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

Mar 7
Quite a lot of investors are worried about the FPIs dumping Indian equities and concluding that this is the prime reason for the ongoing correction in stock prices.

A 🧵 to understand details about FPIs buying and selling in financial markets before jumping to conclusions
(1) FPIs are NOT a uniform class of investors.

Some examples:

Pension funds - very long term horizon (multi-decades)
Hedge funds & AIF - very short term horizon (3-6m)
EM funds - buy/sell as basket including India
ETFs - MSCI, iShare EM, iShare Asia, FTSE
(1a) All these investors differ in Investment:

- Horizon
- Objectives
- Strategies

They rarely act in unison as the universe of investible stocks is also different.

To assume that all FPIs are selling at the same time violating the mandate & exiting India is bit overdramatic.
Read 19 tweets
Mar 5
A good article on the challenges of working as SEBI registered Investment advisor (RIA). The new norms have come from Oct-20 and it has caused more harm than good.

A short thread 🧵
(1) The 2yr PG in "relevant stream" clause is filled with roadblocks (Earlier it was only PG). Forcing RIAs to do a PG degree that too of 2 yrs is bizzare. Many professional certifications like CS were removed from the equivalent PG category overnight.
(2) Foreign PG degrees of 2 yrs require equivalent certificate from Indian authorities which is a pain specially if considerable time has passed for PG. Its like running from pillar to post. Proving "relevant stream" again has been an uphill task.
Read 9 tweets
Dec 25, 2021
A thread of best twitter threads I read this year #2021inreview #twitter #threads
Read 17 tweets
Jan 9, 2021
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.

moneycontrol.com/news/business/…
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
Sep 24, 2020
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

sebi.gov.in/legal/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
Sep 11, 2020
(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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