As the bad loan issue continues to impact the public sector banks, Life Insurance Corporation of India— the largest domestic institutional investor — has decisively reduced its holding in several public lenders in the quarter ended June 2016. On the other hand, during the three month period, the market value of LIC’s holding in 305 companies (where it holds more than 1 per cent) jumped by 9 per cent over the previous quarter to hit an all-time high of Rs 4,57,943 crore.
A look at the data compiled by Prime Database shows a total of six public sector banks in the list of 10 companies that saw the highest cutback in holdings by LIC during the period between April and June 2016. While the state-owned insurer reduced its share in United Bank of India by 2.6 percentage points from 12.1 per cent in March 2016 to 9.5 per cent in June 2016, Uco Bank and Allahabad Bank witnessed a reduction in LIC holding by 2.5 and 2.2 percentage points, respectively. Other three PSBs to figure in the list are Syndicate Bank, Oriental Bank of Commerce and Vijaya Bank. Other than the state-owned banks, LIC also reduced its shareholding in Biocon and HCL Technologies and completely sold off its stake in the two firms from 1.55 per cent and 1.11 per cent it held till March 2016.
LIC, however, seems to be betting big on the hydro power major NHPC as it more than doubled its holding in the company from 3.44 per cent in March 2016 to 8.74 in June 2016. Other companies that witnessed significant increase in LIC holding during the quarter include Tata Communications and BSL Ltd. LIC increased its share in the two firms by 2.5 per cent and 1.9 per cent, respectively.
While the insurer reshuffled its portfolio during the quarter by reducing its holding in some firms and accumulating others, the pick up in the stock markets during the quarter lifted the market valuation of its holdings.
“The rise in market valuation of LIC holding was primarily on account of rise in share prices and it stood greater than the holding of all mutual funds put together in NSE-listed companies (even including the less than 1 per cent holding in companies) which stood at Rs 4.54 lakh crore as at end of June 2016 quarter,” said Pranav Haldea, MD, Prime Database.
During the quarter, Sensex at the BSE rose 6.5 per cent. The data also shows that while LIC has maximum holding (in percentage terms) in LIC Housing Finance (40.3 per cent), Corporation Bank (21.22 per cent), Larsen & Toubro (15.71 per cent), in value terms the maximum holding is in ITC (Rs 43,000 crore), Reliance Industries (Rs 29,000 crore) and Larsen & Toubro (Rs 22,000 crore).
Over the last year, LIC has reduced its share in 74 companies and increased its holding in 133 companies listed at NSE. The average stock price return for the 74 companies where it reduced its holding (over the last year) stood at (-)5.6 per cent whereas the average stock price return for 133 companies where it increased its holding stood at 17.7 per cent.