LIC in India & Warren Buffett in America are buying in the downtrend

August 12, 2011   ·   0 Comments

LIC in India & Warren Buffett were buying stocks when markets fell when others kept fearing. Warren Buffett has been buying amid this week’s sharp declines in the market, and has not yet seen anything that suggests another downturn is emerging.

www.stockssavvy.comApart from a few shrewd long term investors, know who else was buying aggressively when the markets took a tumble? Life Insurance Corporation or LIC. Having one of the most enviable portfolios in India, LIC bought stocks worth Rs.1000 crore on 5th and 8th August when the markets slipped badly. Imagine what the fall would have been if LIC had not been buying too?

Similarly. The 80-year-old “Oracle of Omaha” is known for his love of a good deal, which is why his company made an unsolicited offer below book value for reinsurance company Transatlantic Holdings last weekend, and why Berkshire sold USD 2 billion of senior unsecured notes this week at historically low rates. “The lower things go, the more I buy. We are in the business of buying,” he said, adding that he had “never been better.”

With stocks at a discount of over 30%, while traders and FIIs were making a hasty retreat, LIC stepped in and bought into blue chip frontliners. And what has it been buying? Mainly FMCG, metals, engineering and taking a contrarian call, buying into IT too. So its shopping list consisted of HUL, ITC, Infosys, TCS, Hindalco, Tata Steel, JSW Steel, Voltas and BHEL. LIC is like any other institutional, buying and selling stocks but during the current downward spiral, remained only a buyer. And LIC which has traditionally been always buying into banking stocks, this time around avoided it completely. LIC has been buying consistently over the past 15 days and its net buying during this fortnight has been pegged at Rs.1800-2000 crore. The giant behemoth institution has an investment target of Rs.60,000 crore for current fiscal, FY12.

Its not that LIC only buys all the time. LIC recently changed its practice of holding scrips indefinitely and following that, in June 2011, when the markets were relatively better, it got out of some 57 illiquid stocks. Prominent amongst them being Gokaldas Exports, Sundaram Finance, Cinemax India, JMT Auto, Crisil, Godfrey Phillips, FGP, Thana Electric, Simplex Mills, Shalimar Wires, High Energy Batteries and Oriental Hotels.

In FY11, LIC on net basis invested Rs.43,000 crore in the equity markets and booked profit of around Rs.17,000 crore as against Rs.400 crore profit it made in FY10. As on March 31, 2011, on a mark-to-market basis, LIC’s equity portfolio grew 70% in FY11. In July, LIC hiked its stake in Reliance Industries to 7.16%, having bought some 18.6 lakh shares during the Q1, at an average price of Rs.867.10/share.

www.stockssavvy.comInterestingly, LIC had earmarked Rs.15,000 crore for buying into the PSU IPOs. But with the Govt now planning to postpone a few issues, LIC plans to divert more money into the secondary markets.

LIC typically prefers bulk deals as incremental purchases lead to a spike in share prices. And that is the reason why it remained the biggest investor or should we the ‘saviour’ for PSU IPOs/FPOs which otherwise would have sunk. LIC literally bailed out REC, NHAI and NMDC. But LIC views these rescue acts as a great opportunity as in smaller companies, being fenced by the limit of 10% of the company’s capital, LIC does not get to hold large chunks, given the amount of money it wields. So in IPO/PSU FPO, LIC gets to invest crores of rupees, with no worry about limits.

Take a look at the top 40 stocks in LIC’s portfolio which accounts for 82% of its portfolio. And you will understand why LIC is juiciest of all the institutions, hoping that this giant gets listed too!

 

NAME OF COMPANY

As at 30th June 2011
RIL 7.16%
L&T 19.25%
SBI 11.87%
ITC 12.72%
ICICI BANK 9.21%
BHARTI AIRTEL 4.72%
ONGC 3.09%
HDFC BANK 6.47%
MARUTI SUZUKI 8.71%
HUL 4.94%
INFOSYS 4.88%
RCOM 7.25%
M&M 14.10%
TATA STEEL 13.63%
BHEL 4.78%
SAIL 2.92%
RELIANCE INFRA 8.15%
GAIL 6.10%
GRASIM 7.54%
TATA POWER 12.97%
CIPLA 11.97%
ACC 12.43%
LIC HOUSING 36.54%
ABB 9.46%
SIEMENS 4.12%
HINDALCO 8.73%
IOC 2.50%
PNB 3.05%
TCS 2.56%
HDFC 3.08%
DR.REDDY’S 7.70%
HPCL 12.49%
AMBUJA CEMENT 9.59%
TATA MOTORS 8.11%
BPCL 5.78%
CORPORATION BANK 23.75%
INDIAN HOTELS 8.22%
BANK OF INDIA 8.34%
BANK OF BARODA 7.14%
MTNL 18.81%
NMDC 4.97%
BEML 6.35%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: Premiuminvestments

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Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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