Author: CP

As per IRDA, new business premium collection (individual non-single premium and 10% of individual single premium) for the industry declined 8.4% in April-January 2009.

LIC has shown degrowth of about 26.3% in individual new business premium collections for the period April 2008-January 2009 against about 10.9% yoy new business growth posted by the private sector.

Among stocks under our coverage, HDFC Standard Life has posted muted growth of 13% for the April-January 2009 period compared to our estimate of 35% growth for FY09. ICICI Prudential posted degrowth of about 14.7% for the same period compared to our expectation of 20% for FY09. SBI Life Insurance posted about 28% growth for April- January 2009 compared to 50% yoy growth estimated for FY09. However, note that our growth estimates are on weighted premiums (including individual premiums).

Historically, the life insurance business is back-loaded in the January-March quarter and we can thereby expect a reasonable firming of growth rates. However, given the slowdown witnessed in industry due to the steep decline in the sale of equity market linked products, we expect the growth rates to come at below our estimates.

The near-term steel and cement demand is likely to be firm due to: restocking, government funded projects, rural demand, and prices (of steel) likely having bottomed out. However, most are not convinced of its sustainability, except for on-going government projects.

As segmental drivers differ, there is a low correlation in their growth rates. Risk to steel demand comes from general engineering, urban housing, and auto. Risks for cement come from urban housing and the commercial sector. Medium term infrastructure growth should help steel and cement.

Provisional domestic despatch growth of 7.8% YoY in February 2009 was in line with expectations, but lower than the 12-13% YoY growth in November – December 2008.

For the week ending 7 Mar -09, headline inflation (wholesale price index, WPI) dropped to 0.44%. It was below our (0.93%) and consensus’ (0.88%) estimates.

Fuel deflation fell further to -5.95%, pushed lower by the fall in electricity prices.

Primary article prices fall first time. Primary article prices moved down due to
the fall in food grains (cereals and pulses), vegetables, fruits and nonfood articles. Though food prices softened, food inflation is still relatively high.

Manufactured prices, no change. All the major components, such as food products, edible oils, transport equipment, metallic and nonmetallic products, did not change. Chemicals and chemical products witnessed further softening.

Slow growth and approaching deflation increases the possibility of a rate cut soon. We expect the LAF (liquidity adjustment facility) corridor to go to the 2.5-4% range by end 2009.