Nifty may rise to 4,805, if the day’s low holds
The market ended in the positive for the second day in a row, supported by the brisk move from the noon session onwards. Yesterday we had mentioned that the Nifty should hold itself above the day’s high to see it rising to 4,800 and further to 4,950. Amid volatile trade today, the index managed to make higher high and a higher low and ended in the positive. The index may now witness range-bound movement with an upward bias to the level of 4,805. However, the benchmark should keep the trend of making lower low or else we may see the Nifty going down to the level of 4,645. The National Stock Exchange (NSE) saw a volume of 57.16 crore shares.
The market opened lower today tracking weak global cues as investors were wary about the how the ECB funding to European banks would help the debt-ridden economies. Concerns about the political impasse at the Centre also weighed on domestic investors. The Nifty opened 56 points lower at 4,637 and the Sensex began the day at 15,547, down 138 points from its previous close.
The indices remained range-bound till noon trade and fell to their intraday lows around 1pm despite the weekly food inflation figure coming at a nearly four month low for the week ended 10th December. At the lows, the Nifty touched 4,633 and the Sensex sent back to 15,473. However, buying in select stocks helped the benchmarks enter the positive terrain in post-noon trade.
The market touched the day’s high in the last half hour taking the Nifty to 4,741 and the Sensex hitting 15,835. It pared a small part of the gains, but ended in the positive for the second day in a row. At the end of trade, the Nifty rose 41 points to 4,734 and the Sensex settled at 15,813, up 128 points.
The advance-decline ratio on the NSE was 965:675.
Among the broader indices, the BSE Mid-cap index gained 0.78% and the BSE Small-cap index surged 0.70%.
BSE Realty (up 2.91%); BSE Bankex (up 2.27%); BSE Power (up 1.97%); BSE Consumer Durables (up 1.85%) and BSE PSU (up 1.73%) led the Sensex today. on the flip side, BSE IT (down 1.20%) and BSE TECk (down 1.10%) ended up as losers.
The top five Sensex gainers were DLF (up 4.80%); Tata Motors (up 3.76%); ICICI Bank (up 3.52%); State Bank of India (up 2.79%) and Tata Power. On the losing side, Wipro (down 2.67%); Bharti Airtel (down 1.77%); Infosys (down 1.07%); Coal India (down 0.96%) and TCS (down 0.94%) settled at the bottom of the list.
The main gainers on the Nifty were DLF (up 5.52%); Punjab National Bank (up 4.40%); Tata Motors (up 4.01%); IDFC (up 3.49%) and JP Associates (up 3.47%). The top laggards were Wipro (down 3%); Bharti Airtel (down 2.49%); Sesa Goa (down 1.64%); Cairn India (down 1.61%) and Infosys (down 1.20%).
Markets in Asia were subdued on concerns about the resolution of the European debt crisis remained. Stocks in China fell on a liquidity crunch as banks scramble to meet the year-end reserve ratio requirements.
The Shanghai Composite fell by 0.22%; the Hang Seng declined 0.21%; the Nikkei 225 tanked 0.77%; the Straits Times contracted by 0.32%; the Seoul Composite shed 0.05% and the Taiwan Weighted ended flat. On the other side, the Jakarta Composite added 0.03% and the KLSE Composite gained 0.44%. At the time of writing, key European markets were trading over 1% higher and US stock futures were in the green.
Back home, institutional investors—both foreign and domestic—were net sellers in the equities segment on Wednesday. While foreign institutional investors offloaded stocks worth Rs144.23 crore, domestic institutional investors pulled out funds worth Rs133.26 crore.
Computer maker HCL Infosystems has increased prices of desktops, laptops and servers by 10%-15% September onwards, as depreciating rupee has pushed up its imports bill. The company, however, has not increased the price of its tablet PCs. The stock settled 0.71% lower at Rs41.90 on the NSE.
In order to attract low-cost funds, the private sector lender Yes Bank on Thursday raised its savings deposit rates to 7% from 6%. The bank, according to a statement, will give 7% on deposits to over Rs1 lakh. Customers with cash balance of less than Rs1 lakh in savings bank deposits will get an interest of 6%. The stock gained 2.93% at Rs257.80 on the NSE.
United Spirits, part of Vijay Mallya-led UB Group, said it plans to raise up to $225 million through issue of Foreign Currency Convertible Bonds (FCCBs) in early 2012. In a regulatory filing, the company said its board has approved raising of funds through issue of FCCBs for an “aggregate sum not exceeding $225 million”. The company’s stock fell 0.72% to close at Rs605.60 on the NSE.
The cost of opting for arbitration proceedings could be as high as Rs10 lakh to Rs15 lakh, excluding lawyers’ fees. Therefore it is advisable to go in for arbitration only in cases where the claim amount is significantly higher than the cost. Since an insurance policy is a contract, the insurance company should bear the cost of arbitration, says Sudhir Gudal, director at Magus Corporate Advisors Pvt Ltd
Moneylife (ML): What is the remedial frame-work for insurance in India?
Sudhir Gudal (SG): The insurance industry is regulated by the Insurance Regulator and Development Agency (IRDA). It is set up by the Government of India (GOI). IRDA has laid down rights of policyholders (PH) like the claims should be settled within six months from the date when it was made for both life and non-life policies.
For claims above Rs2 lakh, a surveyor is appointed who submits a report in 30 days. On receiving the surveyor’s report and assessment, the insurance company makes a settlement offer to the policyholder in 30-70 days from the day of receipt of the surveyor’s report.
ML: What are the options available for an individual to redress his dispute?
SG: The government has appointed an Ombudsman to address any dispute arising out of ‘individual risk policies’ for claims of up to Rs20 lakh. Alternatively the individual can also approach the Consumer Grievance Redressal Forum.
ML: This means that the policyholder has three options—the IRDA, the Ombudsman and consumer forums. Is there any hierarchy between these three that needs to be followed? Where is the policyholder supposed to go first?
SG: Ideally, the policyholder should first approach the in-house grievance redressal cell of the insurer. This is also the pre-requisite for all—IRDA, Ombudsman and the consumer forum. If the policyholder feels that his grievances were not addressed by the insurer, he should then approach either of the three. There is no particular hierarchy that needs to be followed. However, the policyholder cannot approach all three simultaneously.
ML: The Insurance Ombudsman has a pecuniary jurisdiction of Rs20 lakh. Does the consumer forum or IRDA have any such pecuniary jurisdiction?
SG: The consumer forum is a three-tier mechanism, district-level forum, state commission and the national commission. The district-level forum takes up matters up to Rs20 lakh, state commission from Rs20 lakh to Rs1 crore and the national commission takes up cases of Rs1 crore and above.
IRDA too has an in-house redressal grievance cell. But IRDA, on its own, does not act as a mediator nor does it actively take a reconciliatory role. All it does is refer the grievance back to the insurance company and ask their opinion on what has been done to resolve the dispute. So unfortunately IRDA has become a redundant body for grievance redressal.
ML: When arbitration is used for redressing grievance?
SG: Arbitration is available only if the insurance company has accepted its liability under the policy and the dispute is only on the quantum aspect. Thus, if the company out rightly refuses or rejects the claim, then the option for arbitration is not available. In such outright denial of claims the policyholder can either go to the civil courts or the consumer forum.
ML: Is Arbitration being actively used as a recourse measure by policyholders?
SG: Although there is a clause under the policy, insurers are reluctant to accept arbitration. Because once the quantum is in dispute but the liability has been admitted by the company it sends a discharge voucher, which clearly says that the amount specified is the full and final settlement. In case if the policyholder discharges the voucher conditionally saying, ‘I accept the voucher but in part settlement’, the insurer does not settle the claim. They insist settling the claim as ‘full and final’. If the policyholder discharges the voucher in full and final, then under the law, the claim has been settled and there is no future liability on the insurer, which brings an end to the contract.
After accepting the voucher, in case, the policyholder invokes the arbitration clause the company denies it. This is becoming common today. Resisting the arbitration clause makes it difficult for the policyholder to go for arbitration. It has been observed in various cases that the insurer plays on emotions and the financial capacity of the policyholder.
ML: What if the policyholder had to accept the discharge voucher due to financial duress? In such case, can he invoke the arbitration clause? If no, what recourse does he have?
SG: In such a case, the policyholder can send a legal notice to the insurance company giving them 15 to 30 days time to resolve the dispute. After the time limit, the policyholder has to go to the high court for appointment of an arbitrator.
ML: What is the point of dispute in the high court?
SG: The reason for going to the high court is to decide whether an arbitrator is required or not. If yes, the court decides on who would be the arbitrator. In this case the court considers two points—if there is a valid contract between the parties or not and whether the policy contains an arbitration clause or not? After being convinced on these two points, the high court will approve the appointment of an arbitrator.
ML: In case the high court approves arbitration, does the insurer have an opportunity to appeal in the Supreme Court?
SG: Yes, many insurance companies do appeal in the Supreme Court through Special Leave Petitions for blocking arbitration.
ML: What is the time taken by the high court to decide whether an arbitrator is required or not?
SG: The Bombay High Court has kept one day in the week for insurance matters. The HC takes up cases of arbitration during the second session of that day. So there is little time for such cases and it may take six months to 2-3 years to decide on whether arbitration is required or not in a particular case.
ML: What about the costs of such litigations? Does the court award costs or are the borne by the parties themselves?
SG: By the time the high court judgement comes, one would have spent at least a lakh of rupees. However, what is striking is that none of these courts awards costs even if it founds that an arbitrator was required.
In my view this is complete violation of the Contract Act. The insurer should ideally pay the costs if the HC says that arbitration is required in the case, because for the company the cost may be minor but for an individual, Rs1 lakh is quite a huge amount.
ML: what is the arbitration process? How is the arbitrator chosen?
SG: The arbitration clause of the policy clearly reads that either party who wishes to invoke arbitration should send a legal notice to the other party suggesting the name of the arbitrator he wishes to have. If the other party does not accept to this choice of an arbitrator then each party proposes the name of one arbitrator each and then these two arbitrators would nominate the name of a third arbitrator. In such cases there is a panel of three arbitrators.
ML: What are the running costs during the hearing during the arbitration process?
SG: The arbitrators appointed are either former judges from the high court or other lower courts or chartered accountants. The act makes it compulsory that all arbitrators appointed have to take the same amount of fees.
In case if it is a single arbitrator, he may charge between Rs50,000 to Rs1 lakh per hearing and in case of a three-bench arbitrators, each arbitrator charges between Rs30,000 to Rs1 lakh per hearing.
The fees include both reading fees and hearing fees. The time taken for completing an arbitration is between one to two years and the cost involved for the whole arbitration may go to as high as Rs10 lakh to Rs15 lakh. Apart from these costs, the lawyers’ fees are to be incurred. As consultants we discourage policyholders to go for arbitration for claims between for Rs5 lakh to Rs10 lakh.
ML: What is the advantage of going for arbitration as against going to a consumer forum?
SG: The technical aspect, exchange of information and understanding of subject matter is lot more in-depth and thorough. The tribunal analyses the matter very clearly and arrives at a more precise order. The Arbitration and Conciliation Act, 1996, provides that the arbitrators can award: -
a) The principal amount with interest, and
b) the costs of arbitration.
The arbitration award needs to be executed with 30 days of the verdict of the arbitration.
ML: What is the scope for appeal in case of arbitration award?
SG: Section 34 of the Arbitration Act provides the opportunity to either party to appeal the arbitration award in the high court. However the grounds for appeal are very limited. It has been experienced that the arbitration award are reasonably respected by the insurance companies.
ML: What are the drawbacks of alternate dispute redressal system (ADR) of the insurance sector?
SG: Delays and costs. ADR were incorporated to tackle these two issues, but unfortunately these two issues are still present. Arbitrators are generally former judges of the high court who have many commitments. They handle much arbitration together. The arbitration gaps therefore are between three to four months. On the contrary, the Act says that the arbitration should be completed within four months.
ML: What are your suggestions to make ADR mechanism for the insurance sector more efficient?
SG: I would say…
1) Increase the pecuniary jurisdiction of the Ombudsman and also allow him to take up commercial matters up to some limit. Also, decrease his territorial jurisdiction and increase the number of Ombudsmen across the country.
2) There should be an appellate body which should have a final say on the matter.
3) Incorporate the suggestions made in the 190th Law Commission Report to enhance the ADR mechanism of the industry.
A creative visionary, Mr Jobs’ innovations such as the iPod and its counterpart, the online iTunes store, revolutionized the industry and how music was distributed and purchased,” the organizer of the prestigious award, The Recording Academy, said in a statement
Steve Jobs, co-founder of Apple Inc, will be posthumously honoured by the Grammys with the Trustees Award for 2012, to be held in February, for his contribution in the area of music technology.
The Trustees Award is given to individuals to acknowledge their contributions in non-performance fields.
The organizer of the prestigious award, The Recording Academy, in a statement said, “As former CEO and co-founder of Apple, Steve Jobs helped create products and technology that transformed the way we consume music, TV, movies and books. A creative visionary, Mr Jobs’ innovations such as the iPod and its counterpart, the online iTunes store, revolutionized the industry and how music was distributed and purchased.”
Mr Jobs, who died on 5th October this year after battling with pancreatic cancer, is respected for his innovative products like iPod, iPad and iPhone.
Apple Computer Inc was a recipient of a Technical Grammy Award in 2002 for contributions of outstanding technical significance to the recording field.
“The company continues to lead the way with new technology and in-demand products such as the iPhone and iPad,” the statement added.
Mr Jobs is one of several individuals among the recipients of 2012 Trustee Award. Others include Antonio Carlos Jobim, a Brazilian composer and arranger, Gil Scott-Heron a soul performer, and audio engineer Roger Nichols, will also be honoured posthumously.
The Grammy Awards ceremony will be held on 11th February 2012.