Bajaj Finserv, Max India, Reliance Capital rally as Cabinet clears 49% FDI in Insurance

NEW DELHI: Insurance-related stocks such as Bajaj Finserv, Max India, Reliance Capital, Exide Industries rallied as much as 6 per cent in intraday trade on Thursday, after the Cabinet approved the hike of the foreign direct investment in the insurance sector to 49 per cent from the current level of 26 per cent, ET Now reported.

The stocks however lost momentum in the later part of the trade.

The bill aims to raise the foreign direct investment in insurance sector to 49 per cent, from the current level of 26 per cent.

Reacting on the news, Reliance Capital rallied as much as 5.4 per cent, followed by Max India, which rose 4.8 per cent, Bajaj Finserv 3.09 per cent and Exide Industries 2.12 per cent.

There is enormous potential for insurance in a country in which large swathes of the population don't have coverage.

But the industry needs a substantial amount of money to increase life insurance penetration, which was just 3.17 per cent in 2012, while non-life coverage was even worse at 0.78 per cent, ET reported.

"Well speaking for the industry, it is a welcome move. It has been long outstanding as all of us know and rather glad to see both the resolve and speed at which things are moving," said Rajesh Sud, Max Life.

"At an overall country level, I feel glad about that part first and yes it is certainly something that the industry would welcome," he added.

The hike was a part of Arun Jaitley's Budget speech and the government has kept its promise which is a welcome sign for the industry and the nation, say analysts.

"It is a promise the nation made about 12 years ago to all the foreign partners who came to India. They have been assured that the govt will raise FDI from 26% and to 49% soon but it did not happen," said Ashvin Parekh, EY.

"For the last 12-13 years the foreign partners who actively been working in the Indian market have been waiting for this particular amendment to happen. The next thing this government should do after the cabinet approval, committee approval is that it should take it to the parliament at the earliest and get the parliament approve and notify the act," he added.