Insurance stocks gain as Finance Ministry proposes 100% FDI

Indian insurance stocks surged after the Finance Ministry proposed increasing the foreign direct investment (FDI) cap from 74% to 100%. This move is expected to attract global players and bring fresh capital to the sector. Additionally, the net-owned fund requirement for foreign re-insurers could be reduced from Rs 5,000 crore to Rs 1,000 crore, simplifying market entry for foreign companies.

The proposals aim to empower the regulator to ease entry barriers, particularly for insurers targeting underserved areas. This aligns with the government’s vision of "Insurance for All by 2047," focusing on accessibility, affordability, and process simplification, while also protecting policyholders' interests.

Stock-wise performance

LIC: Shares jumped 5.2% during the day to Rs 988 before settling 4.3% higher at Rs 979.5 on the NSE. LIC has risen 43% over the last 12 months and 17% year-to-date, reflecting strong investor confidence.

New India Assurance: The stock surged up to 3.7% intraday before trimming gains to close 1.72% higher. Its movement outpaced the broader market, which saw the Nifty 50 rise 0.39%.

Go Digit General Insurance: Shares gained 1.5% to touch Rs 341.7 intraday, later trading 0.59% higher at Rs 338.55. The stock’s relative strength index (RSI) of 26 indicates it is currently in an oversold zone.

Brokerage outlook

Bernstein: Warned that tighter bancassurance caps could hurt SBI Life, HDFC Life, and Max Financial, which heavily depend on bank sales channels. LIC, ICICI Prudential, and PB Fintech are expected to benefit.

Morgan Stanley: Cautioned that caps could slow APE (Annual Premium Equivalent) growth, especially if group credit life business is included.

Kotak Securities: Highlighted attractive valuations for private insurers post-correction, with HDFC Life and ICICI Prudential on its buy list.

While the proposals signal long-term growth for the insurance industry, clarity on regulatory changes will be crucial for sustaining momentum.