LIC betting on old economy stocks

KS Badri Narayanan /Kumar Shankar Roy Chennai | Updated on April 15, 2021

Buys shares worth ₹3,000 crore in at least 15 companies

The biggest domestic institutional investor LIC has upped holdings in at least 15 companies by buying shares worth ₹3,000 crore during January-March quarter even as markets rose nearly 4 per cent.

LIC has hiked stakes in old economy sector companies such as those involved in manufacture of cement, auto ancillaries, chemicals, energy and paints. However, it also appears to have booked profits partly in select PSU bank stocks, Tata Steel and TCS etc., many of whom had seen a healthy rise in price during the aforementioned quarter.

One per cent stake

The data pertains to companies with at least ₹20,000 crore market capitalisation where LIC holds at least one per cent stake. So far, only 35 companies have disclosed January-March 2021 quarter under the category.

IPO-bound LIC, which is known to take a value investing approach, has trimmed holdings worth over ₹4,000 crore in 10 companies while maintaining status quo in 5 stocks including Divi's Lab, P & G Hygiene, General Insurance, Aditya Birla Capital and Cummins India.

LIC has purchased maximum shares in Bank of Baroda, IOC, Ambuja Cements, Cadila Healthcare, Nippon Life India Asset, Berger Paints, Lupin and Hindustan Zinc in the January-March 2021 quarter compared to October-December 2020 quarter. In terms of quarter-on-quarter percentage rise, LIC's shareholding has gone up the most in Aarti Industries, Lupin, IRCTC and Atul, with Aarti and IRCTC appearing to be fresh entries in LIC portfolio.

Onus on PLI

According to analysts, investors are betting big on the impact of Production Linked Incentive (PLI) scheme announced by the Government to drive local manufacturing in being 'Aatmanirbhar'. The Government, which in March 2020 had introduced the PLI scheme to boost domestic manufacturing and cut down import bills, has been expanding the scope of the scheme to a wide range of sectors including auto ancillaries, solar PV modules and chemicals.

During the January-March quarter, domestic institutional investors sold shares worth ₹23,124 crore even as foreign institutional investors pumped in ₹52,270 crore. Mirroring this activity, LIC appears to have offloaded part holdings in Punjab National Bank, Axis Bank, Bank of India, Tata Steel, HDFC, Canara Bank, Havells India, TCS, Bharat Electronics and ONGC. Some of these stocks rose 10-20 per cent in January-March 2021 quarter.

Market watchers say LIC generally adopts a 'contrarian' investment strategy i.e. when the general mood is bullish, the insurance behemoth book profits while it 'buys' when the general mood is bearish. According to prime infobase, LIC’s holding (across 290 companies where its holding is over 1 per cent each) had slipped to an all-time low of 3.70 per cent as on December 31, 2020, down from 3.91 per cent as on September 30, 2020. In value terms, LIC holdings in stocks had touched an all-time high of Rs 6.81 lakh crore in quarter ending December 31, 2020, a 3-month period when markets jumped by 25 per cent. The government is preparing the ground for the initial public offering of LIC by the third quarter of FY21-22.

Published on April 15, 2021

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