 "LIC hikes stake in blue-chips even as others dump stocks")
Since the 10 percent cap on equity exposure came into force in 2008, the country’s largest insurer Life Insurance Corporation has been lobbying for a relaxation, as it has exhausted the limit in various blue-chip stocks.
At a time when domestic funds are on a selling spree due to the weak market sentiment, LIC has invested around Rs 10,000 crore in equities during the first quarter of financial year 2012, of which Rs 1000 crore has been invested in each of these frontline - RIL, Infosys, NTPC, Bajaj Auto and Cairn India.
LIC saw its holding in the IT major Infosys rise from 4.9 percent to 6.3 percent during the quarter ended June 30, 2012, and raised its stake in RIL to 7.77 percent from 7.09 percent.
The insurers investment philosophy attracted criticism after it bailed out government’s disinvestment plan by buying out Rs 12,000-crore worth of shares in Oil & Natural Gas Corp.
Moreover, the insurer’s holding in Corporation Bank, ( 20 percent), Punjab National Bank (14.2 percent), SBI ( 11.1 percent) Syndicate Bank ( 10.4 percent) and Allahabad Bank( 10.6 percent) already exceed the 10 percent cap imposed on it as itstepped in for the cash-strapped government and bought stakes in many state-run lenders. As a Firstpost article said earlier, LIC’s bank holding are simply about transferring money from LIC to a bankrupt government.
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However, increasing this equity exposure limit to 20 percent for all life insurers may just provide a boost to the equity markets as it would mean more flow of money and facilitate the government’s divestment plan.
A report in the Business Standard says this move to hike stake in front lines seems to be based on the government’s decision to allow equity exposure of Life Insurance Corporation (LIC) in a single company to be increased to 20 percent.“The new finance minister has already gone on record to double the investment limits of insurance companies in the capital market, which endorses the fact that government policies are in favour of LIC investments,” Kishor Ostwal, chairman and managing director, CNI Research Ltd, told the newspaper.