Thursday, March 3, 2011

Warren Bufftet in India

Many investors worldwide are fans of Warren Buffet of USA. No doubt, he is one man who could hold his head steady in adverse situations and turn such moments into great opportunities.

For long, close to six or nine months, there has been rumors that Warren Buffet is to invest in companies like ONGC and Bajaj Allianze.

And today there was news that, Warren Buffet's Berkshire Hathaway 'plans' to enter the Indian non-life insurance sector as a corporate agent of Bajaj Allianz General. Inface a company called Berkshire India has been incorporated to sell and distribute general insurance products in the country.Known for irrational behaviour, Indian Investors fell one over another to buy this stock which ultimately got locked up in the upper circuit of 20%, after gaining Rs.88 in a single day today.

We need to understand the basis of such scrambling and the real logic
(1) Plz note Warren Buffet is not taking a stake in Bajaj Allianze.
(2) He is just getting registered in this insurance firm as a Corporate agent.
(3) There is a difference in being a share holder and a distributor of a company.
(4) There needs to be no necessity for such great urgency in buying these stock, at such frency moment.
(5) If the client of Berkshire India had to make an insurance claim, it is for Bajaj Allianze to settle the claim. Berkshire will not be affected in any way. After all it earned its commissions.
(6) Given these situations, in what way Bajaj Allianze would stand to gain is yet to be seen, but for the fact that one of world's richest person is its corporate agent !

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