Insurance Sector Update June 2021 FPI Inflows in this Sector

Introduction:

Foreign Portfolio Investors (FPIs) or Foreign Institutional Investors (FIIs) have made an impressive allocation in the Insurance Sector in June 2021. The discussion on the IPO of Life Insurance Corporation (LIC) is also at its peak. Hence the FPIs and FIIs are keeping a close watch on this sector. Read more about their current allocation and available growth prospects of the Insurance Sector in the next 5-10 years.

FPI Inflows in Insurance Sector in June 2021:

• In June 2021, the Foreign Portfolio Investors (FPIs) have invested around Rs. 7,044 Cr. in the Insurance Sector.
• The Insurance Sector includes both types of Insurances: Life Insurance as well as General Insurance.
• In the Indian Stock Market, 4-5 companies are already listed on BSE, NSE, or both, where one can invest directly.
• The FPI Inflows in the foreign sector is eye-catching because in June 2021 the total FPI Inflows in the country was around Rs. 17,000 Cr. Out of which around Rs. 7,000 Cr. has been invested in the Insurance Sector.
• In percentage terms, 40% of the total FPI Inflows in June 2021 has gone directly to the Insurance Sector, the highest among all.
• Such high inflows by Foreign Portfolio Investors show their strong confidence in this sector.

Reasons for Growth Prospects in the Insurance Sector:

i) Highly Underpenetration of Insurance Sector: In India, there is a high under penetration of the insurance sector and this journey of under penetration to penetration will lead to organic growth of 15%-20% in the next 5-10 years.

ii) Growth in Awareness of Risk Management: During the Covid-19 Pandemic period, people have now become more aware of Risk Management, where Insurance plays a key role.

FPIs Portfolio:

• The total Portfolio of Foreign Portfolio Investors (FPIs) is $591 Billion.
• Out of these $591 Billion, hardly 2.5% is invested in Insurance Sector by the Foreign Portfolio Investors.
• Noticing the available growth opportunities in the insurance sector and possible listing of LIC, and other Life and General Insurance Companies, there could be a rise in the allocation of the Insurance Sector by these Foreign Portfolio Investors.

Insurance Stocks to Keep on Radar:

i) HDFC Life Insurance

ii) SBI Life Insurance

iii) ICICI Prudential Life Insurance

iv) ICICI Lombard General Insurance

Conclusions:

The insurance sector is a highly underpenetrated Sector in India and hence there is organic growth available in this sector. In the next 5-10 years, this sector may yield a healthy double-digit return of around 15%-20%. Investors looking for any allocation in this sector should check on the stocks suggested in this article. Do consult the financial advisor before making any investment strategies.