Insurance, NPS equity investments plunge 45% to Rs 22,714 crore in September quarter

Insurance, NPS flows into equity almost halve in the September quarter<br> — Insurance companies invested around ₹8,013 crore in equities during the September quarter, while NPS investments stood at around ₹14,700 crore, NSE data showed.

Mumbai: Flows from insurance companies and National Pension System (NPS) funds into Indian equities dropped in the September quarter, with their combined investments falling 45% to ₹22,714 crore from ₹41,465 crore in the previous quarter, according to data from NSE. Higher bond yields and falling stock prices prompted these domestic institutions to consider higher allocations to debt instruments in their portfolios.

The decline was the steepest in their combined quarterly investments in five quarters. Insurance companies invested around ₹8,013 crore in equities during the September quarter, while NPS investments stood at around ₹14,700 crore, NSE data showed.

"Some of the decline can be attributed to market weakness, which has reduced the value of equity investments," said Subhasis Ghosh, CEO of Kotak Mahindra Pension Fund. "Secondly, debt investments have also been rising. So, investors may be shifting some portion of their investments towards debt."

Mutual funds - the most dominant among domestic institutions - pumped ₹1.09 lakh crore into equities in the September quarter, compared with ₹1.42 lakh crore in the June quarter, according to data from Bloomberg. FPIs bought stocks worth ₹12,969 crore, compared with sales of ₹1.26 lakh crore in the June quarter.

For insurance companies, too, elevated bond yields offered an opportunity to lock in higher returns. Yields on three-, five- and 10-year government securities rose, making debt investments attractive amid a decline in stock prices, an expert said.

Moreover, falling stock prices also reduce the value of insurers' existing equity holdings, affecting the capital cushion they must maintain to meet potential policyholder claims.

"The eight weeks of market falls have affected insurers' solvency calculations," said Ajit Banerjee, president and chief investment officer at Shriram Life Insurance. "While falling stock prices can offer opportunities to invest at more attractive valuations, negative mark-to-market movements in equities held in non-participating portfolios and shareholders' funds must be factored into solvency calculations."

Insurers also prefer higher debt allocations when equities fall because of the accounting treatment for bonds, which reduces sharp volatility in solvency measures.

"Debt securities, by contrast, are generally held at amortised cost, subject to the applicable accounting treatment. This can limit the immediate impact of market-price movements on insurers' reported positions," Banerjee said. "The difference in accounting treatment could be one reason for higher allocations to debt."

Insurance companies and NPS funds, along with mutual funds, remained major sources of domestic liquidity for Indian equities. The combined investments of insurers and NPS funds in the stock market have been around ₹1.12 lakh crore so far in 2026. MFs alone bought stocks worth ₹4.25 lakh crore so far this year, while FPIs withdrew ₹2.87 lakh crore from the market during this period.

Compared with the September quarter of FY26, NPS funds' investments also remain lower because of the statistical impact of a higher base. The guidelines issued on March 28, 2025, raised the equity allocation cap from 15% to 25%, with pension fund benchmarks adjusted accordingly. Pension fund managers subsequently increased their equity allocations. "The decline in NPS equity investments from last year is due to the base effect, as pension funds were rebalancing their portfolios to align with the new investment guidelines," Ghosh said.