The Hindu Business Line : Life insurance cos see value buying as FIIs exit

Buying opportunity
Among the domestic institutional investors, LIC has been the biggest buyer, followed by ICICI Prudential Life Insurance.
Life insurance cos have better cash position and lesser fear of redemptions compared to mutual funds.

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Mumbai, June 10 As FIIs continue to unwind their positions in Indian stocks, life insurance companies are moving in to make some good pickings. However, such is not the case with the domestic mutual funds.

This situation among the domestic institutional investors persists due to the comfortable cash levels and a lesser fear of redemptions enjoyed by the insurance companies as compared to the mutual funds.

When a market fall is prolonged, mutual funds face a slowdown in inflows and possibly redemption pressures, said analysts.

In fact, in June so far, Domestic institutional investors bought Rs 2,989 crore worth of equities whereas FIIs have been net sellers for Rs 6,166 crore, according to BSE data.

Among the domestic institutional investors, Life Insurance Corporation of India has been the biggest buyer followed by ICICI Prudential Life Insurance. The rest of the life insurance companies have gone slow on purchases as they are smaller, less confident about how much the markets may fall,” said Ms Anita Gandhi, Head of Institutional Business, Arihant Capital Markets Ltd.

“However, most of the mutual funds are stuck at higher levels barring a few like Reliance Mutual Fund, which have cash levels to buy from the market,” said Ms Gandhi.

Domestic institutional investors have bought stocks worth $4 billion this year so far, of which the insurance companies’ share has been more than 60 per cent, according to marketmen.

“If we take yesterday and today into account, most NAVs would have hit their 52-week lows and in this case the investors stand to lose not only the gains on their investments but even part of their capital,” said Mr Dhirendra Kumar, CEO, Value Research.

“Fund managers are preferring to sit on the little cash they have to be reasonably prepared for redemptions.”