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| Insurers likely to invest Rs 1.75 lakh cr in equities |
| T E Narasimhan / Chennai Jul 17, 2009, 00:25 IST |
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The Indian insurance industry is likely to pump in around $25-30 billion (around Rs 1.25-1.75 lakh crore) in the country’s equity market.
Nischal Maheshwari, head (research), Edelweiss Research, a Mumbai-based research firm, said that the cash flow would happen in FY10 and FY11. The firm has derived this figure assuming the industry’s growth rate at 17-18 per cent. He noted that currently the industry was growing at 25-30 per cent.
Edelweiss has brought out a study titled “India strategy: Governance and capital re-igniting growth”. According to the report, the near-term occasional dips in the equity market were opportunities for long-term investments. Maheshwari noted that insurance companies were looking at investing in large-cap funds and Nifty stocks.
| MARKET WISE |
| |
Premium
(in $ billion) |
Premium
growth
(% Y-o-Y) |
% Invested
in equities |
Investments
in equities
($ billion) |
| 2005 |
21.5 |
— |
— |
— |
| 2006 |
30.1 |
40.2 |
— |
— |
| 2007 |
37.9 |
25.8 |
26.5 |
10.0 |
| 2008 |
54.4 |
4.4 |
22.0 |
12.0 |
| 2009 |
54.0 |
-0.8 |
15.0 |
8.1 |
| 2010E* |
64.8 |
15.0 |
20.0 |
13.0 |
| 2011E* |
78.1 |
15.0 |
20.0 |
15.6 |
| E=Estimated Source: Edelweiss Research |
These companies were the largest investor in Indian equities, ahead of foreign institutional investors and mutual funds. Among them, life insurers, especially the country’s largest insurer Life Insurance Corporation of India (LIC), were the biggest investors.
During the financial year ended March 31, 2009, insurance companies had purchased equities worth Rs 53,000 crore as against Rs 31,000 crore in the previous year, an increase of around 70 per cent, according to market reports.
Insurers felt that the market sentiment was improving, which would result in an increased demand for unit-linked insurance policies (ULIPs). Nearly 90-95 per cent of ULIP funds are deployed in equities. This would, in turn, increase life insurers’ investment in the equity market.
Recently, Business Standard had reported that LIC intended to invest around Rs 105,000 crore in non-convertible debentures and equities in the current financial year, nearly 20 per cent more than the Rs 88,000 crore it invested in these instruments in 2008-09.
In 2008-09, LIC had put Rs 40,300 crore in the equity market. LIC’s Managing Director Thomas Mathew T was quoted saying that “we believe the bull run will continue. Given the positive sentiments following the election of a stable government, our investment in equity and equity-related instruments will also go up”.
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