Life Insurance Corporation (LIC) which has registered a whopping 145 percent jump in profit from the sale of equities in the April-June quarter of the current financial year was also busy in raising stake in most of the bluechip names.
There are about 20 companies in which LIC holds more than 10 percent stake which includes names like ITC, Corporation Bank, Orissa Minerals, NALCO, IDBI Bank, Modella Woollens, Bank of India, Central Bank, Oriental Bank, Vijaya Bank, Bank of Maharashtra, Punjab National Bank, Tata Steel, NTPC, Andhra Bank, Syndicate Bank, SAIL, IOB, L&T and State Bank of India.
The insurance major increased stake in 40 companies during the quarter gone by which include names like L&T, SBI, Bank of India, IDBI and Dena Bank among others.
Among the biggies, L&T saw LIC holding go up from 16 per cent in Q4 of FY17 to 17.97 per cent in Q1 of FY18. In Nalco, it went up from 10.57 per cent to 14.46 per cent, Bank of India from 13.87 per cent to 14.25 per cent and Dena Bank from 12.23 per cent to 12.29 per cent, said a report.
However, the insurance major will have to trim its stake in companies where it holds more than 15 percent, to avoid concentration of risks and a have a good balance of risks in their portfolio. LIC has exceeded 15 percent stake in companies like ITC, Corporation Bank and L&T.
Life Insurance Corporation of India (LIC) may only have time till the end of 2018 to trim investments in companies such as ITC, Corporate Bank and L&T to 15 percent, said a Moneycontrol report.
A senior regulatory official said that they are hoping that the insurer would bring down its stake to 15 percent in the companies it has exceeded it.
The portfolio of LIC is heavily structured around financials which are likely to benefit more from the recent rate cut by the Reserve Bank of India (RBI) as well as debt restructuring exercise started by the Reserve Bank of India (RBI).
"LIC made a profit of Rs 6,100 crore in the April- June quarter through the sale of equities from Rs 2,489 crore in the year-ago period, thus showing a growth of 145 per cent," V K Sharma, LIC chairman, told reporters.
The Indian market has been on a roll so far in the year 2017 with over 20 percent return on both Sensex and Nifty50 but there was plenty of action in individual stocks most of which were now trading above their historical averages.
LIC preferred to book some profits in stocks which were signalling frothy valuations as it sold as it sold its stake in as much as 32 stocks in the quarter ended June, Capitaline data showed.
There are more than 30 stocks in which LIC sold its stake in the quarter gone by which include names like Hotel Leela, Orchid Pharma, Oil India, Canara Bank, UCO Bank, IOC, Adani Enterprises, Adani Ports, Reliance Communications, Mandhana Retail among others.
Typically, LIC invests Rs 50,000 crore in equities, the only exception was in 2014-15 when it shot up to Rs 65,000 crore, largely due to our investments in the OFS of Indian Oil and ONGC.
Recent data suggest that all three institutional classes bought Indian stocks and took their ownership to either record highs or multi-year highs.
As per quarter ended Jun 17, their ownership rose to 40.7 percent, the highest level in history. The QoQ change was the sharpest since March 2012, Morgan Stanley said in a note.
We believe that Indian markets are becoming institutionalized. Domestic mutual funds (DMF) increased their equity holdings for the 12th quarter running, to 5.7 percent, up 44bps QoQ.
Domestic financial institutions (DFI – i.e., insurance and banks) bought equity stakes marginally during the quarter. Their ownership rose to 7.6 percent, up 8bps QoQ, said the Morgan Stanley note.
On the sector front, financials remain an overweight play while healthcare remains an underweight and technology are institutions' biggest positions.