SECTOR WATCH Keep your eyes on these five 'happening' sector'
AUTO	CEMENT
ENGINEERING	BANKING
HOTELS

It's always a good idea to take a few investing tips from the big boys. If you've been tracking private equity or venture capital companies, you might have noticed a fundamental shift in their investment focus. They're all betting big-time on sectors fed by domestic consumer demand; export-led services are passé. Take VC firms like Draper Fisher Jurvetson or Oak Partners-both have launched $200 million (Rs 900-crore) funds to invest in businesses driven by domestic demand-or funds like ChrysCapital and Citigroup Venture Capital that have followed suit.

How can long-term investors exploit this trend to grow their portfolios? While it or pharma continue to look good as long as India's cost advantage remains, it's now time they started looking at sectors that depend on domestic demand and capital spending. This is where the action is going to be in the next few years. We feature here five such sectors, along with the most promising stock picks from each.

Auto

Demand in the auto sector has a direct correlation with economic growth. The per capita GNP grew at a CAGR (compounded annual growth rate) of 11 per cent between 1971 and 2001 and the production of passenger cars increased by 9 per cent in the same period. Now, with the economy on a roll, demand for cars is set to zoom. Then, with penetration of automobiles in India being among the lowest in the world, the potential for an upside is huge. Other catalysts include increased government spending on infrastructure (think better roads) and soft interest rates. In October 2005, about 9 lakh vehicles were sold; that's 23 per cent more than the number sold in October 2004, while the two-wheeler segment grew 26 per cent. Good picks here include Maruti Udyog and Mahindra & Mahindra in passenger vehicles, and Bajaj Auto and Hero Honda Motors in two-wheelers.

Cement

The booming economy translates into a huge acceleration in retail housing and infrastructure projects. The obvious gainer is cement, where the demand-supply scenario looks good. No new capacity is being added, and cement prices had gone up 10.8 per cent year-on-year till November 2005. A recent report from broking firm Sharekhan says: "We believe the demand-supply equation will be favourable for cement companies for the next two to three years. We retain our bullish stance." Producing 144 million tonnes per annum, the Indian cement sector is the world's second largest after China. However, per capita consumption is only 110 kg against a world average of 260 kg, indicating the potential for growth. Top picks include UltraTech Cement, Madras Cements, Associated Cement Co. and Grasim.

Engineering And Capital Goods

As long as infrastructure and power remain a priority of the government, the engineering and capital goods sectors hold promise. Power is the largest contributor to engineering companies' revenues. ABB and BHEL, for instance, derive almost two-third of their revenues from equipment supply to power companies. With the government aiming to invest Rs 4,00,000 crore each in generation, transmission and distribution, the opportunities are obvious. Infrastructure is the other big growth area, with industries, housing, expressways, and bridges generating enough work for companies like L&T and IVRCL. The government has recently set up a Rs 10,000-crore special purpose vehicle to exclusively finance infrastructure development. Picks: BHEL, Siemens, Crompton Greaves, L&T and IVRCL.

Banking

This is another sector whose fortunes are directly linked to economic growth. Banking is at its peak, with PSU banks aggressively competing with MNC banks. Retail lending (mainly mortgage financing) accounts for a significant 40 per cent share of loan portfolios. With increased penetration into semi-urban and rural areas, banks could garner more low-cost deposits. On the policy side, the sector is headed in the right direction. For private sector banks, the government has already lifted the cap on voting rights of 10 per cent as well as opened up 74 per cent to foreign ownership (FDI, FII and NRI). Given the low credit penetration and strong capex cycle, credit growth can only increase. Scrips to watch: ICICI Bank and State Bank of India.

Hotels

If you were a traveller scouting for hotel rooms in India's Class A cities, you would have first-hand experience of the potential in hospitality. There are virtually no rooms available. Ergo, occupancy rates have shot up. Private equity firms have realised the potential-WestBridge Capital invested $5.7 million (Rs 25.65 crore) in Royal Orchid Hotels, while Bessemer Venture Partners and New Vernon put in $8.5 million (Rs 38.25 crore) into Sarovar Growth-and will be driven by strong demand. The potential for growth is also significant. Indian Hotels, for instance, has entered the low-cost hotels business with its indiOne brand. Other picks: East India Hotels (EIH), Hotel LeelaVenture and Taj GVK Hotels and Resorts.

Aim And Shoot
As financial institutions succumb to the urge to converge, customers are not complaining. They are getting better choice and lower prices.
By Anand Adhikari

When 35-year-old Pawan Parmar approached banks and mutual funds to manage his investments under their wealth management services, almost all of them turned him down. The reason: Parmar's Rs 6 lakh was too low to qualify for their services; their minimum investment ceiling was Rs 25 lakh to Rs 2 crore.

Then Parmar discovered portfolio management services or PMS-it's akin to wealth management but is offered by stock broking outfits for minimum investments of only Rs 5 lakh. It was just the solution Parmar needed. And just the kind of solution now increasingly available across the financial services industry.

The reason is convergence-a sort of backward integration that's rapidly taking place among financial services companies, with all players offering unified personal finance solutions. The phenomenon has played quite a big role in improving both the choice available to the customer and the price.

Look, for instance, at what happened in the housing finance industry. For decades, consumers banked on housing finance companies (HFCs) for home loans. But when some market savvy banks, with access to cheap funds, stormed the home loan market towards the end of the 90s, the industry's growth shot through the roof. Innovations like money market fixed rate/floating rate loans became popular, so much so that even the traditional HFCs, including the 25-year-old housing finance pioneer HDFC, were forced to follow suit. Net result? Competition pushed down home loan rates and consumers flocked towards housing finance. Today, banks hold 60 per cent of the home loan market.

As the personal finance market grows, almost all financial services companies are moving into newer pastures by invading territory that was traditionally considered someone else's fiefdom. Just as banks intruded on HFC turf, financial services providers of all hues-stockbrokers, mutual funds, insurance firms-are marching into each other's territory. Mutual funds (MFs) are offering insurance as a sweetener; life insurance firms are not just enticing consumers with credit, but also with health and accident insurance cover, which were traditionally the preserve of general insurance companies. And PMS has moved out of banks to MFs and stockbrokers while MFs also eye the lucrative pensions sector, which is due for a dose of liberalisation. "Such blurring will happen right across the financial services industry. In fact, it should be expected," says Naval Bir Kumar, Managing Director, Standard Chartered Asset Management Company.

Here's a quick look at the various kinds of combo offers now available and what it means for you.

One big move has been the entry of the Rs 2,00,000-crore mf industry into the life insurance territory. Reliance Mutual Fund set the ball rolling with its Reliance Tax Saver (ELSS) Fund, which also offered cover for death by rail or road accident up to a maximum of Rs 5 lakh. A minimum investment of Rs 10,000 in Reliance Tax Saver offered an insurance blanket of Rs 50,000. In fact, DSP Merrill mf came out with the most comprehensive insurance cover with a systematic investment plan (SIP) to choose from several mf schemes. And if you go by what mf head honchos have to say, a string of money managers is preparing to launch the mf-insurance combo special. "The world has changed; you have to look at co-operation and competition. We will certainly look at a scheme with an insurance add-on," says Ved Prakash Chaturvedi, CEO, Tata MF. "MFs, with their large size and diversified portfolio, offer a much better vehicle for savings during the accumulation stage than an insurance company," says Kumar. An mf industry official points out that over a five-year period, products of insurance companies are far more expensive as the percentage of the first premium that goes to the distributor is a steep 30-40 per cent.

Life insurance players, however, counter by saying they offer high-value life insurance.

"We also protect the early risk of death and disability," says Ian J. Watts, MD, Tata AIG Life Insurance Company. Global statistics reveal that before the retirement age of 65, a person is five times more likely to have a critical illness like a stroke or a loss of limb.

"That means you are more likely to outlive your retirement. That's where insurance companies offer benefits to pay sums of money in the event of those situations happening," defends Watts. He has a point, but then again, what's stopping a mf from offering critical illness cover in future, you have to wonder.

In yet another convergence play, Reliance mf has been offering an ATM-cum-international debit card to its investors for easy liquidity anywhere, anytime. As a customer why would you complain?

If you think MFs are unfairly treading on life insurance or banking services' turf, the life players are, meantime, being blamed by the general insurance players for stepping on their toes. As Kamesh Goyal, CEO, Bajaj Allianz General Insurance Company, points out: "There is a convergence play in the health, credit insurance and personal accident segments, where life insurance players are getting in." Typically, general insurance is a pure protection against contingencies without the promise of returns. Example: the mediclaim policies offered for decades by the state-owned general insurance companies. But this distinction is now getting blurred. Tata AIG Life Insurance Company offers a comprehensive health policy that encompasses a daily hospitalisation allowance, surgical benefits, post-hospitalisation expenses, critical illness cover plus a term life cover. "We are probably the most focussed on health amongst the life players," boasts Bimal Balasingham, Director, Tata AIG Life Insurance Company. Credit insurance is also being keenly eyed by the life insurance pack. SBI Life, having already entered into a tie-up with credit insurance major Cardiff, has big plans.

The lines are also getting blurred when it comes to services like portfolio management, typically targeted at high net worth individuals. Chasing this loaded bunch are not just stockbrokers, but mutual funds, who prefer to call it wealth management; and banks, which term it private banking. Banks like Societe Generale claim they're better placed to service the customer, thanks to the clutch of sophisticated offerings like derivatives and structured products in their armoury. "Many players in the Indian market (stock brokers and MFs) lack such products," says Pierre Baer, Executive Director (Asia Pacific), Societe Generale, which has launched its wealth management services in India with a minimum investment of Rs 2.5 crore.

Brokers, of course, have a slightly different view. "Performance is the differentiating factor in today's market. We have clocked a return of 150 per cent in the last one year and 325 per cent since inception in 2003 in PMS," says Mihir Kothari, Head (Equity Advisory Group), Motilal Oswal Securities. In 2005, a number of players, including ABN AMRO, BNP Paribas, UTI Bank, HSBC Asset Management Company and ICICI Securities, bagged licences from SEBI to offer PMS. "The pie is big enough for everybody to share," avers Chaturvedi of Tata Mutual Fund.

And the best news for customers is the entry of small-sized players into the arena. What were once neighbourhood agents, who bought your insurance covers or mf schemes, have morphed into full-fledged outfits that manage portfolios as small as Rs 1-2 lakh. They not only advise you on the mf-insurance-tax-savers combos that you need, but also make and track your premium payments or redemptions. And charges are not exorbitant.

Then, of course, there are the PSU banks selling post office schemes while post offices and banks sell mf units while almost everybody offers to let you pay your bills through them. The resulting competition keeps them all on their toes and prices under check. All in all, quite a satisfactory state of affairs.

MIX AND MATCH

Convergence among mutual funds, broking houses, banks, life and non-life insurance players has brought in wider choice at different price points for investors like Pawan Parmar.

However, it's good to get your facts straight. For instance, when your life insurance comes bundled with investment, as in a five-year ULIP (unit-linked insurance plan) from a life insurance company, is this convergence play instantly a good idea? Experts say no. It makes more sense to instead buy a mutual fund that offers insurance cover. "MFs are purely an investment vehicle. They enjoy scale and they also translate that scale at much lower cost to investors," says Naval Bir Kumar of Standard Chartered Bank.

If, however, you are looking for pure death cover or critical illness riders, then why buy a mutual fund? At that point, it's life insurance companies that will have the best deals.

Or take the health segment, where both life and non-life insurers are offering a mix-and-match of all kinds of covers. Here, experts say the advantage lies in buying a health cover from a life insurance company, as you then get an additional death benefit. For instance, Tata AIG Life's Health Protector scheme comes with an additional benefit of Rs 50 lakh (maximum) in the event of the policyholder's death. For pure health policies, general insurance companies are the best bet as they reimburse you on actuals, but if you want the additional death benefit, a life cover is better.

Convergence per se is not the answer-first find out what you need from the product.

NEWS ROUND-UP

'Allo! 'Allo!

Airtel's lifetime offer: Is it really all that worthwhile?

The whole market's abuzz with lifetime free offers. The attempt, of course, is to capture a customer for life. And, as Naresh Malhan, President (Operations-North), Tata Teleservices, says: "It's human nature that as you get more used to the mobile, usage will start picking up."

However, there's more to lifetime offers than meets the eye. First, call charges at Rs 1.99 per minute for local and Rs 2.99 per minute for STD are not necessarily low. Customers with ordinary prepaid cards pay anything from Rs 0.70 (local) to Rs 1.20 (STD). As BSNL Finance Director S.D. Saxena puts it, these schemes do not benefit customers who make outgoing calls. They are for those who don't (but receive lots of calls), such as an aged parent or a chauffeur who have traditionally opted for 'free-incoming' schemes. Then, the talk time offered by lifetime schemes (between 12 minutes in the case of private telcos and 49 minutes for BSNL) is too low for the Rs 999 they charge. Most telcos claim that customers will not have to pay any transaction charge on future recharges and that they will get the entire talk time they pay for.

Next is the whole question of 'lifetime'. As far as we can make out, all the telcos stipulate that the cards must be recharged at least once in six months for you to stay connected. And, at least one telco has stipulated that the scheme remains valid only as long as the subscriber has a minimum charge of Rs 5 in the account. If the amount falls below that, the subscriber pays the entire Rs 999 again. Finally, there's no clarity on what happens if a customer moves cities.

Given that TRAI is looking into the whole concept to see how free "lifetime free" really is, and its report is expected in February 2006, consumers would do well to wait and watch. Also, given that STD rates, indeed all mobile rates, are set to fall drastically, why tie yourself permanently to one telco right now?

-Kumarkaushalam

ING Vysya: And now, Self Banks too

Banking On Service

The ATM reduced the number of bank visits and the time wasted in queues and filling forms; now ING Vysya Bank takes the idea of anytime banking to the next level. After a successful launch in Belgium and Romania, Dutch financial services giant ING Group introduces the Self Bank concept here. The idea is to provide customers a full bouquet of banking services 24 hours a day through self-service kiosks, where you can get full account statements, net banking, and access the bank's call centre. "Customers today want more flexibility to operate their accounts and the Self Bank helps us address this demand," says Shantanu Ghosh, Country Head (Retail Banking), ING Vysya. The outlets will have an ATM, a self-service outlet and a sales area, where ING Vysya Financial Services executives will be at hand during working hours to sell bank products. The bank has tied up with Euronet Worldwide, an electronics payment provider, to launch 200 such outlets across the country over the next two years.

-Rahul Sachitanand

Exemptions Continue

Ever since P. Chidambaram's last budget announcement, tax payers have lived in dread of the Exempt-Exempt-Taxed (EET) regime. Weeks short of this budget, there's good news: If the buzz in the finance ministry is to be believed, EET will probably not be announced this year.

In the long run, though, be prepared to face the tax axe at the stage of withdrawal at least, even if spared during the investment and accumulation stages. Says Nikhil Bhatia, Partner, BSR & Co., Delhi-based tax consultants: "Small savings instruments such as PPF (Public Provident Fund), where funds are locked in for 15 years at 8 per cent, will no longer be attractive, as the rate of return may fall to 5.3 per cent after tax (presuming tax at the maximum marginal rate on withdrawal)." Insurance, too, will become costlier as maturity proceeds will be taxed.

-Kumarkaushalam

In The Limelight
Why is everyone launching close-ended funds?

Before 2003, mutual funds were heavily biased towards debt. Then came the bull run and the market was awash with open-ended equity schemes. Now, close-ended schemes are suddenly all the rage.

Franklin Templeton, HDFC Mutual Fund, ING Vysya, Tata-they are all in the fray. Why this sudden interest when open-ended funds are clearly outperforming indices?

Unlike open-ended funds that provide seamless liquidity, close-ended funds are locked in for a pre-defined period of six to 15 years. Fund managers thus have ample scope to take long positions in growth-oriented stocks, including mid- or even promising small-caps. "We could see close-ended funds taking exposures in debt too, as the future of debt looks promising," says the CEO of a state-owned mutual fund.

Earlier, close-ended funds were listed in the market and traded at a discount to their NAVs (net asset values), which resulted in their ultimately converting to open-ended. "Close-ended funds now offer limited exit options by way of a higher exit load (4 per cent) or allowing exits every six months, which is good for the market," says Dhirendra Kumar of Value Research.

Will returns be higher in close-ended funds? Yes, but only if the market stays bullish. "Theoretically, a close-ended fund offers better scope for returns, but it all depends on the market," says N. Mohan Raj, CEO, LIC Mutual Fund.

Three consecutive bull years have whetted people's appetites for higher returns, possibly pushing mutual funds to bet on close-ended schemes. Sceptics, however, dismiss the comeback as yet another lure to mobilise cheap funds. "Small investors are lapping up whatever they get; I don't see any big trend in close-ended funds," says Kumar.

Invest, but only if you're comfortable with the illiquidity.

-Anand Adhikari

SMARTBYTES

Credit From Everyone

Peerless scores a first: Comes up with a credit card

A first in the personal finance space: a credit card from a non-banking financial company (NBFC). Kolkata-based Peerless General Finance and Investment Company, the country's largest residuary non-banking company (RNBC), has launched the Peerless-ICICI Bank Affinity Card. The launch comes on the heels of RBI's announcement encouraging NBFCs to get into the credit card business. For ICICI Bank, it's a chance to leverage Peerless' legendary network of field staff (more than 150,000) while for Peerless, it is one more step towards becoming a financial products supermarket. Incidentally, Peerless has a depositor base of over 40 million. The lifetime free card-there is no joining or renewal fee-comes with most standard features, and is one more proof that easy credit is here to stay.

-Ritwik Mukherjee

Loans After 60

If age isn't on your side, chances of getting a loan or credit card are remote. In fact, it's tough all around for retirees, what with rock-bottom interest rates, growing medical costs and spiralling inflation. The good news: some PSU banks are ready to lend a hand with personal loans at concessional rates of 11.5 per cent to 12.5 per cent. LIC Housing Finance offers a concessional home loan at 7.7 per cent, the only condition being that the entire loan or 30 per cent or more is repaid out of retirement benefits. Bank of Baroda's personal loan for pensioners, with a generous upper limit of Rs 1.5 lakh, comes at 11.5 per cent against the regular 12 per cent. For defence personnel, the rate is 10.5 per cent, says a BoB official. There's a bonus to ageing after all.

-Anand Adhikari

Left On The Fringe
As Budget Day comes closer, individuals and companies are united in one demand: Would the Finance Minister please scrap the FBT?
By Ritwik Mukherjee

Salaried individuals: Bearing the brunt of FBT

Facts first. Personal income tax collection after the fringe benefit tax (FBT) stands at Rs 66,000 crore, up 20 per cent from last year's Rs 50,000 crore. Little wonder that Finance Minister P. Chidambaram in a televised interview on January 19 ruled out the withdrawal of the controversial tax. For companies, the only consolation has been the fm's assurance that "some simplifications" would be brought into the FBT provisions. But what about the salaried individual?

Interestingly, sources in Income Tax circles say the phenomenal rise in personal income tax collection is not so much due to FBT collections but because most companies have changed the structure of their pay packets so that a higher share of the salaries being paid is taxable income. So, who's the loser? No prizes for the right answer.

Did the Finance Minister really think it would pan out any other way? Business considerations require that certain expenses have to be made by companies-in economic parlance, these are called inelastic expenses. "There are certain benefits, which if the employer doesn't offer, any competent employee would look for a job somewhere else, but if you tax these, it is inevitable that many companies would simply restructure pay packets," says Rathin Datta, Chairman, PricewaterhouseCoopers India, and among the best known tax experts in the country. Therefore, while salaried individuals are not losing out on any of the fringe benefits they enjoyed before FBT, they are certainly paying more personal income tax on them.

Siddhartha Sankar Sen, another leading tax consultant, says he is not aware of any company that has actually withdrawn these perquisites from its employees. However, since companies have to pay taxes on the perks they give to employees, they are simply making the perks part of the employee's whole pay package or CTC (cost-to-company). What the employee once enjoyed as a tax-free perk is now part of her taxable income, thus neatly passing on the burden of tax to the employee. The finance minister's move has simply added on an extra burden to the same salaried class that already pays its taxes faithfully.

Meanwhile, companies too are chafing at the FBT, which taxes genuine business expenses as well as perks. Corporate India is complaining that it is unfair on companies whose business includes a large component spent on travel, entertainment and business promotion expenses. Comments Datta: "When you tax a benefit, the benefit has to be direct, tangible and quantifiable; it cannot be nebulous. I have great doubts if genuine business expenses offer any direct benefits. Besides, the compliance cost of FBT collection is high, as a result of which the cost of business increases significantly and profitability falls. It also goes against the principle of simplification."

Ideally, as other tax experts point out, the net impact of FBT could actually be lowered for both companies and employees if salaries are structured judiciously. Rather than pass the entire burden on to the employee, companies could continue the perks and reimbursements, pay the FBT on them, but thereafter structure CTCs in such a way that the FBT is factored in. This would lower the employee's tax burden considerably while not hurting the employer.

How many companies are actually going to sit down and plan CTCs only with reference to income tax and FBT payments? It's more likely they will simply pass the burden on to employees and sit back.

The best solution, of course, would be the fm scrapping this whimsical tax altogether.

LIFE AFTER DETARIFFING
By this time next year, be prepared to have your insurance premiums determined by your lifestyle choices.
By Nitya Varadarajan

Fire and motor insurance: The two categories are expected to be the most affected when the detariffing regime falls into place

If you are a law-abiding driver, remember the frustration when a maniac overtakes you from the left? And then causes a pile up five cars deep. It seems logical that such drivers should pay more for their motor insurance than you do, but it doesn't happen that way. Not yet, at any rate.

If, however, insurance detariffing comes into being, this is one of the things that could happen under the new regime.

Detariffing has been on the cards for a while now and the present deadline is January 2007. There is still a lack of consensus on the whats and hows of the new dispensation, but experts largely agree that the makeover is imminent. Says K.N. Bhandari, former Chairman of New India Assurance, and now the Director of the Centre for Insurance Studies and Research: "IRDA (Insurance Regulatory and Development Authority) is trying to condition the market and the stakeholders." Companies have to first build an extensive database to quote the right tariffs post detariffing. IRDA has said that companies will have to justify premiums and present them to the regulator for approval.

While this does offer some protection to individual policyholders, on the whole, detariffing will be a mixed blessing-while you can now cock a snook at the road hog, it will also result in a general increase in premium rates across the board.

First, the basics. Premiums for general insurance policies today are fixed by two bodies-the Tariff Advisory Committee (TAC) and individual insurance companies. TAC fixes the premium rates for motor, fire, marine (hull), workmen compensation and engineering business portfolios. These are called tariff businesses and constitute nearly 70 per cent of the Rs 18,000-crore market. Detariffing will allow insurers to fix premiums themselves based on their assessment of risks.

For the insurers, the move will hopefully end cross-subsidisation between businesses. At present, the fire insurance business is the most profitable (with a claims ratio of around 40 per cent), and ends up subsidising loss-making areas like motor and health insurance.

Individual policyholders are in for a sea change. Be prepared, for instance, to see your motor insurance premiums change based on your age, sex, the car model or even colour. So, a young male-perceived to be a faster and therefore less safe driver-will pay a higher motor premium than a middle-aged woman.

An average person usually buys fire, household, health (including accident), travel, and motor covers. Already, individual premiums are far higher than corporate premiums for the same cover. For instance, burglary cover under a householder's policy is Rs 2.40 per Rs 1,000 of sum insured vis-à-vis about 0.01 paise for companies. Now, costs could get higher. Says Bhandari: "Premium rates in India are among the lowest in the world and the one way it can go is upwards."

Why will premium costs increase? With detariffing, insurers will face increased distribution costs. At present, the tariff business pays 12.5 per cent of premium to brokers and 10 per cent for agents; while the non-tariff business pays 17.5 per cent and 15 per cent, respectively. Second, competition could reduce premiums on some business lines, like fire insurance, to uneconomical levels. Also, although insurers want to increase motor insurance rates, a strong transport lobby may not allow it.

Industry sources say insurers are unable to manage personal covers profitably, leaving them with little choice but to increase premiums. Already, insurers are talking of increasing mediclaim premiums. However, Arun Agarwal, Managing Director, Cholamandalam ms General Insurance Company, says: "Prudence and good practice will ensure better risk rating and thus lower premiums."

Of course, once pricing is deregularised, customers are likely to get far more customised and novel covers, much of which is not available today. Bottomline: Next year could see a sea change in how you buy insurance.

IGNORED AS USUAL

One of the roles of the Insurance Regulatory and Development Authority (IRDA) is to protect the interest of individual policyholders. And one good way to do this would be to hear their views on important issues. The regulator, however, seems to have failed them in this aspect. Some months ago, IRDA set up the K. P. Narasimhan Committee to suggest amendments to the Insurance Act 1938.

Unlike the Telecom Regulatory Authority of India (TRAI), which goes to various cities to gather the views of different sections of people to its proposals, IRDA called for submissions and comments from individuals to the Narasimhan Committee to be made on its website (www.irdaindia.org). Unfortunately, the site is difficult to navigate and short on information for the lay policyholder. Given the low penetration of computers and net connections, as also of the concept of insurance itself, it is difficult to see how IRDA thought this move would be enough to percolate to the masses.

The Narasimhan Committee has had submissions so far from insurers, surveyors and from the American Insurance Association. Curiously, the one body that has given suggestions on a grievance redressal mechanism for individual policyholders is the IRDA itself.

Incidentally, for a couple of years now, IRDA has been saying that it's in the process of revamping its website. Nothing seems to have happened yet.

Value-picker's Corner

SHASUN CHEMICALS & DRUGS; PRICE: RS 100.55

As global pharma starts outsourcing non-core activities, companies like Shasun Chemicals & Drugs will benefit hugely. A recent shift in focus to custom chemical synthesis, plus a new formulations unit for the generics market is expected to benefit Shasun. It has also recently bought the French Rhodia group's pharma custom synthesis business, which expands its client base in the US, Europe and Asia. For the quarter ended December 2005, Shasun reported a 43 per cent rise in net profit to Rs 12.9 crore. At Rs 100.55, the stock trades at a P-E of 9.4 on an annualised EPS of Rs 10.73. A reasonable valuation, given companies in its peer group are trading at P-Es of 20-40.

-Mahesh Nayak

Loan rates: Will they soon take the high road?

Trend-spotting

Bad news for borrowers: the hikes in repo and reverse repo rates by the RBI (Reserve Bank of India) may push up lending rates. Already, HDFC (Housing Development Finance Corporation Ltd) has raised its home loan rate by 50 basis points. RBI Governor Dr Y.V. Reddy's move aims to absorb excess liquidity and make funds costlier for banks, but will likely hit retail borrowers hard. Although K. Cherian Varghese, Chairman, Union Bank of India, says: "Competition and liquidity will decide the future of interest rate movements," the effect on liquidity is already being felt. All eyes are now on the Budget, as income tax exemptions on savings deposits are expected, thus increasing banks' low-cost deposit base. Also, there are hints the hike could be reversed.

-Anand Adhikari