LIC ignores bear howls to strengthen hold on Dalal Street’s most hated corner

The March quarter shareholding pattern shows that the state-owned insurer hiked stakes in seven of the biggest Indian tech majors – TCS, Infosys, Tech Mahindra, Wipro, HCL Tech, LTIMindtree and LTTS (L&T Technology Services).

Notwithstanding the subdued performance of TCS so far in the calendar year 2023, LIC’s ownership rose 6 bps to 4.47% at the of March quarter. The hike was sharper at 48 bps in case of Infosys where LIC’s ownership rose to 8.19%.

Wipro saw 20 bps increase in LIC holding to 4.42% while in case of HCL Tech it went up marginally (6 bps) to 4.23%. LTTS saw the highest increase in percentage terms as LIC investment went up 111 bps to 3.34%. Similarly, LTIMindtree and Tech Mahindra also had LIC upping its stake.

Comprising 273 listed stocks, LIC’s Dalal Street portfolio was worth around Rs 10 lakh crore at the end of March quarter. Out of that, around 13% or Rs 1.3 lakh crore of LIC money is riding on the IT sector, shows PRIME Database records.

On a sequential basis, the value of LIC investments in the IT sector rose by about Rs 3,000 crore in the last quarter of FY23.

Financial services, however, is the biggest bet of LIC on Dalal Street as a quarter of its listed stock portfolio, which comes to around Rs 2.6 lakh crore, is riding on the sector.

During the quarter, the PSU’s holding went up in 63 companies and went down in 82 others. LIC’s top buys in value terms during the March quarter include the likes Asian Paints, Reliance Industries, Maruti Suzuki, GAIL (India) and Dr Reddy’s Lab. On the other hand, L&T, HUL, HDFC, Ultratech Cement, Sun Pharma were on its sell list.

What should investors do?

As far as the IT sector is concerned, FIIs and LIC have taken opposing views. TCS, Infosys, Tech Mahindra, LTTS, LTIMindtree and Mphasis saw dollars flowing out of its stocks. FIIs have been flagging concerns on growth outlook of software exporters not just due to macro slowdown but also due to the stress in the banking system across US and Europe.

For global brokerage firm Bank of America Securities, the IT sector is on top of the underweight list.

“With the US/global economy slowing down, visibility on IT spending remains low which could reflect in earnings growth (12% for FY 23-25). Despite heavy outflows, FII positioning remains slightly overweight on the sector and has potential to reduce further. High growth expectations coupled with expensive valuations at 21x vs average 19.8x make us underweight on the sector,” said BofA’s MD and Head of India Research Amish Shah.

While indicating that the calendar year 2023 could end up giving flat returns, Shah said he is also underweight consumer stocks and telecom. “We continue to favor financials, industrials, cement/steel & select autos (2Ws) and utilities & healthcare as defensive plays,” he said.

Against Nifty’s 5% rise in the last one month on the back of FII inflows, the IT index is down 2.6% and is the major sector that has not participated in the rally as investors foresee a downside risk to current earnings assumption.

While the March quarter earnings season has so far been largely in line with expectations, IT companies have led to some negative surprises.

“We believe growth in the IT companies is likely to moderate in FY24 and hence the IT sector would be in a ‘wait & watch’ mode, especially given the concerns in the global market,” said Neeraj Chadawar of Axis Securities.

(With data inputs from Ritesh Presswala)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)