In the falling interest rate scenario, the Life Insurance Corporation of India expects secondary market operations to add one per cent to its annualised yield on investments.

LIC chairman S B Mathur said: "We have targeted profit-booking to the tune of Rs 3,000-3,200 crore (Rs 30-32 billion) this year, both in terms of equity and debt. This will add one per cent to our yield."

Till September, LIC's average yield stood at six per cent on account of falling yields on government securities.

In the current stock market rally, LIC continues to be a net seller, having invested heavily when the BSE sensitive index ruled around 2,900-3,000.

LIC's equity portfolio rose by almost 50 per cent to Rs 31,000 crore (Rs 310 billion) as on July 31, 2003 from Rs 21,000 crore (Rs 210 billion) as at the end of March 2003. Since then it has fallen.

LIC sources said the corporation has sold a substantial share of its bank stocks, including State Bank of India, Bank of India, Bank of Baroda, Oriental Bank of Commerce and a number of new generation private sector banks.

"We felt LIC had a very high exposure to the banking industry and hence decided to reduce our holdings prior to the series of bank IPOs (initial public offerings)," said Mathur.

While LIC thought it would take sizeable subscription in the IPOs, having applied to the tune of Rs 1-2 crore (Rs 10-20 million) in each, on account of the over-subscription to the tune of eight to 17 times, LIC was allotted only about Rs 15-20 lakh (1.5-2 million) in the IPOs.

Till September, LIC had booked profits on its equity portfolio to the tune of Rs 1,200 crore (Rs 12 billion). "We will start buying when the correction takes place," said Mathur.