LIC raises holdings in 13 firms in March quarter

Buys shares worth Rs 8,000 crore in Sensex companies. Value based on average quarterly prices

Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble -- Warren BuffetLife Insurance Corporation of India (LIC) used market volatility during the March quarter to raise its stake in companies on the Sensex, including Housing Development Finance Corporation (HDFC), HDFC Bank, Tata Motors, TCS (Tata Consultancy Services), and Maruti Suzuki.

Of the 27 companies where shareholding pattern data for the March quarter is available, LIC raised its stake in 13 companies during the January-March quarter from the level seen in the preceding three months. In seven companies, the holding declined, while in the remaining seven the stake remained unchanged.

"This is a well-known pattern. Whenever the markets are in a correction or a volatile phase, or even when the foreign institutional investors (FIIs) are selling, LIC comes in and buys or raises stake in stocks of blue-chip companies. And the companies it has raised stake in the March quarter have good stocks. These stocks will do well and generate a good return for LIC. The move also acts as a counter-balance to the FII selling," says Dhananjay Sinha, head of institutional research at Emkay Global Financial Services.

LIC bought shares worth nearly Rs 10,000 crore in 13 Sensex companies. At the same time, it sold shares worth Rs 1,852 crore in nine blue-chip companies, resulting in a net inflow of Rs 8,148 crore in the March quarter. FIIs and mutual funds, on the other hand, made a net investment of around Rs 3,000 crore each during the quarter in 27 companies, NSDL (National Securities Depository Limited) data show.

The values have been arrived at by taking into account the average market prices of the stocks at the end of the December and March quarters.

By comparison, the Nifty 50 and the S&P BSE Sensex lost three per cent each during the March quarter, and hit their respective 52-week lows on February 29.

Meanwhile, data for 114 companies of the BSE 200 index obtained from Capitaline Plus reveal that LIC made a net investment of Rs 12,869 crore in the March quarter. Of this, it bought stocks worth Rs 16,084 crore in 47 companies and sold shares totalling Rs 3,215 crore in 24 companies.

Offer for sale

LIC also raised stake in non-Sensex companies such as IDBI Bank, Punjab National Bank (PNB), Tata Chemicals, and Colgate-Palmolive India. On the other hand, it reduced holdings in Indian Oil Corporation (IOC), Ashok Leyland, and Indraprastha Gas.

In NTPC, India's largest power producer company, LIC holding increased three percentage points to 12.98 per cent in the March quarter from 10.03 per cent in the December quarter. LIC's holding in NTPC increased partly due to its participation in an offer for sale (OFS) by the government. LIC bought 243.1 million shares at an estimated value of Rs 3,182 crore during the March quarter in NTPC.

OFS enables promoters to dilute their holdings in listed companies.

Anirudh Gangahar and Archit Singhal, analysts at Nomura, suggest the government's proposed five per cent divestment in NTPC may remain an overhang on the stock price. But they have maintained a 'buy' rating on the stock, with a target price of Rs 175. In IDBI Bank, LIC increased its stake by seven percentage points to 14.37 per cent by buying shares through preferential allotment in the March quarter. It held 7.25 per cent stake in the bank at the end of the December quarter.

"The other aspect to raising stake is that LIC is also a government agent. It supports PSU (public sector unit) divestment and OFS. We have already seen that several times, like ONGC (Oil and Natural Gas Corporation)'s OFS a few years ago," Sinha adds.