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SBI to dilute 23% stake in SBI General Insurance

(Disclosure:I am market making in the shares of ICICI Lombard)

India’s largest mortgage lender State Bank of India (SBI) has decided to lower its stakes in its general insurance joint venture to 51 percent and has decided to begin the process, the bank said on Thursday.

In a regulatory filing in BSE the bank said its executive committee of the central board (ECCB) on March 25 decided to initiate the necessary action as per the joint venture agreement for dilution of its stake in SBI General Insurance from 74 percent to 51 percent.

SBI said the other partner, Insurance Australia Group (IAG) of Australia would increase its holding in the general insurance company from 26 percent to 49 percent.

According to SBI, the process for diluting its holding in favour of IAG would begin as per the joint venture agreement which includes the appointment of valuer to estimate the enterprise value and the price discovery.

The bank’s decision comes in the wake of Indian parliament passing amending the insurance laws to allow foreign direct investment (FDI) up to 49 percent subject to the condition that the management control remains with Indians.-from Money Life

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Half the market

Says Mehraboon Irani, head of the private client group business at Nirmal Bang Securities: “The only factor the market looks forward to is corporate earnings. Now, it is going down in the minds of markets that earnings are not going to improve in the next two to three quarters. What has happened is that analysts, after elections last year, projected a sharp recovery in earnings. Whether things improve in FY15-16 or in FY16-17 is under question. So, valuations have risen ahead of the earnings. The consensus view is that the March quarter numbers will also not be good.”

Among other things, Irani says the market is looking at passing of important legislation by Parliament. “Third is the dollar strength. Fourth is the US interest rate cut, which I think will not happen in 2015. With not many positive triggers and some negative triggers, the markets are likely to correct,” he says.
While the jury is out over when the US Fed will take its first step on rates, certainty over a delayed pick-up in earnings is slowly sinking in. That could trigger a sell-off or at least lead to under-performance of stocks riding the hope rally.

Hence, investors would be wise in being selective while picking stocks. The fact that the markets are sensing many stocks have run up without reason can also be seen in the unwinding across counters. A large number are quoting at prices below the levels in September last year, says Irani.

“So, it is more important to focus on stocks with high earnings growth and reasonable valuations. That’s also one reason why many such stocks are getting expensive,” says Irani. he adds that even as the Nifty will be higher a year down the line, there will be stocks that will be lower than today’s. That would apply to half the market.-from BS

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Linkfest: March 26,2015

Some stuff I am reading today morning:

The day trader’s guide to Cricket World Cup (Mint)

Earnings shocker likely for markets (BS)

Reliance Entertainment: Dreams,drama,downfall (Outlook Business)

India raises record $ 18 Billion from Spectrum Auctions (Bloomberg)

ICICI Securities Research: Bank of Baroda (MyIris)

The rising $ is creating a $ 9 Trillion problem (FirstBiz)

An investment strategy for current times (Bala)

Personal Finance Self Evaluation Checklist (FreeFinCal)

Why is everything cheaper in India? (Daily Reckoning)

A bond bubble is different from a stock bubble (PragCap)