State-run Life Insurance Corp. of India or LIC, the country’s largest institutional investor, nearly doubled its profit from sale of equity investments in 2016-17 on the back of rising stock markets. According to two people familiar with LIC’s investment strategies, the life insurer booked profits to the tune of Rs21,000 crore in fiscal 2017 compared to around Rs11,000 crore the previous year.
In 2016-17, India’s equity benchmark, the Sensex, gained 16.9%. In the March quarter, the gauge rose 11.24%.
One of the two people said on condition of anonymity that since the stock market was gaining in most trading sessions during 2016-17, LIC got more opportunities to book profits rather than taking fresh positions in listed companies, which in turn led to higher profit booking.
“LIC is a contrarian investor,” said Santosh Singh, head of research at Haitong Securities. “It follows a counter-cyclical strategy. When the market is expensive, LIC books profits in equities. Following this strategy LIC may be able to generate some alpha over markets and outperform in the long run.”
In 2016-17, Indian equities logged more daily gains than losses. The Sensex gained in 132 trading sessions and was down in 115 sessions.
That LIC has sold a lot is supported by the fact that all domestic institutional investors together bought only a net Rs27,900 crore of equities in fiscal 2016-17.(News Courtesy :livemint)