Contrarian bets earn LIC gains of ₹65,500cr from top 10 firms

As of 31 March, the top 10 listed companies made up almost 50% of LIC’s portfolio. In contrast, benchmark indices National Stock Exchange’s Nifty and Sensex declined by 1.76% and 0.49% in the past fiscal year, respectively.

LIC’s contrarian investment approach has enabled the insurer to register gains even amid a market decline, a feat that many fund managers might struggle to replicate, said a Mumbai-based analyst who declined to be named.

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“LIC accumulated shares during market dips when others were selling. On the other hand, LIC booked profits whenever the market was rising, typically when many investors bought. This ability to take a contrarian call gives LIC a unique advantage,” a person close to the insurer said, requesting anonymity.

A Mint analysis showed that the life insurer gained significantly from its investment in Reliance Industries Ltd, ITC Ltd, Tata Consultancy Services Ltd, ICICI Bank Ltd, Infosys Ltd, State Bank of India, Larsen & Toubro, HDFC Bank Ltd and Housing Development Finance Corp, while in Hindustan Unilever Ltd, the insurer made a marginal notional loss.

Based on the net change in the annual volume-weighted average price of LIC’s equity holdings during FY23, the insurer accrued a net gain of at least ₹65,494 crore from India’s top 10 listed companies.

Insurance industry experts suggest that LIC’s mark-to-market gains from its investments may help provide substantial bonuses to market-linked policyholders, higher investment profits, and potentially more dividends for LIC’s shareholders, including the government.

As of 31 March, the total value of LIC’s holdings in the top 10 companies cited above is estimated to be at least ₹4.65 trillion. LIC’s total equity holding (from policyholders’ funds) in about 300-odd listed firms is estimated to be at least ₹9 trillion.

In FY23, LIC recorded substantial gains in its investments in top-listed firms. Compared to FY22, LIC’s investment value in Reliance Industries rose by ₹13,121.4 crore, ITC Ltd surged by ₹17,994 crore, and TCS reported a gain of ₹5,926.7 crore. LIC’s investment value in ICICI Bank rose by ₹4,920 crore, while Infosys saw a gain of ₹2,662.8 crore. Similarly, LIC’s investments in SBI, L&T, HDFC Bank, and HDFC also registered notable gains. In Hindustan Unilever, LIC’s investment value saw a loss of ₹1,379.7 crore.

To take advantage of price movements, LIC has been seen to be changing its shareholding in the top 10 firms. In RIL, for instance, the insurer’s holding changed from 413.54 million at the end of March 2022 to 429.75 million as of now; in ITC, the shareholding changed from 1.95 billion at the end of March 2022 to 1.89 billion now.

An email sent to a spokesperson for LIC remained unanswered.

LIC plans to invest a record ₹2.4 trillion across markets, including shares of locally traded companies this fiscal year.Apart from supporting markets, this will not only be the largest ever investment by LIC but also may help it in maximizing returns for policyholders and profits for shareholders and also work as a vital support system for Indian markets in FY24.

Around 35% of the total investment, or ₹80,000-85,000 crore, could be allocated in shares of listed companies in India in FY24.

LIC’s record investment plan comes at a time foreign investors are pulling out of most emerging markets, including India, because of a risk-off sentiment.

Emerging markets assets are sensitive to US monetary policy changes as higher interest rates make riskier assets less attractive to investors. They also lead to a stronger dollar, making it dearer for emerging nations to import goods and service debts.

In January and February, net outflows by FPIs were at ₹28,852 crore and ₹5,294 crore, respectively.

Even though net inflows by FPIs stood at ₹7,233 crore (due to the investment by US-based GQG partners in Adani Group firms) in March, FPIs continue to be net sellers of Indian equities to the tune of ₹26,913 crore year-to-date.

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