Insurance stocks rally up to 7% as Budget 2025 hikes FDI limit to 100%

Finance Minister Nirmala Sitharaman in her Budget speech today increased foreign direct investment (FDI) from the earlier 74 per cent to 100 per cent. Importantly, the limit has been revised higher for insurers which invest their entire premium in India.

Post the development, shares of insurance companies traded in the green, with Star Health and Allied Insurance Company leading the pack with gains of up to 7 per cent.

Other notable gainers from the basket include ICICI Prudential Life Insurance, HDFC Life Insurance and SBI Life Insurance among others.

Balachander Sekhar, Co-founder and Chief Executive Officer, RenewBuy said, "The government’s announcement to allow 100% Foreign Direct Investment (FDI) in the insurance sector will help facilitate entry of more players into the Indian market, thereby ushering in a new wave of competition, innovation and growth. This influx will drive Indian insurers to adopt global best practices in product and processes, innovation as well as cutting-edge technologies. All of these can further help improve underwriting, claims management and customer service."

Further he added that in a capital-intensive market like insurance, the proposal will help inject substantial capital into the sector, enabling insurers to expand their operations, enhance their product offerings, and strengthen financial reserves. It can also impact improved margins for Indian insurers, listing of insurance companies and newer tax rules.

On the whole, this initiative by the government is appreciated by experts.