Life Insurance Corporation of India (LIC), India’s largest institutional investor, raised bets on banking as well as select auto, gas, retail and midcap IT stocks during March quarter, which saw domestic equity benchmark Sensex jump 7.22 per cent to 38,672 as of March 29 from 36,068 on December 31, 2018.
At the same time, LIC did some major portfolio overhaul, offloading shares of several telecom, metals, power generation, pharma, hotels, chemicals and cement companies.
The banking sector emerged a tempting bet during the quarter on hopes of earnings recovery and likely bottoming out of NPA provisioning. The insurance behemoth seems to have lapped up a number of banking stocks – both largecap and midcap. Shareholding data of HDFC Bank, Kotak Mahindra BankNSE 0.64 %, Federal Bank and IDBI Bank all showed a spike in LIC holding.
LIC also upped stake in Indian Overseas Bank and Syndicate Bank, but offloaded shares in Axis Bank, ICICI Bank and SBI.
During the quarter, LIC completed the acquisition of 51 per cent controlling stake in IDBI Bank. RBI in March categorised IDBI Bank as a private lender for regulatory purposes with effect from January 21, 2019. LIC held 44.31 per cent stake in the bank as of December 31.
Elara Capital in a report said there has been a structural shift in the private banking space in the past few quarters, wherein private lenders steadily raised their term deposit (TD) rates.
“This is because private banks’ credit growth is outperforming CASA deposit growth. We expect credit growth of 20 per cent YoY for Q4FY19E against CASA deposit growth of 12 per cent YoY for private banks,” the brokerage said
The domestic equity market was upbeat through much of March quarter amid sustained inflows from foreign institutional investors on hopes of the Narendra Modi government coming back to power.
Beyond banking, LIC also increased stake in select auto firms like Bajaj Auto, Hindustan Motors and M&M. LIC was not among key shareholders in Hindustan Motors as of December 31, 2018.
At the same time, it offloaded some stakes in the beaten-down Tata Motors. LIC held 5.10 per cent stake in the auto major as of March 2019 against 5.17 per cent at the end of December quarter.
Tata Motors earlier this month reported a 5 per cent decline in March sales globally, including that of Jaguar Land Rover (JLR) vehicles, at 1,45,459 units. It had sold 1,53,156 units in March 2018.
Data available with corporate database Ace Equity till April 22 showed LIC increased stakes in more than 40 companies in March quarter, but reduced it in nearly 60 others.
India’s leading gas players Gail and Indraprastha Gas saw a lot of interest from the domestic institutional investor.
LIC also picked up over 1 per cent stake in Linde India, NIIT Technologies, UPL and Spencer’s Retail during the quarter. It was not among the key shareholders in these companies at December end.
In the pharma space, LIC sold shares of Dr Reddy’s Laboratories, GSK Pharma, Glenmark Pharma, Lupin and SanofiNSE -0.56 % India, but bought additional shares in Cipla and Piramal Enterprises.
Ace investor Rakesh Jhunjhunwala recently said that the price erosion in the pharma sector is behind us. “Indian pharma market will tend to grow faster than it has grown. Pharma is not a market where demand can go down. You must know that 40-45 per cent of all medicines used in the US is made in India. I think it is a sunrise industry, it is not a sunset industry, it can never be a sunset industry,” he said.
Crisil, Tata Coffee, Bombay DyeingNSE 1.10 %, Indo Rama, Adani Ports, ONGC, OFSS, Rajesh Exports, Tata Chemicals, Exide IndustriesNSE -0.23 %, Century Textiles, UltraTech CementNSE 3.61 % and Gillette India were among the other stocks in which LIC increased stake during the quarter.
However, it reduced stake in cement players ACC, Ambuja Cement, Heidelberg Cement, Jaiprakash Associates and India Cement and several hotel stocks including EIH, Hotel Leela Ventures, India Tourism Development Corporation and The Indian Hotels.
In the telecom space, LIC brought down its stake in Bharti Airtel to 3.72 per cent from 3.73 per cent in MTNL from 19.02 per cent to 18.49 per cent and in Reliance Communications from 5.97 per cent to 5.94 per cent.