Sublime Consulting

Yes! Recent data released by Life Insurance Council clearly indicates that the 16 Life Insurance companies in India are moving the Indian Equity market. Literally.
While the FIIs pumped in around $ 8 billion in Indian equities in FY 2006, the Life Insurance companies invested around $ 35 billion worth of equities in FY 06-07.
What is interesting in this finding is that the domestic equity mutual funds chipped in with just about $ 2 billion.
Bulk of the contribution[to the tune of 75%] in the life insurance segment was thanks to the behemoth, Life Insurance Corporation of India.The $ 26 billion investments by LIC indicates that no longer the FIIs flows could have significant impact in the domestic equities market.
Case in point - FII outflows in August 2007 was approximately to the tune of $ 2 billion. But sensex and nifty still ended the month positive with almost 3% returns.
Next to Hang Seng we have been better performers in the last two months in comparison with other emerging markets and developed markets.
The increasing participation by retail investors in equity market through Unit Linked Products or ULIPS floated by the Life Insurance Companies could have helped stemmed the tide in the domestic equity markets while FIIs were pulling out funds, specifically hedge funds due to redemption pressures.

This sure is a tipping point for our Indian Markets and reversal of roles as to who supersedes the equity market flows in the Country.
Of course, one needs to watch whether this is sustainable, because if and when our markets do get bearish[due to global factors and political factors] in the near term, our retail investors again could develop cold feet to equity investing.
The last time around we saw huge participation of domestic house holds investing in capital markets, was when Harshad Mehta moved the market in 1990s!
And the rest is history…

We hope this time around its different..
May we raise a toast to the coming of age of the Indian Investor!

Indian markets continued the bull run for the fourth straight year with 46% returns
in 2006.
FII flows in the Indian equity markets for the year 2006 stood at $ 8 billion
compared to $ 10 billion in 2005.
Domestic mutual funds contributed $ 3.5 billion. It is 17% higher than last year.
This is a healthy sign which indicates that more retail investors are entering the
equity market through mutual funds.
Tough to time correction in the markets, especially for the first few months.
Data and Analysis points to India in the over valuation zone.

According to Morgan Stanley estimates markets could have a downside of 18%
and an upside of 21%.
Various external and internal factors could contribute to the downside..
The key ones are possible U.S. slowdown in 2007, interest rate sensitivity, geopolitical
risks, liquidity squeeze, oil factor etc..
But the broad consensus[estimates by brokerage houses] is that the corporate
earnings growth will be in the region of 30% for FY2007.
Data and analysis points to aligning one’s portfolio predominantly to large caps
and select mid caps stocks/funds.
Overall.. the long term equity story for India is intact and one could get
reasonable returns [with a time horizon of 2-3 years] by holding investments predominantly
in large caps and in select mid /small cap stocks/funds.
On the flip side.. will we[Indian Stock Markets] show the money in 2007!?
Time will tell..