The Life Insurance Corporation of India (LIC), the biggest domestic institutional investor in India, is likely to double its profits from sale of equities this fiscal.
The company, known for its contrarian bets, has been booking profits consistently over the last few months.
A senior LIC official said the firm does not believe in chasing stocks at a time when the Sensex has risen to 20000. Hence, it has been selling equities consistently in the second half of this fiscal and booking profits on stocks acquired at lower valuations.
A DNA Money analysis of LIC's holdings in 102 BSE 200 companies (for which shareholding data is available) shows that it has reduced stake in 50, raised stake in 16 and kept its holdings unchanged in the remaining 36 during the December quarter. Incidentally, BSE 200 companies make up as much as 95% of LIC's equity portfolio.
The firms where LIC has reduced its stake the most are Aurobindo Pharma (down 2.70%), Tata Global (down 1.91%), M&M (down 1.72%), Dena Bank (down 1.71%), Aditya Birla Nuvo (down 1.63%) and Dr Reddy's Labs (1.07%).
“Over the last couple of months, we have started realizing profits to the tune of Rs 200 crore per day and till date, we would have made profits of Rs 15,500 so far this fiscal,” said the official. “This is in contrast to our stand during the first half when we were heavily buying in the market and picking stocks lying closer to the 52-week low aggressively. We had been buying to the tune of Rs 500 crore per day till then (second week of September).”
LIC's profits from sale of equity investments in fiscal 2012 stood closer to Rs. 9000 crore.
At the same time, LIC has been picking up stake selectively through the offer for sale (OFS) route and in the secondary market. Apart from picking up stake in NMDC and Hind Copper, it has increased stake in Cairn India, Infosys, Siemens, Power Grid, Exide Industries and Reliance Industries during the December quarter.
“Though we are selling stocks in a big way, we continue to buy quality stocks which are available at lower valuation,” said the LIC official.
The value investor had during the June quarter increased stake in 27 companies by a huge margin while reducing holdings in 27 others and keeping its stake in 48 others unchanged. Some of the firms that it bought aggressively during the June quarter were Bajaj Auto, NTPC, Cairn India, Infosys, Yes Bank and Dr Reddy's Labs.
Going ahead, the firm is likely to continue buying stakes in PSU companies through the OFS mechanism. The government has lined up divestments in OIL India (Rs 3,000 crore) for which OFS is scheduled today and NTPC ( Rs13,000 crore) expected later this month.
“We may add good stocks in the portfolio if we get the valuations according to our expectation. Also, most of the PSU companies in general are among the leaders in their respective sectors with strong fundamentals and balance sheet. So, it does make sense to buy them in large quantity if we get an opportunity,” he said.