Facts |
| Close | Change | %Change | | BSE Sensex* | 18,240.68 | 370.2  | 2.07% | | Re/US$ | 44.96 | (0.1) | -0.13% | Gold /10g | 22,495.00 | 210.0 | 0.94% | | Crude ($/barrel) | 113.87 | (0.3) | -0.22% | | FD Rates (1-Yr) | 7.25% - 9.25% | Weekly change as on June 23, 2011
*BSE Sensex as on June 24, 2011
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In an interview with the Mint, Mr. Pankaj Bajaj - President of Confederation of Real Estate Developers' Association of India, NCR, and Managing Director, Eldeco Infrastructure and Properties Ltd shared his views on problems in the Indian real estate market.
Mr. Bajaj believes that the biggest problem faced by the Indian real estate market is its excessive regulation. He feels that the sector is over-regulated to a level, where there is duplication of approvals and taxation mechanism at the Centre and State-level civic bodies. For instance, he explains that there is no clarity on the proposed service tax and goods and services tax. Different states have different laws.
According to Mr. Bajaj, the huge gap between actual transaction rates and marked prices can be reduced by lowering tax rates. In fact, he feels that there should be efforts to incentivize high declaration of property costs. He also put forth a rather radical idea lowering stamp duty and transaction cost for a higher-value property as compared with an identical property declared at a lower value.
The rising interest rates will cause a negative sentiment among home-buyers in Tier I cities cites Mr. Bajaj. But at the same time he believes that homebuyers in tier II cities where capital values are still not high will not be impacted.
As far as price corrections in the residential markets are concerned, he feels that the overheated markets such Mumbai and Delhi-NCR may see price correction. However, he thinks that majority of the regions in the country will not witness any price correction and in fact, tier II cities will see appreciation of capital values.
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Bilateral Tax Agreement: An arrangement between two jurisdictions that mitigates the problem of double taxation that can occur when tax laws consider an individual or company to be a resident of more than one jurisdiction. A bilateral tax agreement can improve the relations between two countries, encourage foreign investment and trade, and reduce tax evasion.
(Source: Investopedia) | |
QUOTE OF THE WEEK
"It's not the hours you put in your work that count, it's work you put in the hours."
- Sam Ewing | |