Tuesday, June 18, 2024

LIC plans record ₹2.4 tn investments next fiscal

“Apart from supporting markets, this will not only be the largest ever investment by LIC but also may help it in maximizing returns for policyholders and profits for shareholders but also may work as a vital support system for Indian markets in FY2024,” one of the two people said, requesting anonymity.

“Around 35% of the total investment or 80,000 crore – 85,000 crore could be allocated in shares of listed companies in India in the fiscal year 2024,” the person added.

Graphic: Mint

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Graphic: Mint

LIC’s record investment plan comes at a time when foreign investors are pulling out of most emerging markets, including India, because of risk-off sentiment.

Emerging markets assets are sensitive to US monetary policy changes as higher interest rates make riskier assets less attractive to investors. They also lead to a stronger dollar, making it dearer for emerging nations to import goods and service debts.

“Like several past instances of global crises, this time too, LIC’s investment could provide crucial support to the Indian market since foreign portfolio investors (FPIs) have been steadily selling Indian equities on a net basis in the wake of global uncertainties and additional shocks in the banking system due to the failure of two large US-based banks,” said the second person.

On 24 March, FPIs net sold Indian shares worth 1,720.44 crore, while domestic institutional investors, including insurance companies, were net buyers of shares worth 2,555.53 crore.

In January and February, net outflows by FPIs were at 28,852 crore and 5,294 crore, respectively.

Even though net inflows by FPIs stood at 7,233 crore (due to the investment by US-based GQG partners in Adani Group firms) in March, FPIs continue to be net sellers of Indian equities to the tune of 26,913 crore year to date.

The heads of institutional equities at two Mumbai-based brokerages have indicated that Western investors are expected to maintain a cautious approach and reduce their support for the Indian markets in the short term owing to several factors, including the volatility in domestic markets, defaults by major global bond issuers, a decline in banking stocks worldwide, and the stress in the US banking system following the recent collapse of Silicon Valley Bank and Signature Bank.

In 2022, FPIs sold 1.21 trillion worth of stocks in India on a cumulative basis. In 2023, too, FPIs are net sellers. This trend is here to continue.

In such a scenario, LIC’s proposed investments could support Indian stocks during this year.

LIC’s planned investment will also flow into government of India issued securities or G-Secs, state-development loans, certificates of deposits, commercial papers and debentures.

According to insurance norms, at least 50% of a life insurer’s investible surplus must be allocated to G-Secs, at least 20% has to be invested in infrastructure-oriented securities, and the remaining can be invested in other instruments.

After getting listed last year, LIC recorded a 13% growth in revenue at 1.96 trillion in December, with net profit surging 26 times to 6,334 crore. Meanwhile, net premium income gained 15% at 1.12 trillion.

LIC’s income from investments rose to 84,889 crore at the end of December from 76,574 crore a year ago, said a regulatory filing.

LIC increased its equity holding in Indian Railway Catering And Tourism Corp. (IRCTC) to 7.42% in the December quarter of FY23 from 4.44% in the three months ended 30 September. The insurance behemoth also raised its stake in Voltas to 9.88% from 8.24% in the previous quarter. LIC has also hiked its stake in Mphasis Ltd, Tech Mahindra Ltd, Capri Global Capital Ltd, Dr. Reddy’s Laboratories, Welspun Corp., Deepak Nitrite, GAIL (India) Ltd, and HDFC Asset Management Co.

Data available on BSE showed that. LIC’s top holding includes IDBI Bank with 49.24%, LIC Housing Finance (45.24%), Standard Batteries (19.99%), Modella Woollens (17.31%) and Cochin Malabar Estates and Industries (16.77%).

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