Continuous volatility in the stock market has led to the country’s largest financial investor, Life Insurance Corporation of India, to lower its equity exposure and doubling its investments in debt from its traditional funds.
LIC’s traditional fund stands at about Rs 1, 15,000 crore, which includes Rs 13,000-14,000 crore from pension and group fund.
“There is too much volatility in the markets besides a slowdown is also the reason for lowering investments in the stock market. We are increasing the proportion of debt investments,” said a senior LIC official.
According to officials, corporate debt has become attractive with a yield of around 12 per cent. LIC in the last 7 months has subscribed to 75-80 non-convertible debentures (NCD) issues. LIC will be doubling the investments in corporate debt this financial year to Rs 35,000 crore from the Rs 15,000 crore invested last year.
LIC has also subscribed to Rs 2,500 crore worth of NCDs in four companies of Tata Motors. Among the state companies, it holds NTPC, NHPC, REC, Power Finance Corporation. Says the official, “The range is around 12 per cent in corporate debt. The average ticket size this year for a corporate NCD has doubled to Rs 200 crore while in certain cases its upto Rs 1000 crore,” he said.
Traditional fund is the total premium collected from traditional life insurance policies and has to be invested according to norms stipulated by the insurance regulator — Insurance Regulatory & Development Authority (IRDA).
The norms require insurers to invest mandatory 50 per cent of the life fund in government securities, 15 per cent in infrastructure bonds and the remaining 35 per cent in equities, mutual funds, term loans, project loans and other approved investments.
“This year we are investing close to 35 per cent of the life fund in infrastructure, NCDs and bonds which excludes investments in government securities. Last year, this was 20 per cent,” the official said.