Gic Raises Investments In Capital Markets

GIC is investing in the capital markets because this is a good time to buy shares at low prices. I am doing it because it is good for the company and not because I have been told by the government to invest more in the capital markets, GIC chairman K C Mittal told Business Standard yesterday.Mittals remark is significant in view of reports that the organisation had been asked by the finance ministry to help revitalise the capital markets. GICs total investments is about Rs 15,000 crore at the present book value. The book value of company shares held by it amounts to about Rs 2,250 crore.

 

The GIC chairman said there had been very little erosion in the book value as compared to the market value of GICs investments. A substantial part of the corporations investments were made at fairly low rates much before the prices in the stock market were caught in the bear hug.

Another part of the investments was made recently and picked up at lower rates, he said. One reason for the increase in GICs investments in the stock market is the government decision in April 1995 lowering the level of compulsory investments in socially oriented sectors from 70 per cent to 45 per cent. Ministry sources said the government was gradually giving up its hands-off approach to capital markets and had come to accept that public intervention was needed to enliven a highly depressed market.

A policy change in this respect will result in greater pressure on the GIC to invest in capital markets because the Life Insurance Corporation of India is not allowed to enter this field while the Unit Trust of India has almost exhausted its ability to move the markets.LIC is permitted to invest only 10 per cent of its investible funds in the private sector, of which 8 per cent must be loans to policy holders and the remaining 2 per cent is for construction and acquisition of immovable property.