Life Insurance Corporation of India(LIC), India’s largest domestic institutional investor, stepped in to support Indian equity markets over the past month-and-a-half as foreign funds headed for the exit doors, spooked by a tax row, concerns over corporate earnings and volatility in global bond markets.
LIC has invested about Rs.11,000 crore on a gross basis and at least Rs.8,000 crore on a net basis in stocks since April. This was a period when foreign institutional investors (FIIs) turned negative on Indian equities, pulling the benchmark BSE Sensex down 10% from the intraday record high of 30,024.74 it hit on 4 March.
A row over minimum alternate tax levied on foreign portfolio investors by the income-tax department, the slow pace of corporate earnings growth and volatility in global debt markets were blamed for the sell-off.
Recently, the BSE Sensex closed at 27,687.30, up 363.30 points, or 1.3%. The NSE Nifty closed at 8,373.65, up 111.30 points, or 1.35%. The index is still down 6.72% from its lifetime closing high of 29,681.77, hit on 29 January. Potential losses in the Indian market could have been worse had domestic institutions like LIC not been net buyers of equities.
To be sure, LIC was acting in line with its contrarian investment strategy-of buying when the market is falling and selling when the market is rising. The share purchases were purely to take advantage of attractive stock valuations rather than to prop up the market or limit the downside, the LIC official said.