A close of the Nifty below 5,300 and may see selling pressure accelerate. A close below 5,170 would be bearish
A status quo by the Reserve Bank in its quarterly policy review resulted in the market snapping its four-day gaining streak and closing in the negative. We may now see the Nifty moving sideways with a negative bias. The index may now move in the range of 5,170 and 5,400. Any close of the index below 5,170 may see the benchmark would be bearish. The National Stock Exchange NSE saw a lower volume of 77.30 crore shares.
Snapping its four-day rally, the domestic market opened flat on cautiousness ahead of the Reserve Bank of India’s (RBI) mid-quarter policy review. The political drama that unfolded after railway minister Dinesh Trivedi announced a hike in rail fares in his budget speech yesterday also weighed on the sentiments. The Nifty opened one point lower at 5,463 and the Sensex started the day at 17,917, down two points from its previous close.
The opening figure of the Nifty was also its intraday high while the Sensex hit the day’s high a short while later with the index touching 17,918. The market traded sideways till around 11.00am, but witnessed a sharp drop as the central bank, in its policy review, decided to keep key rates unchanged.
The Nifty dipped below the 5,400 level by losing 65 points to 5,398 points following the announcement of the RBI’s policy statement. Similarly, the Sensex fell further by 194 points to trade at 17,726 at 11.30 am. All the sectoral indices, led by banking and consumer durables, were trading in the negative zone.
The sentiments continued to remain week as trade progressed. The indices fell to their day’s lows in the post-noon session with the Nifty falling to 5,362 and the Sensex going down to 17,623.
The market closed near the lows with the Nifty falling 83 points to 5,381 and the Sensex tumbled 243 points to settle at 17,676.
The advance-decline ratio on the NSE was negative at 474:1255.
Among the broader indices, the BSE Mid-cap index tanked 1.39% and the BSE Small-cap index declined 0.97%.
With the exception of the BSE IT index (up 0.09%), all other sectoral indices settled lower. The top losers were BSE Consumer Durables (down 3.66%); BSE Realty (down 2.66%); BSE Bankex (down 2.60%); BSE Capital Goods (down 2.04%) and BSE PSU (down 1.97%).
Hindustan Unilever (up 1.80%); Wipro (up 1.43%); NTPC (up 1.13%); TCS (up 0.72%) and Sun Pharma (up 0.38%) were the top gainers on the Sensex. The losers were led by DLF (down 4.76%); BHEL (down 3.37%); HDFC Bank (down 3.05%); ICICI Bank (down 2.47%) and ONGC (down 2.45%).
The top performers on the Nifty were HUL (up 1.99%); Wipro (up 1.16%); NTPC (up 0.90%); TCS (up 0.89%) and Sun Pharma (up 0.47%). The main laggards were Reliance Communications (down 5.30%); DLF (down 5.08%); IDFC (down 4.62%); BHEL (down 3.52%); HDFC Bank (down 3.46%).
Markets in Asia closed mostly lower following a report that China’s foreign direct investment (FDI) fell to $7.7 billion in February, down 0.9% on an annual basis. The Japanese market gained on the back of a weaker yen, which boosted exporters. The Chinese benchmark settled to a three-week low after the government said that it would curb any rise in property prices.
The Shanghai Composite declined 0.73%; the Jakarta Composite declined 0.35%; the Straits Times shed 0.02%; the Seoul Composite fell by 0.06% and the Taiwan Weighted lost 0.04%. On the other hand, the Hang Seng gained 0.21%; the KLSE Composite rose 0.23% and the Nikkei 225 surged 0.72%. At the time of writing, two of the three key markets in Europe were in the green and the US stock futures were trading in the positive.
Back home, foreign institutional investors were net buyers of stocks totalling Rs1,659.28 crore on Wednesday while domestic institutional investors were net sellers of shares aggregating Rs857.11 crore.
SKS Microfinance, the country’s only listed microfinance entity, today said it plans to raise around Rs200 crore through securitisation from two different banks. Under the pool securitisation, bundling micro loans made to borrowers like micro-entrepreneurs are sold to investors such as banks to raise funds. SKS Microfinance closed at Rs141 on the NSE, up 3.79% over its previous close.
Shasun Pharmaceuticals has concluded the sale of its Velachery property for a gross consideration of Rs29 crore. The company has taken this step pursuant to shareholders' approval in July 2011. The stock gained 1% to close at Rs86.25 on the NSE.
Ambuja Cements is likely to invest around Rs1,800 crore by December 2013 to expand its production capacity. It intends to fund the project through internal accruals, as it had surplus cash of Rs7,700 crore as of December last year. The stock lost 0.96% to close at Rs165.75 on the NSE.
IRDA should look at it from not just revival of lapsed policies, but from customer service angle
The Insurance Regulatory and Development Authority (IRDA) has recently issued an exposure draft on orphan life insurance policy. The guidelines allow 100% of renewal commission to allotted agent for revival of lapsed policy as well as future renewals. At present, a new agent is entitled to renewal commission of only 50% of what the procuring agent would have been entitled had the policy continued to be in force and that too if lapsed policies required medical examination.
The guidelines are good for life insurance agents who help in revival of lapsed policies which were sold by another agent. But the details are in the fine print. The renewal commission can be paid to the allotted agent only if the original agent who sold the policy is not entitled to the commission. This is a big if, as per insurance regulations.
Under Section 44, except on grounds of fraud, an agent who has served an insurance company for a period of five years shall be entitled, subject to certain conditions, to renewal commission on policies if s/he discontinues his agency. Agents who have completed 10 years of service with a given insurance company and stops for any reason his/her agency business but does not join another company are entitled to renewal commission on all such policies which they had placed. The agent’s heir will get it even after the agent dies. It is contract between an agent and the life insurance company as renewal commission is just deferred compensation which cannot be taken away if the agent has completed certain time with the insurance company. LIC continues to pay many former agents renewal commission even though they no longer continue in the business. In such cases, the lapsed policy even if revived by another agent will yield the allotted agent zero commission. It will go to the original policy seller or heir. Which agent would be interested in reviving policies in such cases?
According to IRDA guidelines, orphan policies are those that are “initially sold by an insurance agent whose services were subsequently terminated or removed from the rolls of the insurer excluding those policies to which the selling agent is entitled to renewal commission under provisions of Section 44 of the Insurance Act.” It means that the policy is not an orphan even if it is lapsed as long as the policy seller is entitled to renewal commission based on number of years with the insurer. In effect, IRDA’s initiative to have the insurance company allot lapsed policy to another agent and give the allotted agent the renewal commission is only applicable to the small subset of lapsed policies.
Addressing the issue of lapsed policies by incentivising agents is welcome step by IRDA, but who will help to revive the lapsed policies wherein the policy seller is still entitled to commission even though s/he is no longer with the insurer or may be even dead? If IRDA is looking to revive lapsed policies, it has to think of ground realities.
As a veteran life insurance agent asks: “Who will help such customers with services like loan processing, change of nomination or even filing to death claim? The agent who sold the policy is gone (left the insurer or dead) and there is no allotted agent to the policy for any kind of servicing. Life insurance companies keep renewal commissions when the policy seller is not entitled for renewal commission. It happens as many agents leave the business after one or two years. The insurer should use these funds to give incentive for agents to revive a lapsed policy even when the policy seller is entitled for the commission, but has left business after completing required years or dead.”
Insurance companies we spoke to have taken a different stand. According to them, “The policy seller does work to help in the renewal of policy even when s/he is no longer selling new policies. They are interested in continuation of renewal commission which can be substantial and hence they don’t want the policies to lapse.” If the agent has left business and is doing other things in life, how much time will that person have for servicing the sold policies?
IRDA also has put the onus on the insurance company to allocate the lapsed policies to another agent to helping policy revival. Till now, it was mostly initiated by the agent who would help revive lapsed policy sold by another agent and ask the insurance company for 50% of renewal commission. As per the draft, insurers shall take into account the track record of the agent and complaints registered against an agent while allotting the orphan policies. It is unclear what will be the process for insurance company to allot one agent over the other when many fit the same criteria. Whether the allotted agent is interested with renewal of the existing policy or to sell new policies to earn high upfront commission is another story.
IRDA has requested comments to the draft, but there is no email address which used to be given in other draft documents. It means there may be inconvenience in giving feedback. Comments if any on the above exposure draft may be forwarded to the following before 31 March 2012 - Joint Director (Life), Insurance Regulatory and Development Authority, 3rd Floor, Parisrama Bhavan, Basheerbagh, Hyderabad - 500004
While a life insurance agent can get renewal commission after leaving the business and even passing it to his/her heir, a general insurance agent does not get anything. Most of the general insurance policies are renewable every year and there is no concept of renewal commission payment if the agent has left business or dead. It’s something on the wish-list of general insurance agents.
Now officially, Mumbai’s taxis have outgrown their “sweet sixteen” ways. And it is raising the hackles of commuters
Jokes apart, ‘officially’, cab fares in Mumbai have been hiked by Re1 for the minimum 1.6 km distance; and 50p for each km thereafter. Taxi drivers are happy, though they would have ‘preferred’ a Rs4 hike for the first 1.6 km and Rs2 for each km thereafter, as the increase in the price of CNG from Rs31.47 per kg toRs33.10 per kg cannot be overcome.
So for the Rs1.5 increase per kg, everyone taking a taxi will pay much more per kilometre. Navi Mumbai residents, though, will see better days; with auto fares being slashed from Rs15 to Rs11 for the first km, and Rs7 for each subsequent kilometre from the earlier Rs9.50.
“That is so much better,” said a resident of Vashi, “Because even in Bandra we have Rs11 on the meter. Why pay Rs15 in Navi Mumbai?” But overall, travel is going to cost the same to her; because she comes to work near Sewri, and has to take a cab from the station to her office. “I am paying more or less the same. The auto from my home to Vashi station is going to cost less, but travelling from Sewri station to my workplace is going to be more. There is not going to be any difference. Only if I decide to roam around in Navi Mumbai, it is going to be cheaper,” she said.
Similar is the case of people who travel by bus. BEST says that fares may be hiked, with the minimum amount being raised from Rs5 from Rs4, and subsequently, Rs3 from Rs2. Going by the deplorable financial condition BEST finds itself in, there are also talks about a 15% hike in electricity tariff in the city. Because, as the BEST officials put in, “there is a limit to the subsidies we can offer”.
Naturally, it has not gone down well with commuters. “Everything becomes more expensive—transport, food, medicines, electricity, homes, cosmetics, books. Our salaries don’t,” says Mrs Seema Godbole, a schoolteacher.
Experts have a different view on the matter. “The local public transport in Mumbai— be it bus, taxi or train—is currently in a pathetic condition. Hiking fares does not address the issue. One has to consider the real problem that people face and come up with a solution. Bus transport is the most under utilised mode of transport, while train is used beyond highly used. Ideally, the residence and work place should at minimum distance for easy commuting. There has to be a shift from people travelling in the car to taxi, from train to buses and then finally to bicycles and even walking,” says Ashok Datar, a transport expert. Sudhir Badami, another transport expert, says that taxes on cars should be increased.
Thankfully, train fares are going to stay the same. Though overburdened, the lifeline continues to pulse. “Long distance train journeys are going to become expensive,” said a city resident, “hopefully they stop at that and leave local fares untouched.”