RINGSIDE VIEW. Should a less aggressive LIC worry retail investors?

Recently, Life Insurance Corporation of India, the country’s largest domestic equity investor, said that it has decided to bring down its aggressive investment in equities. LIC had invested in Indian stocks worth ₹39,224 crore between April and September this year, more than twice that in the past year. The insurer made about ₹12,374 crore on sales of equities during this period.

VK Sharma, Chairman, LIC of India, was quoted as saying: “We are contrarian (when it comes to investment). Market (equity) is at peak. We will be selling whenever we have an opportunity…We will keep on doing routine sale and purchase, but we will not be aggressive in buying equities.”

LIC will keep booking profits on its ₹5.71 lakh crore equity holdings, Sharma added.

Should these statements unnerve domestic investors?

Not really. Investors need not be perturbed by LIC’s decision, as there are now a large number of equity-heavy MFs, PMS and private insurers whose managers may take their own call on buy or sell decisions. In fact, as long as their investors continue to pour money into their market-linked schemes, their worries will be more about finding good buying opportunities in the market than selling.

In fact, if one believes in the long-term India story, such disruptions may provide a good entry point for investors.

Compared to a decade ago when LIC dwarfed every other domestic institution, today the Indian market is mature with counter-balances to LIC in the form of mutual funds, EPFO, NPS and insurance companies. Domestic MFs manage over ₹7 lakh crore of equity money. FIIs, which had been in sell mode in the recent past, can also turn buyers as they take a relative call across markets for the new year.

Goldman Sachs remained overweight on India and raised the target for Nifty from 10,900 in September 2018 to 11,600 by December 2018.

Japanese brokerage firm, Nomura Securities still sees 16 per cent upside in the Nifty 50 from the current market levels and has fixed its December 2018 target at 11,880, valuing the benchmark at 17 times one-year forward earnings.

The constructive view on India is due to expectations of a strong revival in corporate earnings, going ahead, backed by a stable macro economic environment and government’s policy initiatives during the last two years, Nomura said.

It is also necessary to appreciate that global markets are so diverse and large today that statements by one participant seldom influence market direction.

In December 2016, the California Public Employees’ Retirement System, one of the world’s largest portfolio investors, had said it would restructure its $300-billion portfolio to invest less in global equity and private equity. CalPERS Chief Investment Officer Ted Eliopoulos had said the global equity asset class will see the largest change of a 5-percentage-point reduction to 46 per cent from 51 per cent of the overall portfolio over the next two years.

One year has since gone by, but global stock markets are still enjoying the bull party.

Happy investing.