Life Insurance Corporation (LIC), one of the biggest institutional investors in the stock market, bought aggressively on every decline.
Kolkata: Life Insurance Corporation (LIC), one of the biggest institutional investors in the stock market, bought aggressively on every decline, thereby providing the desperately needed support to prices on a tailspin.
LIC has made purchases of around Rs 800 crore over the last six trading sessions. On last Friday, it bought stocks worth Rs 180 crore. It is said to have been an aggressive buyer on Monday afternoon too, due to “mouth-watering” valuations.
As the equity markets tanked almost 1100 points over the last few days, the company bought stocks ranging across a number of sectors including oil, information technology, banks among others.
D K Mehrotra, managing director, confirmed to DNA Money that the company had taken full advantage of falling prices to get invested in good stocks at the lower levels.
“This was a good opportunity to buy stocks which we felt had a lot of promise. We are never into the speculating mode and the company felt that these purchases which were made at reasonable prices came at an appropriate time,” Mehrotra said.
Other insurance companies, while no comparison in terms of size of LIC’s support to the market, chipped in to provide support at the margins. This at best could have provided a sentimental support to the sagging market.
Sam Ghosh, CEO, Bajaj Allianz Life, one of the leading private sector insurers said,
“We have just about 2.5% of their investible funds in equities (excluding Ulips).”
Puneet Nanda, chief investment officer, ICICI Prudential Life said, “We believe that the fall is because of technicals rather than fundamentals and we remain confident of the fundamental strength of the Indian economy. And hence as long term investors, we think these are great levels to buy.”
Having made purchases, LIC will stick to its total share of buying into equity at around 8-10% of its total investments.
Despite having over Rs 1 lakh crore of investible surplus, LIC is planning to make equity investments of only Rs 8,500-9,000 crore in the current fiscal.
Total investible funds in the current year are expected to be in the region of Rs 90,000 crore.
The insurer will, however, tread cautiously in making strategic investments in 2006-07. Most of its strategic investments like that in Maruti have been through bids.
Equity investments do not include the unit-linked portfolio, where the company keeps on churning our assets once in a while.
As to whether LIC will make investments in the forthcoming IPOs, the MD said, “If the company thinks that the IPO is worth a buy, we will make purchases,” he said.
Out of the total investible funds amounting to Rs 81,000 crore in 2005-06, LIC had made equity investments of Rs 8,400 crore and invested about Rs 13,800 crore into infrastructure. The largest chunk as per insurance rules has to be in government securities, where it invested Rs 53,900 crore.
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