India’s largest domestic institutional investor, Life Insurance Corporation of India (LIC), has used the subdued market conditions in the June quarter to raise its exposure to equities, even as most banks and other financial institutions have reduced their stakes during the same period.
LIC pumped in about Rs 10,000 crore in equities during April – June (Q1) and increased its holding in frontline stocks, including Reliance Industries (RIL), Infosys, NTPC, Bajaj Auto and Cairn India. According to the shareholding pattern data, LIC bought shares worth about Rs 1,000 crore each in these companies.
Of 226 companies from the BSE-500, LIC raised its stake in 37 and reduced its holding in 32 firms. In the remaining 157 firms, the stake remained unchanged.
Based on the average market price in Q1, LIC has bought shares worth of Rs 12,565 crore, while it sold shares amounting to Rs 1,801 crore, the CapitalinePlus data shows.
| RAISING EXPOSURE LIC holding as on June 30, 2012 | ||
| Company | in % | % chg* |
| Bajaj Auto | 4.2 | 2.4 |
| NTPC | 6.0 | 2.2 |
| Cairn India | 5.2 | 2.1 |
| Infosys | 6.3 | 1.4 |
| RIL | 7.8 | 0.7 |
| HUL | 4.4 | -0.3 |
| Colgate | 4.3 | -0.4 |
| Tata Motors | 6.2 | -0.5 |
| Allahabad Bank | 10.6 | -2.3 |
| Syndicate Bank | 10.4 | -4.2 |
| *Percentage points change over March Source: BSE/CapitalinePlus; Data complied by BS Research | ||
Government policy
Analysts see this move as a decision based on the government’s policy. “The new finance minister has already gone on record to double the investment limits of insurance companies in the capital market, which endorses the fact that government policies are in favour of LIC investments,” said Kishor Ostwal, chairman and managing director, CNI Research Ltd, a capital market research firm.
“However, domestic funds were sellers due to heavy redemption pressure on falling net asset value and weak market sentiments. Losses to investors in secondary markets, too, aggravated the pressure on redemption of mutual fund units,” Ostwal added.
In Q1, the benchmark index was almost flat against a sharp rally of 13 per cent in Q4 FY12. The subdued market conditions during the quarter were due to the depreciating rupee, slowing economic growth and high fiscal and current account deficits.
Foreign investors withdrew a net Rs 1,958 crore from equities in the April-June quarter. This was against a record inflow of Rs 43,951 crore in the January-March quarter, Sebi data shows.
Increased allocation
LIC increased its stake in the Mukesh Ambani-led RIL to 7.77 per cent from 7.09 per cent during the quarter. LIC has acquired an additional 19.92 million shares during this period, worth about Rs 1,434 crore.
In Infosys, the insurer has hiked its stake to a record high level of 6.3 per cent with the purchase of 7.79 million shares worth Rs 1,916 crore. LIC is the largest non-promoter shareholder of the information technology company.
However, the insurer reduced its holdings in Tata Motors Ltd, Hindustan Unilever Ltd, HDFC Bank Ltd, ITC Ltd and State Bank of India, data suggests.
During 2011-12, LIC invested about Rs 2 lakh crore, of which Rs40,000 crore was invested in equities. In the current financial year, the government-led insurer has plans to invest a similar amount in equities, reports suggest.
