After being sellers of equity for five years, insurance players have turned buyers this fiscal on a cumulative basis.

According to SEBI data, between FY-11 and FY-15, domestic institutional investors net sold $29 billon worth of shares. According to market participants, a majority of the selling ($24-25 billion) was by insurance players.

Redemption pressures Experts attribute the heavy selling by insurance companies to redemption pressures post the financial crisis.

However, in 2015-16 till date, insurance players have turned buyers of equity. Of the $6.7 billion DIIs invested in the market, about 20 per cent was by insurance players.

This despite insurance players dumping stocks worth $740 million in July.

The renewed buying activity by insurance players is attributable mainly to increased fund flows after IRDA made changes to guidelines favouring unit linked insurance products.

In 2013, the Insurance Regulatory and Development Authority of India amended guidelines increasing the lock-in period to five years from three.

This reduced the redemption pressure on insurance companies.

Besides, charges to ULIPs are now evenly distributed during the lock-in period to ensure there is no high front ending of expenses.

“ULIPs have become attractive products from a cost and taxation perspective post IRDA guidelines,” said Aneesh Srivastava, Chief Investment Officer at IDBI Federal Life Insurance.

The buying trend is also sustainable due to completion of redemption of old policies, according to Manoj Jain, CEO at Shriram Life insurance.

Mutual funds have bought equity worth $5.3 billion so far this fiscal. In contrast, foreign institutional investors have been hitting the exit door, selling Indian equity worth $3.6 billion from April till September 9.

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