Even as the benchmark Nifty rose 5 percent in the first three months of 2021, the country’s biggest institutional investor, Life Insurance Corp. of India (LIC), reduced its interest in publicly listed firms, as the country’s largest insurer booked profits to take advantage of an equity rally in the previous year.
According to data collected by Prime Database, the insurer’s shareholding fell to an all-time low of 3.66 percent of the market cap of all publicly listed firms at the end of March. Since June of last year, LIC has been reducing its exposure to publicly traded firms.
At the end of December, the state-run insurer owned 3.7 percent of these firms, up from 3.88 percent at the end of March last year. In June 2012, LIC’s shareholding in these businesses reached a new high of 5 percent. Companies in which the LIC has a stake of more than 1 percent are included in the LIC shareholding results.
However, by the end of March, LIC’s holdings in these companies had reached an all-time high of 7.24 lakh crore, up 6.3 percent from the previous quarter. “The key reason for LIC’s reduction in stake in the businesses is profit-booking. LIC continues to command the lion’s share of investments in equities among insurance companies, with a 76 percent share”, Pranav Haldea, managing director of Prime Database Group said.
Rail Vikas Nigam Ltd, New India Assurance, Bajaj Auto, Tata Communications, Jammu and Kashmir Bank, Adani Total Gas, Alembic Pharmaceuticals, PI Industries, Aurobindo Pharma, and Biocon saw the largest percentage increase in LIC’s holdings in the March quarter. An LIC spokesperson did not immediately respond to a request for comment.
However, as of March 31, all insurance firms’ equity assets had fallen to a five-year low of 4.8 percent. By the end of March, mutual funds’ stock holdings had dropped for the fourth quarter in a row, to 7.23 percent. As a result, aggregate holdings of domestic institutional investors (DIIs) dropped to a 10-year low of 13.03 percent in the March quarter, down from 14.42 percent the previous quarter. In the three months ended March 31, DIIs, which include mutual funds, insurance firms, banks, financial institutions, and pension funds, were net sellers of local shares worth Rs 23,124 crore.
Despite net inflows of Rs 55,741 crore during the year, foreign institutional investors (FIIs) held a 22.60 percent stake as of March 31, down from 22.74 percent at the end of the previous quarter. FII holdings were at 21.17 percent in March of last year.
At the end of March, the top 10 percent of companies by market capitalization accounted for 91.55 percent of overall FII holdings (down from 92.25 percent as of December 31), 85.15 percent of overall DII holdings (down from 86.69 percent in December), and 82.29 percent of overall mutual fund holdings (down from 83.72 percent as of December 31), indicating high levels of institutional concentration.
Meanwhile, retail holdings in NSE-listed companies (individuals with up to 2 lakh shares) remained unchanged at 6.9 percent as of March 31 from the previous quarter, but increased from 6.54 percent the year before. In the March quarter, retail holdings increased in 863 NSE-listed firms. During the same time span, the average stock price of these companies rose by 5.51 percent.
