Life Insurers Keep Faith in India Stocks Amid Mayhem

(Bloomberg) -- Investment chiefs at two Indian life insurance companies are keeping money in stocks despite selling by overseas funds that has put the nation’s benchmark index on course for a record monthly decline.

The S&P BSE Sensex has plunged 30% so far in March as the coronavirus-led wave of risk aversion has prompted foreign investors to dump local stocks at the fastest pace in at least two decades. The benchmark gauge is trading at 12.4 times 12-month estimated earnings, near its cheapest level since 2011.

“The fair value of a quality stock doesn’t change due to a few quarters of earnings downgrades,” said Saibal Ghosh, chief investment officer at Aegon Life Insurance. “At such attractive valuations, this is where we would like to bet our money,” he said.

Aegon has been building its portfolio with select names in the consumer and pharmaceutical sectors while avoiding companies with global links such as metals producers.

“The cash we are maintaining is more tactical and not as a hideout at a time like this,” Ghosh said. “Once the coronavirus impact starts tapering, the stocks will outperform.”

Disruption to business amid the world’s biggest virus lockdown has clouded the outlook for Indian company earnings. That unpredictability has helped drive the market into panic mode, with the Sensex’s 10-day realized volatility hitting a record of 106% on Tuesday.

“Undoubtedly, there will be some impact, but the effort from our end is to identify where the impact will be less,” said Manish Kumar, the Mumbai-based chief investment officer at ICICI Prudential Life Insurance Co., which manages about 1.7 trillion rupees of assets ($22.3 billion). “We are looking at good businesses across sectors.”

ICICI Prudential is carrying a “low to moderate” level of cash, and is advising clients to have a mix of both equity and debt investments to ride out the volatility.

©2020 Bloomberg L.P.