Nifty crashed through 5,635 and headed sharply lower. More decline may be in store
As the Dow Jones Industrial Average crashed yesterday by 226 points and US 10-year treasury yield crossed 2.8%, a 2-year high, the Reserve Bank of India (RBI) measures to control the rupee fall by imposing selective capital controls on outward remittances, failed hopelessly. In the face of such global headwinds, a massive selloff hit the Indian market on Friday. The Sensex and Nifty both opened in the negative and soon they hit their respective intra-day high. After this, both the indices slid continuously and closed deeply in the negative.
The Sensex opened lower at 19,297 and hit a low of 18,560 and closed at 18,598 (down 769 points or 3.97%). Nifty opened lower at 5,705 and hit a low of 5,496 and closed at 5,508 (down 234 points or 4.08%). The percentage loss of 3.97% on the Sensex is the maximum since 22 September 2011 while for the Nifty, the loss has been the maximum since 17 August 2009. The National Stock Exchange (NSE) recorded a volume of 68.12 crore shares.
All the major indices on the NSE except for India Vix (up 26.42%) and Nifty Dividend which ended flat, closed in the negative. Lix 15 was the top loser, down 5.65%.
All the other indices ended in the negative. Realty (down 6.66%); Bank Nifty (down 5.74%); Metal (down 5.47%); PSU Bank (down 5.38%) and Finance (down 5.27%) were the top five losers.
Of the 50 stocks on the Nifty, three ended in the in the green. The top gainers were Hero MotoCorp (up 2.17%); Power Grid (up 1.13%) and HCL Technologies (up 0.20%) while Jaiprakash Associates (down 11.09%); BHEL (down 10.92%); Axis Bank (down 9.36%); Bank of Baroda (down 8.63%) and Reliance Infrastructure (down 8.52%) were among top losers today.
The RBI on Wednesday increased efforts to stem the rupee’s plunge by cutting the amount local companies can invest overseas without seeking approval to 100% of their net worth, from 400%. Among other measures, the RBI has also announced reduction in the limit for remittances made by resident individuals, under the Liberalised Remittance Scheme (LRS Scheme), to $75,000 from $200,000 per financial year. The present set of measures is aimed at moderating outflows. However, any genuine requirement beyond these limits will continue to be considered by RBI under the approval route.
Also on Wednesday, the banking regulator banned import of gold coins and medallions. Now importers of gold will have to pay upfront before getting any of the yellow metal with the condition that at least 20% of the gold imported will have to be re-exported and the balance for domestic use.
US market fell sharply on Thursday. The better-than-expected data of jobless numbers heightened fears of imminent tapering of the Federal Reserve's bond-buying program. Market now awaits the reports on US housing starts and consumer confidence.
Except for Taiwan Weighted (up 0.48%), all the other Asian indices fell. Jakarta Composite fell the most, 2.49%. Indonesia is in the same situation as India – of rising interest rates and inflation.
China’s stocks had a torrid day today ending in a negative territory apparently due to a computer glitch. The Shanghai Stock Exchange (SSE) said this afternoon that the department of investment strategy of Everbright Securities Company encountered a problem in its arbitrage system when it was operating on its own funds during the morning trade on the bourse.
So far, there is no official conclusion as to whether there is a direct correlation between Everbright’s trading error and the market’s sudden surge, state-run Xinhua news agency reported.
European indices were trading mostly in the red while US Futures were trading in the positive.
TVS Motor Company has dis-invested 7.35 crore shares of its unit TVS Energy Ltd, constituting 90.46% of share capital of TVS Energy to Green Infra Ltd. Consequently, TVS Energy and its subsidiaries, viz., TVS Wind Power Ltd and TVS Wind Energy Ltd, cease to be subsidiaries of the TVS Motor from 16th August. TVS Motor fell 4.67% to close at Rs30.60 on the NSE.
Even though Finance Ministry and IRDA are gung-ho about banks getting insurance broking license to help penetration of insurance products, it is the RBI which will decide whether banks will continue as corporate agents or become brokers and sell any insurance product
Finance Secretary Rajiv Takru on Wednesday gave a candid speech at 16th CII Insurance Summit in Mumbai. According to him, “Certain sections (insurers) may not be keen on banks getting insurance broking license as it will hurt existing relations. But, to be fair and also to give the customer choice, banks with broking license should be the way forward.” The finance ministry has been in favour of banks becoming insurance brokers. In his budget speech this year, Finance Minister P Chidambaram said banks would be so permitted to help insurance penetration. But will RBI oblige, especially since RBI’s deputy governor Dr KC Chakrabarty is personally against banks selling any kind of insurance?
Currently, a bank is allowed to sell the products of only one life and non-life insurance company as a corporate agent. Speaking on the sidelines of 16th CII Insurance Summit, Insurance Regulatory and Development Authority (IRDA) Chairman TS Vijayan, said, “There have been informal discussions with RBI. People have reservations with the word ‘broker’. Broker regulations are more in tune with larger risks like reinsurance. But, we are not expecting banks to sell huge risk. It is a personal line of business for them. This idea will get acceptance widely, among both companies and banks. Today, a bank is the corporate agent of one insurance company (Life and General). While an agent represents the company, a broker represents the customer. As such, banks utilise own customer base and hence represent the customer. With broking license, they can give the best deal and product to the customer.”
According to a senior IRDA official, “RBI is not keen on banks becoming brokers as many of them have promoted insurance companies and this could lead to a conflict of interest. With broking license, banks will have a fiduciary responsibility to customers and can be made accountable for mis-selling.” RBI holds all the aces, which at present, points to status-quo of bank continuing as corporate agents.
Even if RBI were to relent and allow banks to go for insurance broking license, how many banks that promote own insurance company will really apply for it? In an interview with Business Standard, Canara HSBC OBC Life Insurance CEO John Holden, said, “For us, bancassurance is not a channel, it’s a business model. We have always been a proud 100 per cent bancassurer. That strategy and business model are working.” Top private insurance companies are backed by banks which will find conflict of interest about being open to the broking idea. For example, ICICI Pru Life, SBI Life, HDFC Life, IDBI Federal, SUD Life, Kotak Life and IndiaFirst are backed by banks like ICICI, HDFC, SBI, IDBI, Federal bank, Bank of India, Union bank of India, Kotak Mahindra, Bank of Baroda and Andhra Bank.
IRDA Chairman is optimistic about broking model. Mr Vijayan, says, “An insurance company promoted by a good bank is in a comfort zone. It is limited to monopoly situation of one insurance company product sale. But, even bank promoted insurance company has opportunity (if banks opt for broking license) to sell their products through other banks currently not sold through. Today, the insurer may have bank as captive distributor, but with broking license they will have to go out and sell products suitable to the customer.” Time will tell if a bank that promotes an insurance company bites the bait of broking license.
According to Shashwat Sharma, partner, KPMG India, “Many banks who have promoted their own insurance company and have signed distribution agreements for promotion of products of their own insurance JV (joint venture) may find it difficult to immediately become a broker as it may impact their proposed breakeven plan and shareholder returns. Also, those banks whose JVs would manage to reduce their dependence on the partner bank through growth of other distribution channels are more likely to become brokers.”
RBI's financial stability report’s Chapter III - Financial Sector Regulation and Infrastructure raises several crucial questions on bancassurance model’s use of unfair and restrictive practices.
While banks are well suited to distribute insurance products because of their wide network, several issues have risen regarding their conduct in the process, pertaining to mis-selling and certain restrictive/ unfair practices (such as linking provision of locker facilities to purchase of insurance products, selling of unsuitable and/or multiple policies etc).
According to IRDA’s Annual Report 2011-12, the maximum complaints in life insurance related to mis-selling, mainly pertaining to private sector, although state-owned LIC leads the business with over 70% share. Complaints were mainly in the nature of unfair trade practices and mis-selling of products (e.g. malpractices, actual product sold being different from what was proposed, single premium policy being issued as annual premium policy, surrender value being different from projected, free look refund not paid, misappropriation of premiums).
As a significant portion of private life insurance companies use banks as their corporate agents, there seems to be an urgent need to revisit the marketing and sales strategies used by the banks in pushing insurance products, especially since insurance is among the more complex financial products for common man to comprehend.
Given that this is the current thinking of the RBI, it will be a surprise if the banks are allowed to act as brokers.
Only those who have paid all taxes and do not have any refund claim can file their I-T returns by 31 March 2014
The Income Tax (I-T) department has urged all those taxpayers who have not filed their I-Tax returns, even by the extended deadline of 5 August 2013, to file their returns at the earliest to keep away unavoidable difficulties. However, the option to file one's I-T return before 31 March 2014 is available only for those who had paid all their taxes and there are no refund claims.
According to a release issued by Press Information Bureau (PIB), if the returns are not filed by 31 March 2014, there will be a penalty of Rs5,000 levied on the taxpayer. Those with tax dues will have to pay late payment fee leviable for every month of delay since April 2013, the release said.
While I-Tax department gives taxpayers certain grace period to file their returns, there are certain disadvantages associated with late filing of I-T returns. Those who file their returns late, cannot modify their returns if there are any mistakes. They also cannot carry forward any short term and long-term losses.
All those with total income of Rs5 lakh and above and all those having foreign assets have to mandatorily file their IT returns online. Those with total income less than Rs5 lakh can file their returns off-line. So far, more than 1.23 crore taxpayers filed their returns online this year.
According to the release, a person defaulting in filing returns of income could be liable for prosecution under Section 276CC of the Income Tax Act, 1961. Conviction may result in rigorous imprisonment for a term not less than six months but which may extend to seven years and a fine, if the tax liability which has been evaded exceeds Rs25 lakhs.
Recently, the additional chief metropolitan magistrate in New Delhi sentenced a taxpayer to six months imprisonment in one assessment year and one year imprisonment in subsequent assessment year for repeating the offence of not filing return of income.