Moneycontrol Bureau
Shares of insurance companies rallied on Friday after the Parliament passed Insurance Bill. The Bill proposes to increase foreign investment limit (FII) in insurance firms to 49 percent from 26 percent. Stocks like Max India and Reliance Capital jumped 5-7 percent in early trade.
So, how to trade these stocks now?
Rel Cap and HDFC remain top picks of Deutsche Bank. Life Insurance contributes largest to Max India (80 percent of value from life business) and Rel Cap business (39 percent of value from life business).
CLSA feels that the move may drive USD 2 billion of capital market transactions. HDFC Standard Life, ICICI Prudential and Max Life are likely to be frontrunners for capital market transactions while PSU banks may also monetise stake in insurance JVs to improve capital, the brokerage says. It has outperform rating on Max India.
Max India, also, tops list of Edelweiss. It does not expect any earnings kicker in near to medium term but feels the move will go a long way in boosting sentiments. Edelweiss agrees that the reform will pave way for listing on bourses
According to Morgan Stanley, though large insurers are well capitalised for near term growth the move will be particularly beneficial for capital starved mid-to small sized companies. It will also help price discovery and crystallisation of value for insurers. Morgan Stanley, however, remains underweight on Max India on expensive valuation.
At 9:53 hrs, Max India was at Rs 498.30, up Rs 10.10, or 2.07 percent while Reliance Capital was at Rs 496.00, up Rs 6.05, or 1.23 percent on the BSE.
| Companies | Insurance Subsidies (stake) |
| Max India | Max Life (71%), Max Bupa(74%) |
| Bajaj Finserv @ 74% | Bajaj Allianz Life (51%), Bajaj Allianz General (51%) |
| Reliance Capital | Reliance Life (74%), Reliance General (100%) |
| IMPAL | Royal Sundaram (10%) |
| Tube Investments | Cholamandalam MS General (74%) |
| Aditya Birla Nuvo | Birla SunLife (74%) |
| Exide Industries | Exide Life (100%) |
| ICICI Bank | ICICI Pru Life (74%), ICICI Lombard (74%) |
| Sundaram Finance | Royal Sundaram (50%) |
| Edelweiss Financial Ser | Edelweiss Tokio Life (74%) |
| HDFC Limited | HDFC Life (71%), HDFC Ergo (74%) |
| SBI | SBI Life (74%), SBI General (74%) |
| Dewan Housing | DHFL Pramerica (50%) |
(Posted by Nasrin Sultana)
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