LIC cuts exposure to banks, IT firms during Jan-Mar quarter

Taking a contrarian call of sorts, insurance major Life Insurance Corporation of India (LIC) significantly cut its exposure to banking, financial services and other index heavyweight stocks during the three months ended March 2013.

As per Capitaline data, LIC sharply reduced its stake, q-o-q, in state-owned Syndicate Bank (-2.66%, R200 crore), HDFC Bank (-0.19%, R250 crore), IDFC (-1.05%, R230 crore) and Punjab National Bank (-1.14%, R175-200 crore).

The Mumbai-based insurance major also sold its stake in other state-owned banks like Indian Overseas Bank (-1.26%), Bank of Baroda (-0.83%), Bank of India (-0.65%) and Punjab & Sind Bank (-0.38%). Based on the average share price in that period, LIC is believed to have cumulatively sold R2,000 crore worth of shares belonging to banks and NBFCs.

In addition to banks and NBFCs, LIC reduced its stake in companies in fertiliser, IT-services and FMCG sectors.

In case of Infosys, LIC reduced its holding in the March quarter to 5.96% from 7.24% in the quarter ended December. It sold nearly 73.5 lakh shares worth R2,000 crore. The insurance company also reduced its exposure in 3i Infotech by 0.19%. During the period, LIC reduced its stake in HUL by 0.6%, estimated to be worth R600 crore. The insurance major sold 1.3 crore shares during January-March, Capitaline data showed.

Market experts said that LIC is a long-only fund and keeps shuffling its portfolio. However, the insurance major aggressively reduced its holding in certain companies and sectors to support the government?s divestment programme. ?With poor market conditions, the government was not confident in getting the desired response to its divestment programme and needed LIC?s assistance in making the auctions successful,? said an investment banker who preferred to remain anonymous.

LIC emerged as the single-most biggest acquirer of shares offloaded by the government in last year’s divestment. As per Capitaline, exchange disclosures and estimates, LIC was believed to have invested R4,800 crore (nearly $1 billion) of the total R23,778 crore raised by the government in FY13 divestment programme.

Data show LIC?s holding sharply increased in state-owned aluminium producer Nalco, in which, the insurance major invested R236 crore by acquiring 5.25 crore shares in the Nalco OFS. Apart from divestment candidates, LIC increased its exposure in companies like Castrol India (0.06%), GAIL (0.22%), ACC (0.29%), Mastek (0.92%), Cairn India (0.94%), and Glenmark Pharma (1.06%) among others.