Market seen touching new benchmark of 2012 by Diwali: LIC

Analysts are betting big on the Indian market and expecting to see some more fireworks by Diwali or year-end. DK Mehrotra, Chairman of LIC believes that the market has started improving and is expected to reach new benchmark for 2012 by Diwali.

In an interview to CNBC-TV18 he said, "In a short and medium-term, the market would be performing very well. Maybe by the time we reach Diwali it should reach a new benchmark for the year. I think a lot of positive signs are visible in the market." Mehrotra adds that LIC has invested Rs 10,500 crore in equities as of September-end and is on a lookout for good investment opportunities. As an investment strategy, he advises investors to stay put in equity market. According to him, stocks like Axis Bank, L&T and ITC have a lot of value while ONGC is a good buy. Below is the edited transcript of his interview with CNBC-TV18’s Sonia Shenoy and Reema Tendulkar. Q: How are you feeling about the market and the economy up until now, post the decent rally that was driven by both global and local factors? What do you see as the set-up going ahead? A: The market has started improving. It has observed the improvement because of the various initiatives taken by the government. It has also improved due to the better sentiments. I presume that, in a short and medium-term, the market would be performing very well. By the time we reach Diwali, it should reach a new benchmark for the year. I think a lot of positive signs are visible in the market. Q: Domestic institutions have consistently been on the sell side in India. Is there a feeling that it may be a good time to take some profits off the table then? A: LIC is a long-term investor. We always find opportunities on either side of the spectrum. When the market moves down, we get opportunities to buy new scrips. When it moves up, we book profits. So, if opportunities come in the market and we see that it is the right time to enter, we enter. But since the market is moving, I will advise the people to stay put there because we are going to have a better level this year. Q: How much have you already deployed in the equity market so far? What are you looking to deploy in the second half of the fiscal year? A: By the end of September, we put in about Rs 10,500 crore in the equity market. Last year, we touched the level of about Rs 45,000-48,000 crore. We are hoping the market will improve and it should improve. If we get a good opportunity, we should be able to reach that level this year as well. _PAGEBREAK_ Q: Of that, has any amount been earmarked for the government’s divestment programme? A: We don't earmark any amount for any particular interaction or idea or anything that is going to come in the future. We look into opportunities. If the disinvestment comes through, it all depends upon the valuation, the company, and the scrip that is going to come in the market. We will take a call accordingly. But today we keep on scanning the market. If we get a good opportunity, we put our money into it. Q: There are reports that have been doing the rounds for a long time that LIC is interested in picking up SUUTI's (Special Undertaking of Unit Trust of India’s) stake in Axis, L&T and ITC. Has that been considered? A: We already hold all these scrips with us. Those scrips definitely have a lot of value. If we are approached anytime in the future, we will have a look at it. And if we find the valuation is right, we may look into it, but nothing at present. Q: Have you heard from the Insurance Regulatory and Development Authority (IRDA) on the subject of the increase in the 10% investment cap on a single company? When do you expect a final decision on that issue to come through? A: This is a matter which has been discussed for quite some time now with the regulator and with the ministry. They have been very open and receptive to our suggestions to increase the cap of 10%. But we have not heard any final thing on this matter. I think there are some discussions going on between the regulator and the ministry. Some decision would be communicated to us very soon. I'm awaiting that decision. Q: There has been a lot of criticism from many quarters about LIC consistently bailing out the government in its divestments. As the new chairman, would you like to respond to these concerns in the street? A: We never do anything under pressure. ONGC has been talked about so many times. I have already told that we have taken an absolute commercial decision. I stand by that.  Our company stands by that. It was nothing wrong. We never tried to bailout anybody. We never do that. Our decisions are based on our valuations of the company, our research report. ONGC has been a good buy for us. Time will definitely show that it is going to give us great value and profits. Q: One concern has been the slow growth that we have seen in Annual Premium Equivalent (APEs). That has been a problem for private insurers. Do you see the Foreign Direct Investment (FDI) hike in insurance, if it goes through, changing the outlook in a couple of years? A: That will definitely help the private players. They are facing a lot of liquidity problem. This is a capital intensive industry. They are working under a lot of stress. So, if FDI is increased and they are able to get some money, it is definitely going to help the industry. Ultimately, the customer should be the last beneficiary, who should get advantage of it - new products, new services and new returns. Q: According to you, what do you think is needed to revive the business sentiment in the insurance industry again? A: The industry is showing a turnaround. But that turnaround has to be supported by various other factors such as product innovation. The product should hit the market well. If you are able to get some tax relief as well, that is going to give a big boost to the insurance market. So, there are various factors that are involved in giving a turnaround to the industry. But we have started moving ahead in a positive manner. It should continue in the future as well.