Is it advisable to invest in insurance stocks in the current scenario, considering the fact that it is an underpenetrated sector? Also, why is the PE of insurance companies generally high?
Insurance as a business has great promise. And also, it is designed and conducted in a way that it is able to attract long-term customers. Perhaps that is the reason why they are pricey. Also, when we look at the 10-year incubation period of life insurance companies, they have really come out very well, for example HDFC Life Insurance.
Now, we also have the IPO of LIC in the pipeline, which is probably going to be the biggest IPO of the country. LIC is like the daddy of the industry and it will be very interesting to see its IPO. But I think relatively, newer insurance companies are more efficient.
I would say, don't rush things or have the feeling of missing out. We will have far more opportunities. We are steering through a market scenario where many things are pricey with only reasonable quality. Something even with modest quality is too pricey. The money is chasing a particular set of stocks, thereby making them expensive. But the realism may hit the market in the coming two to four quarters. So, don't rush and take your time. There will be many opportunities in that sense.