It's that time of the season again when Divestment talks during a bull run gathers momentum (with little results)

LIC IPO is back on the table with advisors being chosen. Fair enough!

A thread below on why LIC IPO is not going to be a cakewalk
(a) LIC is the largest #DII in India handling $500bn #investment portfolio. LIC act stipulates that all #receipts and payments need to be made out of that fund only. In case govt divest 10% stake (min stake required as per #SEBI regulations), who will do the corpus handling?
(b) LIC act stipulates that the insurer distribute 5% surplus p.a to GOI as #dividend. Most pvt insurers prefer higher ratio to shareholders. Any change in this ratio requires approval from both houses of #parliament. Even investors would insist on clarity before committing $
(c) LIC policyholders has #sovereign guarantee from the GOI and no claim can be rejected on the basis of capital adequacy. If this continues then either GOI show LIC as contingent #liability in their budget or capital base of LIC needs to be boosted before IPO.
(d) LIC has a market share of ~70% owing to its #network of agents. LIC employee union need to be assured that partial stake by GOI will not lead to sidelining of their #commissions or their role in the future.
Without these issues being ironed well before the investors are brought on board, i would take any news with a pinch of salt. The divestment talks may go around in circles till then!

Disc : Invested and recommended few pvt insurers in portfolio

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More from @amitgupta0310

9 Jan
A thread on cumulative FII inflows into India in the CY2020

Background  : This was a widely shared link on social media and also tweeted by FM @nsitharaman amid a lot of discussion around the strong foreign inflows in Indian equities.…
India received ~1.6 lakh crore in FII flows last calendar year when most Asian and emerging markets witnessed outflows. This is encouraging stuff one would say. However, this is not the complete story.
The total flows in Secondary markets (Debt + Equity but not including FDI deals in primary markets) are marginally positive. It means as yields collapsed, FIIs switched from Indian debt to Indian equities.

In fact, last 6 CYs (2015-2020) net flow in debt & equity is negligible.
Read 9 tweets
24 Sep 20
A thread on the new Registered investment advisors (RIA) regulations which are coming to effect from 30th Sept, 2020

SEBI came up with the final regulations/explanations yesterday. Here is the link to the circular…
(Q1) Are there any new changes apart from the one notified in 1 July, 2020 and effective now?

Not much, but SEBI has given few clarifications where RIA has raised doubts. Good news is there are no further burden. The new guidelines are almost similar to the consultation paper.
(Q2) So, segregation for clients with respect to advisory and distribution remains?

Yes. Client has to choose one at the time of onboarding itself. Existing clients also need to choose one if they were doing both with same RIA.

Existing investments can continue to hold.
Read 13 tweets
11 Sep 20
(1/n) A thread on the SEBI new circular with respect to increase in equity exposure across multi-cap funds

For brevity, Large caps (LCs), Mid caps (MCs) and Small caps (SCs)
(2/n) Which funds are impacted by this?

ALL multi-cap funds. [It does NOT mean focused funds with multi-cap strategy or Combination funds (large & mid or mid & small cap types)]

A clean reading means Multi-cap funds with international exposure to equities will also be impacted
(3/n) What is the definition of Multi-cap asset funds?

Any asset fund which invests a minimum of 65% allocation in equities. Rest 35% can be invested in other asset classes - debt, international equities, Gold or plain old liquid funds.
Read 10 tweets
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"Right now, we're in an absolute raging mania. We've got commentators encouraging companies to do stock splits. Companies then go up 50%, 30%, 40% on stock splits. That brings no value, but the stocks go up"

Very interesting comments from Druckenmiller
"I have no clue where the market is gonna go in the near term. I don't know whether it's going to go up 10%; I don't know whether it's going to go down 10%," Druckenmiller said. "But I would say the next three-to-five years are going to be very, very challenging"
"The merging of the Fed and the Treasury, which is effectively what's happening during Covid, sets a precedent that we've never seen since the Fed got its independence," Druckenmiller said. "It's obviously creating a massive, massive mania in financial assets."
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31 Aug 20
There are some genuine queries regarding this. It was clarified by the exchanges couple of weeks ago.

Please see the new thread below for further clarification
(1) The minimum margin requirement for BUYING stocks from the client can be 20% of the trade value instead of (earlier decided) full 100% VAR+ELM

In such case, broker will make up for the difference between this 20% and VAR+ELM from its own capital. Most will be happy to do so
(2) 20% margin is NOT required for selling holdings from DP if your broker is doing EPI by 7:30 pm on T-day. Contact your broker to ensure this. Most are doing it as that means higher efficiency and more business.
Read 10 tweets
20 Aug 20
The global economy is recovering at a modest pace after bottoming out in April, with data showing much improvement from May to July. But how long can this pace be sustained? Will social distancing measures and restricted global travel cap the recovery?
Those remain key questions as we gauge the "new normal" across major economies.

Sure, things are getting better with time but how much "better" can things be when there are fears of a second wave brewing in many countries/regions once again?
The health crisis remains a key factor to keep an eye out for and in countries with less fiscal space to act, not addressing the virus situation will just lead to the economic and potentially financial crisis worsening in the coming months.
Read 5 tweets

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