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Message posted by:- ganga ( ganga.techyolk@gmail.com ) On:-9-Apr-2010-at-15:31:53
Even in the course of bad news, volatility and fears of job loss and slowdown, insurance institutions have been consistent net buyers of Indian equities. Unlike the foreign institution investors who mix their portfolios actively in the market, they have participated consistently every month for almost three years now. According to Sebi data, this fiscal year insurance companies have bought worth Rs 34,000 crore which is less than Rs 53,000 crore in FY09, when the market witnessed a huge sell off. However, industry experts said that by the end of the fourth quarter they see the domestic insurance companies to pump another $4 billion of money into the market, as this will be the period during which taxpayers will pay insurance premiums to get tax benefits. Last month, when FIIs were net sellers and pumped out Rs 1,100 crore from the market, the insurance companies pumped in Rs 13,500 crore in equities, which is the highest in a single month in the past few years. According to institutional dealers, in the month of January FIIs have sold close to Rs 8,000 crore in the past two weeks. However, the sale was offset by their purchase of 60% of Reliance Industries'' (RIL) treasury stock worth about Rs 6,000 crore in the first half. In the past three years, FII inflows in the Indian equity market have saw huge divergence. In FY08, they buy stocks worth $12.7 billion whereas in FY09 they sold stock worth $10.7 billion. Currently they have purchased equities worth $19.5 billion. Against this, domestic insurance companies have been consistent buyers and have played a role in providing stability to the market, said Vikram Kotak, chief investment officer, Birla Sun Life Insurance. Mr. Kotak further said that in the past three years they have bought stocks worth $25.8 billion and in the next 2-3 years, annual equity investment by the domestic insurance companies is likely to be equal to what they invested in the past three years, which is about $25 billion. Moreover, the Insurers expect that the demand for unit-linked insurance policies (Ulips) will continue, as 90% of Ulip funds are deployed in equities, increasing life insurers'' investment in the equity market. According to Aneesh Srivastava who is the chief investment officer in IDBI Fortis Life Insurance, the long term perspective of the market is optimistic and is expecting major investment in Ulips. Going forward, we believe that there will be deployment of funds in the equity markets, from idle cash and as well as from the new inflows. The January-March quarter is one of the best periods for the insurance industry. In past two years, the percentage of total ownership in equities by insurance companies has gone up. For example, in September 2009 their holding rose to 6.8% of market cap as compared to 4.2% of the market capitalization of BSE 200 domestic insurance companies. Net investments made by insurers in FY08 and FY09 stood at Rs 31,000 crore and Rs 53,000 crore respectively, against FIIs'' purchases of Rs 53,000 crore in and sale of equities worth Rs 48,000 crore respectively in the corresponding years.
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