LIC hikes stake in banks

Banking stocks were a favoured investment option for insurance companies, especially Life Insurance Corporation of India, during the December quarter.

LIC’s stake in PSU and private banks moved up by one to four per cent during the last quarter, as the State-owned insurance company reduced stake in several other sectors, a study of BSE data showed.

Its stake in some PSU banks rose by between two and four per cent. The banks were Allahabad Bank (up 4.60 per cent), Oriental Bank of Commerce (2.60 per cent), Syndicate Bank (2.32 per cent) and Union Bank of India (2.18 per cent).

In some PSU banks, LIC’s stake rose by between one per cent and two per cent. These institutions were Bank of India (1.63 per cent), Indian Overseas Bank (1.59 per cent), Bank of Baroda (1.53 per cent), SBI (1.33 per cent), Canara Bank (1.21 per cent) and Punjab National Bank (0.38 per cent).

Some of these banks saw LIC’s stake exceed two digits. The insurance company’s holding rose to 16.02 per cent in Oriental Bank of Commerce and to 10.99 per cent in Allahabad Bank.

LIC’s investment in Corporation Bank, the bank in which LIC holds the most, remained unchanged at 26.32 per cent during the period.

The insurer’s stake went up in private sector banks also. In HDFC Bank, the holding rose by 0.37 per cent to 5.07 per cent and in ICICI Bank, it went up by 0.35 per cent to 8.80 per cent.

Private sector insurance companies, too, have shown interest in banking stocks.

ICICI Prudential Life Insurance Company has raised its stake in Bank of India (1.61 per cent), SBI (from less than a per cent to 1.54 per cent), HDFC Bank (0.15 per cent) and Axis Bank (0.14 per cent). However, it reduced holding in Punjab National Bank by 0.65 per cent.

Reliance Life Insurance raised its stake in Dena Bank by 1.08 per cent.

LIC also raised stake in Sensex power stocks Reliance Infrastructure and Tata Power, by more than one per cent in each. In the same quarter it reduced stake by between one and three per cent in some blue-chips in FMCG, automobile, metals and pharmaceuticals.

LIC has reduced stake by 2.43 per cent in Hindalco to 8.80 per cent, and pruned holdings in Hindustan Unilever and ITC by less than one per cent each, to 5.89 per cent and 13.98 per cent, respectively. In Ranbaxy, too, LIC reduced stake by 0.79 per cent to 7.28 per cent.

LIC’s holds more than 10 per cent in 10 companies on the Sensex. Some time ago, the IRDA had indicated that LIC reduce stakes in listedfirms to less than 10 per cent.

The insurer holds more than 10 per cent stake in M&M (17.61 per cent), ACC (17.48 per cent), L&T (17.38 per cent), Maruti (14.36 per cent), Reliance Infra (12.99 per cent), Tata Motors (10.27 per cent), Tata Power (11.44 per cent) and Tata Steel (11.56).

( source : Hindubusinessline )

Hence for a medium to long term view to have excellent return one can really take huge positions in banking stocks especially banking stocks as.

• Bank of India
• IOB
• Union Bank
• Bank of Rajasthan
• City Union Bank
• Axis Bank
  

Highest bid may be benchmark for Satyam open offer price

3 The highest quote in any competitive bid for Satyam Computer could be used as a benchmark for determining the open offer price for the company. It is reliably learnt that this is one of the possibilities being considered by SEBI, which is revising its takeover regulations to accommodate abnormal cases such as Satyam.

This methodology is being seen as a safe and transparent solution to arriving at an open offer price, said sources.

The Government-appointed Satyam Board had sought exemptions from the takeover code, as the six-month average market price for an open offer under the current regulations would deter suitors from bidding for that company. Satyam prices have plunged since promoter Mr Ramalinga Raju’s admission in early January of a fraud in the company.

On Monday, the SEBI Chairman, Mr C.B. Bhave, said the regulator saw merit in the argument that the Satyam’s market price until January may not make for a credible benchmark, being based on the company’s financials that have been disowned by the auditors themselves.

The counter argument this set off among legal experts was that the current market price itself is equally rootless, since everyone is still in the dark about Satyam numbers, which need restatement.

Using the highest competitive bid price to arrive at the open offer price frees the entire process from taking into account the market price.

Some market experts feel the entire exercise only serves to pave the way for easy acquisition of Satyam by other corporate hawks. “If the pre-January Satyam price was higher than it should have been, assuming it was based on false financials, then post the scandal the loss of credibility has certainly brought the price lower than it should have been,” said a broker. “The idea of a six-month average is exactly that, to iron out the volatility in the stock price.”

Many companies, including Larsen & Toubro and the Spice Group, have shown interest in acquiring Satyam. L&T, which acquired a 4 per cent stake in Satyam in December, raised its stake to 12 per cent a week ago.

(source : hindubusineesline)

*Interesting BSE Sensex figures*

· As at January 8 2009, the BSE Sensex closed at 9071, a far cry from 20873
on January 8, 2008.

· Now, even if it took 5 years (Jan 2014) for the Sensex to reach
its previous high, the return would be *18.14% (CAGR) *.

· If it took *7 years (Jan 2016) *, it would be *12.64% *.

· And even if the Sensex reached that figure in *Jan 2019 (10
years) *, the returns would be *8.69% *.

· The surprise is that even for a *15 year time frame (January 2024)
* the Sensex would generate a CAGR of *5.71% *.

*Not bad at all when you consider that the 10 year Government Security
yields 5.65% (as on January 21, 2009 ) and that the long term
capital gains tax on equities is presently NIL