New Delhi: Life Insurance Corp. of India will withstand the global shift toward higher interest rates because its $128 billion stock portfolio is dominated by larger companies in sectors such as financials and energy, an analysis by Bloomberg Intelligence shows.
LIC, set for the nation’s biggest ever initial share sale in Mumbai, has a portfolio peppered with index heavyweights such as Reliance Industries Ltd. and ITC Ltd. The assets comprise almost 3.6% of India’s market capitalization, according to analysts Kumar Gautam and Nitin Chanduka.
LIC’s holdings include more than 370 stocks, but the ownership is concentrated in 35 companies. Large caps account for more than 75% of LIC’s exposure, showing the portfolio may not be as diversified as it appears, the analysts write.
“LIC’s equity portfolio duration risks appear low,” the analysts write. They estimate LIC’s investment in financial and energy companies that make up 23% and 16% of its portfolio, has a low duration profile of 12 and 16 years, deriving a large part of their valuation from current cash flows. In contrast, consumer discretionary and staples have a duration profile of about 19 years.—Bloomberg
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