Insurance firms' stake in BSE 500 at all-time high

Last Updated: Wed, Aug 15, 2012 05:36 hrs

Holdings of insurance companies in Indian stocks touched an all-time high level in the June quarter, even as most mutual funds continued to pare their holdings.

Driven by robust investments, the average shareholding (based on value) of insurance firms in BSE 500 stocks, which comprises 95 per cent of the total market capitalisation, rose 11 basis points to 5.9 per cent at the end of the June quarter.

According to estimates, insurance companies were net buyers to the tune of Rs 3,500 crore during April-June. Meanwhile, foreign institutional investors (FIIs) sold shares worth Rs 1,958 crore and mutual funds sold shares worth Rs 918 crore during this period.

Experts said the March quarter was the best for insurance companies in terms of incremental flows.

Insurance holdings in BSE 500 stocks is at an all-time high of 5.9% 
(in Rs lakh cr)

Insurance companies stake in BSE 500

BSE 500 m-cap In value In %
Mar,'11 64.52 3.48 5.40
Jun,'11 63.29 3.39 5.35
Sep,'11 55.98 3.04 5.42
Dec,'11 50.38 2.90 5.75
Mar,'12 59.87 3.47 5.79
Jun,'12 58.14 3.43 5.90
Compiled by BS Research Bureau Source: Capitaline

They added the bulk of investments from the sector came from insurance behemoth Life Insurance Corp of India (LIC), which controls more than 80 per cent of the assets under management of the sector. Gross buying of LIC in Indian stocks during the June quarter was in the range of Rs 5,000 and Rs 6,000 crore.

"Given the volatility, insurance companies try to deploy funds whenever there is any correction," said Sudhakar Shanbhag, chief investment officer, Kotak Life Insurance. "As long term investors, we are hoping things will improve on the macro front, so that markets deliver good returns," he added.

Interestingly, unlike FIIs, who turned defensive during the June quarter, insurance companies adopted an aggressive stance by increasing their exposure to high-beta sectors like financials and industries.

According to JP Morgan, insurance companies increased their holdings in most sectors with the exception of consumer staples and healthcare. FIIs, on the other hand, increased their holdings in consumer staples, utilities and health care sectors, while they reduced holding in industrials, IT services and financials sectors.

Some of the companies in which insurance firms upped their stake are Bank of Baroda, Rural Electrification Corp, Infosys and Bajaj Auto, while they pared their holdings in firms such as Mahindra Satyam, Tata Motors, Zee and Bharat Petroleum Corp.

Ownership of FIIs in BSE 500 dipped by a marginal 10 basis points to 15.7 per cent and mutual fund holdings came off even further to just 3.7 per cent, according to an analysis done by JP Morgan.

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