Latest news with #Ulips
Mint
4 days ago
- Business
- Mint
Not too worried about markets as strong flows are unlikely to taper off soon, says WhiteOak's Mantri
India faces external risks even as the domestic economy stays on a solid footing, according to Ramesh Mantri of WhiteOak Capital Asset Management Co. Improving domestic growth, rising liquidity, and potential rate cuts are expected to aid recovery, but the 'real concern is on the external front" from growing global protectionism to US-China tensions, said Mantri, chief investment officer (CIO) at the company. Mantri isn't worried about domestic markets. Even though small-cap valuations are a concern, he expects stable domestic flows—from mutual funds, insurance (including unit-linked plans), and Employee Provident Fund Organisation—to support Indian equities and are unlikely to taper off anytime soon, he said. Edited excerpts: What do you see as the biggest risks for the market right now? The domestic economy is in good shape–growth is improving, liquidity has picked up, and rate cuts should support recovery, though with a lag. The real concern is on the external front. We are witnessing rising trade barriers, like recent tariffs even on Japan—a key US ally—which shows how broad-based protectionism is becoming. Then there is the uncertainty around US-China relations; even if a deal is signed, we don't know how long it will last. Read more: Bajaj Finance had an excellent Q1. But the managing director's exit left investors on edge. Geopolitical risks are unpredictable and could disrupt exports. Although these risks have been manageable so far, this may change. India has a chance to boost its manufacturing and R&D, but despite some progress and new government schemes, it still trails behind countries like China in electric vehicles (EVs) and industrial technology. On the markets, the main concern is valuations in small caps. However, Indian markets are supported by strong, stable domestic flows—from mutual funds, insurance (Ulips), and EPFO—which aren't going away anytime soon. So overall, I am not too worried. Has the easing of geopolitical pressure prompted a strategic rethink? Maybe reducing exposure to export-oriented firms and leaning more toward domestic-facing ones? We don't know how future geopolitical events will play out. So, I don't change my strategy based on assumptions that tensions will either escalate or ease. Instead, I focus on finding value, whether it is in export-oriented or domestic-facing companies. The goal is to maintain a balanced portfolio, rather than swinging heavily to one side. Sure, if you bet right, you could win big, but if you are wrong, the hit is just as hard. What is your take on current valuations—do they seem stretched? Valuations, at the headline level, look fair in large caps. However, small- and mid-caps are trading at a 20–25% premium to large-caps, so valuation in this segment is definitely a headwind. That said, it does not mean every stock is overvalued, just at the aggregate level. The universe beyond large-caps is vast and less efficient, which means that skilled stock picking matters more. Think of it like this: large-cap investing is like fishing near the coast—calm waters, lots of competition, and fewer big catches. Small- and mid-caps are deep-sea fishing—fewer fishermen, more opportunity, but also more risk. If you're skilled, you can catch a lot more. But if you're not, you might just end up being lunch for the sharks. Which means getting caught in the market turbulence? It is not just about market turbulence; there can also be issues with the company itself, such as poor corporate governance, business model flaws, or simply picking the wrong stock. In small-caps, especially if you get it wrong, exiting can be tough. That is the challenge with this space. There are more sharks, more hidden risks. And that is where things can really go wrong. What is your sell discipline? Our approach to investing in our equity fund is that we don't take cash calls. We don't sell just because we have a view on the market. We believe asset allocation should be managed by the investor or their adviser. If they've chosen to allocate to equity, our job is to stay fully invested. That means, when we want to buy something new, we need to sell something else, typically what we consider the weakest or most inferior idea in the portfolio at that time. There are several clear reasons why we decide to sell. One, when we have made the returns we were aiming for. Sometimes, we expect a thesis to unfold over three years, but it often happens in one. If that's the case, we book profits and move on. Two, when we get something wrong. That includes governance issues—for example, if the management lacks transparency, we exit without hesitation. Three, when something significantly changes the industry or business dynamics, like a new regulation, a major global shift, or a new competitor that permanently alters the landscape. For example, if a regulator clamps down on a segment like F&O, companies dependent on that space could be structurally impacted, even if the regulation is well-intentioned. Similarly, if a country like the US imposes steep tariffs, exporters may suddenly become unviable; not their fault, but still a valid reason to re-evaluate. Lastly, even if the industry is stable and the business model remains intact, poor execution alone — such as consistent market share loss — can be a reason to revisit the investment and potentially exit. Read more: Dixon preps for life after PLI, fearing hit to margins Since you spoke about market share loss, what is your take on the paints sector? First of all, the paints sector is facing aggressive new competition, and there has also been an ownership change in one of the top companies. Both are interesting developments. Paints is a unique industry in India. One player holds a large market share, and distribution plays a big role. That makes it tough for new players to break into the market. In fact, many global companies have attempted to do so over the last 30–40 years, achieving some initial success, but have eventually struggled. So, sustaining that is a problem? In any industry, achieving the first 5% market share is relatively easy. There is always some low-hanging fruit. But once you start gaining more, competition wakes up, realizes they're losing ground, and begins to take aggressive action. Do you think the era of alpha (outperformance to the underlying benchmark) coming from fast-moving consumer goods (FMCG) staples is behind us now, with the focus shifting towards the likes of consumer discretionary and e-commerce? First, I would not categorize all FMCG products together. Some categories, such as soaps or toothpaste, already have very high market penetration. Therefore, growth is limited to premiumization—such as whitening benefits or encouraging second-time brushing, which remains low in India. Tea is another example—people already consume a lot, so there's little room for growth in volume. But there are still high-growth areas within FMCG. The consumption of coffee, for instance, is increasing as people shift from tea. Chocolates too—India is a country of mithai, or traditional sweets, and chocolates are a type of mithai made with cocoa. There is a lot of room for variety and flavours. Processed food is another big space. Whether we like it or not, with less time and more disposable income, people are shifting to ready-to-eat meals—ranging from Maggi to instant poha. Double-income households want convenience. Ice creams, global snacks like nachos with salsa, and innovative noodle flavours are becoming more popular, especially among younger consumers. FMCG growth is shifting to these new categories, while many established companies still prioritise traditional staples. Read more: HDFC Bank unlocks massive gains ahead of NSDL IPO, fuels retail frenzy in unlisted market Additionally, energy drinks and vitamin waters are gaining more prominence in the beverage market. There are areas experiencing significant growth, and current trends indicate that discretionary products may grow at a faster pace than staples, as consumption of essential goods tends to remain stable. Where is the incremental spending now moving towards in the discretionary basket? Incremental spending is moving towards fashion, entertainment, and travel. As per capita income rises, discretionary spending will shift toward premium and luxury across categories—cars, bikes, real estate. Many consumers will move from unbranded to branded products, like buying their first branded suitcase. Travel will also see a boost, with more people shifting from trains to flights and spending more on holidays and tourism. Which is what luggage makers are banking on. Tourism is a natural beneficiary; as incomes rise, people start valuing experiences more, including eating out. That's also where modern retailing comes in. We have shifted from traditional kiranas to modern trade and digital commerce. First came food delivery, now quick commerce is becoming a habit. What started with a few essentials has expanded into regular use, with people ordering almost everything online. India is uniquely suited for this shift in consumption habits. Unlike the West—where cheap land, personal cars, and bulk buying are common—India has expensive real estate, high traffic, limited storage space at home, and a culture of eating fresh. Daily milk delivery and weekly vegetable shopping are part of that. So, the Western big-box model doesn't fit here. Instead, quick commerce and hyperlocal models are likely to work better. Thinking a little more about the medium term. Premiumization is trending, but there is a concern about demand. So how do you balance these two? Demand in India can broadly be split into three buckets. The top end remains largely unaffected — incomes are high enough that slowdowns don't pinch. The lower-income and rural segments, however, go through demand cycles tied to agri-income, rural economy stress, and government spending. The spending by the middle-income group is driven by inflation, job stability, and confidence. In recent years, especially post-Covid, households in both low and middle-income categories have leaned on microfinance and small personal loans to meet rising aspirations — amplified by social media and influencer trends. But this has led to some stress, with even bankers flagging early signs of strain. As the economy stabilizes and rural indicators improve, especially with policy support and a good monsoon, demand recovery should follow. Which sectors do you see holding the most exciting opportunities? The biggest sector with opportunities is BFSI (banking, financial services and insurance)—a large and diverse sector, good fundamentals, and reasonable valuations. Next is pharma and healthcare, with solid fundamentals and acceptable valuations. Beyond that, we find pockets of opportunity mainly in consumer discretionary, which is a mix of hotels, real estate, paints, alcohol companies, brands, airlines, and more — a heterogeneous set of businesses. Read more: SRF pushes the pedal on capex amid potential demand revival So moving on, how would you draw the line between diversification and dilution? So, dilution only happens if you cannot invest with quality research. If you are a small team covering too many stocks, then yes, it is dilution. But if you have a large team, owning more stocks actually adds alpha, not dilution—especially beyond the top 250 names, where competition is lower and fewer analysts track those companies. In small- and mid-caps, the alpha potential is higher if backed by strong research. Do you think expanding the stock universe could be a smart way to uncover more alpha opportunities? Exactly, that's our core belief: the deeper you go beyond the top 200 stocks, the less competition you face. Fewer investors track these names, which creates alpha opportunities. We aim to play well at the top, but the big alpha often lies deeper in the market. What's your outlook on gold? You recently reduced your exposure—does that signal a shift in how you're viewing the markets ahead? We cut our gold exposure not based on judgment but through our model, which compares gold valuations relative to interest rates, the dollar, and equities. As gold rallied, it became less attractive versus equities, so we rebalanced accordingly, shifting profit from gold into equities. An important point to note would be – while most focus is on equities (just 15% of total wealth for most people), the bulk—85%—is in real estate, gold, FDs, and insurance. If people can improve returns slightly on that 85%, the overall impact on their financial well-being would be far greater than trying to outperform within equities alone.
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Business Standard
14-07-2025
- Business
- Business Standard
Results preview: Insurance companies set for a profit bump in Q1 FY26
Aathira Varier Mumbai Listen to This Article Life and general insurance companies are likely to see an improvement in their profitability in the first quarter (Q1) of 2025–26 (FY26) on the back of an increased share of high-margin products and better operational efficiencies, according to analysts. Life insurance companies are expected to report improved profitability — measured by the value of new business (VNB) — due to a higher share of high-margin, non-participating (non-par) products. This, combined with a lower share of low-margin unit linked insurance plans (Ulips) in the same period last year, has created a base effect that further supports profit margins in the reported
Time of India
07-07-2025
- Business
- Time of India
Earn above Rs 12 lakh? Here's how you can make your retirement plan tax-efficient
Long-term capital gains from stocks and equity-oriented funds are now taxed at 12.5%. But there is a Rs 1.25 lakh tax-free threshold that can help small investors avoid the tax. (AI image) Saving for retirement used to be easy. But in the past few years, there have been several amendments in tax rules for retirement products. Many instruments are now in the tax net. At the same time, individuals earning up to Rs 12 lakh a year will pay no tax under the new regime, which is a massive relief for millions of taxpayers. If your income is more than Rs 12 lakh a year, here's how you can make your nest egg tax efficient. Stocks and equity funds: Long-term capital gains from stocks and equity-oriented funds are now taxed at 12.5%. But there is a Rs 1.25 lakh tax-free threshold that can help small investors avoid the tax. They should harvest long-term gains of up to Rs 1.25 lakh every year by booking profits, and then buying back the same stocks or mutual funds. Also Read | ITR filing FY 2024-25: Top 8 mistakes first-time tax filers make; how to avoid them in AY 2025–26 Ulips: Maturity proceeds of Ulips are taxable if the combined premium of policies bought after 1 February 2021 exceeds Rs.2.5 lakh. To avoid the tax, restrict investments in Ulips to Rs.2.5 lakh in a year. If you need to invest more for retirement, use mutual funds or the NPS to fatten your nest egg. NPS investments can also help you save more tax. Traditional insurance policies: The maturity proceeds of life insurance plans have also been made taxable if the total premium of policies bought after 31 March 2023 is over Rs 5 lakh. Don't put more than Rs 5 lakh in traditional insurance plans. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Prepárate para replantearte todo en lo que crees Movistar Plus Mirar Ahora Undo Use debt funds and the NPS if you need to invest more. Debt funds: There is now no distinction between long-term and short-term gains from debt funds. These funds are also no longer eligible for the indexation benefit. All gains will be added to income and taxed at slab rates. Even so, debt funds help defer tax because the gains are taxed only when you redeem. Keep investing in debt funds and redeem after retirement when your income and tax liability will be lower. Also Read | ITR filing FY 2024-25: Why filing Income Tax Return is important even if you have no tax to pay - explained Provident Fund: The Provident Fund has always been seen as a tax-free haven. But three years ago, the interest earned on contributions to the Employees' Provident Fund beyond Rs 2.5 lakh in a year were made taxable. To get past this, restrict contributions to Rs 2.5 lakh a year. Investors who want to put in more should open a PPF account, if they don't already have one. They can also go for debt funds to defer tax. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Economic Times
01-07-2025
- Business
- Economic Times
Insurers step up their hedge game amid 2025 volatility
The first half of 2025 has seen rising geopolitical tensions, unprecedented volatility and uneven inflation trajectories across advanced and emerging markets alike. With GDP growth holding above 7%, inflation largely contained within RBI's comfort zone, and continued investment in infrastructure and digital expansion, India stands out as a market of sustained interest to international strong foundation will help a large section of the population grow in terms of spending and investing power, with more formalisation of savings. Simultaneously, the insurance sector is also poised to benefit directly from this expansion. Greater household affluence and heightened risk awareness are two factors that are accelerating demand for both life and non-life products. But as portfolios grow and equity allocations deepen, so too does the exposure of those same insurers to global volatility. Protecting value in this climate requires moving beyond static asset management towards more dynamic risk governance. It is against this backdrop that IRDAI has permitted insurers to use equity derivatives to hedge market exposure. The reform was timely. But the bigger question remains: is the industry moving fast enough to operationalise this? Indian insurers have increased their exposure to equity markets over the past decade, particularly through Ulips and longer-dated retirement products. This shift, while positive for long-term returns, can expose portfolios to market shocks. As evident in recent events, these can easily be triggered by geopolitical conflicts, macroeconomic shifts or regulatory developments, domestically or recent decision gives insurers another tool. But tools don't mitigate risk, systems do. The ability to respond to market stress hinges on infrastructure: precision in hedge construction, oversight through real-time visibility, and compliance that ensures every trade is auditable and aligned with accounting volatility seen in recent months has begun to stress-test institutional portfolios. Insurers who have translated IRDAI's reform into integrated risk systems are better positioned. Those still reliant on manual processes or fragmented data flows may find this mark-to-market (MTM) capture, hedge effectiveness testing and automated documentation are not just risk management tasks - they're governance imperatives. They enable boards, regulators and investors to trust that the hedging strategy is not just permitted, but precise. Over the past decade or so, Indian insurers have fine-tuned their technological capabilities, investing heavily in digital delivery, claims settlement and underwriting. The enhanced hedging imperative could trigger a significant reconfiguration of insurers' investment workflows, enabling more sophisticated risk management strategies and dynamic asset-liability matching. Beyond market responsiveness, capital efficiency is increasingly at stake. As India prepares to transition to a risk-based capital regime, the effectiveness of an insurer's hedging strategy will have a direct bearing on its capital charges. Precision in hedge execution can help insurers avoid capital over-allocations for market risk exposures that are otherwise mitigable. And this will, of course, free up resources for innovation and there is a real determination to embrace this change. Most insurers have started upgrading their systems to strengthen their ability to manage risk, comply with regulations and innovate. In an age where headlines move markets, that's a strategic don't mistake this for a technology shift and nothing more. Insurers that invest in these capabilities signal institutional readiness, attract greater investor confidence and align more closely with international best at stake is more than regulatory alignment. Insurers who can hedge effectively will deliver more stable portfolio performance, face lower capital charges and enjoy greater stakeholder trust. In contrast, those who delay may face avoidable write-downs, audit flags or reputational risk. IRDAI's reform opened the door. Global markets have issued a wake-up call and are testing operational responses in real time. Indian insurers must now align their execution with ambition, deploying the necessary tools and infrastructure to hedge risk in real-time, at scale and with confidence. In a world of persistent volatility, readiness is the only real hedge. (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of Elevate your knowledge and leadership skills at a cost cheaper than your daily tea. Inside TechM CEO's 'baptism by fire' and the blaze he still needs to douse Why the RBI's stability report must go beyond rituals and routines How the sinking of MSC Elsa 3 exposed India's maritime blind spots Profits plenty, prices attractive, still PSU stocks languish. Why? The bike taxi dreams of Rapido, Uber, and Ola just got a jolt. But they're winning public favour Stock Radar: Indus Tower stock breaks out from Symmetrical Triangle pattern; could hit fresh 52-week high – check target & stop loss Weekly Top Picks: These stocks scored 10 on 10 on Stock Reports Plus Will worst of perception be over in Q1 earning season? 9 IT stocks, probably best contrarian bets. Use a different way to be contrarian Stock picks of the week: 5 stocks with consistent score improvement and return potential of more than 25% in 1 year
Mint
29-06-2025
- Business
- Mint
HDFC Life banks on broader playbook to keep its lead—but margins remain a worry
Mumbai: HDFC Life Insurance Co. Ltd, India's second-largest private life insurer, is focusing on more partnerships and increased reach to sustain its industry-beating growth amid regulatory disruptions, managing director and chief executive Vibha Padalkar said. The company is expanding its distribution by adding new branches and resources, Padalkar told Mint in an interview. 'We stand out as the only major insurance company to aggressively grow our branches, and have added more than 200 new branches over the past 24 months," she said. 'These strategic moves are projected to drive significant top-line growth in times to come, ensuring we maintain our competitive edge." HDFC Life's net profit increased 15% to ₹1,800 crore in 2024-25. Individual annualised premium equivalent (APE) grew 18% to ₹13,620 crore, and renewal premium rose 13% to ₹37,680 crore. In comparison, individual APE growth for domestic private life insurers was 15% in FY25, according to a note by Phillip Capital. 'HDFC Life has delivered consistently over the years, driven by its focus on a balanced product mix and conservative operating assumptions," the brokerage said in a note last month. India's life insurance sector has been facing a slew of disruptions in recent years. In FY22, the Union government removed tax exemptions for unit-linked insurance plans (Ulips) of over ₹2.5 lakh, and in FY24, for traditional savings products of over ₹5 lakh. In FY25, India's insurance regulator introduced tighter surrender value guidelines for insurers, which increased costs, disrupted distribution channels, and restructured distributor commercials. Padalkar said she is in favour of 'lighter touch regulations and not tweaking business models" for the sector. 'There has been a close correlation between changes in business model with the growth of the sector. As an industry and regulator, the need of the hour is to focus on expanding the pie." An expanding footprint and regulatory hurdles HDFC Life Insurance has more than 300 distribution partners, including small finance banks, non-banking financial companies, and new ecosystem players. In FY25, it added 40 bancassurance partnerships, under which partner banks distribute HDFC Life's products to their customers. Unlike other bank-backed insurers, HDFC Life operates an open architecture model, which means HDFC Bank Ltd sells insurance products of multiple insurers, including HDFC Life. Despite criticism of misselling via the bank insurance distribution model, Padalkar supports it, given the channel's 6-7-fold higher reach than the life insurance industry. Rising instances of such misselling in a hunt for higher commissions prompted a call by the Union finance ministry in November to curb such incidents. HDFC Life has a network of more than 650 branches and 240,000 agents. SBI Life Insurance is estimated to have more than 1,000 branches. But it follows under a closed architecture model, which means all branches of its promoter bank, State Bank of India, operate as SBI Life branches and only sell its products. Macquarie Research said in a recent note that HDFC Life would likely be the most affected if the government overhauls distribution or bancassurance regulations, given the insurer has the industry's highest bancassurance mix, 65%, of which HDFC Bank accounts for 70-80%. 'Our focus should be on strengthening processes, not on curtailing bancassurance. We need more distribution touch points, not fewer," Padalkar said, adding that the insurer is working on growing its proprietary channel faster than its overall growth rate. Behind the move is a conviction that financial services will remain 'phygital"—a combination of physical and digital distribution channels—especially in terms of higher value and long-term policies. 'Customers need guidance to commit to 7-10 years of premium payments based on their unique circumstances," Padalkar said. A chase for new customer segments As HDFC Life grows its distribution network, it expects bancassurance to account for a smaller percentage of its total business. 'This is precisely why we are investing in strengthening our distribution, which encompasses adding new branches and feet on street," Padalkar said. The insurer's distribution expansion includes venturing into tier-2 and tier-3 towns and cities where the presence of insurance companies continues to be limited, even as more customers seek insurance products. 'There is more than enough demand. The conversation is changing from 'why do I need to save for my old age?' to 'how much I will need,?' or is my insurance cover enough—all good questions," the managing director said. HDFC Life's growth in terms of percentage has been similar across tier 1, 2 and 3 cities—the contribution of tier-2 and tier-3 markets in the insurer's APE rose to 65% in FY25 from 58% in FY21. Another area of focus for HDFC Life is the non-resident Indian. In 2016, the insurer established a subsidiary in Dubai, which, in turn, has set up a branch at Gujarat's GIFT City, a global hub for financial and technology services. HDFC Life's GIFT City entity has launched eight dollar-denominated products so far. 'We are now offering NRIs the option to also avail multi-currency life and health insurance products through this offering," Padalkar said. NRIs currently account for about 8% of HDFC Life's overall portfolio. An evolving product mix HDFC Life typically quantifies a blockbuster product as one that garners at least ₹100 crore in premiums. 'This is how we dispassionately evaluate whether our product ideation has been received well by the market. Thus, despite volatility, our market share has steadily moved northwards," Padalkar said. The insurer's market share has improved to 11.1% from 10.4% in FY24. Among private life insurers, its market share, based on individual weighted received premium, is 15.7%, higher than 15.4% in FY24 but lower than 16.5% in FY23. Unit-linked plans comprised 39% of HDFC Life's individual APE in FY25, followed by non-participating savings products at 32%, participating products at 19%, and term and annuity policies at 5% each. The protection business contributed 27% to overall new business premiums during FY25, with retail protection APE growing 25%. Padalkar expects demand for Ulips to remain elevated. The insurer, however, is looking to moderate the share of Ulips and instead offer Ulips with enhanced protection through higher sum assured multiples and additional riders. 'Our aim is to keep Ulip mix a little less than one-third of our business," Padalkar said. Padalkar is also batting for the Insurance Regulatory and Development Authority of India (Irdai) to introduce a composite licence, which she believes will be a 'game changer" as it will allow insurers to manufacture and distribute all classes of insurance products. "This would make our proposition holistic—a one-stop shop offering solutions for mortality, morbidity, longevity, and savings, all rolled into one. It will also help ease the claims process for policyholders," she said. HDFC Life Insurance is also overhauling its technology under an initiative called 'Project INSPIRE' to improve customer experience and enhance its 'go-to-market' capabilities. 'We are overhauling the entire customer journey to reduce friction from on-boarding onwards," Padalkar said, adding that this will also help enable high-value digital transactions. Pressure on margins and valuation The value of new business (VNB), which is the expected profitability from the new business written by an insurer, was at ₹3,960 crore for HDFC Life in FY25, up 13% on-year. However, its VNB margin in FY25 dropped to 25.6% from 26.3% in the previous year. According to Macquarie Research, the decline was due to an increase in unit-linked plans in HDFC Life's product mix and changes resulting from surrender value regulations. 'Management targets to maintain range-bound margin levels, which we believe could be around 25-27%. Further, it plans to grow its APE at a 17% CAGR over the next four years (not in a linear trajectory) as seen over FY21-25. This, we believe, remains a key monitorable," Macquarie Research said in a note. On a 5-year CAGR (compound annual growth rate) basis, HDFC Life's value of new business was 16%, and the embedded value was 22%. Embedded value is an indicator of the corporate value of life insurers, attributed to shareholders. It is calculated as the sum of 'adjusted net worth' or accumulated realised profits and 'value of in-force business' or estimated future profits. Phillip Capital estimates HDFC Life's VNB margin at 25.8-26.3% across FY26-28, with higher commission expenses keeping the cost ratio elevated. It expects the insurer's value of new business, on a CAGR basis across FY25-28, at 17%. 'HDFC Life has historically traded at a premium to other private life peers, but this has narrowed recently. With private peers showing improving metrics, this valuation gap may remain under pressure," the research firm said, pegging the insurer's stock at 2.6 times its FY27 price-to-embedded value (P/EV).
