HDFC Life, SBI Life Shares Jump Up to 3% as FM Raises FDI Limit to 100%
HDFC Life, SBI Life Shares Jump Up to 3% as FM Raises FDI Limit to 100%
On February 1, insurance stocks witnessed a notable surge after Finance Minister Nirmala Sitharaman announced an increase in the foreign direct investment (FDI) limit for the insurance sector from 74% to 100% during the Union Budget 2025-26 presentation. Shares of major insurers like HDFC Life, SBI Life, LIC, New India Assurance, ICICI Prudential Life, and Star Health gained up to 3% following the announcement.
The finance minister specified that the new FDI cap applies to investors committing their entire premium investments within India. She also highlighted plans to review and simplify the existing FDI guidelines, aiming to attract more foreign capital into the insurance sector.
According to Moody’s Ratings, the increased FDI limit could drive improved profit margins, significant capital inflows, stronger financial reserves, and a boost in new insurance listings. Industry leaders are optimistic about enhanced funding opportunities, aligning with the government’s earlier proposal to amend the Insurance Act of 1938 to accommodate higher FDI limits.
Despite recommendations from Axis Securities to reduce Goods and Services Tax (GST) rates on health and term insurance and increase tax exemption limits, these suggestions were not addressed in the Budget. However, the finance minister announced plans to introduce a new income tax bill next week, which may include changes to tax exemption thresholds.
Experts advocate raising the deduction limit under Section 80D of the Income Tax Act, 1961, to Rs 50,000 for all taxpayers and Rs 1 lakh for senior citizens. This section allows deductions on health insurance premiums, encouraging wider insurance adoption.
Dhruv Chopra, Managing Partner at Dewan P N Chopra & Co, noted that the revised FDI cap targets insurers retaining their premium investments domestically. He emphasized that the review and simplification of foreign investment regulations are expected to create a favorable environment for foreign investors, promoting growth in India’s insurance industry.
