Nifty hovers around 8500; Coal India, L&T, Sesa gainers

1:30 pm Result poll: With results for Infosys and TCS out of the way, all eyes will be on the country’s third-largest IT services exporter Wipro when it reports quarterly earnings Friday. A poll of analysts forecasts the firm’s dollar revenues to grow 0.76 percent to USD 1785 million while revenue in rupee terms may rise 1.35 percent to Rs 11,070 crore. Operating profits are seen at Rs 2,431 crore while EBIT margin is seen unchanged at 22 percent. Analysts will also likely watch out for guidance the company gives for the fourth quarter, likely to come in at 1-3 percent or 2-4 percent – crucial because weakness in Wipro’s strongest vertical, energy (17 percent of revenues) may bog down revenue growth.

Don't miss: TCS falls 2%: Why are analysts still bullish post mute Q3?

The market is still flat as the Sensex is up 48.25 points at 28123.80. The Nifty is up 13.90 points at 8508.05. About 1361 shares have advanced, 1341 shares declined, and 313 shares are unchanged.

Coal India, L&T, Sesa Sterlite, M&M and BHEL are top gainers in the Sensex while Bharti Airtel, SBI, Tata Motors, Hero Motocorp and TCS are among the laggards.

Brent futures edged higher holding above USD 48 a barrel on positive technical price momentum, although few analysts expect a strong rebound anytime soon as global output continues to outweigh demand.

Still, crude markets may be bottoming out, analysts said, as prices were receiving support around current levels.

Despite the slight price gains, oil opened up into a wobbly market after Switzerland jolted markets already roiled by plunging commodities prices by abandoning its currency cap on Thursday.   

Insurance agents, brokers now under same ambit

In the recently promulgated insurance ordinance, the government has brought corporate agents within the definition of ‘’insurance intermediary’’ in line with brokers thereby opening up the debate on whether banks can now act as brokers and seek partnership with multiple insurers.

In the ordinance, approved by the government on December 24 and signed by the President on December 26, the Centre expanded the definition of “intermediary” by bringing corporate agents within its ambit. “Insurance intermediary includes insurance brokers, re-insurance brokers, insurance consultants, corporate agents, third party administrators, surveyors and loss assessors and such other entities as may be notified from time to time by the authority,” said the Insurance Ordinance in its definition of intermediary.

In the earlier definition, corporate agents were not defined as intermediary and the Insurance Act had mandated exclusive distribution arrangement only for agents including corporate agents.

The email and messages sent to the Irda chairman on Monday, asking the impact of the same, went unanswered until late Tuesday.

Former Irda chairman, J Hari Narayan, however, said that an agent is an agent and a broker is a broker, their roles are defined. “Going forward, Irda will have to come out with a regulation with regard to corporate agents and will have to specify their reporting mechanism,” said Hari Narayan.

Within the industry, while some feel that by bringing them under the common head of ‘intermediary’, the government intends banks to also act as brokers and sell products of various insurers in a bid to increase penetration, there are others who feel that they continue to be defined individually as brokers and agents and Irda will have to clarify the same.

A senior official with a private sector insurer said, “By bringing both under the definition of intermediary, the government set the ground for opening up Bancassurance that will allow banks to sell products of multiple insurers. The Irda will now have to come out with a guideline relating to the same. However there are some who do not entirely agree with this and say that they would wait for Irda’s guidelines.”

“We will have to wait for IRDA to define who will act as what. However, the change in ordinance as of now means that while earlier the insurer was answerable for the errors and omissions of corporate agents, now they themselves will be answerable for the same,”said the head of an insurance company who did not wish to be identified.

The CEO of another private sector general insurance company said, “The power now rests with the regulator and Irda will have to come out with a guideline clarifying the scope of brokers, corporate agents and agents.”

In August 2013, Irda had come out with a notification allowing banks to get licensed as insurance brokers making it possible for banks to migrate from a corporate agency structure to broking but despite the enabling regulations, no bank has till date migrated.

Banks unlikely to take the insurance broking route

An open architecture of banc assurance could still be a distant phenomenon, since banks are unlikely to take the broking route.

While the Reserve Bank of India (RBI) has bought out final guidelines for banks to become insurance brokers, high liability and lower revenue from this model may dissuade banks from doing do.

In its final guidelines, RBI has said that banks may become insurance brokers and sell multiple products though it is not mandatory.

To facilitate an open architecture of bancassurance where a bank is enabled to sell products of all insurance companies, RBI had earlier brought out draft norms on the same.

Bancassurance, which refers to banks selling insurance products, now follows a corporate agent structure. This means that banks sell insurance as a corporate agent and these regulations allow each bank to sell insurance products of one life, one general and one health insurance company each. 

As per the final RBI norms, a bank can enter insurance broking only if their Capital to Risk (Weighted) Assets Ratio is 10% and above and their level of net non-performing assets is 3% or below. RBI said that the net worth of the bank should not be less than Rs 1,000 crore, compared to Rs 500 crore criteria mentioned in the draft guidelines of RBI.

Insurance players also agree that unless they are forced to do so, large banks are not likely to voluntarily become insurance brokers.
 

Amitabh Chaudhry, MD & CEO of HDFC Life said that unless mandated to do so, banks may not be interested in becoming brokers. He said it was easier to be a corporate agent than a broker especially since the bank would be liable for the policies sold in the latter model.

There was a call to have an open architecture of bancassurance in the insurance industry since there were several late entrants in the market which did not have a bank to tie-up with. 

Almost all the private and public sector banks either have JV agreements or are corporate agents of insurance companies. Banks like ICICI Bank, HDFC Bank, Axis Bank and YES Bank apart from State Bank of India, Punjab National Bank, Oriental Bank of Commerce, Canara Bank are corporate agents. 

An existing  JV agreement would restrain players from opting for the broking route, said the chief executive of a mid-size private life insurer. “Once these banks become brokers, they would not be in a position to push products of their group companies. Private insurers, which get almost 60-70% of their new business from these banks, may see a sudden slump if their parent bank becomes a broker. This is not something the shareholders would approve,” he said.

As banks have already tied-up with existing players, others like Reliance Life Insurance and Edelweiss Tokio Life Insurance do not have a bancassurance partner. On the other hand, players like Canara HSBC OBC Life Insurance that has three bank partners depends 100% on the bancassurance channel to procure business.

Rajeev Kumar, chief and appointed actuary at Bharti AXA Life Insurance said that the regulator could have a model wherein banks are able to earn higher revenues as brokers. “This will be an incentive for them to become brokers. While not all banks would want to become insurance brokers, even if one or two marquee players take this step, others may follow later,” he said.

Insurance Regulatory and Development Authority of India (IRDAI) had also favoured an open model of insurance distribution by banks. While proposals like one bank distributing insurance in certain geographies and others in other geographies was mulled, these were not favoured by the stakeholders. 

Sector experts said that there could also be newer models between the current corporate agency model and insurance broker model to help open up the sector. Here, a bank could be enabled to sell two policies of life, non-life or standalone health companies to begin with. 

On 20 December 2013, a letter from finance ministry, addressing the public sector bank chief executives, said that banks should become insurance brokers and leverage their branch network for insurance penetration.

Former finance minister P Chidambaram in his budget speech had also said that banks could become insurance brokers to boost insurance penetration, which stands at 4.1% of the Gross Domestic Product (GDP). 

However, banks that had a joint venture agreement with insurance companies had expressed their discontent with this proposal. This would have meant that they had to sell products of all insurance companies. 

As an insurance broker, the bank is liable to consumers with respect to an insurance policy, unlike the case with a corporate agent. The liability is high, especially since the bank will sell products of multiple insurers. 

This too, said the chief distribution officer of a private general insurer would be a deterrent for banks since they would not wish to take risks on the books, be it a subsidiary or a joint venture.

RBI has also said that the bank should have made a net profit for the last three continuous years and that the track record of the performance of the subsidiaries, if any, of the concerned bank should be satisfactory.

Delhi poll battle: Dear BJP, what about Kiran Bedi's own history as a bhagora?

Kiran Bedi’s past is so full of many U-turns, controversies, spats with seniors, courts, lawyers and outbursts against Narendra Modi that an entire issue of Charlie Hebdo could be dedicated to satirizing her career.

Her opinion on Modi, before she inexplicably (or was it part of a political strategy?) changed her mind is well known, courtesy her tweets. Till a few months before Modi became the PM -- a fact that must have inspired Bedi to rearrange her thoughts and realign her political philosophy -- she was continuously attacking him for the Gujarat riots.

In March, Bedi tweeted: "One day NaMo will need to respond with clarity about riots massacre. Despite Courts clearing him so far."

And in April 2012, she has argued that Modi may have passed the SIT exam but was yet to clear the test of ‘prevailing perception of serious incidents’ under his watch.

But, hey, now that the BJP desperately needs somebody to take on Arvind Kejriwal, all such past sins are forgiven.

The public spotlight that comes with an election may be less merciful. Now that she has taken the plunge into politics, Bedi will have to undergo a serious scrutiny of her career, persona and politics. There may not be Charlie Hebdo cartoons, but there will be uncomfortable questions.

Why was Bedi, for instance, bypassed for the post of Delhi’s police commissioner? And why was she not found suitable for a filed posting after being reprimanded by an enquiry committee for ordering a lathi charge on lawyers?

In July 2007, Bedi proceeded on a three-month ‘protest leave’ when she was overlooked for the Delhi commissioner’s post. Bedi claimed she was a victim of gender bias, and declared that she was weighing all ‘options including legal’. She instead suddenly changed her mind, cancelled her leave, resumed office and finally applied for voluntary retirement. The government accepted her application and relieved her immediately.

At the time, many critics challenged her claim that her ‘merit has been compromised’ and she has an ‘outstanding record.’

Writing for the Hindustan Times, Karan Thapar said he had invited Bedi to discuss her grievances on his TV show, but she failed to turn up. So he instead shot a volley of questions at Bedi, some of which were serious, including the grave suspicion that Bedi could not be ‘trusted with classified information and security.’

“To begin with, you've received neither the Indian Police Medal for Meritorious Service nor the President's Police Medal for Distinguished Service. Given that these are routinely awarded after completing a certain number of years of service, isn't your not getting them proof that your record is neither meritorious nor distinguished?

Secondly, is it true that on 4 separate occasions you failed to complete your tenure and at least twice left your post without permission which is tantamount to desertion of duty? (She didn't complete her tenure as Superintendent of Police in Goa, DIG (Range) in Mizoram, Inspector General (Prisons) Tihar Jail and Inspector General of Police in Chandigarh. The posts that she left without permission were Goa, in 1983, and Mizoram, in 1992. Speaking to the Sunday Observer on the 27th September, 1992, she said of Mizoram: "I left without asking". Her letter of 25th January, 1984 to the Inspector General of Police in Goa, Mr Rajendra Mohan, establishes that she left on leave that had not been sanctioned.)

In 1990, Bedi was indicted by an enquiry committee headed by Justice DP Wadhwa for gross irregularities in dealing with a strike by Tis Hazari lawyers in Delhi. In a damning indictment of her role, the committee said the lathi-charge on agitating lawyers ordered by Kiran Bedi, the then deputy commissioner of police (north), a week after the incident was "indiscriminate and unjustified".

Worse, it declared that Bedi had connived with a municipal councilor in organising and transporting a mob to Tiz Hazari who then assaulted the lawyers. Bedi maintained that she was discriminated against during the enquiry. But it was accepted by the home ministry and tabled in the Parliament with an assurance to lawyers that Bedi will never be posted in Delhi in any important position.

Bedi was later sent to Mizoram where her actions stirred up another controversy. People of the state poured into the streets when it was revealed that Bedi had secured her daughter’s admission to an MBBS course in Delhi’s Lady Hardinge College under the Mizoram quota.

Bedi argued that she was within her rights to avail the quota since she was at that time posted in Mizoram. But protesters claimed the purpose of the reservation was to ensure local students get its benefit and Bedi had taken advantage of a loophole in the law. When Mizoram became too hot to handle, Bedi once again left. Incidentally, her daughter also dropped out of the course later.

Incomplete tenures, unauthorised leaves and lots of flip-flops. And let’s not forget the words Thapar used to describe her actions while in the police of force: “desertion of duty”.

The Delhi elections is now a battle of the bhagoras. Voters will have to decide whose dereliction of duty matter more: Arivnd Kejriwal’s 49-day tenure or Kiran Bedi’s many hasty exits.

Censor Board chief Leela Samson quits over MSG nod, govt denies interference

A day after Censor Board chief Leela Samson quit over clearance to controversial film Messenger of God, the government denied any interference in the board's functioning.

"There was no government interference in clearing the film Messenger of God", minister of state for Information and Broadcasting, Rajyavardhan Rathore told reporters.

Hitting out at Samson, Rathore said, "The Censor Board is an independent body, it needs to behave like one."

He also said that the decision of the Film Certification Appellate Tribunal (FCAT) over the film should be final and acepted by all. 

Leela Samson announced her resignation after the tribunal's reported to clear Messenger of God featuring Dera Saccha Sauda chief Gurmeet Ram Rahim Singh ina lead role.

Asked if she was aware of media reports that the nod has been given by FCAT to the film's screening, Samson told PTI that "I hear so. Nothing in writing yet. Yet, it is a mockery of Central Board of Film Certification. My resignation is final. Have informed the (I&B) secretary".

The Censor Board had referred the issue of clearance to "Messenger of God" to FCAT. The film was slated to hit the screens on Friday.

Asked why she has decided to quit, she did not specifically refer to the reported clearance to the film but said the reasons cited are alleged "interference, coercion and corruption of panel members and officers of the organization who are appointed by the ministry."

According to Samson, "...having to manage an organization whose Board has not met for over nine months as the ministry had no funds to permit the meeting of members."

She said the term of all the members and the chairperson of the Censor Board "are over. But since the new government failed to appoint a new Board and Chairperson, a few were given extension and asked to carry on till the procedure was completed."

"However, recent cases of interference in the working of the CBFC by the ministry, through an 'additional charge' CEO, and corrupt panel members has caused a degradation of those values that the members of this board of CBFC andcChairperson stood for," Samson alleged.

Meanwhile, a spokesperson of Sirsa (Haryana)-based Dera Sachcha Sauda said "as per our information, FCAT has cleared the movie for release. But a written order is awaited."

Sensex holds 28000 amid pressure; Sun TV, SpiceJet in focus

10:30am Piramal Enterprises in News

Piramal Enterprises (PEL) gained 2 percent today as the Piramal Group company has been considering the acquisition of UK-based company.

"Piramal Enterprises is in final stages of discussion with the University of Kentucky for the potential acquisition of Coldstream Laboratories for a total consideration of USD 30.65 million," said the company in its filing to the exchange.

Of the total amount, USD 5.65 million would be towards the Coldstream facility on the Research Park Campus of the University, while the rest would be towards purchase of the company’s shares, it added.

This potential transaction is subject to corporate approvals and is expected to be completed by the end of this week. However, the transaction is not subject to any regulatory approvals. No related party of PEL has any interest in Coldstream, said the Piramal Group company.

10:00am Market Check

Equity benchmarks entered into consolidation mode after the yesterday's rally priced in all events like surprise rate cut by RBI, fall in trade deficit etc. The frontline indices were marginally in red on profit booking.

The Sensex fell 42.23 points to 28033.32 and the Nifty declined 12.15 points to 8482. However, the broader markets outperformed benchmarks marginally with the BSE Midcap and Smallcap indices rising 0.2-0.5 percent.

About 1073 shares have advanced, 786 shares declined, and 276 shares are unchanged on the Bombay Stock Exchange.

“With sharply lower commodity prices, favourable macro indicators like inflation, CAD & fiscal deficit and now rate cuts, we believe conditions are ripe for economic recovery to take shape,” says Rakesh Arora, Macquarie.

According to him, the government sustaining its policy momentum and delivering on reforms would be key. “Markets will closely watch the upcoming Budget session in late February.  In our view, any market weakness should be seen as an opportunity to buy,” says Arora.

TCS fell nearly 2 percent on reporting lackluster results. Dollar revenue growth was flat and constant currency growth at 2.5 percent was lower than that of Infosys. CLSA lowered FY16/17 earnings per share by 2/3 percent due to deeper cross-currencies and lower than expected revenue acceleration and cut target price to Rs 3100/share.

Bharti Airtel dropped nearly 3 percent. Media report suggested that Bharti Airtel, Idea Cellular, Reliance Communications and Vodafone may collectively bid Rs 74,000 crore as per HSBC report.

Shares of ICICI Bank, SBI, ITC, Bharti Airtel, Tata Motors, Tata Steel, Maruti Suzuki, Hero Motocorp and GAIL fell 0.6-1.3 percent while HDFC Bank, HUL, Cipla, Coal India and Sesa Sterlite bucked the trend, up 1.5-2 percent.

Shares of SpiceJet jumped 10 percent as investors queued up for buying shares of the low-cost carrier after Ajay Singh decided to take complete control of the company which has been struggling with financial problems. Sun TV Network gained 9 percent as brokerages believe the SpiceJet deal removed a major overhang on the stock.