LIC churns portfolio in December quarter

Pulls out mainly from private companies; select PSUs saw the insurer raise its stake

At a time when most analysts are hopeful about equities, Life Insurance Corporation of India (LIC) has used the recent market rally to cut its exposure to frontline stocks, especially those in the information technology (IT), banking, automobiles, telecom and oil & gas sectors.

The state-owned insurance giant offloaded equity shares worth about Rs 15,000 crore in about 30 companies from the BSE 100 index during the quarter ended December 2013. The benchmark indices rallied about 10 per cent during the quarter. Compared to the September quarter, LIC reduced its holding in 37 blue-chip companies in the December quarter, according to an analysis of the shareholding pattern of 80 companies in the BSE 100 index.

Rahul Arora, chief executive officer (institutional equities) at Nirmal Bang, says, “A lot of public sector disinvestments have been planned and if these aren’t priced attractively, historically, we have seen LIC comes to bail out the issue. This includes banks’ secondary offerings. Another reason for LIC to exit these counters could be pure profit-booking, after the sharp run-up seen in these stocks, especially the IT counters.”

LIC bought shares of Rs 3,200 crore in 18 blue-chip companies, resulting in a net outflow of Rs 11,600 crore in all the BSE 100 companies together. The calculation is based on the number of equity shares sold by LIC at the stocks’ average market prices during the December quarter. According to an estimate, LIC cut its stake in 26 of the 50 blue-chip firms in the benchmark Nifty, selling shares worth an estimated Rs 13,000 crore during the quarter.

Most of the pullout during the December quarter was from private companies. LIC bought shares in select public sector companies. It also purchased shares worth about Rs 600 crore each in engineering major Larsen & Toubro and fast-moving consumer goods company ITC, data showed.

The insurer reduced its stake in the IT sector substantially, selling shares worth Rs 6,700 crore in the top five IT companies — Tata Consultancy Services, Infosys, Wipro, HCL Technologies and Tech Mahindra.

The insurer cut its stake in commercial vehicle and luxury car makers by two percentage points to 4.07 per cent. It sold 57.4 million shares, worth about Rs 2,200 crore, in Tata Motors. Besides, it lowered its stake in banks such as ICICI Bank and HDFC Bank, selling shares estimated at Rs 800-900 crore. LIC also cut its stake in Maruti Suzuki, Bharti Airtel, Hero MotoCorp, Reliance Industries, Cairn India, Mahindra & Mahindra and JSW Steel.

Tirthankar Patnaik, director, strategist and chief economist, Religare Capital Markets, says, “One reason why LIC could have sold is this year, flows to the insurance space, typically recorded towards the fourth quarter, haven’t been seen yet. Therefore, the money at LIC’s disposal, in case the government divests its stake in companies, will be less. Typically, LIC plays a contra-trade; when it saw interest return to IT, automobiles and other sectors, it found it appropriate to book profit in these spaces.”

Rate sensitive stocks

LIC cut its stake in commercial vehicle and luxury car makers by over 2 percentage points to 4.07%. It sold 57.4 million shares of nearly Rs 2,200 crore in Tata Motors. The stock hit an all-time high of Rs 405 in November last year, rallied 13% in Q3.

Besides, it lowered its exposure to banks like ICICI Bank and HDFC Bank with sale of shares for an estimated of between Rs 800 – 900 crore.

Maruti Suzuki, Bharti Airtel, Hero MotoCorp, Reliance Industries (RIL), Cairn India and Mahindra and Mahindra and JSW Steel also saw the insurer trim its stake.