LIC Takes Bullish View Of Modi's India

Mumbai: The chairman of India's largest investor, Life Insurance Corporation of India (LIC), said on Thursday he saw few red flags ahead, betting on a long-term rally for the country's stock market under a new pro-business government.

India's equity market has outperformed emerging market rivals this year, thanks to overseas fund interest fuelled by Prime Minister Narendra Modi, who came to power in May with a pledge to boost growth and revive investment. After months of caution, domestic investors are now also growing more confident.

LIC Chairman S. K. Roy told Reuters he was "very bullish" about the banking, pharmaceutical, metals and IT outsourcing sectors because of expectations of a cyclical recovery and a stabilising rupee currency.

"There are a large number of sectors about which we are very confident this year," Roy said in an interview.

The state-run life insurer also likes the capital goods sector and is looking develop its existing holding of more than 70 land plots in phases over the next three to five years, either for commercial or residential purposes, Roy added.

Roy, who has been with the insurer more than three decades, added he saw few warning signs for markets, thanks to the government's commitment to contain the fiscal deficit and receding concerns about lower rainfalls in the monsoon period.

"The general perception in the country is that this rally will be around for some time," he said.

The growing confidence of India's domestic investors is seen as critical to sustain the strong performance of recent months, at a time of concern that overseas funds could start paring their holdings if the U.S. Federal Reserve raises rates.

LIC plans to invest 3 trillion rupees in markets this year, of which 550 billion will be in shares, more than an estimated 2.5 trillion rupees last year. The bulk of its investments will go to government bonds, traditionally its biggest allocation.

Roy added LIC was headed for a "very good year", both in terms of its market investments and its core insurance business. The chairman said he expected growth of 12 percent in insurance premiums this fiscal year, in line with 13.4 percent last year.

A good year

The strong endorsement from LIC, which has 17.69 trillion rupees ($290.29 billion) of assets under management, is a sign of a changing mood among domestic investors in India, which last year suffered its worst market turmoil since the 1991 balance of payment crisis.

LIC is a powerful market player in India whose moves shift sentiment, and who has also been known to step in to support markets at times of vulnerability.