$400 Billion Indian Asset Manager Plans to Curb Stock Buying

(Bloomberg) -- India's equities rally, which has made the market the region's most expensive, is giving the nation's largest investor a pause.

“We don't want to buy in equity, we are contrarians,” V.K. Sharma, chairman at the Life Insurance Corp. of India, told reporters Tuesday. The insurer, whose assets of 27 trillion rupees ($419 billion) tops that of all Indian mutual funds combined, says it will restrain new purchases through the March year-end, while adding to its holdings of government debt.

Overseas and local funds have purchased a record $25 billion of Indian equities this year, spurred in part by economic policies implemented by Prime Minister Narendra Modi. That's sent the S&P BSE Sensex to one of the best performances in Asia and pushed up its price-to-earnings ratio to 23, the highest among major Asian markets.

LIC will “keep booking profits” on its 5.71-trillion rupee stock holdings, Sharma said. The insurer said it plans to buy 100 billion to 200 billion rupees of government bonds by March. That would add to its 16.2 trillion rupees of sovereign debt. It has a 3.1-trillion rupee exposure to company debt.

The S&P BSE Sensex fell as much as 0.2 to 32,741.51 as of 11:08 a.m. in Mumbai, led by Tata Steel Ltd. The benchmark has retreated in five of the past six sessions. The central bank is also in focus this week, with economists expecting the Reserve Bank of India to hold rates when it announces its policy decision at 2:30 p.m. Mumbai time.

While LIC plans to dial down its stock purchases, it still plans to invest in state-backed lenders. Selectively.

“Whenever the state-owned banks are in need, we will be one of the investors for sure, depending on a bank's performance,” Sharma said.

LIC helped drive this year's boom in Indian stocks, plowing 392 billion rupees between April and September, more than double last year's amount. The insurer made about 124 billion rupees on sales of equities during that period, Sharma said.

The company's premium from new policies rose 24 percent in April to September to nearly 682 billion rupees from a year earlier. Revenue from new pension and company policies jumped 27 percent to about 471 billion rupees in the same period.

To contact the reporter on this story: Ameya Karve in Mumbai at akarve@bloomberg.net.

To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Kurt Schussler, Ravil Shirodkar

©2017 Bloomberg L.P.