LIC to take on market volatility

Written by Sitanshu Swain | Kumud Das | Mumbai | Updated: Aug 29 2011, 09:36am hrs
The countrys largest capital market player Life Insurance Corporation (LIC), with over R12 lakh crore assets, is ready to provide support to reduce volatility in the capital market. The Sensex tumbled below the 16,000-mark for the first time in 18 months last Friday and registered its fifth straight weekly loss.

Speaking to FE, LIC acting chairman DK Mehrotra said the market would remain range bound and the corporation was finding buying opportunities.

Though little cautious, with thorough due-diligence, we are investing in the markets. For investment, we look at any sector where there is a good track record. Though mostly, market movement is done by FIIs, we have our own contribution, said Mehrotra.

In 2010-11, LIC made an overall investment of R1.90 lakh crore. This year too, LIC is planning to invest R2 lakh crore, according to Mehrotra

LIC had invested around R12,000 crore in equity till August 13, while selling equity worth R6,000 crore during the same period. In August, so far the corporation has bought around R1,500-2,000 crore of equity. We are also investing in NCD and corporate bonds. We are looking at liquid funds also to reap good returns. However, we have not invested much in the infrastructure sector. We could invest only 13% of our allocated money in infrastructure during the last fiscal as against the limit of 15%, said Mehrotra.

Admitting that unit linked insurance plans (Ulips) are not doing well due to the current volatile market, Mehrotra said LIC now is focusing more on conventional products. In case monsoon is good and second quarter results are better, interest rates are set to soften.

During 2010-11, LIC invested R43,000 crore in equity markets and by churning its portfolio the corporation could book a profit of around R17,000 crore in 2010-11 as against R9,400 crore in 2009-10.

Other life insurers are also sensing buying opportunities in the current market situation. Shashi Krishnan, CIO, Bajaj Allianz Life Insurance said ongoing market volatility has provided the company with opportunity to buy. Currently, the insurers total assets under management (AUM) stands at R33,000 crore

From premium mobilised through Ulip Bajaj Allianz Life Insurance has invested 85% in equity and the balance 15% in debt. Our strategy is try and find good long and short term investment opportunities. Short-term volatility may be there, but it will be short-lived, he said.

Prashant Sharma, chief investment officer (CIO), Max NY Life Insurance said the company has been little cautious on market for past several weeks. Now we have started deploying our cash. We have deployed a significant amount of sum in the banking sector funds too. There may be short-term volatility in the market due to conversion. It will become attractive in the medium term. We have got the ratio of 60:40 for our equity and debt portfolio.

Nirakar Padhan, CIO, Future Generali Life Insurance said that the company has reduced its high risk portfolio by 5-10%.

Currently, 22 life insurers have over R15 lakh crore of investment portfolio out of which R5 lakh crore have been invested in equityand rest deployed in government securities, said Sandeep Bakshi, CEO & MD, ICICI Life Insurance.