Monday / January 27.


fsNew Delhi: The department of industrial policy and promotion (DIPP) has finalised proposed foreign investment policy reforms related to composite limits as part of efforts aimed at greater clarity and the plugging of loopholes. DIPP, the nodal agency for overseas investment policy, has readied a cabinet note incorporating suggestions from various government departments that had raised concerns over the stringent guidelines recommended for portfolio investment, especially in pharmaceutical companies. The government will prescribe one limit that will include all kinds of overseas investment -foreign direct investment (FDI), foreign portfolio investment, NRI investment, depository receipts, foreign currency convertible bonds and fully and mandatorily convertible preference shares or debentures. “No government department has an objection to the basic principle of the need for composite caps. The aim is to attract foreign investment by clearing ambiguity in the existing FDI policy related to sectoral caps and conditionalities. Investors want clarity in policies for safety of investment,“ said a government official. The note is likely to be presented to cabinet by the end of the month.The current policy allows foreign institutional investors (FIIs) and foreign portfolio investors (FPIs) to invest up to 24% in the capital of Indian companies. http://economictimes.indiatimes.com/news/economy/policy/department-of-industrial-policy-and-promotion-prepares-composite-limit-draft-for-foreign-investments/articleshow/44882465.cms





MUMBAI: Housing finance company, Repco Home Finance has been allowed to raise its foreign shareholding to 49 per cent, after getting approval from the Reserve Bank. The foreign shareholding limit by Foreign Institutional Investors (FIIs)/Registered Foreign Portfolios Investors (RFPIs) had gone below the threshold limit in the company. Since the threshold limit fell, the RBI removed the restrictions placed on the company on the purchase of shares by foreign investors. “FIIs/RFPIs can now invest upto 49 per cent of the paid up capital of Repco Home Finance Limited under the Portfolio Investment Scheme,” RBI said in a notification. Repco had passed resolutions at its Board of Directors’ level as well as a special resolution by shareholders, agreeing to enhance the limit for the purchase of its equity shares and convertible debentures by FIIs/RFPIs. FIIs held 40.45 per cent shares in the bank as of June 30, 2014, according to data on BSE. Shares of the company had closed 4.23 per cent higher at Rs 469.75 apiece on the exchange. FIIs, NRIs and PIOs (Persons of Indian Origins) can invest in primary and secondary capital markets in India through Portfolio Investment Scheme (PIS). The RBI monitors the ceilings on FII/NRI/PIO investments in Indian companies on a daily basis. http://economictimes.indiatimes.com/industry/banking/finance/rbi-allows-repco-home-finance-to-raise-foreign-shareholding-to-49/articleshow/44874979.cms?prtpage=1




Mumbai: The rupee is seen appreciating this week due to easing concerns of interest rate hike by the US. The Bharatiya Janata Party (BJP) election victories in Maharashtra and Haryana are also expected to give the domestic currency a boost. The rupee recovered from an over seven-month low on Friday to close at 61.44 compared with the previous close of 61.85 a dollar. St. Louis Federal Reserve Bank President James Bullard has said the US should consider delaying the end to its bond-buying programme amid concern that slowing growth in the rest of the world will weigh on the recovery in the US. At its meeting to be held later this month, the Federal Open Market Committee is expected to wrap-up its asset-purchase programme. The programme which once stood at $ 85 billion is now at a mere $15 billion. “The results of Maharashtra and Haryana elections will be out on Sunday. If Bharatiya Janata Party (BJP) wins then it will be very positive for the currency market,” said Sandeep Gonsalves, forex consultant and dealer, Mecklai & Mecklai. Gonsalves expects the rupee to trade in the range of 61-62 next week. http://www.business-standard.com/article/finance/rupee-seen-appreciating-yields-may-fall-114102000010_1.html





State Bank of India Chief General Manager of Andhra Pradesh and Telangana States C.R. Sasi Kumar on Saturday promised that the bank would take up CSR activities in the cyclone-affected North Andhra region. Mr. Sasi Kumar, who distributed blankets, utensils and food packets to flood victims at Kunduvanipeta of Srikakulam mandal, said that the bank was setting up relief camps in Vizianagaram and Visakhapatnam too. He said that they had been trying relentlessly to resume operations in all branches in the flood-affected areas. “We could reopen 65 branches of out of the 72 in Visakhapatnam alone. Our staff have been putting extra efforts to restore normalcy in other branches,” He said. “The SBI branches in Visakhapatnam will function on Sunday as customers could not take up transactions last week,” he said. Replying to a query, he said the bank might consider rescheduling of loans advanced to industries in case-to-case basis. “Many industries have incurred huge losses. They will apply for insurance claims. Only after damage is assessed, we will try to extend help at the time of distress,” he said. Srikakulam Regional Manager D.Rajarama Mohana said that the bank would take steps to load extra cash in the ATMs in flood-hit areas. http://www.thehindu.com/news/national/andhra-pradesh/sbi-chips-in-with-relief-material/article6515127.ece





Chennai: There are clear signs of growth in credit offtake in the second half of the current financial year, said Rakesh Sharma, Managing Director and CEO of Lakshmi Vilas Bank. “We staged a good performance in the second quarter, and considering the demand (for credit) in the pipeline, we are reasonably confident that our second half will be way better,” he said. The bank reported a net profit of Rs. 31.5 crore for the quarter ended September 30, 2014. In the comparable previous year quarter, it was Rs. 5.85 crore. “Of course, there was an aberration last year as the bank had to make higher provisioning of Rs. 58 crore for NPA, against Rs. 28 crore this year,” Sharma explained. Total income for the second quarter went up 15 per cent to Rs. 618 crore. Total deposits grew 17 per cent to Rs. 19,315 crore from Rs. 16,455 crore in the previous year. Advances too went up by 11 per cent to Rs. 13,724 crore ( Rs. 12,333 crore). Thanks to Rs. 10-crore sale of NPA to Asset Reconstruction Companies, cash recovery of Rs. 16 crore and upgradation of accounts worth Rs. 15 crore made during the quarter, the bank’s gross and net non-performing assets have come down. Gross NPA came down by 150 basis points from 5.22 per cent to 3.72 per cent, and net NPA came down by almost 1 percentage point to 2.78 per cent from 3.77 per cent last year. Sharma said the bank will continue to focus on retail and MSME (micro, small and medium enterprises) loan portfolio, which account for 70 per cent of the bank’s total advances. The bank is also close to tie up with a leading automobile manufacturer for lending for its customers. http://www.thehindubusinessline.com/todays-paper/tp-news/lakshmi-vilas-bank-reports-over-5fold-jump-in-q2-profit/article6517689.ece




Hyderabad: ICICI Lombard General Insurance has provided a dedicated hot line number, 18002666, to initiate claims and handle any queries to support its customers affected by the recent Hudhud cyclone in Andhra Pradesh. In addition, special teams were formed to expedite claims, according to Sanjay Datta, Chief of Underwriting and Claims, ICICI Lombard, said in a release here. The company was getting in touch with its customer base in AP by sending out SMS informing them about the call centre number for intimating claims. It is also making outbound calls to its customer to check their safety and to resolve any urgent queries, he added. It would deploy additional manpower including surveyors for quick assessment and claim intimation across all types of claims and the Central team had also geared up to expedite claim processing and approvals. http://www.thehindubusinessline.com/todays-paper/tp-others/tp-states/icici-lombard-provides-hotline-help-to-cyclonehit/article6517730.ece





New Delhi: State-owned life insurer Life Insurance Corporation of India (LIC) has shored up its stake in Infosys Ltd to 4.45%, purchasing shares that are worth about `1,400 crore in the July-September quarter. This is the second consecutive quarter of share purchase by LIC in the software services firm. While the exact date of share purchased by LIC could not be ascertained, Infosys new chief executive officer (CEO) and managing director Vishal Sikka took charge of the company from August. LIC, the biggest institutional investor in the stock market, which held 3.25% stake in Infosys during the January-March quarter, has increased holding to 4.45% as of 30 September. During April-June quarter, LIC had 3.71% stake in the country’s second largest software services firm. The state-run firm has been increasing its holding in Infosys since the January-March quarter. Prior to that LIC had been reducing its stake in the software company since last year. It held 6.72% stake in IT firm at the end of 30 June 2013, as per the latest data available with the stock exchanges. Taking into account the current market value of Infosys shares, the 0.63% hike in LIC’s holding in the company would be worth about `1,400 crore. Infosys shares closed at `3,853.85 on Friday. http://www.livemint.com/Companies/vgBSxVpSCnKguzOWt5AfzK/LIC-hikes-stake-in-Infosys-buys-shares-worth-Rs-1400-cr.html?facet=print





THE purpose of insurance as deciphered over years has not just been to hedge against the risk of untimely death. Insurance plans have been bought for reasons other than protection such as savings for long-term financial goals and saving taxes. Unit Linked Insurance Plans (ULIPs) have emerged from this trend and are a category of goal-based financial solutions that offer dual benefits of protection and investment with various flexibilities to the customer. A ULIP is linked to the markets and offers the flexibility to invest the units in equity or debt funds depending upon the customer’s risk appetite. The investment risk is borne by the policy holder. In this respect, a ULIP acts somewhat like a mutual fund with added benefit of life cover and flexibilities. http://www.tribuneindia.com/2014/20141020/biz.htm#2





NEW DELHI: To check any fraudulent use of investor accounts by brokers, capital markets regulator Sebi plans to tighten norms for the Power of Attorney taken by them from their clients including by colour-coding such PoAs as per the risks involved in such transfer of powers. A number of measures have been suggested by an expert group set up by Securities and Exchange Board of India to ring -fence the POAs given by investors to their brokers from any possible misuse that are under consideration of the regulator, sources said. Sebi had last tightened its norms in 2010 for POAs signed between brokers and their clients, but further changes have become necessary to the regulatory framework in this regard to safeguard the investors’ interest in the marketplace. The existing guidelines already define the acts that can or can’t be performed by a stock broker or a depository participant in pursuance of rights conferred by the client by execution of POA. However, there have been cases of significant misuse of such POAs and there have been complaints that investors are misled into signing these agreements without being informed about the risks involved. To check these malpractices, the expert group has suggested multiple POAs for different kinds of operational permissions, colour coding of such agreements as per risks involved and limited validity period, in place of the current practice of one single POA being signed for all purposes. Another proposal relates to digitisation of POA and storage of its soft copy with exchanges so that it can be easily retrieved whenever needed for inspection and probes. However, brokers are concerned that these moves could result in additional costs and extra workload for them. http://economictimes.indiatimes.com/markets/stocks/policy/sebi-mulls-stronger-norms-to-check-misuse-of-poas-by-brokers/articleshow/44875810.cms?prtpage=1




Turmoil continues in the mutual fund industry concerning how funds are sold. Despite the SEBI having radically upended fund companies’ and fund distributors’ business model over the last five years, there still seems room for further R&D. Part of it arises from unintended — but entirely predictable — side effects of regulatory changes. Obviously, caught in the middle is the investor, who is still being sold products that might make business sense for the sellers, but are not the best investment option. To understand what is happening, let us examine the changes that have taken place. Fund distributors — who range from individuals working from homes to large organisations like banks — get paid in two ways when they get an investment. One is a percentage of the investment right in the beginning. Two is a continuous monthly commission that is a percentage of the assets, which continues for the lifetime of the investment. The former is called the upfront commission and the latter trail commission. Generally, there is a tradeoff between the two. If the product is such that the investor is locked in for a certain time, then the upfront commission is high, and there is no trail commission. This is true for closedend funds, where the investor is locked in for three or five or even longer periods. Asset management firms’ revenue stream from these funds is guaranteed for that period so they can afford to pay a high commission out of their own pocket, secure in the knowledge that the revenues will come. And of course, higher commission means higher sales, of which there is never any doubt for any financial product. And the high commissions really are quite high — it seems that up to 5 or 6% may be paid to large distributors who can get money in bulk. Even small distributors get 4%. There is a huge shift to closedend funds that is driven by this. In the last one year, more than half of the fresh money that has flowed into equity funds has come into closed-end funds. In the decade before that, the equivalent number was less than 10%. Unfortunately, closed-end funds have significant disadvantages for investors. http://economictimes.indiatimes.com/markets/stocks/news/turmoil-continues-in-the-mutual-fund-industry/articleshow/44882655.cms?prtpage=1

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