LIC coffers swell by Rs 10,000 crore as automobile stocks zoom

Value of holding in five auto companies up 32% to Rs 42,000 crore since April

Life Insurance Corporation of India (LIC), the country’s largest institutional investor, has turned richer by Rs 10,000 crore in the first five months of the current financial year, thanks to a strong rally in the stocks of top five automobile companies. The value of LIC’s stake in Maruti Suzuki, Tata Motors, Mahindra & Mahindra, and Hero  MotoCorp and Bajaj Auto has zoomed 32 per cent to Rs 42,000 crore since April 1. The value of LIC’s equity investments (total) as of March 2016 was Rs 5,95,389 crore.

Positive sentiments on account of good rainfall and higher government wages have triggered rally in these stocks. The S&P BSE Auto Index is the second best performer among the major sectoral indices with a 25 per cent surge this year, creating wealth for investors. Metal was the only index that delivered a greater appreciation of 33 per cent. The benchmark BSE Sensex has surged 12.33 per cent, while its large-cap index has gained 14.32 per cent. The small-cap and mid-cap indices have appreciated 19 per cent and 24 per cent, respectively.

Four of these five stocks (barring Tata Motors) have hit their all-time high in the past one month. The share price of three companies — Maruti Suzuki, Hero and Bajaj — hit their all-time high in the past week. For LIC, the sharpest gain has come from Tata Motors, whose stock has run up  45 per cent this financial year on a revival of Jaguar Land Rover sales. The next best performer has been Maruti.

The country’s largest carmaker has seen its stock run 38 per cent (since April 1) on increasing sales and profitability. The remaining three stocks have gained between 21 per cent and 24 per cent this year.

LIC, which has been an active investor in the automobile sector, has been raising its stake in some of these companies in the past year when some of these stocks, especially two-wheeler makers, were under pressure.

In Maruti Suzuki, for instance, its stake along with its funds stood at 6.88 per cent as on June 30, against 5.7 per cent a year ago. In Hero MotoCorp, it has increased stake to 6.24 per cent from 4.77 per cent in the same period. In Bajaj Auto, too, the stake has been increased to 5.67 per cent from 4.9 per cent. Both the two-wheeler makers were impacted in the past two years due to a sub-normal rainfall that hit rural purchases of motorcycles. The increased shareholding along with an appreciated value has expanded gains for LIC.

All these companies have seen a high single-digit to double-digit growth in domestic sales this year on improved sentiments. Companies have also been able to take some price increase. Analysts also say there is a lack of good investment opportunities in the equity market.

“Stocks in sectors like information technology, telecom, health care and commodities have not delivered in recent years. But, the automobile consumption growth story is strong. A good monsoon will help the car and two-wheeler industry post a growth close to double digit,” said a Delhi-based equity analyst.