- Increasing demand for guaranteed products in insurance
- Interest rates are not expected to rise soon
- Very little impact on economy in second wave
Indian Bharti Axa Life Insurance, a joint insurance venture between the Group and France’s Axa Group, has successfully completed 15 years of its operations in the life insurance industry. In the last 15 years, the company has expanded its footprint across the country. In relation to the latest trends in the life insurance sector, the possibility of a hike in interest rates and the record rally in the stock market, the Chief Investment Officer of Bharti Aksa Life Rahul Bhuskate From Vishnu Bharadwaj Had a detailed conversation. Rahul Bhuskate has a vast experience of 23 years in the Banking, Mutual Funds and Insurance Sectors. Here are the highlights of the discussion:-
The stock market is making new records of rapid growth while touching new heights. In such a situation, now the question in the mind of every investor is whether this bullish will drag on for a long time or a big correction will come. What is your opinion about this?
Look, there are many strong reasons for this bullish pull to be long. The biggest reason is the earning factor of Corporate India. Except a few sectors like hospitality, entertainment, which are more affected due to the COVID crisis, the results of all the companies, small and big, are coming very well and the growth in sales and profits is exceeding the expectations. Is. With increasing profits, companies are strengthening their balance sheet by reducing their debt burden. That is, Corporate India is getting stronger. Due to which the investors are excited and the share price is increasing with the earnings growth. The second reason for the boom is a sharp cut in interest rates and the third reason is that the impact on the economy in the second wave is much less compared to the first wave of COVID.
But after the record high valuations have become very expensive?
It is true that stock valuations have increased significantly, but the growth of Corporate India is also picking up. Also getting global support. After America, very good growth has started coming in the countries of Europe. The COVID epidemic is coming under control in the country. Along with this, the private capex of companies has started increasing. While a rise in valuations may lead to a small correction in the short term, we are ‘bullish’ in the medium to long term.
There is talk of increasing interest rates. Do you see growth in the near future?
No, we do not see any possibility of an interest rate hike anytime soon as RBI has kept well support for liquidity in the economy. Secondly, there is no fear that the liquidity will drop abruptly. Apart from this, our foreign exchange reserves have crossed $ 600 billion. Indian currency is almost stable. Export growth is getting very good. So overall for the next 6 to 9 months the interest rates will remain almost constant or there may be a slight increase of 10 to 15 basis points.
Which sectors look attractive from investment point of view?
Economic recovery is coming along with India globally and with the recovery fast, the demand for all metal commodities including steel, aluminum, copper is increasing. Secondly, everything is going digital now. With digitization, many new companies with digital themes are emerging. Also we are seeing that ‘Work from Home’ has become a very successful model globally. So we are bullish in the IT sector as well. The government is paying a lot of attention to infrastructure development. The steel, cement sector is getting the benefit of which. Apart from this, the chemical, pharma and electronics sectors will benefit from the ‘China Plus’ theme of multinational companies.
Which products are in high demand in insurance now after the COVID crisis?
It is such that due to COVID, people now want stable returns for a long period in financial planning. Uncertainty about their life and health has increased among people. In such a situation, every person has started wanting financial security for himself and his family. Therefore, the demand for all insurance products has increased and among them there is a demand for the most guaranteed products (Guaranteed Insurance Plans). In which insurance protection is also available with a fixed return. Apart from these, with the boom in the equity market, there is also a good demand for ULIP products.
What is the return on insurance products with guaranteed returns?
Usually they are getting 5.5 to 6% fixed return and with tax benefits, this return goes up to 9%. Hence the demand for guaranteed products is increasing. Bharti Aksa’s ‘GI Pro’ and ‘Flexi Pro’ plans are becoming quite popular.
Both ‘ULIPs’ and Mutual Funds are equity products. Is ULIP better among these?
Of course, because in ULIPs, there is a huge benefit of insurance cover along with the return of equity. Apart from this, investment in ULIPs up to Rs 2.50 lakh is also available with the benefit of tax exemption. All ULIP plans including ‘Grow Money’ and ‘Grow Opportunities’ by Bharti Aksa have consistently delivered returns above their benchmarks. That’s why they get the top 5 to 4 rating of ‘Morningstar’.