Shares of major insurance companies like HDFC Life, SBI Life and others plunged after Finance Minister Nirmala Sitharaman, while presenting Budget 2025-2026, incentivised the new tax regime by introducing new tax slabs. Notably, the new tax regime provides no deductions for health and life insurances.
The finance minister has also increased the foreign direct investment (FDI) limit in the sector to 100 percent from 74 percent.
HDFC Life shares tumbled 6 percent to trade at Rs 599.75 apiece, while those of SBI Life fell 5.67 percent to Rs 1,399.50 apiece. The two stocks were briefly the top losers on the Nifty 50 index. ICICI Lombard, meanwhile, saw a nearly 3 percent drop in share price to trade at Rs 1,806 apiece.
The stocks later recovered major portions of losses. At 1.32 pm, HDFC Life shares were trading 1.2 percent lower at Rs 630.50, while SBI Life shares were trading 1.51 percent lower at Rs 1,462 per share. ICICI Lombard shares were trading 1.24 percent lower at Rs 1,834.80 apiece.
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.
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