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As on: Feb 24, 2019 10:42 AM
Aditya Birla Sun Life Insurance to increase holdings on oil marketing companies for 2019
29-Nov-18   09:51 Hrs IST

Aditya Birla Sun Life Insurance (ABSLI) plans to increase its holdings in oil marketing companies as crude prices come under pressure and valuations in the sector turn attractive ahead of general elections next year.

"I think over the last five years we've seen a huge re-rating of these stocks and a very sharp correction as we approach the elections," Deven Sangoi, chief investment officer for equities at ABSLI, the life insurance arm of Aditya Birla Capital, told in a leading magazine.

Sangoi said he expected oil prices to remain between $50-$60 a barrel. Oil might even drop to $40 a barrel, if there is a demand shock due to a global growth slump, he added, potentially giving a boost to oil marketing companies' margins.

"If this oil call goes right, then I think oil marketing companies are a value," said Sangoi, who manages about 280 billion rupees ($4 billion) in equities out of ABSLI's 390 billion rupees of assets under management.

Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp are among the top oil marketing companies in India.

Sangoi's bet also hinges on the outcome of national elections due by May.

He said the current government had let oil marketing companies maintain their margins during a period of rising crude prices by passing the cost to consumers.

He is also betting on power generating companies next year, as a pickup in economic growth boosts demand for energy.

"I'm a very firm believer that there is going to be very high growth in energy consumption, if we continue to grow at 6-7 percent," Sangoi said.

An increase in tariffs by the regulator and better capacity utilisation at power plants should also help these firms, he said.

Elsewhere, Sangoi said he expected private sector banks, especially those with corporate clients, to benefit next year as non-banking financial firms suffer from an ongoing credit crisis and bad loans, which have plagued lenders, continue to dwindle.