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Economy Round Up – October 01 to October 05, 2012

India Infoline News Service | Mumbai | October 08, 2012 14:48 IST

The overall objective is to further deepen the reform process which is already underway in the insurance sector. The official amendments will be moved in the Insurance Laws (Amendment) Bill, 2008 pending in the Rajya Sabha.

Freaky Friday freezes Nifty: Erroneous trade it was!

It would have been just another trading day on Friday. A slew of reforms were announced by the government after trading hours on Thursday. But the market had already sensed the same which resulted in the Sensex climbing Mount 19K while the Nifty was comfortably close to the 5800 levels. Suddenly, on Friday morning share prices changed rapidly and a freak tick on the Nifty showed a day’s low of 4,888 as against the 5700 levels. The Nifty opened at 5,815 and suddenly at 9.50 am, the Nifty circuit filter got triggered upon which the cash market was closed automatically. In a statement, the NSE said, "The Nifty fall was apparently on account of abnormal orders resulting in multiple trades at low prices. While the Exchange systems functioned normally without any glitch, the above abnormal trades caused market closure automatically due to the index circuit filter getting triggered."

"The market was reopened by the Exchange with a pre-open phase at 10.00.22 and trading resumed at 10.05.00. The market is functioning normally and the incident is being investigated," the NSE statement added. According to NSE, "The market circuit filter got triggered due to entry of 59 erroneous orders which resulted in multiple trades for an aggregate value of over Rs. 650 crores. These orders have been entered by a trading member Emkay Global Financial Services on behalf of an institutional client. These non-algo market orders have been entered for an erroneous quantity which resulted in executing trades at multiple price points across the entire order book thereby causing the circuit filter to be triggered. These orders have been identified to a specific dealer terminal. " The BSE Sensex too was affected by the sharp fall in the Nifty. It dropped nearly 300 points and slipped below the 19,000 mark. Later BSE issued a statement that there was no technical issues or otherwise at the BSE and trading was normal. Some media reports attributed the huge crash in the Nifty index to a freak trade in the HDFC counter. Today’s instance has joined the list of other freak crashes in the markets and individual stocks in recent times. On April 20, NSE's Nifty futures contract for April saw a freak trade which valued the futures contract at 5,000. Earlier that day, Infosys stock futures which was trading around Rs. 2,400 levels suddenly lost Rs. 450 and touched the day's low of Rs. 1,950. As a result, the main indices too tumbled. The Sensex fell as much as 1.56% and the Nifty dropped1.64%, following the suspected erroneous trading. During Mahurat trading in 2011, the BSE had to annul trades due to extraordinary volumes. Reports had indicated it was an algo trade which triggered the wild movement. In June 2010, shares of Reliance Industries crashed nearly 20% on execution of a large 'sell' order at a very low price. The Sensex dropped over 600 points after the order was executed on BSE...Read More

NSE says incident is being investigated

The market opened normally today and Nifty opened at 5,815. At 9.50.58 Nifty circuit filter got triggered upon which the cash market was closed automatically. The Nifty fall was apparently on account of abnormal orders resulting in multiple trades at low prices. While the Exchange systems functioned normally without any glitch, the above abnormal trades caused market closure automatically due to the index circuit filter getting triggered. The market was reopened by the Exchange with a pre-open phase at 10.00.22 and trading resumed at 10.05.00. The market is functioning normally and the incident is being investigated. According to NSE, "The market circuit filter got triggered due to entry of 59 erroneous orders which resulted in multiple trades for an aggregate value of over Rs. 650 crores. These orders have been entered by a trading member Emkay Global Financial Services on behalf of an institutional client. These non-algo market orders have been entered for an erroneous quantity which resulted in executing trades at multiple price points across the entire order book thereby causing the circuit filter to be triggered. These orders have been identified to a specific dealer terminal. "

What caused the crash on NSE?

The market circuit filter got triggered due to entry of 59 erroneous orders which resulted in multiple trades for an aggregate value of over Rs. 650 crores. These orders have been entered by a trading member Emkay Global Financial Services on behalf of an institutional client. These non-algo market orders have been entered for an erroneous quantity which resulted in executing trades at multiple price points across the entire order book thereby causing the circuit filter to be triggered. These orders have been identified to a specific dealer terminal.

Cabinet proposes hike in FDI for insurance to 49%

The Union Cabinet approved necessary official amendments in the Insurance Laws (Amendment), Bill 2008, pending in the Rajya Sabha, with such drafting and consequential changes, if any, in consultation with the Legislative Department. These amendments are aimed at removing archaic and redundant provisions in the legislations and incorporating certain provisions to provide Insurance Regulatory Development Authority (IRDA) with flexibility to discharge its functions effectively and efficiently. The overall objective is to further deepen the reform process which is already underway in the insurance sector. The official amendments will be moved in the Insurance Laws (Amendment) Bill, 2008 pending in the Rajya Sabha.

Based on the recommendations of the Standing Committee on Finance, the Cabinet has approved amendments containing the following :

  • The foreign equity cap is proposed to be kept at 49 per cent as provided in the Insurance Laws (Amendment) Bill, 2008 as against the 26 percent. This is done in order to meet the growing capital requirement of insurance companies.
  • Foreign reinsurers will be permitted to open branches only for reinsurance business in India and the provisions of Section 27E, which prohibits an insurer to invest directly or indirectly outside India the funds of policyholder, would apply to such branches.
  • The definition of "Foreign Company" for the purpose of Insurance and reinsurance would mean :a company or body established under a law of any country outside India and includes Lloyd`s established under the Lloyd`s Act, 1871 (United Kingdom).
  • In order to encourage health insurance in India, the capital requirement for a health insurance company is now proposed at Rs. 50 crores (instead of Rs. 100 crores for General Insurance companies) with a view to reduce the entry barrier to a sector which is a priority sector in the insurance space.
  • The definition of `health insurance business` has been revised to clearly stipulate that health insurance policies would cover sickness benefits on account of domestic as well as international travel...Read More

Insurance shares mixed after gains on FDI reforms

Cabinet approves amendments to PFRDA Bill

The membership of the PFRDA will be confined to professionals having expertise in economics, finance or law only. The Union Cabinet approved the introduction of certain official amendments to the Pension Fund Regulatory and Development Authority Bill, 2011. These official amendments have been necessitated in view of the recommendations of the Standing Committee on Finance which has examined the Bill. Based on the recommendations of the Standing Committee on Finance, the Government has decided to accept the following:

  • That the subscriber seeking minimum assured returns shall be allowed to opt for investing his funds in such schemes providing minimum assured returns as may be notified by the Authority;
  • Withdrawals not exceeding 25 per cent of the contribution made by subscriber will be permitted from the individual pension account subject to the conditions, such as, purpose, frequency and limits, as may be specified by regulations by the Pension Fund Regulatory Authority and Development Authority (PFRDA)
  • The foreign investment ceiling in the pension sector at 26 per cent or such percentage as may be approved for the Insurance Sector, whichever is higher may be incorporated in the present legislation;
  • To establish a vibrant Pension Advisory Committee with representation from all major stakeholders to advise PFRDA on important matters of framing of regulations under the PFRDA Act.
  • The membership of the PFRDA will be confined to professionals having expertise in economics, finance or law only.

The New Pension Scheme (NPS) has been made mandatory for all the Central Government employees (except Armed Forces) entering service with effect from 1.1.2004. 27 State / UT Governments have notified NPS for their employees. NPS has been launched for all citizens of the country including unorgnised sector workers, on voluntary basis, with effect from 1st May, 2009. Further, to encourage people from the unorganised sector to voluntarily save for their retirement, Government has launched the co-contributory pension scheme titled "Swavalamban Scheme" in the Budget of 2010-11. As on 7th September, 2012 the number of subscribers under NPS is 37.45 lakh with a corpus of Rs. 20535.00 crore...Read More

US Prez poll: Romney scores big in 1st debate

Republican Mitt Romney has reportedly turned in a spirited performance against rival Democratic candidate and current US President Barack Obama. He appeared to have emerged as a clear winner in his first face-off with Obama on Wednesday night. About 67% of the people surveyed by CNN in a "flash poll" after the first presidential debate declared Romney the winner. Reports say Romney might benefit from positive news coverage and could possibly close the gap with Obama in the run up to the November 6 polls. At the same time, there is a school of thought that believes Presidential debates do not have much of an influence over the behaviour of voters on the election day. Voting has begun in some form or the other in 35 states, and ~6% of those have already cast their ballots, according to a Reuters/IPSOS poll released on Wednesday. Obama's re-election prospects on Intrade, an online prediction market, fell from 74% to 66%, according to reports.  But, the incumbent US president maintains an advantage in opinion polls.   Obama led Romney by 47% to 41% in the daily Reuters/IPSOS tracking poll, a gap that has held nearly unchanged since the middle of September. Other polls show the race to be a little closer. Romney is still trailing badly in the crucial swing states. The two presidential candidates squared off mainly on the state of the US economy, especially on taxes, jobs and healthcare. The 90-minute debate was expected to draw an audience of more than 50mn, according to reports.

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113110701977
Economy Round Up – October 01 to October 05, 2012
Economy Round Up – October 01 to October 05, 2012
The overall objective is to further deepen the reform process which is already underway in the insurance sector. The official amendments will be moved in the Insurance Laws (Amendment) Bill, 2008 pending in the Rajya Sabha.
http://www.indiainfoline.com/article/news-top-story/economy-round-up-–-october-01-to-october-05-2012-113110701977_1.html
October 08, 2012 14:48 IST
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Nifty, NSE, What caused the crash on NSE, PFRDA Bill, Mitt Romney, Sensex, China consumer, Knight Frank, Companies Bill, Asian Development Outlook 2012, Rupee, General Anti-Avoidance Rules, GAAR, Prime Minister Dr. Manmohan Singh, Sonia Gandhi, Reserve Bank of India, RBI, India's exports, India's manufacturing PMI, life insurance, Mutual Fund, Petrol, Reliance Industries Limited, RIL, Kingfisher, Economy Round Up
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