Insurance Stocks Decline Due to Profit-Taking; ICICI Lombard Sees Gains Over 2%

On Thursday, most insurance stocks saw declines due to profit-taking after an earlier surge. Finance Minister Nirmala Sitharaman announced that all individual life insurance policies, including term life, ULIP, and endowment policies, along with subsequent reinsurance, are now exempt from GST. This announcement followed the 56th GST Council meeting.

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At the close of trading, Max Financial Services shares fell by 3.11%, Niva Bupa Health Insurance Company dropped 3.02%, and HDFC Life Insurance Company decreased by 2.95%. Star Health and Allied Insurance Company saw a decline of 1.76%, ICICI Prudential Life Insurance Company went down by 1.56%, and SBI Life Insurance Company dipped by 0.95% on the BSE.

Market Reactions to GST Reforms

ICICI Lombard General Insurance Company bucked the trend, ending 2.42% higher, while Life Insurance Corporation of India rose by 0.78%. The benchmark indices had a volatile session but closed with slight gains. The Nifty-50 started strong due to optimism from the GST reforms, which were seen as a major tax overhaul.

The initial market rise was driven by strong buying in auto and consumer staples sectors. However, profit-booking at higher levels and underperformance in some index heavyweights limited further gains, according to Bajaj Broking.

Impact on Various Sectors

Earlier in the day, Star Health surged 9.35%, Niva Bupa increased by 9%, ICICI Prudential rose 5.70%, LIC gained 5%, and HDFC Life climbed 4.90%. Rahul Singh from Tata Asset Management noted that direct beneficiaries of the GST changes include consumer, auto, cement, healthcare, and insurance sectors.

The GST rate of 18% has been applied to health and life insurance premiums since July 2017. Sitharaman stated that companies are expected to pass on the GST reduction benefits to make insurance more affordable and increase coverage in India.

Future Prospects for Beneficiaries

The new GST rates will be effective from September 22, coinciding with the start of Navratri. Pranav Haridasan from Axis Securities highlighted that key sectors benefiting from these changes include insurance, FMCG, automobiles, agriculture equipment, cement, consumer durables, apparel, footwear, QSRs, and retail.

This development is anticipated to boost growth for retail banks and NBFCs as second-order beneficiaries. The reforms aim to enhance affordability and accessibility of insurance products for the general public.

With inputs from PTI