Shares of leading life insurance companies jumped on Wednesday after institutional brokerage firm CLSA upgraded the stocks saying the ‘negatives are already priced in’. CLSA has upgraded HDFC Life Insurance Co. Ltd to ‘underperform’ from ‘sell’, raising the target price to Rs 500 from Rs 460 earlier.

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On Wednesday, the stock was trading at Rs 492.85, up 2.1 percent, on BSE at 10:38 am.

Max Financial Services Ltd shares also jumped nearly 4 percent to Rs 654.15 after CLSA upgraded the stock to ‘buy’ from ‘underperform’. It gave a target price of Rs 780 on the stock, implying an upside of 24 percent from its previous close.

CLSA also maintained its ‘outperform’ rating on ICICI Prudential Life Insurance Co. Ltd, giving a target price of Rs 485. The stock was trading at Rs 429, up 3.2 percent, on Wednesday.

The brokerage firm said that though the near-term growth of life insurance companies in the first half of 2023-24 could see an impact from the pre-buying seen in February-March 2023, insurers are preparing for mitigating growth factors.

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To recall, Finance Minister Nirmala Sitharaman on February 1 had proposed that where aggregate of premium for life insurance policies (other than unit-linked insurance plans) issued on or after April 1, 2023 is above Rs 5 lakh, the maturity amount will not be exempt from tax.

This implies that insurance policies (excluding Ulips) with cumulative annual premiums exceeding Rs 5 lakh will become taxable from April 1, 2023. Hence, this is the last month to buy such products for tax-free maturity amount, which is leading to a lot of pre-buying of late.

CLSA also said, “While expect no change in taxable limit (Rs 5 lakh), there is a small possibility of long-term capital gains (LTCG) which reduces IRR (internal return rate) impact from 115 basis points now to 30 basis points and could also reverse a large part of the Budget negative.”

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(Edited by : Anshul)

First Published:Mar 22, 2023 2:03 PM IST