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Foreign Investors to be allowed to increase stake in Stock Exchanges

Hat Tip: Shivam Bose

Disclosure:I am market making in the shares of Bombay Stock Exchange

In a move that could increase the stake of foreign investors in Indian stock exchanges, the government is considering a three-fold increase in the single-investor investment ceiling.

Currently,a foreign portfolio investor (FPI) investment in an exchange is capped at 5%.

The finance ministry has written to the regulatory authorities to increase the ceiling to 15%, said sources. The proposal is said to have in-principle approval from the Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI).

The move would bring the FPI investment limit in line with those for financial institutions such as insurance companies and banks.

The government allowed the foreign investors to invest in stock exchanges in 2006, with an overall cap of 49%. This latter cap is likely to be unchanged.

BSE and the National Stock Exchange (NSE), the two large nationwide bourses, are likely to benefit from the increase in limits. BSE has eight foreign investors, which cumulatively own about 31% in it. The shareholding of Deutsche Boerse Group and Singapore Exchange Ltd are a little below the 5% ceiling.

NSE has about 20 foreign shareholders, holding around 36%. Cyprus’ Gagil and Goldman Sachs own 5% each; Citi Group has around 2%.

“The finance ministry has received representations stating that the present limit of five% is a deterrent in attracting long-term anchor and strategic foreign investors in stock exchanges. Following which, the ministry has sought comments from both Sebi and RBI,” said a person privy to the matter.

A higher foreign investor limit will not only encourage more investment in Indian bourses but help in exchange of technology and products, said exchange officials.

“A five% limit on the shareholding of any single investor or investor group is too small to encourage them to take sufficient interest in growth of the exchange,” said an official associated with one, asking not to be named.-from BS

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Standard Life keen to raise stake in HDFC Life

Disclosure:I am market making in the shares of ICICI Pru Life

STANDARD Life is expected to use some of the financial firepower it has gained from the £2.2 billion sale of its Canadian operations to boost its presence in the Indian market.

The Edinburgh-based firm, which last week said investors were in line for a bumper £1.75bn windfall following the sale of its Canadian arm to Manulife, already has a 26 per cent stake in HDFC Life, one of India’s largest life insurers, and chief executive David Nish is keen to see that holding strengthened. After handing back the bulk of the Canadian sale proceeds to shareholders, the group will have about £450 million left over, which it said would be used for “general corporate purposes”.

Rather than seeking out a fresh takeover target, sources said that Standard Life was now more likely to focus on the organic growth of its UK business and lifting its stake in HDFC Life.

With Narendra Modi’s BJP sweeping to victory in May’s general election, the country’s government is planning to implement rules allowing foreign investors to own up to 49 per cent of local firms.

Nish has already said that he would “look positively” on any opportunity to increase the group’s holding in HDFC Life, which has more than 400 branches and almost 14,000 employees around the country.

Life insurance penetration in India is about 3.2 per cent of gross domestic product in terms of premiums a year, much lower than Japan’s level of more than 10 per cent and almost 6 per cent in Australia.

State-owned Life Insurance Corporation of India controls about 70 per cent of the life insurance market, but the Modi administration is “more open to inward investment and foreign ownership”, said Garry White, chief investment commentator at Charles Stanley.

The new regime could open up more opportunities for other companies with local joint ventures, such as the Dutch parent group of Edinburgh-based insurer Aegon UK.-from Scotsman

 

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Who is right?The Buyer or The Seller?

Investing is not a game against nature, but against other investors. Both buyers and sellers are acting on the same information but doing opposite things. Who is right? The recent earnings and dividends reported is history and the seller already enjoyed the benefits. As a buyer you are buying an unknown future. Investing is a game of probabilities and possibilities but not certainties. A rational investor should understand this. If not he is a damn fool.-from SeekingWisdom

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RBL Bank :Spreading Wings

Disclosure:I am market making in the shares of RBL Bank

[gview file=”https://alphaideas.in/wp-content/uploads/2014/09/Spreading-Winds.pdf”]

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BSE gets SEBI,CCI go-ahead for USE Takeover

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

Markets regulator Securities and Exchange Board and the fair trade watchdog Competition Commission (CCI) have approved the merger of United Stock Exchange of India with the BSE, making it the first merger of two exchanges in the country, the premier bourse said today.

For the merger to go ahead, however, the exchanges will have to secure the approval from the Bombay High Court as well, where the proposal is pending.

The move will boost BSE’s own currency trading business, which has seen massive spike in recent months following the introduction of faster technologies following which the oldest bourse in Asia massively narrowed the market share gap on the currency front with the NSE.

According to sources, the deal is likely to be structured through a share swap, which is likely to be 1:385, which means USE shareholders will get one BSE stock for 385 of their stock. The deal will be effective April 1. Though BSE has not said anything about the deal details.

The BSE board has valued USE at around Rs 150 crore and itself at about Rs 4,000 crore, the exchange spokesman had told PTI in May, adding the merger of USE would lead to equity dilution of around 3 per cent of BSE.-from ET