Life Insurance Corp. of India (LIC) booked a record Rs₹37,000 crores to take advantage of share sales in 2020-21, the very best in its 65-year history because the stock exchange reached record highs. the newest profit may be a 44.4% jump against its ₹25,625 crores take advantage of stock sales in fiscal 2020.
During the financial year, India’s largest institutional investor purchased shares amounting to ₹94,000 crores, also its highest ever.
“We booked maximum profit by churning the equity portfolio, counting on available opportunities, and also to take care of a long-term high-performing portfolio. The sale has been across sectors and driven by our specialise in generating reasonable profits and available market opportunities,” director Mukesh Kumar Gupta said in an email reply to Mint.
India’s largest life insurer is additionally the most important investor in its markets, managing assets worth around ₹34 trillion. it’s been the government’s biggest financial backer, especially in its divestment programs.
LIC’s profits primarily come from the sale of shares in its large, non-linked portfolio, which incorporates traditional life assurance policies.
The record profit increases LIC’s ability to pay better bonuses and returns to policyholders and better dividends to the government; expands LIC’s investible surplus which may support stock markets at uncertain times, and helps attract new customers thanks to its ability to get such profits.
“The corporation’s investment strategy is to accumulate and maintain quality assets… We also churn the portfolio to understand some profits and also switch some stocks. Our investment strategy aims to satisfy the reasonable expectations of policyholders alongside the security of the funds,” said Gupta.
The bumper gains are partly helped by a resurgent stock exchange. “We cash in of emerging market opportunities to enter and exit companies to get profits also on creating a robust equity portfolio to offer reasonable returns over a long-term horizon,” Gupta said.
LIC’s record profits came from significant churning in equity portfolio within the wake of uncertainties arising out of widespread covid crisis impacting industries and corporations during which the state-run insurance giant has traditionally been allocating billions of rupees over decades.
Sectors, including infrastructure, land, financial services, durables, automobile, metals and mining, hardware, entertainment, and services, are badly hit. This has limited the upside for the stocks of companies from these sectors. Traditionally, in these sectors, LIC has been predominantly investing most of its funds from its investible surplus.
LIC has been reducing investment within these sectors and shifting focus to new sectors where it wont to have a little exposure in the pre-covid era.
According to Mint research, LIC has cut its exposure drastically within the infrastructure industry, one among the worst-affected sectors. LIC’s investment in infrastructure decreased from Rs₹24,000 crores in March 2020 to only Rs₹4,100 crore now. within the IT and software sector, LIC’s investment has come down from Rs₹55,000 crores in March 2020 to Rs₹11,600 crores now, since businesses of most IT firms are down thanks to the demand slowdown within the US and Europe, with offices closing down.
On the opposite hand, the pharmaceutical industry, which has gained thanks to the pandemic, has attracted LIC the foremost as an investor. Its investment in pharma is now at over Rs₹37,000 crores against Rs 17,700 crores last year. As demand for FMCG products shot up with people rushing to shop for more personal and residential care products, LIC has increased investment within the FMCG industry from ₹Rs 15,000 crores last March to around Rs 50,000 crores now.