LIC using market rally to churn portfolio

Does Life Insurance Corporation of India (LIC) know something other institutional investors don't?

In the last few years, LIC's equity portfolio has seen significant churn. Known for its contrarian and long-term approach to equity investing, the insurance major seems to be using the market buoyancy to cut exposure to segments such as fast-moving consumer goods, health care and private sector banks, in favour of laggards such as public sector banks and companies in the power, telecom, metals, capital goods and oil & gas segments. While a few of its bets such as IT and telecom have begun to pay, the insurer might have to wait longer to see success with the others.

There has also been a change in LIC's effective ownership of India's top 10 business houses by market capitalisation. In the last two years, LIC's effective ownership (the value of LIC stake in group companies) declined in the Tata Group, the Aditya Birla Group, the Mahindra Group and the listed subsidiaries of multinational corporations. LIC has, however, raised its stake in companies controlled by the two Ambani brothers, Anil Agarwal's Vedanta group and Bharti Group. At the end of December 2012, LIC's effective ownership of public sector undertakings stood at 7.5 per cent, against 5.1 per cent two years ago. (Click for charts)

At the end of December, LIC's equity portfolio had 530 stocks. It was worth Rs 3.6 lakh crore, a rise of 34 per cent on an annual basis.