Market likely to open higher: Friday Market Preview

Markets in the US continued their winning streak bolstered by good corporate earnings and positive economic data and tracking the US markets, most markets in Asia were in the positive terrain in early trade today

Global cues indicate a positive opening for the local market today. Wall Street continued its winning streak on Thursday on good corporate earnings and manufacturing data, which saw the Dow and the S&P 500 at their highest levels since June 2008. Markets in Asia were mostly in the green in early trade on Friday on positive cues from their US counterparts. The SGX Nifty was up 12.50 points at 5,562.50 against its previous close of 5,550 on Thursday. 

The market opened flat yesterday as profit booking set in early. The key indices touched the day's lows in early trade but brushed aside early hiccups, as a fall in weekly inflation numbers for early February sparked off an upmove. The momentum continued in the post-noon session, with the indices touching intra-day highs in the last half an hour and closing with impressive gains. Yesterday’s close was the fifth consecutive positive ending for the key indices. 

The benchmark indices ended well above the 20-day moving average. The Sensex closed 206 points higher at 18,507, while the Nifty closed 65 points up at 5,546. The 301 points loss on the Nifty in the five days starting 4 February 2011 has been covered in this five-day run (starting 11 February 2011) with a gain of 321 points. The market will pause now for breath, but if the decline is shallow we will see a sharp rally unfolding.

Markets in the US continued their winning streak bolstered by good corporate earnings and positive economic data. Consumer prices rose at the quickest pace in 15 months in January. The consumer-price index advanced 0.4% for a second month, led by the biggest increase in food costs in more than two years, according to figures from the Labor Department. The so-called core rate, which excludes volatile food and fuel prices, rose 0.2%, the biggest gain since October 2009. 

Another Labor Department report showed applications for initial jobless benefits increased by 25,000 to 410,000 in the week ended 12th February, exceeding analysts’ forecasts. A separate report showed factory activity in the US Mid-Atlantic region rose in February to its highest since January 2004, with an employment sub-index reaching its highest point since April 1973.

Among corporates, Cliffs Natural Resources Incorporated jumped 7.2% as profit beat analysts’ estimates. Nvidia Corporation vaulted 9.8% as the maker of graphics chips forecast higher sales than analysts had predicted. American Express Company declined 2.3% amid concerns about the impact of a proposed rule on interchange fees. Huntington Bancshares Incorporated declined 2.5% after Bank of America cut its stock rating.

The Dow surged 29.97 points (0.24%) to 12,318.14. The S&P 500 gained 4.11 points (0.31%) to 1,340.43 and the Nasdaq Composite added 6.02 points (0.21%) to 2,831.58.

Tracking the US markets, which closed higher overnight, most markets in Asia were in the positive terrain in early trade today. The Japanese market pared recent gains as the yen rose against the dollar, impacting export-oriented companies. Elsewhere in the region, institutional buying lent support to the markets.

The Hang Seng gained 0.56%, the Jakarta Composite rose 0.62%, the KLSE Composite advanced 0.34%, the Nikkei 225 added 0.02%, the Straits Times rose 0.67%, the Seoul Composite surged 1.30% and the Taiwan Weighted jumped 1.82%. On the other hand, the Shanghai Composite declined 0.59% in early trade.

Back home, the government on Thursday said it will soon notify the format that companies will have to follow while preparing their account books as per the International Financial Reporting Standards (IFRS) from the next fiscal.

In an official statement, the corporate affairs ministry also said that it is ready with the depreciation rates that companies will have to follow while compiling their financial statements. The ministry also pointed out that companies will have to comply by the IRFS norms from April 2011.


Essar group CEO Prashant Ruia appears for questioning at CBI HQ

The CBI has started questioning the top honchos of major telecom firms after the Supreme Court directed it to check the eligibility criteria of operators who won 2G spectrum licenses

New Delhi: A day after Reliance Dhirubhai Ambani Group chairman Anil Ambani was called for questioning at the Central Bureau of Investigation (CBI), it was the turn of Essar Group CEO Prashant Ruia to appear before the investigating agency for questioning in the 2G spectrum scam case.

CBI summoned Mr Ruia at its headquarters on Thursday, according to media reports.

The CBI has started questioning the top honchos of major telecom firms after the Supreme Court directed it to check the eligibility criteria of operators who won 2G spectrum licenses.

The CBI is likely to question more CEOs in connection with its ongoing probe to seek details of possible irregularities in the sale of 2G licenses below the market price.


Jan sales were disappointing, but we’re optimistic about Feb-Mar: IDBI Federal Life MD

January to March is a crucial period for insurance companies. GV Nageswara Rao is optimistic that innovative products and new approaches will improve business for IDBI Federal Life Insurance

Managing director and chief executive officer of IDBI Federal Life Insurance,. GV Nageswara Rao, says that while ULIPs are still popular, traditional policies are gaining the attention of customers. In an interview with Moneylife, he discussed how the company was adapting to the requirements of customers and the new regulations for the business.

How has business been this year and specifically what are your expectations during the crucial period, this month and next month? How much business is generated through bancassurance?

We had a healthy 37% increase in new business premium at Rs990 crore. We are projecting a growth of 70%-75% in terms of total premium income by the end of this fiscal. We have sold 2.5 lakh policies since inception with a sum assured of Rs13,647 crore. Two-thirds of business, in terms of premium, comes from bancassurance, while one-third is from agents. The number of policies sold via these channels is equal.

We have been focussing on improving efficiency and profitability. Unlike some other insurers, we have not downsized. We have doubled the number of agents. We have come out with innovative products to meet customer needs. We are trying out different approaches of direct marketing, like telemarketing and even salaried employees selling policies.

January sales were disappointing, but we are optimistic about the current and next month. March is the biggest month for insurance companies. The mix of ULIP to traditional policies is 60:40 now, earlier it was 80:20. The ticket size of traditional policies is smaller when compared to current ULIPs and that also leads to lower premium collection.

How many offices, agents do you have? How many branches for bancassurance?

We have 57 offices and 9,545 advisors. Bancassurance operates through 1,500 branches of our partners.  

How do you see the prospects of the just-launched traditional pension plan Retiresurance? Also, you are waiting for approval from the IRDA for a single premium pension ULIP. Why not regular premium pension ULIP?

We have designed Retiresurance to suit the definitive needs of people post-retirement. With an increase in the life expectancy, many Indians could be spending a good 20 to 25 years of their life in retirement. The product offers a guaranteed corpus for every premium paid. Moreover, if the customer continues the policy till maturity, the plan offers guaranteed loyalty additions. We will come out with a single premium pension ULIP soon. But regular premium pension ULIP is not practical for 4.5% per annum guaranteed. It is difficult to forecast future interest rate when premium is received each year over a long term.

New guidelines from IRDA, effective July 2011, require terminating the contracts of agents who fail to get more than half the policies sold by them renewed in the subsequent year. How will this impact business? What is your renewal ratio for policies?

It will be a challenge for us, but good for customers. The agent commissions in ULIPs have gone down, but renewals will add to commission. We are working on improving productivity through better training and sales aids. Our renewal ratio is 70-75%.

Is the single premium ULIP getting more sales compared to the regular premium ULIP? What would be the commission percentage for agents?

Yes, it is because of the reduction in the commission gap between single and regular premium ULIPs. It is also easier to sell the single premium ULIP. Agents sell a mix of products (ULIP, traditional) and the average commission is 8% of premium.  

Any expectations on the IPO guidelines, in terms of the number of years required in the business to be eligible to go for an IPO?

We would be happy if the number of years in business before going for IPO is seven or less.

How do you see the impact of DTC if the tax-savings aspect of ULIP changed?

It would have a big impact on business. Tax benefit is an important selling aspect of ULIP.

What has been the response to your TV advertisement campaign?

It's been great. We have received over 45,000 SMSes evincing interest in the product.

Are there any customer service initiatives for online premium payments?

We already have a functional online gateway for policyholders to make online premium payments.

Is term insurance sold more in urban or rural markets?

It is sold more in the urban market than the rural market. People who want something back at the end of the policy term don't go for term insurance.

What is your claims settlement ratio? Any plans for capital infusion?

We are nearing only the third year of operations and hence have only a few claims till now. We will look at capital requirement in the next fiscal.


We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)