Foreign investors snap up insurance stocks

Foreign investors are pouring money into the Indian insurance sector which received a record inflow of foreign equity investment in the April to September period which was the first half of the current fiscal year ending 31 March 2020.

Data available with depositories shows that foreign portfolio investors (FPIs) made a net investment of INR169.76bn ($2.4bn) in insurance equities in the April-September period. The inflow into the sector is nearly 13 times higher than the volume of net investments made during the same period last year, reported Hindu Business Line.

The continued investments by FPIs in the insurance sector reflects their bullishness about the sector and its growth potential. Despite being net sellers of Indian equities in July and August, FPIs remained net buyers in the insurance sector in that period.

Mr Deepak Jasani, head of retail research at HDFC Securities, said, “Insurance companies have seen a lot of buying from FPIs and domestic institutions over the 4-6 quarters. New SEBI regulations on mutual funds banning up-front commissions has also played in favour of insurance companies, which so far do not face any such restrictions. This has made insurance products more popular among financial product distributors.”

Emkay Global Financial Services said, “With the changing demographic landscape and calls for higher protection, largely by millennials, the margin profile of insurance companies has started to improve, reflected in their improving product mix and value of new business (VNB) margin. The protection gap, at 92%, is the highest in India. We thus believe that insurance is a long-term play and has got its due attention from FPIs interested in its growth story.”

Source: Asia Insurance Review