Budget 2021: Insurance stocks rally as govt increases FDI limit to 49%

Budget 2021: Insurance stocks rally as govt increases FDI limit to 49%

NEW DELHI: Insurance sector stocks rallied up to 4 per cent in Monday’s trade after the FM Nirmala Sitharaman announced an increase in FDI limit for the sector to 74 per cent from 49 per cent at present.

The move would help insurers attract more capital to expand business. Besides, it would also potentially boost the government’s divestment programme, as the government is looking to launch IPOs of largest life insurer LIC and a PSU general insurer in FY22.

“This will also augment foreign inflows and help attract more foreign companies,” said Manoj Purohit, Partner and Leader – Financial Services Tax at BDO India.

The announcement largely met the Street expectations.

Shares of ICICI Prudential Life Insurance Company rose 2.93 per cent to Rs 495.20. SBI Life Insurance Company rose 2.79 per cent to Rs 888.75. HDFC Life added 2.04 per cent to Rs 691.65. ICICI Lombard advanced 3.48 per cent to Rs 1,363 a piece.

In her 2019 budget speech, Sitharaman had said that the government will explore further easing the foreign direct investment (FDI) limit in insurance. The Insurance Regulatory and Development Authority of India (IRDAI) had also backed an increase in the limit to 74 per cent.

This rise in the limit to 74 per cent for the insurance sector now equals the limit set for private banks.

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