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• LIC’s ‘Smart Move’ portfolio
• Withdrawal of LIC from private banks
• Investment shifted to public banks

LIC Portfolio Shift: LIC has taken a bold decision. Investments have shifted from private banks i.e. HDFC, ICICI, Kotak to public banks i.e. SBI, Yes Bank. Life Insurance Corporation of India (LIC), the institutional investor with the country’s largest equity portfolio worth over Rs 16 lakh crore, has made bold portfolio moves in the September quarter. Which has created a stir in the entire stock market. LIC has reduced its holdings in private sector leaders HDFC Bank, ICICI Bank and Kotak Mahindra Bank and has sharply increased its stake in public sector giants State Bank of India (SBI) and Yes Bank, creating a frenzy in the market.

LIC added 6.41 crore shares of SBI during the quarter, making an investment of approximately Rs 5,285 crore. At the same time, LIC sold shares worth Rs 3,203 crore in HDFC Bank, Rs 2,032 crore in Kotak Bank and Rs 2,461 crore in ICICI Bank. The sale led to a 8-10% decline in total insurance holdings among these lenders, respectively, which is LIC’s biggest withdrawal from India’s leading private banks in recent years and a steep decline in holdings.

LIC’s turnaround time is significant. While insurers have increased investment in public borrowers, foreign investors are pouring capital into private banks in 2025. Emirates NBD bought 60% stake in RBL Bank for $3 billion, Sumitomo Mitsui increased its stake in Yes Bank to 24.2% after investing $1.6 billion and Blackstone bought nearly 10% stake in Federal Bank for Rs 6,196 crore.

Although small public sector banks have performed well, it is important to sustain their momentum on loan demand due to lower interest rates and improved liquidity. Even a small drop in income can cause investors to despair.

Private lenders benefited from strong net interest margins and healthy credit growth, while public sector banks also reported good performance. Many banks have guided for margin expansion in the second half of FY26, supported by the recent reduction in cash reserve ratio (CRR) and improvement in growth momentum.

Meanwhile, the government is considering allowing up to 49% foreign direct investment in state-owned banks, double the current limit. Such a move could lead to an idle flow of $4 billion in PSU banks.