All the major life insurance companies have turned a blind eye to the capital market watchdog’s diktat barring them from selling ULIPs; business continues as usual
For life insurance companies, business continues as usual despite a blanket ban imposed by the Securities and Exchange Board of India (SEBI) barring them from selling unit-linked insurance policies (ULIPs). All 14 insurance houses barred by SEBI have chosen to defy the order and are continuing to offer ULIP products to customers, while collecting premiums from existing ones also.
Several of these companies have been flooded by customer enquiries, with anxious policy holders desperate to know whether their policies are safe and operational. Even those that have not been named among the 14 companies are getting regular calls from nervy customers.
Following the insurance sector regulator Insurance Regulatory and Development Authority’s (IRDA) go-ahead to continue selling ULIPs, insurance companies have presented a united front in openly ignoring the SEBI diktat. When Moneylife contacted several companies under the pretext of customer enquiries, we were told that ULIP products would continue to be offered until further communication to the contrary is received from the company management. We were also informed that existing holders of ULIPs would face no difficulties and that they would continue collecting premiums as usual.
These companies include AEGON Religare, Aviva Life, Bajaj Allianz, Bharti AXA Life, Birla Sun Life, HDFC Standard Life, ICICI Prudential, Kotak Mahindra, Reliance Life, SBI Life, Tata AIG Life, Max New York Life. Officials from Metlife India and ING Vysya Life could not be reached.
An official from Bajaj Allianz said, “This ban will not affect our customers—existing or new. You can buy new plans or continue paying premiums on existing policies.”
Another official from Bharti AXA Life said, “We will continue to issue new ULIP policies till the time we get a directive to the contrary from our management. Existing policy holders need not be concerned about their policies.”
A representative from Reliance Life reiterated, “Our customers need not worry. ULIPs are regulated by IRDA and not SEBI. As such, we will continue to offer ULIPs to new customers.”
With IRDA firmly standing by insurance companies, the battle between the two financial regulators has taken an ugly turn. SEBI had on Saturday issued a startling order barring 14 insurers from selling ULIPs without its approval. The very next day, IRDA took the market watchdog head-on by challenging SEBI’s ban and stating in its directive, "Notwithstanding the SEBI order, these insurance companies can continue to do business as usual, including offering, marketing and servicing ULIPS."
The stock markets have rallied strongly for the past nine consecutive weeks. What does the tenth week have in store? Past trends suggest a 100% positive outcome
For a straight nine weeks now, the 30-share BSE Sensex has been on an upswing. From 16,153 points on 11 February 2010, it has rallied to a high of 17,933 for the week ending 9th April. If past market trends are anything to go by, then the Sensex looks set to gain some more ground in this week.
Moneylife has been tracking every movement of the index over the past nine weeks. In our study of past performance of the Sensex, we have found that the index had witnessed a five-week, six-week, seven-week, and eight-week straight rally exactly 33, 22, 16, and 7 times respectively. The study has also correctly shown the probability of the index continuing its momentum in the subsequent weeks.
This time, the Sensex registered a 1.4% rise over the previous week, to post a nine-week straight rally. Based on our historical data, there have been five instances (excluding this time) of a sustained rally in the Sensex for nine straight weeks. What happened in the 10th week in these five cases? In all five instances, the subsequent week has reported a continuation in the Sensex rally. That translates into an astounding 100% positive outcome!
It is worthwhile to note that, on such occasions, the Sensex has risen by an average of 1.28%. The index has seen a maximum gain of 2.50% and a minimum gain of 0.02%.
These are indeed encouraging signs for the bulls, which are still upbeat on the market despite valuations now appearing stretched. Today’s 80-point decline and another possible soft opening tomorrow morning might just see more investors getting into the fray.
The turf war between SEBI and IRDA over ULIPs spooked market sentiment
The market took a breather after a straight nine weeks of gains. The Sensex was down 80 points (0.45%) to 17,853 and the Nifty shed 22 points (0.41%) to end at 5,339. The sentiment in the market was subdued by the row between the regulators on the selling of unit-linked insurance plans (ULIPs). The Securities and Exchange Board of India (SEBI) has barred 14 insurance companies from issuing ULIPs with immediate effect. SEBI feels that ULIPs, being a combination of investment and insurance, can only be offered after taking permission from the market watchdog. The market started with a gain—however, it soon came down from the high. Trading was volatile with the indices recovering from the low of the morning session and then sliding down in the afternoon session to touch the intraday low. Foreign institutional investors were net buyers on Friday (Rs233 crore). Domestic institutional investors were net sellers at Rs66 crore.
The rupee was strong today as the euro rose to its highest in nearly a month against the dollar. Most Asian stocks rose on Monday on news that the European Union had agreed on Sunday to details of a rescue package, if the Greek government needs one. Key benchmark indices in Singapore, Japan, Indonesia and Taiwan rose by 0.07% to 1.06%. The key benchmark indices in China, Hong Kong and South Korea fell by 0.32% to 0.82%. US stocks rose on Friday with the Dow passing 11,000 for the first time in a year-and-a-half after Chevron’s upbeat outlook and wholesale inventories data reinforced bets on an improving economy. The Dow gained 70.28 points (0.64%) to end at 10,997.35. The S&P 500 rose 7.93 points (0.67%) to 1,194.37. The Nasdaq added 17.24 points (0.71%) to 2,454.05. The World Trade Organisation (WTO) director-general Pascal Lamy said that the recovery in the global job market may be delayed by 18 months.
Data showed that US wholesale inventories rose more than expected in February and sales at wholesalers reached their highest level in 16 months, brightening prospects for first-quarter financial and earnings growth.
Closer home, industrial output in February grew at a slower rate than expected. Industrial output rose 15.1% in February from a year earlier, less than a rise of 16.7% in January, and a 16% rise expected by analysts. A top government adviser forecasted that March inflation will remain on the higher side. The RBI has allowed foreign institutional investors to use their government bond holdings and foreign sovereign securities with ‘AAA’ ratings as collateral for stock market transactions. Sesa Goa (down 2.7%) was suppressed as China has banned import of iron ore with less than 60% iron content. Alstom Engineering (down 0.12%) has received a contract from AST Company LLC, (Dubai) for the construction of fuel storage facilities at three locations on the outskirts of Abu Dhabi. The contract is to be completed within a period of six months. IntraSoft Technologies (up 9.9%) has started trading on the bourses today. The company priced its initial public offering (IPO) at the higher end of the Rs137-Rs145 price band. Tata Motors (down 3.5%) will sell part of its shareholding to Tata Cummins in a process to divest its non-core assets to reduce debt. The key shareholders of SpiceJet (down 1.6%) have refused an offer from the Reliance Anil Dhirubhai Ambani Group to pick up 51% stake in the airline for Rs 40-45 a share. Reliance Infrastructure (up 0.2%) expects the governments of Gujarat and Andhra Pradesh to invite bids to develop regional airports. Exxon Mobil is reported to be in the process of assessing the eastern offshore assets of ONGC (down 1.1%) for a possible tie-up. DB Corporation (up 1.95%) has set up a committee of directors to consider the demerging of its FM radio business and merging the Bhaskar Publication & Allied Industries with the company.
As we predicted on Friday (9th April), we seem to be headed for another correction, possibly a longer one this week.