Working as an Assistant in LIC of India, Rockfort BO, Trichy, TN.
Having a strong belief that LIC's welfare is our welfare and always trying to work towards that. Also functioning as an office bearer of AIIEA Thanjavur Division.
In the game of stock picking, the largest local investor, LIC has been a contrarian. It's a bet that has paid off so far in the current bull run. LIC's mantra is simple: buy shares of operationally sound companies
that are caught in unfavourable business cycle and trading at a lower
multiple. Based on the latest stock holdings, the state-owned insurer
has gained almost Rs 10,000 crore in the past four quarters on back of
its contrarian calls on scrips like BHEL and Axis Bank.
In both stocks, LIC raised its stake nearly 4% since December 2013 when
several brokerages gave 'sell' call and even three months ago many were
bearish about the stocks. "The biggest ability of LIC is to relate the
current valuation and current business cycle of the operationally sound
companies. When they find valuation of a stock is discounting current
business cycle excessively, LIC buys the stock," said G Chokkalingam,
Founder, Equinomics Research.
"What works in favour of LIC is the duration of holding period for a
stock. Being an insurance company, it can hold stock for 8-10 years.
However, mutual funds do not have such flexibility as they are under
pressure to outperform the benchmark index on a quarterly basis," he
said. The point LIC started buying BHEL, three out of four
analysts covering the stock came out with 'sell' reports. Their reasons:
a depleted order book and an operating profit margin that was 50% lower
than the historical average; and, thanks to competition, things are
unlikely to look up till FY16.
Similarly, investors dumped bank stocks as a tight money market had increased cost of borrowing.
Axis Bank, with high loan exposure to power and infrastructure
companies, was among the stocks to suffer the most. A year ago, the
private lender was trading at a discount of 45% to its 5-year average
"The price plays a pivotal role in LIC's
investment decision. If a stock looks attractive even after factoring
earnings de-growth, it becomes a clear buy for an investor with longer
This is the reason why LIC is able to
generate higher returns by picking up operationally sound stocks that
are punished by the market badly due to their cyclical nature of
business," said Amit Tiwari, portfolio manager at Escorts Securities.
Over the past few quarters, LIC has been consistently paring down its holding in IT stocks. But Infosys is an exception. Till September 2014, the stock had fared badly compared to its peers following adverse analyst reports.
But LIC had been quietly increasing stake in the company - from 3.25%
in March 2014 to 4.45% in September 2014. During the same period, it
raised its holdings in Bajaj Auto, NTPC and NMDC, which had underperformed in the past few months as most viewed the stocks differently than LIC.