India’s largest domestic institutional investor – Life Insurance Corporation of India (LIC India) used the sluggish market conditions in FY12 to increase its exposure to equities. The Big Daddy of insurers invested Rs 49,960 crore during the year as against Rs 43,224 crore in FY11, an increase of 26% year-on-year.
At the same time, a combination of falling equity prices and redemptions shrunk LIC’s unit linked insurance policy (ULIP) portfolio by 20% to Rs 1,55,377 crore as on March 31, 2012, a senior official from the corporation told on condition of anonymity.
“In the subdued equity market ULIP portfolio however, has booked a profit through the sale of equity, thereby registering a growth in the profit by nearly 10% over the previous year. In FY12, our total equity portfolio has recorded a significant appreciation on mark-to-market basis even after booking healthy profit during the year,” said the source.
The corporation which has an investment portfolio of over Rs 8 lakh crore plans to invest around Rs 60,000 crore in the equity market in 2012-13, the official said.
In 2011-12, the 30-share BSE Sensex dropped 10.50% as against a rise of nearly 11% in 2010-11. The sharp fall was account of global economic weakening coupled with domestic factors like higher rate of inflation and low GDP growth. The corporation’s total equity portfolio stands more than Rs 8 lakh crore.
During the financial year LIC, a wholly government owned entity, increased its stake in many capital-starved public sector banks. The widening fiscal deficit prompted the government of India, a major stake holder in those banks, to devise a strategy to infuse capital by way of hiking LIC’s stake.
For example, LIC raised stake in Allahabad Bank to 12.93% in Q4 compared with 7.95% in Q1, FY12. During the same period, it upped its holdings from 3.14% to 12.36% in Union Bank of India ; from 7.93% to 10% in Uco Bank ; from 10.43% to 14.53% in Syndicate Bank, among others.
Similarly, LIC played a key pivotal role in the ONGC ‘s share sale in March, 2012. It reportedly acquired 37.71 crore shares of the 42.04 crore shares on offer. LIC’s ownership in the company rose from 3.09% to 7.77% in between June and March quarter, FY12. This decision drew criticism from market participants, who alleged that LIC was forced to bail out the government.
Besides, two private banks also figured in the investment list of LIC during the same period. They included Axis Bank (from 0.86% to 9.69%) and Yes Bank (from 1.90% to 2.38%).