A fresh downturn may have started
The market was down on concerns over the tough austerity measures taken by eurozone nations, which may slow down the global economy. The Sensex ended at 16,994, lower by 271 points (1.5%) while the Nifty shut at 5,093, lower by 85 points (1.6%). The bourses started the day with an initial gain. However, they pared their gains around noon with weak European equities dragging the indices lower. Bank, realty and metal stocks were down.
Asian stocks recovered from an initial fall triggered by an overnight decline on Wall Street. Key benchmark indices in Indonesia, South Korea and Taiwan were up by 0.02% to 0.24%. On the other hand, benchmark indices in Singapore, China, Hong Kong and Japan fell by 0.39% to 1.49%.
US stocks were down on Thursday as downbeat comments on the economy from Cisco Systems and retail chain Kohl’s Corp shadowed concerns over the economic recovery. The Dow dropped 114 points (1.05%) to end at 10,783.
The S&P 500 fell 14.23 points (1.2%) to 1,157. The Nasdaq lost 30.66 points (1.26%) to close at 2,394. US central bankers said that the promise to hold the interest rate lower for an extended period depends on the economic conditions.
Back home, India's foreign exchange reserves fell to $276.23 billion as of 7th May, from $279.63 billion a week earlier, the Reserve Bank of India (RBI) said in its weekly statistical supplement.
India has secured a contract for buying 4.7 million tonnes of soil nutrient at $370 per tonne for FY2011 with an option to buy more, nearly 20% cheaper than the previous year’s price. India also imports most of its di-ammonium phosphate (DAP) requirement and has tied up for 7 million tonnes DAP at $500 a tonne.
The chief economic adviser suggested that the RBI may intervene to counter the rupee’s appreciation against the dollar. The rupee’s rise against the greenback has put huge pressure on exporters. In 2009-10, the rupee had strengthened 12.6% against the dollar and 8.3% against the euro year-on-year.
Foreign Institutional Investors (FIIs) were net sellers, offloading stocks worth Rs15 crore. On the other hand, Domestic Institutional Investors (DIIs) were net buyers, purchasing stocks worth Rs222 crore. The rupee was down on the weak equity market and the greenback’s strength against the euro.
HDFC (down 1%) has extended its concessional home loan scheme till 30 June 2010. As per the scheme, the housing finance major would offer a fixed interest rate of 8.25% up to March 2011; 9% for the next one year and a floating rate thereafter. Reliance Industries (RIL) (down 2.6%) will join the ONGC-led consortium that may get rights to oil fields located in the Orinoco belt of Venezuela. RIL did not take part in an earlier consortium led by Indian State-owned oil companies, which won the $20-billion Carabobo 1 oil block in Venezuela as it was busy trying to tie up the LyondellBasell acquisition.
Infosys (down 1.6%), Mahindra Satyam and unlisted company Cognizant have been shortlisted by UK's National Grid, which manages the country's natural gas and electricity networks, for an outsourcing contract. Seven offices of Parsvnath Developers (down 2.6%) in Delhi and the National Capital Region (NCR) have been searched by the Income-Tax Department. Oil PSU stocks were in demand as crude prices are on the lower side. Light, sweet crude oil dropped $1.25 or 1.65%, to $74.40 a barrel on Thursday. Zensar Technologies (down 0.5%) has received a contract worth over Rs100 crore from a leading South African insurance company for a period of five years.
Many insurance companies are trying to empanel distributors whose earlier core business was mutual funds, especially after the ban on entry load on funds by SEBI
A few days back, a Chennai-based certified financial planner (CFP) allegedly received an email communication from Aviva Life Insurance detailing two business proposals from the insurer.
The first model is ‘Business Service Associate’ (BAS) under which one distributor has to refer at least one person to the company who can pass an Insurance Regulatory & Development Authority (IRDA) examination. The distributor who referred this person enters into an agreement with the company after which he gets a business code. The former gets an amount from all the business generated by the new agent.
Moneylife could not confirm from the company that such a communication emerged from their end. The Independent Financial Advisor (IFA) who received this proposal was not available for immediate comments either. Distributors contacted by Moneylife indeed confirm that various insurance companies have approached them with similar proposals in the past and they have refused to be part of such a deal. These distributors’ core business area was selling mutual funds (MFs). Since the ban on entry load by the market regulator Securities and Exchange Board of India (SEBI), smaller intermediaries who found it unviable to continue selling MFs have been gradually shifting towards insurance products, especially Unit Linked Insurance Plans (ULIPs), which offer better commissions.
“I sell only relationship and trust with my client. It will be very difficult to stay in the business if you start selling for the extra commissions. They had met me in my office. I have received several proposals like this, which I had refused,” said Thiru Murugan, CEO, Wealth Creation & Management Services.
The benefits of this business BAS model were detailed in the email are as follows: Distributor A gets an average 20% commission in the first year plus an additional overriding commission ranging from 30%-55% and around 5% from the second year onwards. The proposal also assured marketing and advertisement support for the scheme including reimbursements of stationery, phone and staff expenses.
The second proposal is ‘Corporate Alternate Database’ (CAD), also similar to the first plan. Unlike the first plan, here the distributor only has to refer a client to the company’s exclusive manager who advises the client. Here the IFA gets 20%-55% commission depending on the product bought by the investor. Financial advisors say that such business models are prevalent among many insurance companies.
While some intermediaries question the morals of such proposals, others say that if the business is done in a fair manner there is nothing to worry about.
Established distributors believe that they prefer not to work on a referral model as it can be detrimental to their long-term relationship with the client. Financial advisors say that insurance companies have been wooing them since more than a year and especially after the SEBI’s ban on entry load.
“These sorts of plans are business models with all leading companies with minor changes but the spirit is the same. I don’t see anything wrong as long as all people are properly licensed and you work as a team manager and licensed individuals work under your code,” said Vivek Rege, CFP, VR Wealth Advisors Pvt Ltd.
“It’s like you start a business and they fund it. They don’t want to manage a big team under them. Recruiting under payroll is becoming an issue. Since IFAs know the business well they want us to sell ULIPs. They want us to manage it because IFAs can motivate better,” added Mr Rege.
“They (insurance firms) have approached me for this. In fact, since the ban on entry load by SEBI in August, I started getting calls from insurance companies. I don’t agree with this concept. I don’t want to become empanelled just for the sake of business. When I told them about my view, they (insurance firms) never got back to me. Insurance companies are not interested in selling other products like term insurance. Commission is good but I run a risk of losing all my customers whom I know from quite some time,” said Harish Mohan, MD, Time Financials.
The MCI would be replaced by a seven-member body of eminent doctors, which will look after the functions of the council
The government would soon bring in a law for the formation of a body to regulate medical education in the country and till then a seven-member panel of doctors will replace the scam-tainted Medical Council of India (MCI), which has been dissolved, reports PTI.
Health secretary Sujatha Rao today said a draft law for the formation of such a body would be formulated within a month.
"We have suggested an over-arching body, which will be responsible for maintaining standards and regulation of medical colleges," she told reporters adding that the draft law would be a legislative response to the credibility crisis which the MCI was in.
The Union Cabinet is understood to have yesterday decided in-principle to dissolve the MCI whose chief Ketan Desai has been arrested by the Central Bureau of Investigation (CBI) on graft charges.
Rao said that an ordinance in this regard was awaiting the President's assent. An ordinance is required since the MCI was created by an act of Parliament.
Desai was arrested on 22nd April by CBI for allegedly accepting bribe of Rs2 crore to give permission to a Punjab medical college to recruit a fresh batch of students without having requisite infrastructure. He has already submitted his resignation to MCI vice-president PC Kesavankutty Nair.
In Mumbai, health minister Ghulam Nabi Azad when asked about the ordinance, indicated that this was required as there was no law by virtue of which action could have been taken against the MCI.
Mr Azad said the MCI was created by an Act of Parliament.
"That had given them absolute power. In that Act there was no provision of suspension or even a show-cause notice".
"So we have to take some action," he said.
Sources said the MCI would be replaced by a seven-member body of eminent doctors, which will look after the functions of the council. Among the names doing the rounds for heading the panel are former AIIMS director P Venugopal.
The main functions of the MCI, set up under the Indian Medical Council Act, 1933, are to ensure uniform standards in medical education and grant of recognition to medical degrees awarded in India and abroad.
The government had earlier proposed an amendment to the MCI Act in 2005 to ensure some amount of government control over the body. But the proposal had been negated by the Parliamentary Standing Committee.