MUMBAI: Life Insurance Corp (LIC), the countrys biggest institutional investor, is said to have sold equities worth about Rs 12,000 crore through the past month, putting in place a judicious and systematic financing plan to raise its stake in the beleaguered IDBI Bank.The LICs move was part of a prudent approach to arranging funds for the acquisition, two people familiar with the matter told ET.
Equity sales and subsequent purchases of beaten-down stock in state-run lenders such as IDBI Bank should be seen in the broader context of reaping extraordinary long-term returns when the fortunes of public-sector banks revived in the future, one of the two people said.LIC did not reply to ETs email queries on the recent market sales of equity for financing the IDBI stake purchase.The LIC mostly invests in blue-chip stocks.
With an expected correction in the equity markets, it has booked profits by selling a part of its large holdings.
It has sold stocks that have already generated significant returns and are falling due to market corrections, sources said.Monthly premium inflows could either be used to invest in high yielding debt papers or value buying in stocks.It has also recently bought some FMCG stocks available cheap but have future potential because of the consumption story, said another market source.As a long-term investor, LIC always enjoys an advantage.
It need not rush to generate returns in the short term, said another source.
The average holding period is not less than 10 years.LICs profits have been increasing.
It booked a profit of Rs 25,000 crore by selling equities in the last financial year.
It had earned Rs 19,000 crore profit in 2016-17, and Rs 11,000 crore a year earlier.Investment gains at the insurance behemoth have beaten returns on the Sensex of late.