New regulator

Twitter was all agog in the early part of the week, after the Department of Economic Affairs (Ministry of Finance) put out an ad inviting applications from ‘eligible candidates’ for the post of the SEBI Chief. The new SEBI Chairman will hold office for 5 years, but not beyond 65 years of age. Based on the Seventh Pay Commission, he is being offered a consolidated pay package of Rs 4.5 lakh a month. If you’d like to throw your hat into the ring, check out the ad here

Though market players weren’t all that enthused about the pay, there’s bound to be a flood of applications. Last year, there were reported to be about 50 contenders in the fray.

You may recall that the present Chairman UK Sinha, was given an extension at the nth hour, when his term wound to an end last February. He steps down on March 1 2017. Sinha, originally from the mutual fund industry, has been quite a strict regulator. Apart from banning MF entry loads, introducing MF direct plans and going after ponzi operators with a vengeance, he has tightened the vetting process for IPOs, forced greater merchant banker accountability and generally made life difficult for all sorts of market intermediaries.

They must be praying for a more easygoing successor. But they must also pray for a well behaved market. Sinha’s last-minute extension was justified on the count that the Centre didn’t want to disturb “continuity” at SEBI, at a time of high market volatility.

Clutching at straws

After much nail-biting about the Bank of Japan and the US Federal Reserve meetings last week, the markets closed this week on a much-relieved note. If you into the policy statements though, there is not a lot of cause for rejoicing.

Yes, the FOMC decided to hold its target Fed Funds rate steady in this meeting. But it has clearly hinted that the case for acting on rates was building up, with a strong jobs market and solid household spending. The statement opens up the distinct possibility that 2016 could end with a rate hike. In the FOMC’s words - “The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.”

Three of the FOMC members actually voted for hiking the rate and being done with it, in this meeting itself. Essentially while the markets have cheered that the dreaded hike has been put off for now, it is still looming large on the horizon, three months down the line.

The Bank of Japan spoke in riddles, basically saying that it was adding a new variable to the cocktail of factors that it now uses to decide on QE. It now hopes to ensure, though its market interventions, that the 10-year Japanese government bonds trade at zero yields, instead of sub-zero levels. The market interpreted this as a sign that its largesse to bond markets will stretch on for a while more. But opinion was dividend on whether this will actually mean more bond mop-ups (they’re already buying 80 trillion yen a year) or less in the coming months.

All this suggests that this week’s relief rally may not have legs. Yes, a tide of global liquidity from various central banks has been lifting all boats. And the global high tide may yet last for a few more months.

But if the end-game is in sight, will those bullish investors still wait for the nth hour to bail out, is the question.

Good thing going

In the past, Indian companies making a debut on the exchanges haven’t had very good luck wooing their own employees. Even in IPOs where an investors scramble for allotments, the employees’ quota often gets under-subscribed.

But ICICI Prudential Life, which decided to try its luck with shareholders of the parent bank, has enjoyed sweet success. It carved out a special quota for ICICI Bank shareholders in the IPO and this was heavily over-subscribed with the shareholders putting in bids for 12.2 times the shares offered. This was in fact higher than the over-subscription number for the whole IPO, which was 10.5 times.

The mammoth issue, the largest this year, had a slow start and looked liked it would just about get fully subscribed. But a flood of applications from HNIs (they put in bids for 28 times the shares offered to them) on the last day helped it sail through. Apart from generic arguments like low insurance penetration in India, high reliance on market-linked plans, comfortable solvency margins and decent claims ratios argue for investing in ICICI Pru Life.

But the clinching argument in favour of investing in Indian insurers is that they seem to run a very lucrative business. Somehow or the other, they manage to make us all sign up for complicated plans with fat annual premiums with a variety of costs and hefty surrender charges built in.

So if you’ve been a policyholder all along and feel that you are getting the short end of the stick, become a shareholder in an insurer and jump over to the other side!

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