Mumbai, Nov 27: The state-run Life Insurance Corporation's plan to infuse around Rs 3,500 crore in the market is set to give a big push to the moribund capital markets.

The move follows the finance ministry's decision to allow the corporation to expand its capital market exposure by 20 per cent. In absolute terms, LIC's exposure in the capital market will now go up to Rs 19,000 crore.

Chairman G Krishnamurthy said that the new norms announced by the finance ministry stipulating that LIC can now invest 60 per cent of its special group-insurance funds in the approved market investments will augment the total fund size in the category to around Rs 4,000 crore from around Rs 2,300 crore.

So far, LIC was allowed to make 35 per cent investment towards the approved market investments which includes a whole lot of capital market instruments like equity and bonds, said Krishnamurthy.

The LIC's investment limit in government securities -- 65 per cent -- has now been reduced to 40 per cent.

The total group scheme fund roughly constitutes seven per cent of the total life fund which was pegged at around Rs 91,000 crore during 1996-97.

Referring to the new-found freedom to appoint fund mangers to manage its investible funds, Krishnamurthy said that several options can be adopted by the institutions while implementing the new provisions.

"We have just been allowed to appoint fund managers. We are yet to formulate a specific plan for this,'' he said, adding that both the LIC board and the LIC investment committee will deliberate on this soon. The investment committee is managed by eight members who are also part of the 30-member LIC board.

The new autonomy package allows LIC to enlarge its individual exposure in any project beyond Rs 10 crore on the basis of the investment committee approval. Previously, LIC had to seek the finance ministry's permission for this.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.