IRDA chairman appears to inclined towards the idea of guaranteed pension product even after scrapping of the 4.5% p.a guarantee. According to him, the pension ULIPs sold prior to 1 September 2010 were mis-sold as it was not really sold for pension needs
The Insurance Regulatory and Development Authority's (IRDA) pension guidelines mandate non-zero guarantee of returns even if it is lower than the 4.5% per annum guarantee offered by pension ULIPs (unit linked insurance plans) sold post September 2010 regulatory changes. Interestingly, IRDA chairman J Hari Narayan believes that the pension ULIPs sold prior to September 2010 were mis-sold as some financial accumulation products without an insurance component.
Making mandatory annuity of two-third of the corpus at vesting time for both traditional and pension ULIPs is another way to ensure customer keeps the funds locked for retirement needs. Pension ULIPs prior to September 2010 did offer lump sum payment (taxable). This option was removed post September 2010 regulatory changes. The window of opportunity was left open in traditional pension products, but it is now closed.
Another important change is not to allow an option for the policyholder to choose the insurer for annuity phase of the product. The same insurer will have to offer the annuity. If it is not the best offer, the policyholder is still stuck with the same insurance company.
There are mixed views from insurance companies on all the regulatory changes with both sides having valid arguments. Having a guarantee and transparency in surrender value will mean high exposure to debt instruments. The locking up of funds into annuity will enforce discipline. All this leads to questions on target segment for the pension product. Will a financially savvy investor buy pension products?
According to Rituraj Bhattacharya, head of market management and product development, Bajaj Allianz Life Insurance, "The pension guidelines will certainly help the masses. People want guarantee for retirement funds. There will be restriction for financially savvy investors who may want high exposure to equity. The average customer will have the incentive of knowing that there is capital guarantee and some returns. The customer may not know the annuity rates at the time of buying the product, but will have some estimate of annuity payment to be received based on the annuity rates at the times of vesting.
"In short, there will be transparency in the product from start all the way to vesting time and beyond for annuity payments."
The masses may have something appealing, but the classes may not have much to look for. It will be interesting to see how much the pension market grows with these new changes. As such, the slump in pension market from 20%-25% of life insurance business down to 3% has hit a nadir.
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Market will bounce back but the direction is down
A weak set of second quarter results and global issues kept the Indian markets lower for a fifth day in a row. While the Nifty opened slightly above yesterday’s low, it could not sustain itself above those levels and closed lower. The National Stock Exchange (NSE) witnessed volume of 67.73 crore shares being traded today. The NSE Nifty closed the day 38 points or 0.75% down to 5,030 while the BSE Sensex ended 106 points below at 16,775 points, a decline of 0.63% over previous closing.
The Indian market continued to trade lower for the fifth day on poor showing by corporates in their second quarter earnings reports and a negative trend in the Asian markets this morning. The Nifty was down 10 points over its previous close at 5,059 and the Sensex opened trade at 16,872, down 11 points. Capital goods, oil and gas, banking, metal and auto sectors witnessed selling pressure in early trade.
The southward journey continued till the post-noon session after which a marginal bounce-back resulted in the market hitting the day’s high at around 2.30pm. At the high, the Nifty touched 5,059 and the Sensex went up to 16,878. However, institutional selling amid choppy trade in the late session resulted in the benchmarks coming off the highs. The market finally closed with a cut of over half a percentage point with the Nifty going down 38 points to 5,030 and the Sensex erasing 107 points to settle at 16,776.
The advance-decline ratio on the NSE was a dismal 466:1,218.
Among the broader indices, the BSE Mid-cap index settled 0.94% down and BSE Small-cap index declined 1.34%.
BSE Consumer Durables (up 0.56%); BSE Fast Moving Consumer Goods (up 0.51%); BSE Metal (up 0.15%) and BSE Realty (up 0.12%) were the sectoral gainers. The top laggards were BSE Capital Goods (down 3.88%); BSE Power (down 2.02%); BSE Oil & Gas (down 1.27%); BSE IT (down 0.92%) and BSE Healthcare (down 0.84%).
The top performing Sensex stocks today were Jindal Steel (up 3.03%); State Bank of India (up 2.02%); Mahindra & Mahindra (up 1.89%); ONGC (up 1.74%) and DLF (up 1.30%). The top losers were Jaiprakash Associates (down 4.49%); BHEL (down 4.15%); Larsen & Toubro (down 4.04%); Sun Pharma (down 3.03%) and Hero MotoCorp (down 2.73%).
The major gainers on the Nifty were Jindal Steel (up 2.92%); Tata Steel (up 2.75%); SBI (up 2.72%); DLF (up 2.63%) and M&M (up 2.11%). SAIL (down 5.40%); BPCL (down 4.42%); Siemens (down 4.27%); GAIL (down 3.62%) and HCL Technologies (down 3.35%) settled at the bottom of the index.
The Asian pack closed lower as a rise in Italian bonds raised concerns that the country’s new government would face challenges to prop up the debt-stricken economy. The developments pulled down export-oriented companies in Asia, which depend on Europe to sell their products. Meanwhile, the Hang Seng Index slid 2% after the International Monetary Fund said Hong Kong’s sudden credit growth increased the risk of bad loans.
The Shanghai Composite tumbled 2.48%; the Hang Seng tanked 2%; the KLSE Composite shed 0.03%; the Nikkei 225 declined 0.92%; the Straits Times fell 0.15%, the Seoul Composite skidded 1.59% and the Taiwan Weighted lost 1.38%. On the other hand, the Jakarta Composite added 0.01%.
Back home, foreign institutional investors were net sellers of equities totalling Rs 409.77 crore whereas domestic institutional investors were net buyers of shares aggregating Rs205.96 crore.
State-owned oil marketing companies (OMCs) last night slashed petrol price by Rs2.22 a litre, the first reduction in 33 months. The reduction comes days after state-owned oil companies raised petrol prices by a steep Rs1.80 per litre. Following the reduction, Indian Oil Corporation declined 2.38% to Rs269 on the NSE, Bharat Petroleum Corporation plunged 4.42% to settle at Rs514.65 and Hindustan Petroleum Corporation tumbled 5.27% to Rs285.80 today. Earlier in the day, they all touched their 52-week lows in trade.
Titan Industries today said it is set to acquire Swiss watch brand Favre Leuba for up to 2 million euro (over Rs13 crore) as a part of its strategic business plan to expand product portfolio. Titan has signed a binding offer with Valfamily SL Spain and Maison Favre Leuba of Switzerland for the acquisition, following which the Indian watch major will secure global rights of the brand. The stock jumped 3.88% to close at Rs214.85 on the NSE.
Glenmark Pharmaceuticals today said it is launching anti-ageing products from the stable of Canadian firm Immanence-IDC as it forays in to the cosmeceuticals segment in India. A new division ‘Glenmark CosmoCare’, has been formed to pursue opportunities in the cosmeceutical segment in the country, Glenmark said in a statement. The stock added 0.24% to close at Rs335 on the NSE.
A weaker rupee is a matter of concern for India as it depends on imports for over 70% of its oil and gas requirements and the depreciation in the local currency have made imports expensive
New Delhi: As the rupee depreciated to a new 32-month low against the US dollar, finance minister Pranab Mukherjee today said the Reserve Bank of India (RBI) is monitoring the situation and will intervene in the forex market “as and when necessary”, reports PTI.
“As RBI has already mentioned, it is watching the situation. As and when it is necessary, they will intervene” Mr Mukherjee told reporters on the sidelines of CAG event.
His comments came a day after the apex bank said that it will intervene in the foreign exchange market only to arrest volatility.
“We intervene when there is a very strong movement in a particular direction or extreme volatility and the objective is to smooth that volatility and not fix a rate,” RBI deputy governor Subir Gokarn had said yesterday.
The Indian rupee fell by 24 paise to a fresh 32-month low of Rs50.91 against the US dollar in early trade today amid depreciation of the euro due to the deepening debt crisis in the euro-zone nations.
The Indian rupee is the fourth most depreciated currency in the world and most depreciated in the Asian continent.
The RBI has attributed the movement to the demand-supply factor, and said it is happening globally.
Mr Gokarn had said that RBI would opt for open market operations to manage liquidity in the system only if there is a stress and not to influence government bond yields.
A weaker rupee is a matter of concern for India as it depends on imports for over 70% of its oil and gas requirements and the depreciation in the local currency have made imports expensive.
This has come at a time when headline inflation has remained above the 9% mark for 11 consecutive months.