Insurance companies have turned net buyers of Indian equities after eight years. So far this year, domestic institutional investors (DIIS) have purchased stocks worth Rs. 80,000 crore, of which mutual funds (MFS) account for Rs. 33,700 crore, implying net buying by insurers.
Market watchers say this buying has provided boost to the market at a time when foreign portfolio investor (FPI) flows have been choppy and MF investments have moderated owing to a slowdown in investor flows into equity schemes.
Domestic insurers, mainly LIC, stepped up their equity purchases during March and April, taking advantage of the attractive valuations amid the Covid-19-induced market plunge.
The DII pie also includes other local institutions such as pension funds, but MFS and insurance companies make the bulk of the purchases.
As in the past, LIC, the country’s largest life insurer, may have been instrumental in cushioning the market fall this year as well. The insurer says it has pumped in about Rs. 20,000 crore this financial year, mostly in blue-chip stocks.
“LIC, being a long-term investor, is usually sector-agnostic and focuses on diversified investment. However, due to the current pandemic, the focus was on large caps, and the sectors badly affected were avoided,” LIC Managing Director T C Suseel Kumar had told earlier.
Insurers are known to be contra-players – they buy when sentiment is bearish and sell when there is euphoria.
“Insurers this year have got consistent inflows in both ULIPS (unit-linked insurance plans) and traditional plans, some of which has found its way into the equity market. The lower share prices, after the correction in March, may also have dictated flows,” said Mihir Vora, director and chief investment officer at Max Life Insurance.
