Stocks
Nifty, Sensex may be headed lower – Monday closing report

Nifty will be under pressure if it closes below 8,330

 

We had mentioned in Friday’s closing report that S&P CNX Nifty will move up as long it closes above 8,380 on Monday. Today after a positive opening the benchmark moved further higher. Today’s upmove at the beginning of the session seemed to show that the gains of past six days would continue. However, after hitting the day’s high the index was pulled lower. Every time it made an effort to revive, it met with further selling. The pessimism of Asian counterparts and the Greek concerns played negatively on the market sentiments.
 
The S&P BSE Sensex opened at 27,978 while Nifty opened at 8,408. Sensex hit a high at 28,064, a high above 28,000 after 18 trading days (including today). Nifty hit a high at 8,446. The indices hit their lows at the end of the session at 27,787 and 8,364. Sensex closed at 27,842 (down 45 points or 0.16%). Nifty closed at 8,378 (down 17 points or 0.20%). NSE recorded a volume of 79.00 crore shares. India VIX rose 2.59% to close at 14.1525.
 
Public sector banks suggested to the government to transfer government's stake in PSBs to a bank investment company. At the two day “Retreat for Banks and Financial Institutions” called “Gyan Sangam” held on 2 January 2015 and 3 January 2015, PSBs also suggested that eventually the government should reduce its stake in PSBs to less than 51%.
 
Ashok Leyland (8.33%) was the top gainer in ‘A’ group on the BSE. The stock hit its 52-week high today. It reported a 48% jump in its total sales at 9,290 units in December 2014 as compared to 6,275 units during the same month of 2013.
 
IRB Infrastructure (8.43%) was the top loser in the ‘A’ group on the BSE, following the news that CBI had conducted raids and searches at the realty developer's around 20 offices in Pune & Mumbai. The CBI is re-investigating complaint of land grab filed by slain RTI activist Satish Shetty against Virendra Mhaiskar, chairman and managing director of the company. The Bombay high court had permitted the CBI to re-investigate Shetty's complaint saying it was "in the interest of justice".
 
Maruti Suzuki (2.62%) was the top gainer in the Sensex 30 pack. The stock hit its 52-week high today. It recently reported 20.8% growth in December 2014 sales to 109,791 units.
 
Dr. Reddy’s Labs (2.19%) and Bharti Airtel (2.10%) were among the top two losers among the Sensex 30 stocks.
 
On Friday US indices closed flat after a strong opening and a sharp selloff during the day. Factory activity in the United States grew at the slowest pace in six months in December 2014, weakened by declines in orders and production. The Institute for Supply Management, a trade group of purchasing managers, said on Friday, 2 January 2015, that its manufacturing index fell to 55.5 in December from 58.7 in November, which was just below a three-year high reached in October.
 
Except for NZSE 50 (0.62%) all the other Asian indices closed in the red. Straits Times (1.26%) was the top loser.
 
In Japan, the final Markit/JMMA Japan Manufacturing Purchasing Managers Index (PMI) came at 52 in December, slightly less than a preliminary reading of 52.1 and unchanged from the final reading in November.
 
European indices were trading lower. US Futures too were trading in the red.
ECB President Mario Draghi said ECB will start quantitative easing. He said policy makers were ready to act if needed to counter deflation, in an interview with German newspaper Handelsblatt published on 2 January 2015. The ECB next meets on 22 January 2015.

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Debottlenecking of stalled projects underway in India

Due to government policy efforts, debottlenecking of previously stalled projects is underway in India. However, the country needs continuous new investment to create strong foundation for sustainable growth, says Nomura

 

The Increase in revived investment projects that were stalled suggest that debottlenecking of previously stalled projects is underway in India, due to government policy efforts. However, since these revived projects only make up a small proportion of overall investment and therefore, new investment needs to continue to accelerate to create a stronger foundation for sustainable growth, says Nomura.

 

According to the data from Centre for Monitoring the Indian Economy (CMIE), new investment projects announced rose to 12.3% of GDP in Q4 2014 from 8.8% in Q3. On a four-quarter rolling sum basis, investment rose to 7.1 % of GDP from 5.1 % in Q3 2014. 
 
New investment projects announced in the infrastructure sector rose sharply, especially in the air transport, aircraft orders and road sectors. New investment in the manufacturing sector though remains very tepid.
 
Meanwhile, the number of investment projects revived rose sharply to 1% of GDP in Q4 2014 (4-qtr sum) versus a low of 0.2% in Q1 2014, led by a revival in projects in the mining and electricity sectors.
 
Nomura said, "(the data shows) capital expenditure for projects has revived sharp rise. New investment also rose, but it is still at low levels."

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Mediclaim: Use of Tertiary hospitals driving treatment costs higher

Cashless preferred for high cost treatment and medical inflation seen as moderating says the ICICI Lombard 2014 trends report 

 

ICICI Lombard General Insurance has released the key trends for 2014 and its outlook for 2015 for the Health and Motor insurance segments. Here are the important points and Moneylife's comments -  
 
Use of Tertiary hospitals increased from 43% to 49% in case of retail customers which influenced treatment costs. 32% of corporate cases are referred to tertiary hospitals.
 
Including tertiary hospitals (Hinduja, Lilavati, Breach Candy, etc) for cashless is good for consumers, but it can mean that the insured will go to these hospitals even for minor ailments. Insurance companies often overlook smaller nursing homes for including in cashless network, which can push the insured to go for tertiary hospitals.
 
Medical inflation was seen as moderating, especially in the last three years. Mediclaim premium of private and government insurers have drastically increased in recent times and we hope it will pause or increase minimally going forward
 
Cashless route continued to be preferred for high cost treatments. Cashless is an important feature for policyholders. The list of hospitals on cashless network, also known as preferred-provider-network (PPN), varies across insurance companies and is a dynamically changing list. The cashless hospital when you purchased the policy may no longer be on the network after some time. It causes inconvenience to the insured who may buy specific insurer mediclaim product after finding close-by decent hospitals to be on the PPN list. It is disappointing for the insured when the hospital is removed from the PPN list. Moreover, government insurers do not have prominent tertiary hospitals on their PPN in major cities. Recently, Pune, Chinchwad-Pimpri hospitals have stopped cashless for government insurers, retail customers even when group mediclaim customers  continue to enjoy cashless    
 
The key disease trends remained consistent in 2014 led by genito urinary, eye disorders, respiratory disorders, injuries and digestive ailments
 
The pattern was similar for critical illness as neoplasm, metabol ailments, heart ailments continued to dominate
 
Among the key trends likely to emerge/ strengthen in 2015 include:
 
Rising demand for OPD as is evident from initial response in group health segment. Mediclaim covering OPD (consultation, diagnostics) is an expensive product which is marketed for fully utilizing Sec 80D limit of Rs15,000 (Rs20,000 for senior citizens). If an insurer offers mediclaim covering OPD at an affordable premium, then the product will be a success. 
 
Consultation services driving OPD usage at 73%, while diagnostics remains at 27% usage. Insurers can tie-up private primary healthcare providers and general physicians from different cities to offer discounted consultation fees for mediclaim policyholders who may or may not have opted for OPD cover. 
 
E-cashless module will gain prominence in the year ahead
 
Motor Insurance 
 
Impact of natural calamities was clearly evident with 40% increase in claims arising out of storms/cyclones
 
Motor Insurance continued on the growth path, though pace of growth slowed (9.8% in April to November 2014 compared to 17.1% in April to November 2013)
 
Private car sales are being driven by hatchbacks, 40% growth in April to November sales 
 
Bikes segment continued to witness muted demand, scooters (132% growth) provided a silver lining
 
Among the key trends likely to emerge/strengthen in 2015 include:
 
Industry to benefit from road safety measures focused on increasing governance on manufacturers and penalties on violations
 
Introduction of DAIR (Detailed Accident Investigation Report) to reduce reporting time for insurers, waiting time for claimants
 
Usage based insurance, though nascent, may see an uptrend in the coming year

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