LIC equity investment soars 23% in Q1; these stocks delivered up to 17x return
The Economic Times 03/07/2020
Life Insurance Corporation of India (LIC), India’s biggest institutional investor, witnessed a 23 per cent rise in its equity portfolio during the first quarter of FY21.
The market value of the companies in its portfolio swelled to Rs 5.27 lakh crore as of June 30 from Rs 4.30 crore on March 31. The calculations were made on the basis of LIC’s shareholding data as of March 31, 2020.
Data available with Ace equity showed LIC betted on at least 25 penny stocks during the quarter, trying to make a quick buck. With 17 times, or 1,603 per cent, rally, Birla Tyres emerged the top gainer in the portfolio in percentage terms.
Reliance Power, Cox and Kings, Ballarpur Industries, Jaypee Infratech, GTL Infra, Reliance Capital, Bajaj Hindusthan and Suzlon Energy were among the other stocks that rallied over 100 per cent during this period.
“Investors who have been investing directly should stay away from penny stocks as the quality and balance sheets of companies are more important at this point of time,” Sundeep Sikka, Executive Director and Chief Executive Officer, Nippon Life India Asset Management, told ETNow in an interview.
Earlier, the insurance behemoth’s ownership in listed companies touched a record low of 3.88 per cent in Q4FY20 amid the March selloff triggered by the Covid-19 breakout. LIC held over 1 per cent stake in 300 BSE companies as of March 31, Ace Equity data showed.
In terms of value, Reliance Industries alone contributed Rs 22,360 crore to LIC’s total June quarter gains of Rs 97,400 crore. Shares of the energy-to-telecom behemoth jumped to Rs 1,703 from Rs 1,102 during the quarter.
The company managed to impress Dalal Street all through June quarter with a series of stake sales in Jio Platforms and India’s biggest ever rights issues.
Others like ITC, IDBI Bank, TCS, M&M, Maruti Suzuki, L&T, HDFC Bank, InfosysNSE 0.81 %, Adani Ports, Sun Pharma, Bharti Airtel, ONGC, ICICI Bank, Britannia Industries, Bajaj Auto, NTPC, Hindalco and Grasim Industries together added Rs 50,725 crore, as these stocks gained between 13 per cent and 127 per cent.
Brokerages are positive on some of these stocks. SBICAP Securities has set a target price of Rs 2,000 for RIL, while Prabhudas Lilladher sees ITC at Rs 251. JM Financial holds a bullish view on Airtel with a price target of Rs 590.
Stocks like SBI, HUL, Coal India, Rajesh Exports, Power Finance Corporation, Bank of Baroda, Gillette India and Procter & Gamble Hygiene, SiemensNSE 4.99 % and Tech Mahindra cut LIC’s gains during the quarter, as these stocks declined between 1-14 per cent.
After falling 23 per cent in March due to a nationwide lockdown, BSE benchmark Sensex recovered 18 per cent during the quarter gone by. Firm global cues, inflows from foreign portfolio investors fueled the stocks rally as monetary and fiscal measures to uplift the economy aided market sentiment.
However, analysts are cautious on the market for the rest of the year due to expensive valuations, a shaky fiscal situation, rising joblessness and income cuts.
Rusmik Oza, Executive Vice President and Head of Fundamental Research at Kotak Securities, said Nifty50 is trading at 20 times on a one-year forward basis, which is peak valuation. “The next six months will be challenging with more of a downside bias. The market should brace for a very rude Q1FY21 earnings season, as this is the first time earnings will reflect the consequences of near-zero activity for two of the three months.”