After witnessing a decline in the share of its holdings in stocks listed on the National Stock Exchange (NSE) to a decade’s low, Life Insurance Corporation (LIC) — India’s largest investors in the capital market — is set to improve the valuation following the partial recovery in the market and fresh purchases by the Corporation between April, May and June.
LIC’s holding in companies listed on NSE fell to at least a decadal low of 3.88 per cent at the end of March 2020. Data sourced from nseinfobase.com, a joint initiative of NSE and PRIME Database, shows that LIC’s holding in NSE-listed companies went down from 3.96 per cent as on December 31, 2019. Six years back, in March 2014, its share stood at 4.72 per cent.
In absolute value terms, LIC’s holding stood at Rs 4.24 lakh crore on March 31, 2020, a 29.4 per cent, or around Rs 1.8 lakh crore, drop over its holding value of Rs 6 lakh crore in December 2019. The value of LIC holding’s stood highest in the quarter ended December 2018 at Rs 6.22 lakh crore. However, sources said the value has since increased as the Sensex recovered by over 5,400 points from the March 31 level of 29,468.49. LIC did not respond to an email from The Indian Express.
According to sources, LIC and other domestic institutional investors (DIIs) had bought heavily when the market crashed in March, April and May and foreign investors exited. In March, DIIs bought Rs 55,595 crore worth of stocks. While in April they turned net sellers with sales of Rs 824 crore, in May, they made investments of Rs 11,356 crore.
During the quarter ended March 2020, the 10 companies that saw the highest rise in LIC’s shareholding in percentage terms included eight where LIC made fresh investments. While it picked up 2.59 per cent stake in HUL, LIC bought 2.12 per cent stake in Tata Consumer Products. Among other companies, it also picked up stake in HCL Technologies, Mahanagar Gas and Cochin Shipyard.
While the Centre has been preparing to list LIC and come up with its IPO, the insurer has seen its premium income from new business fall 32 per cent in April and 26.49 per cent in May. However, the premium income for June has gone up. LIC has also been witnessing a gradual fall in its shareholding of Indian listed entities.
With the fall in premium income during the lockdown, closure of units and job layoffs, insurance companies are expecting a tough couple of months. “We expect normalcy by November or December. The subdued trend in premium collection of insurance companies is likely to bring down fresh investments in the capital market in the current year,” said an insurance official.
LIC invested Rs 46,850.33 crore in equities in the first 10 months of FY20, down 20.75 per cent from the amount invested in the same period last fiscal, as per official data. The state-owned insurer had invested Rs 59,115.67 crore during April-January in FY19.
Market experts say that the government’s decision to dilute its holding in the Corporation and list it on the stock exchanges will yield the optimum result when the overall business sentiment improves and markets recover fully.
LIC is currently under the supervisory oversight of the Insurance Regulatory Development Authority of India (Irdai), but it is governed by the LIC Act of 1956, which enables the insurer to obtain a special dispensation in several areas including higher stakes in companies beyond the limit set by Irdai. Under Section 37 of the LIC Act, the Centre has guaranteed the sum assured with bonus in all LIC policies to ensure the availability of financial security to the family of the deceased.
LIC’s total income, which includes total premium and investment income, was around Rs 5,60,784 crore in FY19, a rise of 7.10 per cent.
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