LIC trims stake in listed companies, FPI exposure at 10-year low in July-Sept

LIC, most likely, has taken a cautious stance of stock markets and reduced its stake in companies
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Life Insurance Corporation of India (LIC) has reduced its stake in listed companies in July-September period, the first full quarter after its stock markets debut in May this year. The largest domestic institutional investor in Indian stock markets trimmed its stake in listed companies to 3.87 percent in the three months ending September, probably indicating LIC's cautious stance on the markets or simply profit booking as markets had surged during the period.
 
LIC’s holding in companies listed on the National Stock Exchange (NSE) were at 3.69 percent in year-ago period on an aggregate basis by value percentage, as per analysis based on Prime Infobase data. This compares to LIC’s exposure at 3.92 percent in June quarter of 2022.
 

However, in absolute value terms, its holding was at Rs10.27 trillion in September-end, showing an increase of 10.38 percent over the previous quarter. In terms of ownership by number of shares or share by volume, LIC’s share went down marginally to 0.76 percent by September from 0.79 percent one quarter back.
 
“LIC, most likely, has taken a cautious stance of stock markets and reduced its stake in companies,” said an analyst requesting anonymity.
 
According to Pranav Haldea, managing director, Prime Database Group, profit booking is the key reason for LIC’s cutting stakes in listed companies as markets had risen in the three months period. “Typically, LIC sells off stake in companies to book profit in periods when markers rise,” he says.

LIC’s stake in these companies were around or above four percent in previous quarters. It was only from the September-ended quarter of 2019, when LIC’s holding in these companies started to decline below four percent.
 
Indian markets had made high return in July-September period with both benchmark indices Sensex and the Nifty increasing 8.3 percent each, while BSE 500 was up nearly 11 percent.
 
On an overall basis, LIC holding went up in 72 companies listed on the NSE over the last one quarter. The average stock price of these companies in the same period increased by 7.74 percent. Meanwhile, LIC holding declined in 105 companies listed on the NSE. The average stock price of these companies in the same period increased by a higher 11.31 percent.
 
The top companies that saw the highest selling by LIC in September quarter are Maruti Suzuki, Power Grid Corp of India, Sun Pharma, NTPC and Hindustan Unilever.  Companies that saw the highest buying by LIC include Tata Steel, HDFC Bank, Bajaj Finserv and Indian Oil Corporation.
 
As a whole, however, share of Insurance companies saw a massive increase to 5.57 percent in September-ended quarter, up from 5.15 percent in previous quarter.
 
LIC continued to command a lion’s share of investments in equities by insurance companies, with at least 69 percent shares. Insurance companies increased their exposure to financial services and commodities sectors while trimming their exposure to information technology and energy, showed the data analysis.
 
LIC is Indian insurance market leader with 44 percent total annual premium equivalent (APE) market share (on a weighted basis) as of FY22. It has a 68 percent market share in terms of new business premium (NBP), 71 percent in terms of number of individual policies issued, 86% in terms of number of group policies issued in FY23.

Also read: LIC: Tough road ahead as stock continues to drag

DII versus FPI

Domestic institutional investors (DIIs), which includes domestic mutual funds, insurance companies, banks, financial institutions, pension funds investors had a share of 24.03 percent in listed companies in September quarter, which is at an all-time high. This compares to DII’s share at 23.54 percent in the June quarter. In the same period, DIIs had pumped in Rs17,597 crore during the quarter. In value terms, DII holdings in these companies increased to Rs 39.26 trillion by end of September, a jump of 17.46 percent over the last quarter.
 
Meanwhile, despite net inflows from foreign portfolio investors (FPIs) of Rs 48,570 crore during the quarter, FPI’s share declined further to a 10-year low of 19.03 percent in September quarter, down by 17 basis points from 19.20 percent as on June.
 
To put this in perspective, as on March 31, 2015, FPI share was 23.30 percent while the combined share of DII, retail and HNI was just 18.47 percent. The gap between FPI and DII holding decreased to its lowest level in this quarter, DII holding now being just 22.30 percent lower than FPI holding.
 
The widest gap between FPI and DII holding was in quarter ending March 31, 2015, when DII holding was 55.45 percent lower than FPI holding. “The FPI to DII ownership ratio also declined to all time low of 1.29 as on September down from 1.37 as on June 30, 2022. Over a 13-year period (since June 2009), FPI share has increased from 16.02 percent to 19.03 per cent while DII share has increased from 11.38 percent to 14.79 percent. This further showcases the rise of domestic investors and the huge counter balancing role they have played to foreign investors,” Haldea adds.

Data showed FPIs pulled out Rs 21,878 crore from sectors like information technology and oil, gas and consumable fuels during the quarter while investing Rs 22,689 crore in financial services and health care.

Also read: IDBI Bank: Lot Of Value, Difficult To Extract

Retail Investors

Share of retail investors in companies listed on NSE declined marginally to 7.33 percent in three months ending September from 7.40 percent in previous quarter. In value terms, retail holding increased to Rs19.47 trillion from Rs17.59 trillion in previous quarter, showing a jump of 10.64 percent. Retail investors are defined as individuals with up to Rs2 lakh shareholding in a company.  Considering only free float (non-promoter holding), retail share by value went down to 15.11 percent in the quarter ending September from 15.26 percent a quarter back.
 
On an overall basis, retail holding went up in 827 companies listed on NSE in the last quarter. The average stock price of these companies in the same period increased by 10.80 percent. Retail shareholding declined in 901 companies. The average stock price of these companies increased by a much higher 22.34 percent.
 
Data also showed a significant presence of retail investors in mid and small cap companies, from which institutional investors typically stay away. The picture is very different if one looks only at Nifty-50 companies; the retail share in these companies was a meagre 7.08 percent (by number of shares or share by volume), declining marginally to 6.54 percent in case of top 100 companies listed on NSE.