Budget 2025: HDFC Life, SBI Life, other insurance players rise up to 3% as FM increases FDI limit to 100%

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Insurance stocks surged on February 1 after finance minister increased the foreign direct investment (FDI) in the sector to 100 percent from 74 percent.

Shares of HDFC Life, LIC, New India Assurance, SBI Life, ICICI Prudential Life, and Star Health went up to 3 percent.

On February 1, the Finance Minister Nirmala Sitharaman released Union Budget 2025-26. In her speech, Sitharaman said that this enhanced limit would be applicable to those investors who will invest their entire premium in India. The quad rails of current FDI guidelines will be later reviewed and further simplified, Sitharaman added.

Moody's Ratings said that raising the FDI limit in the insurance sector could improve profit margins, inject substantial capital, strengthen financial reserves, and encourage new listings within the sector.

Insurance players were also hoping for the Budget to allow improved funding through foreign direct investment (FDI) rote. The government had previously proposed amendments to the Insurance Act of 1938 to raise FDI limits and now have finally shared the same.

In their pre-Budget observations, analysts at Axis Securities had also suggested a reduction in Goods and Services Tax (GST) rates to make health and term insurance more affordable, along with an increase in tax exemption limit to encourage insurance policy purchases. However, the finance minister skipped these during the 2025 Budget presentation.

Apart from that, the Finance Minister also said that new income tax bill would be tabled next week. Analysts would watch out if there is any revision in tax exemption limit.

Experts had suggested raising raising the deduction limit given under Section 80D to Rs 50,000 for all taxpayers and Rs 1 lakh for senior citizens. Section 80D of the Income Tax Act, 1961, allows individuals to claim a tax deduction for health insurance premiums.

While the new tax regime does not encourage exemptions, experts had suggested that the regime allow for exemptions for health-insurance premiums.