Among DIIs, insurance companies raised their exposure in equities over the last 15 days with state-owned insurer Life Insurance Corporation (LIC) alone estimated to have picked up shares worth about R3,000 crore in June. Mutual funds, meantime, have sold shares worth more than R300 crore in June. The net buying from domestic players helped cap the fall of the BSE benchmark index Sensex, which has fallen about 1.8% in June.
According to players in the insurance sector, buying in equities has picked up in response to recent government policy decisions which could help improve the outlook for the economy. Measures such as regulating the coal industry and hiking gas prices are boosting investor sentiment. The Reserve Bank of India (RBI) has also managed to cut 125 bps since April 2012. Apart from this, it makes sense to invest when markets are down as stocks can be picked up at attractive prices, said Dr Nirakar Pradhan, chief investment officer, Future Generali India Life Insurance.
DIIs have been largely focussed on beaten-down blue-chip stocks such as BHEL (-13%), Tata Motors (10.21%), NTPC (-6.93%) and Coal India (-6.77%), which are now available at attractive valuations according to experts.
Market observers believe that the fall in stock prices has come at a good time for the insurance firms as most companies announce their dividends around this time. Insurance companies were net sellers in April-May, but are now seeing good opportunities in the equity market. Unlike MFs, they are immune to redemption pressures, said RK Gupta, managing director, Taurus Wealth Management.
Selling from mutual funds, however, continues unabated. Experts attribute MFs selling spree to redemption pressure and panic on the Street, especially among retail investors. Small-time investors dont take chances when markets start losing momentum. They are quick to book profits, which is why MFs have been selling, said V Balasubramian, fund manager, IDBI Asset Management. MFs have sold more than R12,000 crore worth of shares in the current calendar year.