Increase in LIC investment cap a short-term positive, say experts
According to financial services secretary DK Mittal, LIC can invest upto 30% of a company’s paid-up capital against earlier 10%.
Market observers cite the measure as the government’s resort to achieve its divestment target in order to manage country’s fiscal deficit that has remained a major concern for the global investors.
As per Vikas Khemani, president and head- institutional equities with Edelweiss Securities, even as the the step reasserts the policy makers’ commitment in achieving its fiscal deficit targets, it may not impact the market sentiment significantly. “It may be regarded symbolically negative because it is would not be a conventional divestment process,” he added.
Although the government had pegged fiscal deficit for the current fiscal at 5.1% of the GDP in the Budget, it has revised the target to 5.3% due to subdued revenue collection and rising fuel and food subsidy bills. In wake of these limitations, it is estimated that India may miss its fiscal deficit target. In 2011-12, the fiscal deficit stood at 5.8% of the GDP.
“This may be a
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