InvestorQ : Can you tell me why the insurance stocks like GIC and Oriental rally so sharply on 18 February after almost lying dormant for so many years?
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Can you tell me why the insurance stocks like GIC and Oriental rally so sharply on 18 February after almost lying dormant for so many years?

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Khushi Patel answered.
2 weeks ago
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When insurance stocks like GIC and New India Assurance were first listed on the Indian stock exchanges in the year 2017, the idea was to give them an indicative valuation. But these stocks have given up a lot of value since then partly because they were expensively priced. Over the last 3-4 years, the stocks have languished.

In the latest budget, the FM announced gradual moves towards full privatization of the general insurance players albeit only a minority stake sale in LIC. On Thursday 18 February, two stocks that have rarely shown firm positive movement i.e. New India Assurance and GIC Re, were locked in 20% upper circuit. In a way it was about the privatization enthusiasm.

There were reports on Thursday and reliable indications that the government would soon take up full privatization of state-owned general insurance companies. New India Assurance and GIC Re are the only two listed state general insurers while other 3 state general insurers are yet to be listed. New India is the largest among the general insurers in India.

The other listed entity, GIC Re, is the biggest reinsurer in India and only does aircraft insurance directly. The government had divested its stake in them in 2017 and currently holds 85.78% in GIC RE and 85.44% in New India Assurance. Union Budget 2021 has set an aggressive divestment target of Rs.175,000 crore for the year including the two general insurers.

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