MUTUAL FUND

Mirae's Indian arm launches China equity fund

MUMBAI: The Indian arm of South Korea's Mirae Asset said it has launched a domestic fund that will invest in one of its existing equity fund investing in Chinese firms.

Mirae Asset China Advantage Fund will invest in Mirae Asset China Sector Leader Equity Fund or overseas funds and units of exchange-traded schemes that invest at least 65 percent of their assets in companies domiciled or running their operations in China and Hong Kong.

Rest of the money would be invested in debt and money market securities, the money manager said in a statement on Thursday.

Mirae's Indian arm managed average assets of 2.52 billion rupees at the end of August, data from the Association of Mutual Funds in India showed.

http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/Miraes-Indian-arm-launches-China-equity-fund/articleshow/5022775.cms

FIIs, MFs keep fingers crossed over valuation, eye correction

MUMBAI: The Nifty may have revisited the 5,000-mark, but there appears to be a lack of euphoria that was seen, when the level was first breached around the same time in 2007. At least the data suggests this.

The share of turnover of foreign institutions and mutual funds in Indian equities has fallen to around 25-35%, of late, from 50-60% in 2007. The data does not include the share of insurance companies and retail investors.

Though there has been a surge in the number of foreign institutions participating in Indian equities over the last six months, brokers said, of late, they are now waiting on the sidelines for a correction. This is because these investors are conscious about stock valuations, with most stocks doubling since March 9.

What differentiates the current period from that in 2007 is that investors still lack the confidence in the global economy and markets that was seen then. In 2007, most foreign funds invested heavily in emerging markets, including India on borrowed money, several times their capacity. The unwinding of such positions precipitated the market fall starting January 2008.

Brokers said valuations factor in estimated earnings of 2009-10 and even some part of 2010-11, but still they do not expect the recent upsides to recede soon. The reason is the significant money supply sloshing around.

“The past few days’ run-up in the market is largely liquidity-driven. But what is driving this liquidity is optimistic future. We have already seen most of the worst and there is a strong belief that from hereon, fundamentals will only get better,” says the head of a Mumbai-based brokerage.

The upcoming earnings season will be closely watched by investors to get a hint of what is in store in terms of corporate earnings, going forward.

Some in the market feel it would not be reasonable to compare the foreign institutional activity in 2007 and 2009, given that economic conditions are different. While in 2007, the Indian economy was moving at a rapid 8-8.5% growth rate, now it has mellowed to around 6%.

http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/Govt-nod-must-before-insurance-cos-go-public/articleshow/5028091.cms

Insurance sector likely to witness consolidation: Report

MUMBAI: With increasing competition, the fast-growing insurance industry may witness a consolidation among smaller players, and see the emergence of some big companies, a report said.

The insurance regulator, IRDA, is in the process of finalising guidelines for mergers and acquisitions in the insurance space, the report on insurance growth prospects, prepared by the Confederation of Indian Industry (CII) and Ernst & Young, said here today.

As the insurance industry is maturing, it will focus on stabilisation in the next few years. The rapid growth in the last 10 years is not sustainable, it said.

The Government, regulator and insurance companies are now focussed on maintaining a conducive environment for sustainable growth, higher contribution of the industry to the economic development and increasing reach of insurance to the under-developed areas of the country, it said.

With private players completing nearly 10 years of existence, the sector is looking at new ways to meet capital requirement. The Government is considering raising the upper limit in FDI to 49 per cent from 26 per cent, it said.

Increase in foreign investment will help companies to fund their expansion plans to tap the huge potential for insurance products in the country, the report said.

Mumbai: J. Hari Narayan, chairman of the Insurance Regulatory and Development Authority (Irda), is not too worried about the losses the life insurance industry is facing as the sector has grown faster than expected. But insurance companies would have to watch their costs, he says. Edited excerpts:
Are you concerned about the mounting losses of the life insurance industry?
What concerns me is not the fact that they are making loss per se. That the insurance company, particularly in the life sector, will be making losses for at least 8-10 years was well known even before they started. Most of them assumed that their business will show some bottom-line blackening by about the eighth or ninth year. Now, what we find is that’s not happening. What seems to have happened is they are actually selling more than they had planned to. So that rate of growth is actually too fast. And the effects of that are now being seen. So it is getting pushed by 2 or 3 years.
Do you think their cost strategy has also failed little in that sense?
What is increasing in the cost of the insurance companies is non-commission related cost—other types of cost whose rate of growth has been rather high and they should watch it.
Have you conveyed to them that they need to watch their costs?
The Insurance Act sets a limit on the total management cost and insurance companies are expected to abide by it. We allow a leeway initially by not being very rigorous in the implementation of that regulation for the first five years of the genesis of the company because we expect that there will be far more administrative costs initially. After that, we expect them to comply.
Have you found any of them violating?
Three of them are not compliant.
What actions have you taken?
We have written to the management of these companies asking them to spell out the steps that they propose to take to bring it in line.
A lot of the companies are closer to going public. Do you see a composite road map being evolved for the entire industry or is this going to be a case-by-case thing?
No, it won’t be. It will be a structure and within this structure these companies will have to operate, whichever company applies. It won’t be a case-by-case basis.
You said you haven’t heard from the government, but we have information that the law ministry has not found anything wrong with the law in relaxing it? Where does the matter stand?
The government has called for our comments on their draft notification. And that’s where the matter is.
Are you in principle fine with that? Do you think insurance companies are ready to go public?
We have no issues with that. That is a call the insurance companies will have to take. What we are really concerned with is the kind of steps, the disclosures, the kind of measures that will have to be in place to ensure that when an IPO (initial public offering) is issued it is fair to the investing public in terms of the disclosure and available knowledge.
On FDI (foreign direct investment), the Indian partner has to dilute its stake; there is no clarity with regard to FII (foreign institutional investment). What are your thoughts on that?
Yes, I think that is indeed a blind spot in the proposed bill and in the comments that have been called for, this has been pointed out. We have pointed out that there is indeed such a requirement and I am sure that before the bill becomes an enactment, it will be addressed.
Principally, do you believe that as equity dilution happens, this 49% cap should be able to take the FII bit as well?
There are various ways in which a company can go from 26% to 49%. And yes, at the moment, the Bill is unclear as to which way is it going to be. That will have to be clarified.
Are you in principle opposed to the thought that commissions should be between a distributor/agent and consumer/investor, or should they be embedded in the financial products?
I think that it is a very premature step given the width and the depth and the different types of the Indian market and the need to nurture much closer relationship between the policyholder and the agent. Therefore, I think it will have to be embedded in the premium for times to come.

http://www.livemint.com/2009/09/18225123/Insurance-firms-will-have-to-w.html

BANK

Credit may grow 20%: Bankers

Banking biggies also tell RBI that the economy is likely to grow 6.5 per cent
With recovery in select industrial sectors and improvement in rainfall, banks expect credit offtake to grow 20 per cent and the economy to rise 6.5 per cent in the current financial year. They also expect the gross domestic product (GDP) to increase 6.0-6.5 per cent.
At a meeting with Reserve Bank of India (RBI) governor D Subbarao and Deputy Governor Usha Thorat today, chief executives of big Indian banks presented their assessment of economic growth and other monetary indicators as the first half of the financial year draws to a close.
SBI Chairman OP Bhatt and ICICI Bank Chief Executive and Managing Director Chanda Kochhar were among those who attended the meeting.
Since the rate of credit growth has been steadily slipping since the beginning of 2009-10, the feedback (on 20 per cent growth) indicates that bankers expect a sharp revival in the second half of the financial year.
To meet the year-on-year credit growth projection of 20 per cent, banks will have to disburse an additional Rs 5,16,400 crore between September 2009 and March 2010. So far this fiscal, credit disbursal has grown 1.35 per cent over the figure at the end of the previous financial year.
The year-on-year growth in credit was 14.1 per cent till the end of August.
A senior banker who attended the meeting said RBI sought bankers’ perception about market conditions, including credit offtake and liquidity.
“A credit growth of 20 per cent can be attained as the industry growth is resilient. There is revival in certain industrial segments given the industrial production data,” said another banker.
The Bankers told RBI that interest rates would stay steady for the next few months, but might increase towards the end of the financial year. They also conveyed to the central bank that there was adequate liquidity in the system.
Besides helping in the formulation of the monetary stance for the second half (October 2009-March 2010), these inputs are expected to help RBI decide the timing of its money policy reversal.
Last week, Subbarao had said that RBI might reverse its current easy money stance before the central banks of other countries did it, due to inflationary pressures.
Any change in RBI’s monetary stance is expected to be announced in the second-quarter review of the policy scheduled on October 27, 2009.
In a related development, RBI Deputy Governor KC Chakrabarty has said that the Wholesale Price Index (WPI) inflation might cross 6 per cent by the end of the current financial year.
“The rise in WPI inflation rate has not come as a surprise to us. We have always said that by March next year, it will be 5 per cent. It may even cross 6 per cent,” Chakrabarty told reporters at a function in Mumbai today.
WPI inflation for the week ended September 5 had risen to 0.12 per cent from -0.12 per cent in the previous week.

http://www.business-standard.com/india/news/credit-may-grow-20-bankers/370546/

SEBI

IRDA to come out with disclosure norms for IPO : Narayan
Insurance regulator IRDA proposes to come out with disclosure norms for Initial Public Offering (IPO) by insurance companies by this month end, its Chairman J Hari Narayan said today.
"We will be ready with the disclosure norms by the end of this month," Insurance Regulatory and Development Authority (IRDA) Chairman, Hari Narayan, told reporters on the sidelines of CII-organised insurance summit here.
There are few (insurance) companies which have shown interest for IPOs, and IRDA is working with market regulator Sebi to come out with guidelines, Hari Narayan said.
The whole route towards an IPO would have three mile stones — Finalisation of the Red Herring Prospectus (RHP) requirments, disclosure norms and valuation of insurance companies, he said.
"The first milestone towards IPO will be finalisation of the RHP. The design, structure and disclosure required in consulation with SEBI," he said.
"The second mile stone would be the pattern of disclosure, which IRDA would mandate to insurance companies for IPO," the regulator said, adding, the third milstone would be the calculation of insurance companies' valuation.
"We have worked and standardised it (calculation of valuation). The Indian Institute of Acturial wil bring out a guidance note on it. And once the guidance note is ready, we will make it mandatory for the insurance companies," Hari Narayan said.
"The disclosure norms are under our jurisdiction and they would be ready by the month," he said. The other milestones may take few more months as there are several other players involved in the process, he said.
http://www.business-standard.com/india/news/irda-to-come-outdisclosure-norms-for-iponarayan/73823/on