Shankar Sharma says he will never touch LIC as an investor. Here's why

Veteran investor Shankar Sharma said he would stay away from the initial public offer (IPO) of state-run Life Insurance Corporation of India (LIC), blaming the government for making it absorb public sector undertaking’s unsold issuances.

“I would never touch LIC as an investor. The government sold their unsold items to LIC and now they are selling the owner of those unsold items to us,” Sharma, Co-founder, and Chief Global Strategist, First Global said on Saturday at ANMI’s International Convention 2020.

Market participants have often blamed the government for pushing state-run corporations, particularly LIC to absorb the shortfall in their offerings, a claim which the life insurer has denied. Earlier this month, Finance Minister Nirmala Sithamraman unveiled plans for LIC’s IPO, which is going to be a key component in the government Rs 2.1 lakh crore revenue target to be raised from the sale of public assets and equity holdings in various public sector enterprises.

Samir Arora, the Singapore-based fund manager and founder of Helios Capital, said though he was bullish on the market after the corporate tax cut, that optimism has now tempered down. In a major fiscal booster, last September, the had government slashed effective corporate tax to 25.17 per cent inclusive of all cess and surcharges for domestic companies. The current narrow market rally will continue, the market stalwarts said. “It is a narrow bull market and I don’t see anything changing right now,” said Sharma.

“Investing is not a full-time job right now. Only 10-20 companies are running higher. We have an extremely narrow market right now,” he said. Arora, however, added that the market rally has to broaden at some point. “I exited stocks in the last three-four years where earnings were normal to good, say around 15 per cent, but the stock was appreciating 40-50 per cent,” Arora said.

“Equity market generally beats the same country's fixed income return. The big picture is that equity should have a high weight in your portfolio. You should not leave the market during a bad time, “ he advised investors. Sharma believes that the introduction of the long-term capital gains (LTCG) tax was not a good step, and incentivising the investor is important. “Reintroduction of LTCG (tax) was a bad idea two years ago, but policymakers do not think it was,” Sharma said.

In 2018, former Finance Minister Arun Jaitley had re-introduced LTCG tax on stocks, and market participants have been batting for removal of the same. Commenting on Vodafone IdeaNSE -24.44 %, Arora said the company can be given one more chance to pay the dues in a staggered manner.

“My thinking is Vodafone Idea still has one more shot; they can pay some amount and later seek 'EMI' option,” he said referring to Rs 53,000 crore AGR dues that the company needs to pay to the telecom department (DoT).”

Source: The Economic Times