Impact ![]()
The Insurance Regulatory and Development Authority's (IRDA) issued a directive to general insurance industry for creating a provision of an additional  7,000 crore by March 31, 2011. Reacting to this directive, 35,000 crore general insurance industry expressed its view saying it could go insolvent if the directive is implemented.
In its response to the IRDA's directive, the General Insurance Council (GIC) has stated in its letter to the regulator that the estimate of their (General Insurance industry) extant liabilities on third-party motor portfolio is grossly exaggerated.
The letter has also further stated that, "In order to make the commercial vehicle third-party liability portfolio viable, IRDA should raise the regulated price for the portfolio by a minimum of 85% with effect for April 1, 2011. An increase of value lower than this would continue to jeopardise the sustenance of the portfolio and consequently the industry. Also, there should be a mechanism for annual increase of premium by aligning it to an existing index such as the consumer price index or minimum wage inflation. Going forward, the third-party liability portfolio should also be de-tariffed."
To this issue Mr. M. Ramdoss - Chairman and Managing Director of New India Assurance (the largest general insurance company in the country) said, "It would be impossible to meet the new requirement by this year-end. General insurers should be allowed to raise the premium for third-party motor portfolio. We understand that IRDA is seized of the matter and hope the regulator would find a way out of the situation."
We believe that IRDA's directive of imposing an additional provisioning is justified to make up the under provisioning in the last four years. Also from a long-term financial health sustenance point of view, this move is worth appreciating. However, before implementing any of its directives, the IRDA should consider the issues faced by general insurance companies; and anything done without assessing the present financial health of the general insurers may be detrimental to general insurer as well as the policyholders'.
| Multibagger Stock Ideas
Claim this Free & Exclusive Guide Today. Act Now!
CLICK HERE to know more... | |  Impact ![]()
An estimated $1 trillion wealth management industry will soon get its new rules as the Government is planning to frame a comprehensive rule-book for wealth management practices by seeking inputs from Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and other financial sector regulators.
Given the sheer size of the wealth management industry, there is a greater risk of large scale frauds or manipulations. Thus, in order to keep a watch for any violations, the RBI and SEBI may be given more powers to impose strict penalties.
While the RBI and SEBI would be primarily responsible for compliance of the rules, help would be sought from other regulators, namely commodity regulator FMC, insurance watchdog IRDA and pension fund regulator PFRDA, whenever needed.
The new set of rules are being framed under the aegis of Financial Stability and Development Council (FSDC), a high-level regulatory body chaired by Finance Minister that was set up by the government in December 2010 in place of erstwhile High Level Coordination Committee on Financial Markets.
In our opinion it is a prudent step by the Government to rope in both RBI and SEBI and make them work jointly over the issue, which would make wealth managers accountable and responsible for the advice provided. However, care should be taken that the new rules do not undermine the interest of the investors as well as fund managers by making it too strict. | |
Impact ![]()
 (Source :ACE:MF, PersonalFN Research)
Even as the world is griped with fears rising crude oil prices due to the unrest in Libya and Gulf countries, gold has been and will always remain for years to come, the safe haven investment destination for investors of all kind (from individual to Governments). And as the U.S. economy is still paper driven (due to QEII announcement), we may witness a weakening of the U.S dollar which may keep an upward bias on the prices of gold (gold prices and the U.S dollar are inversely related to each other).
The underlying fundamental attribute which makes gold a "Super Asset" class is, it does not lose its sheen during the economic or political turmoil. This has been proved time and again. As investors are taking a refuge under this precious yellow metal as the economic and political turmoil continues, gold has become bold by scaling a new historic high of 21,125 (value of 10gm of gold) in Mumbai spot markets.
In our opinion gold insures you against all economic and political turmoil. Yes sure there have been ups and down, but overall it has displayed a secular uptrend. And you as investors needn't worry, because as long as all the central banks (all over the world) resort to printing more money and scale-up their gold reserves (to hedge their economic risks), gold would continue its northward journey.
We believe that you investors should keep on allocating a part of your portfolio towards this asset class.
At PersonalFN we recommend that investors should at least hold 5% - 10% of their portfolio in gold.
| | | Weekly Facts |
| Close | Change | %Change | | BSE Sensex* | 18,174.09 | (312.36) | -1.69% | | Re/US$ | 45.18 | (0.1) | -0.31% | | Gold/10g | 20,925.00 | (45.0) | -0.21% | | Crude ($/barrel) | 115.32 | (0.6) | -0.55% | | FD Rates (1-Yr) | 7.00% - 9.00% | Weekly change as on March 10, 2011
*BSE Sensex as on March 11, 2011
| |
In this issue
| FREE Guide:
Your Guide to Insurance Planning and protecting your financial future.
CLICK HERE to download! | | |
In an interview with the Economic Times, Mr. Shankar Sharma - Global Trading Strategist of First Global shared his views on reaction of equity markets post Budget 2011-12 and the fiscal deficit number.
Mr. Sharma is of the view that the markets are looking very bleak or depressing. Further explaining his stance he said, "The market is looking pretty patchy in the sense that the banks look very good and we have been bullish on them for quite a while. I was told that there was no excise duty hike as was expected in the budget on autos and, therefore, they are also having their time under the sun. Pharmas continue to look quite okay and these are pretty much the trades. Other than that, it is a very bleak landscape for Indian equities."
On India's fiscal deficit front, Mr. Sharma believes that the 4.6% fiscal deficit number (without the one-off items such as the 3G auction money) given out in the budget seems to be unrealistic. He further said, "Indian budgets are fairytales and if you want to believe fairytales, then you should go back to school. India has always grappled with deficit. We have a twin problem of the current account as well which is a bigger concern in my view because that is your external account deficit. We can always paper over local account by a variety of means, but the external account is a genuine problem. So the twin deficits do constitute a serious part of India's problem situation and if you have the crude situation getting worse, then these numbers obviously can have risk on the upside."
| |
Kotak Gold Fund : Kotak Mahindra Mutual Fund launched Kotak Gold Fund, a Gold Fund of Fund (GFoF) which invests its corpus into Kotak Gold Exchange Traded Fund (KGETF), (which in turn invests in physical gold) and its (KGF's) performance would be closely linked to the performance of the underlying fund - KGETF. To read more please Click here.
| |
Asset Class: A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations. The three main asset classes are equities (stocks), fixed-income (bonds) and cash equivalents (money market instruments)
(Source: Investopedia) | |
QUOTE OF THE WEEK
"A clear vision, backed by definite plans, gives you a tremendous feeling of confidence and personal power."
- Brian Tracy | |
This Week's Poll !!!
************
What are you investing in these days?
To Vote Now! | |