Life insurers to invest Rs 5,000 cr in equities

Insurance companies are expected to invest over Rs 5,000 crore in the Indian stock market in March.

Though the growth in new sales has dipped for life insurers, who are now the biggest institutional investors in the Indian stock markets, the total investment in equities is around the same level as last year. Since policies sold last year are continuing, the incremental investment may be a little lower as premium collected from the sale of new policies is growing at a slower pace.

Insurers have not given up hope of additional premium mop-up in March, which accounts for almost a quarter of their annual sales.

In 2007-08, insurers invested Rs 65,000 crore in the stock markets. In January, chief financial officers at life insurance firms said they have parked around Rs 8,000 crore in equities during January and February. Between April and December, investment by insurance companies is estimated at Rs 45,000-50,000 crore, said Max New York Life Vice-President (Investment) Prashant Sharma.

“There has been a shift away from equities but it is marginal,” said Reliance Life Insurance CEO P Nandagopal.

Life Insurance Corporation of India alone was looking to invest around Rs 13,000 crore in equities between January and March. “The valuations are attractive and interest rates have come down giving more room for equity investment. Equity will remain attractive for the next financial year also,” added Sharma.

According to the research report by Citigroup, insurance companies are staying away from information technology in the last six months but they are concentrating on consumer goods and utilities.

Almost 80 per cent of the first year premium mobilised through the sale of unit-linked plans is invested in equities, while 10-20 per cent of the premium from traditional products is parked there.