LIC India - Buying Stocks of 11 Companies

Cashing in on the current lower value of different stocks, the Life Insurance Corporation has been buying stocks in past 3 months in 2009 and have increased its stake in as many as 11 firms, including SBI and ICICI Bank worth a little more than Rs 6,400 crore.

The country's largest financial institution has hiked its stake in seven companies to nearly 10 per cent, while it has raised its holding in another four in the range of 3-7 per cent. The value of the transactions is totalling to Rs 6,450 crore based on the current market prices.

On Monday, LIC informed the Bombay Stock Exchange that it has raised its stake in the country's largest bank, State Bank of India, to 9.16%, from 4.58% in December 2008 nearly doubling the stake in a space of less than three months.

LIC said it acquired 1.34 crore shares, representing 2.11% equity of the State Bank, for Rs 1,484.12 crore on Monday. It said the remaining shares were bought through open market transactions between November 2008 and March 2, 2009.

"Most banking stocks are trading at their near or below book value levels and that present a tremendous growth opportunity for the insurance company. When the India story gets on track again, these stocks will have a bull run," says a fund manager with a leading domestic mutual fund. "Also, many the leading banks have subsidiaries, whose value, is not reflected on the books fully. And when these are sold off, they will unlock tremendous potential," he added.

Read: Best stocks to buy now are banking stocks

LIC has also been buying heavily into the ICICI Bank stock. On February 23, LIC had raised its stake in India's largest private sector lender to 9.38%, by purchasing 2.27 crore shares. Currently LIC, which is a promoter of the ICICI Bank, holds over 10.44 crore shares, representing 9.38% stake in the bank.

Both SBI and ICICI Bank have strong subsidiaries in the insurance, broking and mutual funds businesses, the value of which can be unlocked when the cycle turns again, reckon others. Banking stocks have remained a favourite of the insurer. Also, in many ways, the cash-rich institution acts as a support to the markets when it buys at dips. It is reckoned that LIC gets substantial investible funds at the end of the year, when many investors tend to complete their taxation obligations this time and the premium collection rises.

LIC holds almost close to 26.32% of Corporation Bank. LIC has in recent times increased its stake in public sector banks like Allahabad Bank (up 4.60 %), Oriental Bank of Commerce (2.60 %), Syndicate Bank (2.32 %), Union Bank of India (2.18 %), Bank of India (1.63 %), Indian Overseas Bank (1.59 %), Bank of Baroda (1.53 %), Canara Bank (1.21 %) and Punjab National Bank (0.38 %).

LIC's stake in Oriental Bank of Commerce and Allahabad Bank rose to 16.02% and 10.99 %, respectively. Its holding in HDFC Bank rose by 0.37% to 5.07 %.