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Sensex Down Over 120 Points; Realty Stocks Witness Losses
Thu, 21 Sep 11:30 am | Monish Vora, TM Team

After opening the day marginally higher, Indian share markets witnessed selling pressure and went on to trade on a negative note. Sectoral indices are trading on a mixed note with stocks from the realty sector and the metal sector witnessing maximum selling pressure. Healthcare sector is witnessing buying interest.

The BSE Sensex is trading down 121 points (down 0.4%) and the NSE Nifty is trading down 45 points (down 0.5%). Meanwhile, the BSE Mid Cap index is trading down by 0.7%, while the BSE Small Cap index is trading down by 1%. The rupee is trading at 64.47 to the US$.

In the news from global financial markets, the US Federal Reserve left interest rates unchanged at its policy meeting yesterday.

The central bank, however, signaled that it still expects one more increase by the end of this year.

As per the news, new economic projections released after the Fed's two-day policy meeting showed 11 of 16 officials see the appropriate level for the federal funds rate, the central bank's benchmark interest rate, to be in a range between 1.25% and 1.50% by the end of 2017.

Regarding the forecasts for upcoming years, the US Fed forecasts only two rate increases in 2019 and one in 2020.

The Fed also said it would stick to the schedule for normalising balance sheet by trimming its bond portfolio from October.

On the balance sheet trimming programme, the Fed is said to cut up to US$10 billion worth of US Treasury bonds and mortgage-backed securities each month from the amount of maturing securities it reinvests to reduce its approximately US$4.2 trillion holdings by about US$1 trillion or more over several months.

Normalising the balance sheet could impact emerging markets.

With the US economy chugging along for many months, the Fed has also been gradually easing off the stimulus it provides to the economy by raising interest rates to more normal levels.

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Yet so far, the cost of lending has been slow to respond to the interest rate increases. But as the Fed continues with this policy, consumers who borrow to buy houses, cars, refrigerators, and other items will have to pay more for those goods.

That said, the question comes as why should global financial markets worry about which way the American economy and interest rates are headed? Vivek Kaul has answered this in one of the recent editions of The Vivek Kaul Letter. As he writes:

  • The answer is simple. The United States still forms around one-fourth of the global gross domestic product (GDP). It remains the largest consumer in the world. And any global recovery isn't going to happen, without the American economy finding its way back to where it was during its heydays or somewhere close to it.

In the news from IPO section, Matrimony.com made a tepid debut on the Indian indices today as the scrip of the company got listed at Rs 985, broadly the same as its issue price.

Matrimony.com is one of the oldest and leading matrimony portals of India. The Chennai-based company operates in three segments - matchmaking services, marriage services and related sale of products and other services.

As of 31 March 2015, Matrimony.com had a large database of profiles comprising 2.65 million active profiles which creates a network effect that attracts more users to register or subscribe and also results in higher customer engagement.

The company differentiates itself from other players in India by following a micro-market strategy whereby it offers a range of targeted and customized products and services that are tailored to meet the requirements of customers based on their linguistic, religious, caste and community preferences as well as personalized matchmaking services such as AssistedMatrimony and EliteMatrimony.

Matrimony.com has also launched marriage services such as MatrimonyDirectory.com for listing of matrimony-related directory services and MatrimonyPhotography.com to provide wedding photography and videography services. The company has also introduced Tambulya.com, an online marketplace operated by its subsidiary, Tambulya Online Marketplace Private Limited, for gifts for weddings and other occasions on a bulk order basis.

To know more about the company, you can read our IPO note on Matrimony.com (requires subscription).

At the time of writing Matrimony.com share price was trading down by around 7%.

Speaking of IPOs, the IPO of SBI Life Insurance Company Ltd is open for subscription. The public offer of the general insurance company will remain open until 22 September 2017.

SBI Life Insurance Company Limited is one of the leading life insurance companies in India. The company is a joint venture between India's largest bank State Bank of India (SBI) and the leading global insurance company BNP Paribas Cardif. SBI owns 74% of the total capital and BNP Paribas Cardif the remaining 26%.

But is the IPO worth considering? Does the company have strong fundamentals? What about valuations and growth potential? Equitymaster Insider Ankit Shah has the answers.

To know more, get on the Insider list now.

Apart from life insurance, many general insurance companies such as General Insurance Corp of India and New India Assurance Company are also planning to come up with their IPOs.

Various estimates put India's insurance market size at US$100 billion. The same could become a dominant theme for Indian stock markets in the years to come.

This is because the penetration levels for general insurance is very low in India as compares to other countries. As per Crisil Research, the non-life penetration in India is among the lowest with premium income forming 0.8% of the GDP in 2016. This is evident in the chart below:

Non-Life Insurance Penetration in India is Woefully Low

The rate is quite low as compared to the global average of 2.8%. In fact, India lags behind China and Brazil, each having non-life insurance penetration of 1.8%. As per Swiss Re, India is the fifteenth largest market in the world and fourth largest market in Asia.

Going by the above data, it can be said that there remains huge growth potential for non-life insurance businesses. As we also wrote in a recent edition of The 5 Minute WrapUp...

  • The non-life insurance sector in India is valued at Rs 1.28 trillion and has been growing at a compounded annual growth rate of 17.4% in the last 16 years. Demand drivers such as rapid urbanisation, rising disposable income, increasing risk awareness emergence of new risks such as cyber frauds and regulatory focus on improving insurance coverage are expected to accelerate growth ahead.

Therefore, it hardly comes as a surprise that the insurance industry is actively seeking to capitalise on the current IPO frenzy.

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