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LIVING up to its image of a contrarian investor, the Life Insurance Corporation of India (LIC) has been the biggest buyer of Indian equities during the current financial year. The insurance major has invested close to Rs 40,000 crore in equities and another Rs 40,000 crore in non-convertible debentures (NCDs) of companies, a senior LIC official said.

LIC’s purchases come at a time when foreign institutional have been fleeing the Indian markets in droves. So far in 2008-09, FIIs have net sold shares worth nearly $10 billion.

LIC has increased stake in many frontline companies, including banks such as SBI, HDFC Bank, Syndicate Bank, Indian Overseas Bank, Union Bank of India, Allahabad Bank and Andhra Bank, through open-market purchases. The insurance major bought an additional 2-3% in these banks over the past 6-7 months. It has also increased holdings in a few non-banking blue-chip companies such as Cummins India, ABB, Mahindra and Mahindra, Dabur India and Zee Entertainment, according to disclosures filed with BSE.

“We are long-term investors. We don’t take sector-specific calls, rather prefer to invest in specific stocks of companies which have growth potential and are available at attractive valuations,” says LIC executive director N Mohan Raj.

LIC’s equity investment pattern shows that its focus has been largely on banking stocks, which have witnessed a massive value erosion amid the ongoing global financial crisis as well as a slowdown in the domestic economy. Among the largest banks in the country, ICICI Bank is now available at a price/earnings ratio (P/E) of 9, compared with 22 last year. The ratio is based on the standalone earnings, in the past one year. While HDFC Bank’s P/E has declined from 30.8 to 17.2 times, that of SBI dipped from 16 to 7 times during the same period. UK-based hedge fund The Children’s Investment (TCI) Fund has been a heavy seller in most banks where LIC has raised its stake.

The largest insurer in the country, has also increased its investments in NCDs of many blue-chip companies, pumping in more than Rs 40,000 crore, said another top LIC official, who did not want to named.

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