Insurance Sector Update - November 2013

Insurance Update – November, 2013

I am starting for now onward to simple update on insurance industry time to time. Insurance is very vital and critical part of any financial plan. It is our duty as an advisor and planner to inform our readers to update about this industry. A lot of regulatory activity is going on and companies come with new customized product. Every investor must know about this. Some recent update as given below:

• According to FICCI report, General insurance industry may touch gross written premium (GWP) 3 lakh crore by 2025 with a conservative growth rate of 13% CAGR. According to report that increased health insurance awareness would increase the opportunities in this sector.

• National Disaster Management Authority suggested that insurance should be mandatory for residential properties, malls, theaters, hospitals and hotels. It also be recommended that it should be applies on all urban property tax payers.

• Insurance regulator IRDA has increased investment limit in various category. Now general insurance companies are allowed to invest upto 1.50% or Rs, 3,500 crore in liquid mutual fund. It is for temporary time and can be reversed at a later stage.

• Life insurance companies now can invest upto 5% in FD schemes of promoter group bank. Earlier the limit was 3%. IRDA has also increased  invest limit to invest in information technology and industrial sector from existing 15% to 20%.
• Reliance life insurance has launched policy revival drive. In this campaign lapse policyholder can revive their lapse insurance policy without any penalty and medical tests subject to conditions. This offer will available till 30^th November, 2013 for all reliance insurance products.

• IRDA wants insures to stop giving high incentives to auto dealers. For pushing motor insurance policies sales, insurers offering high incentives to auto dealers and due to this policy holder are paying unreasonable premium.

• IRDS has also proposed to set up insurance clearing house. For smooth functioning of reinsurance and coinsurance business IRDA want to establish “Insurance Clearing House”. It would be promoted by Indian insurers, reinsurers and the authority.

For more detail and any other query related investment, you can contact me through my email

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Equity Investment : When should be start?

Equity Investment : Is it the right time to invest ?

I have seen the equity market has become more volatile in these days. On 31^st October it was on all time high. But honestly saying, most of the investor has missed all this share market all time high rally. I am getting so many calls from the investor about it and the very common query is that is it the right time to enter the equity market. With my experiences and studies, I can say with very confidence that anytime is good for invest in equity market. You only need discipline, long term view, good research and passion. If you have these mentioned things, share market is your cup of tea.

Most of time, I find the investor and all of those has many reservation about the equity market. They have so many reasons to not invest in equity market. Some of reason like that I had invested some money in ABC mutual fund but not got return, I have bought some shares and lost money, Now market will be go down more after that I will think about equity investment and so more reason.

What I have seen all of those person’s argument that they all have missed something before equity investment. They did not know the time horizon, investment risk and product characteristic. They have trusted blindly someone and hoped that their money would be grow many times fold in very short time span like a gamble and smuggling. I request to all of the investors please keep in your mind that investment in equity is not gambling.

Ask yourself first before any investment whether you are trader or investor. The reality is that most of us enter in the market like trader and want to make some quick money. Somewhere I have read a very interesting fact about the sensex. If you have invested in the sensex on every October over the 22 year period 1991 to 2012. You have invested Rs 2.20 lakh total investment over 22 years and the value of this investment was Rs 8,67,310 on 1^st October. I think it is handsome tax free return of 11.30% for anyone without much burden on pocket stress.

The outcome of this study that long term view, regular investment is the key of equity investment. One more interesting fact that we have witnessed all negative event like global recession, asian financial crisis. Harshad Mehta scam, dotcom bust, Ketan Parekh scam, India Pak Kargil war, 9/11 world trade center attack in US, war in Iraq, 2008 global financial crisis, European debt problem and many more. In spite of these events share market has given above mentioned return.

Right now I don’t know honestly where will be the market go ahead in short or medium term exactly but I know this is the right time to start invest if you have not invested in equity market till date. Many people have negative view on India and many people are very optimistic about the Indian market after 2014 general election. Many big broking house like India Infoline has stopped the retail broking and HSBS has also stopped the equity market operation. In my sense, all of these news are making a good ground for strong bull market but when the time will tell you only..!!!

For more detail about any other query related investment, you can contact me through my email.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Close or Open ended Fund, which one is good ?

Close Ended or Open Ended Mutual Fund which one is good?

Often we invest in mutual fund after looking past performance or on any friend’s suggestion. You do not care whether that particular scheme is suitable or not for you. So there is always confusion which scheme is good and which scheme is bad. Every mutual fund scheme are not made for all. You have to choose a good mutual fund according to your need, future goal, investment time horizon and risk profile. There is possibility that one scheme is good for Mr ‘A’ and the same scheme is not good for you. Be careful before investment in any investment instrument.

In mutual fund, you can invest between 1 day to any period based on your need. There are basically two type of mutual fund one is open ended scheme and other is close ended scheme. In open ended scheme you can enter in the scheme and exit from the scheme at your chosen time. Close ended schemes come with some defined lock-in period. You cannot exit from these schemes before lock-in period.

The lock-in period varies from few months to 4 - 5 years according to investment objective of particular scheme. Some investment instrument need time to be able to generate good returns. Closed-ended funds provide proper timeframe to fund manager and investors to cultivate this opportunity.

At current scene, when whole mutual fund industry face redemption pressure from the investor due to turbulent market condition. Since January, Rs 10,694 crore has moved out from equity schemes as outflows. Fund houses come with more close ended schemes. ICICI Prudential, Union KBC, Reliance MF and Axis MF have launched closed-ended equity schemes since last few months. A lock-in product would help fund houses deliver better returns over the longer run, as many mid- and small-cap stocks are trading at cheaper valuations now.

In a closed-end product, investors would remain for the entire duration, whether three or five years, whereas in an open-ended scheme, the investor can move to another one at any point. From investor point of view, the can also the take advantage stay invested in schemes as stock valuation is very cheap in current market.

For more detail about any other query related investment, you can contact me through my email.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Few Points for Old Age Financial Freedom

Some Sutra for old age financial freedom

After a long 15 days vacation spending in my native place, I have came back to my daily routine life. My native place is Kanpur. I have also travelled many places in hinterland and met many people. There is some good news that the new or you can say younger generation is very serious about their financial future. The new generation now have hunger for knowledge and growth which is good sign for India. They understand better the difference between saver and investor. In typical saying we Indian are good saver but not good investor but I hope with all my positive energy this saying would change soon. India would be country of great investor. We will deliver more and more Warren Buffet.

In today’s short blog, we will discuss some important aspects for secure future. We often explore personal finance options at later stages of life when we have lost out on the opportunity to make the most of "power of compounding". Personal finance is one area which is almost ignored during our upbringing to become adult. There are few points which we should keep in our mind for secure future planning.

Buy Insurance at early age: Recognize your life and general insurance need. Keep in mind that insurance is not return generating asset, it is only a financial protection for yourself and your dependents against unfortunate emergencies. Be smart and get a good health insurance plan as early as possible.

Set realistic future goal: Apply SMART approach for your future goal. Simple, Measurable, Accurate, Realistic and Time-bound goals can be achieved easily. Don’t ignore inflation, interest rate movement and time horizon.

Start saving early. Make sure you could save upto 25% at your early earning stage as later it is very difficult to save. When you start save early, it make you more confident and happier. You can also gain from “power of compounding” through early saving.

Never blindly copy of others: You financial goals and condition may not be similar to that of your friends. Each person have different need, goal and risk appetite. Analyze your need, goal and risk appetite and invest accordingly

The conclusion of this article is that saving for future is essential part of everyone's life and all you need to do is start today and start small.

For more detail about any other query related investment, you can contact me through my email.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Health Insurance Policies

Have you read your health insurance policy carefully..?

As we already know that the health insurance policy is very essential thing for anyone regardless any income group or age group. It is mandatory part of any comprehensive financial planning. Many private and public sector companies provide these types of policies with many attractive benefit and limitation.

Many companies come with these types of policies with restriction like hospital daily room rent and many exclusions like pre existing decease. Now, it has become more important that we should read all the term and conditioned very carefully. At present, there is no free look in facility but IRDA has indicated that they can implement this norm on health insurance policies. As per current scenario, it is only implemented on life insurance policies only.

Please make sure whether lifetime renewability is available or not with the policy. Many medi-claim policy provider often refuse renew the policy after certain age. You can select a plan that offers lifelong renewal because buying insurance at older age becomes a difficult task in case any ailment. There are many decent policies available with lifelong renewal. Few of them as given below:

• Apollo Munich Easy Health Plan
• Apollo Munich Optima Senior
• Star Citizen Red Corpet
• ICICI LombardComplete Health Insurance – iHealth Plan
• Max Bupa Health Assurance
• Religare Mediclaim

You should check premium and benefit and select the plan according to your need.

For more detail about any other query related investment, you can contact me through my email.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Inflation would play crucial role in next RBI policy..?

Inflation would play crucial role in next RBI policy..?

There is little respite from rising prices. The wholesale price index, the most widely-watched indicator of inflation in India, rose 6.46 per cent in September from a year earlier. That is sharply higher than August's level of 6.10% and 5.85% in July’s level. It is well above the RBI's comfort level of 5 percent level. The biggest driver of inflation is still food inflation, which accelerated to a three-year high of 18.40  percent in September from 18.8 percent in August  because of supply disruptions due to heavy monsoon and poor storage facilities.

This is the fourth straight month that wholesale inflation has remained above the Reserve Bank of India's comfort zone and could add pressure on it to raise interest rates. A Reuters poll of economists predicted wholesale inflation at 6 percent for the month of September.

The elevated price levels will add more pressure on the Reserve Bank of India – which has clearly signalled that it will target inflation – to raise interest rates even as the economy is growing at its weakest pace in a decade.


At its last policy review on September 20, the RBI's new governor Raghuram Rajan had surprised everyone by increasing its main lending rate by 0.25 percent and clearly signaled that the central bank's focus would be on bringing down inflation. The RBI would be closely watching the September inflation numbers to determine its next rate action. The RBI's next policy review is scheduled for October 29. Economists polled by Reuters have forecast a further 50 basis points of increases in the RBI's main lending rate in six months.

Supply disruptions following heavy rainfall in some parts of the country have driven up food prices, particularly vegetable prices, in recent months. A weak rupee, along with increase in fuel prices, has kept upward pressure on inflation. The consumer inflation data will be released later today evening.

For more detail about any other query related investment, you can contact me through my email.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Shriram Transport Finance Company Limited NCD issue

Today Shriram Transport Finance Company Limited (STFCL) have  launched  its public issue of non-convertible debentures (NCDs). The current issue will get closed in a couple of weeks time on October 21st, if it does not get preclosed this time again or extended by the company beyond this date. The company plans to raise Rs. 500 crore with this issue, including a green-shoe option of Rs. 250 crore.

This is the second such public issue of this financial year from STFC, as the company raised Rs. 750 crore from its first issue in July and the issue had got preclosed in just seven days time on July 24th.

Shriram Transport Finance offered 10.90% per annum for 36 months and 11.15% per annum for 60 months in its last issue to the individual investors. This time the rates are 35 basis points (or 0.35%) higher at 11.25% per annum for 36 months and 11.50% per annum for 60 months. The company did not offer 84 months option in its first issue. There is no monthly interest option this time.

Here you have the table having the details about the tenors and the interest

rate options with cumulative and non cumulative option.

As you can check from the table above, there is an additional incentive of 0.50% p.a. with 36 months option, 0.75% p.a. with 60 months option and 1% p.a. with 84 months option. Unlike tax-free bonds, this additional incentive is available to the individual investors irrespective of the size of their investment amount.

Categories of Investors - The investors have been classified in the following four categories and the individual investors fall in Category III as well as Category IV.

§  Category I – Institutional Investors

§  Category II – Non-Institutional Investors

§  Category III – High Net-Worth Individuals, including Hindu Undivided   Families (HUFs)

§  Category IV – Retail Individual Investors, including Hindu Undivided    Families (HUFs)

Non-Resident Indians (NRIs), foreign nationals and qualified foreign

investors (QFIs) among others are not eligible to invest in this issue.

Allocation Ratio - 50% of the issue is reserved for the Retail Individual Investors. The individual investor  can invest up to Rs. 5 lakh and 30% of the issue is reserved for the High Net-Worth Individual Investors. 10% of the issue is reserved for the Institutional Investors and the remaining 10% is for the Non-Institutional Investors (NIIs). The allotment will be made on a “first come first serve” basis.

Minimum Investment - The company has decided to keep the minimum investment requirement is  Rs. 10,000 again The face value of bond is  Rs. 1,000 each.

Listing - STFC will get these bonds listed on the National Stock Exchange (NSE) as well as the Bombay Stock Exchange (BSE). Investors can apply for these bonds either in physical form or in demat form. The company will get the NCDs allotted and listed within 9 working days from the date of closure of the issue.

Rating & Nature of the NCDs - CRISIL has rated these NCDs as ‘AA/Stable’ and CARE has assigned a rating of ‘AA+’ to this issue. Moreover, these NCDs are ‘Secured’ by a first charge on an identified immovable property and specified future receivables of the company.

Taxability & TDS - The interest earned on these NCDs will be taxable as per the tax slab of the investors. TDS will be applicable if the NCDs are taken in the physical form and the interest amount exceeds Rs. 5,000 in a financial year. But, if you take these NCDs in your demat account, the company will not deduct any TDS from the interest income.

Interest on Application Money & Refund - Investors will get interest on their application money @ 9% p.a., from the date of investment till the deemed date of allotment, and @ 4% p.a. on the amount liable to be refunded.

Interest Payment Date & Record Date - STFC will make its first interest payment on April 1, 2014 and then on April 1st every year. The record date will be 15 days prior to every interest payment date.

IIFL NCDs Issue vs. STFC NCDs Issue vs. HUDCO Tax-Free Bonds

The business model of Shriram Transport Finance is good and its credit rating also suggests that.  If you want to go with this issue, prefer short term period instead of long term period.

The investors falling in the higher tax brackets should opt for tax-free bonds rather than these taxable NCDs. So, personally I would go for HUDCO tax-free bonds or the upcoming IIFCL tax-free bonds rather than these STFC NCDs.

If you don’t fall in any tax bracket or fall in 10% tax bracket then you can consider this issue.

For more detail about any other query related investment, you can contact me through my email.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com