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LIC Buys Double as Prices Dive - 10 Aug 2011

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LIC Buys Double as Prices Dive

10-Aug-2011

Life Insurance Corp of India, the government's institution of choice to stabilise the stock market whenever it gets wobbly, has more than doubled stock purchases in the past three days as the global debt worry-triggered selloff made valuations attractive.

LIC, the country's biggest investor with stakes in L&T, Axis Bank and Grasim, will raise its secondary market purchases this fiscal as IPOs dry up with promoters not keen to sell shares at lower valuations. "We have been buying in the past few days,'' said a LIC executive involved in decisionmaking. "With the market correcting and not many public issues coming up, we would be investing more in secondary market," said the person who did not want to be identified.

LIC to Invest . 50k Cr More

LIC, which had been buying stocks for an average of . 120 crore in the first four months of the fiscal, raised it to . 330 crore in the last three days. The official declined to disclose which were the stocks that were bought. It had invested . 10,000 crore in the first four months and will invest . 50,000 crore in the rest of the year. Domestic funds have been buying shares in the last three days when the benchmark Sensex fell as global investors turned risk averse after the US credit situation worsened. Although, the US administration managed a compromise on raising the debt ceiling, the downgrade by Standard & Poor's and scramble over worsening European credit crisis made investors flee risk assets. The corporation had set an initial target of up to . 15,000 crore for investments in the primary market which may not be utilised. The government, which aimed to raise . 40,000 crore from share sales, may also miss the target. In sales from government, LIC is the biggest buyer many times, including in Coal India and follow on offers such as NTPC and Power Finance Corp.

Equity purchases could rise if scarred investors choose unit linked insurance policies instead of directly investing in stock markets. "Investment in equity market depends on fund flow,'' said the official. "If more money comes in Ulip, equity investments will be high." LIC's total premium income was . 2 lakh crore in fiscal 2010-11, of which . 40,000 crore was invested in equities. It expects the income to rise 10% this year to . 2.2 lakh crore. It is also looking to sell off 50 illiquid stocks this year, said the official. It has already exited from 10-12 illiquid stocks. Some of the illiquid stocks include FGP, Thana Electric, Simplex Mills, Shalimar Wires and High Energy Batteries that trade less than a thousand shares a day.

LIC will be able to trade in stocks without the broker's intervention using the direct market access, like most foreign institutional investors, and will be the first domestic institutional investor to use the system. The corporation has started using implementing the DMA facility. This facility will allow LIC to offer clients' direct access to the exchange trading system through the broker's infrastructure without manual intervention by the broker.

Source : ET
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