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Life Insurance Corporation of India sure has a yen for banking sector stocks. In the October-December 2011 period, India's largest life insurance company substantially upped stakes in State Bank of India, Punjab National Bank, Bank of Baroda and HDFC Bank.
As on December-end 2011, the life insurance behemoth had raised its shareholding in SBI to 12.76 per cent from 7.36 per cent as on September-end 2011; PNB (to 8.54 per cent from 3.57 per cent); Bank of Baroda (to 8.04 per cent from 6.99 per cent); and HDFC Bank (to 6.32 per cent from 3.29 per cent).
During the reporting three-month period, the BSE's Banking Index (Bankex), comprising 14 banks, saw a steeper fall, compared to the broader benchmark BSE Sensex. While the Sensex fell 5 per cent, the Bankex was down 15 per cent.
Cheap valuation
“With the banking index (Bankex) falling steeper than the benchmark BSE Sensex, bank stocks were available at cheap valuation during the October-December 2011 period. So, LIC may have made the most of the pickings in the banking sector,” said Mr Anuj Jain, Senior Manager, CARE Ratings.
Historically, LIC has been investing in the equity market when it tanks and booking profits when it goes up, acting as a sort of counterbalance to the investment actions of foreign institutional investors, say analysts.
After the Government, LIC is the single largest shareholder in majority of the public sector banks (PSBs). The insurer continues to hold 23.75 per cent stake in Corporation Bank and 8.87 per cent in Oriental bank of Commerce. It has stakes in 27 public and private sector banks.
The other banks in which LIC has increased its stake are: ICICI Bank (to 10.12 per cent from 9.39 per cent); Allahabad Bank (to 8.65 per cent from 8.11 per cent); UCO Bank (to 8.44 per cent from 7.96 per cent); Union Bank of India (to 7.81 per cent from 7.21 per cent); Canara Bank (to 4.97 per cent from 4.74 per cent); Andhra Bank (to 6.05 per cent from 5.36 per cent); and Yes Bank (to 2.39 per cent from 2.07 per cent).
Reduces stake in some
LIC has pared investment in three PSBs: Bank of India (to 8.93 per cent from 9.32 per cent); Syndicate Bank (to 10.27 per cent from 10.43 per cent) and Central Bank of India (to nil from 3.68 per cent).
Despite the slowdown in the life insurance industry, in the current fiscal LIC plans to invest about Rs 45,000 crore, said Mr D. K. Mehrotra, current-in-charge Chairman last month. LIC invested about Rs 43,000 crore in equities last fiscal.
The state-run life insurer has already invested Rs 25,000 crore from April to November 2011.
“Our total investment (including debt) last year was Rs 1.95 lakh crore. We will maintain that despite the slowdown in the life insurance industry. We have continued to pick up some good scrips this year as well,” said Mr Mehrotra.
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