Shares of insurance companies rallied up to 5% on Saturday after Finance Minister Nirmala Sitharaman, in her Budget speech, proposed to raise the foreign direct investment (FDI) limit in this sector from 74% to 100%. 

FDI limit for insurance will be raised from 74% to 100% for those companies that invest their entire premium in India, says the finance minister.

Cheering the news, shares of LIC of India jumped up to 5%, while the New India Assurance, Star Health & Allied Insurance, Go Digit General Insurance, HDFC life Insurance, and ICICI Lombard General Insurance gained in the range of 1-3%.

On the other hand, SBI Life Insurance shares dropped over 1%, while Max Financial Services and GIC of India shares were trading tad lower.

Meanwhile, the equity benchmarks Sensex and Nifty were down up to 0.45% as investors reacted to Budget announcements. Early today, the BSE Sensex opened 136 points higher at 77,637 and the NSE Nifty belled the day at 23,528.60, up 22 points. the Dalal Street has maintained buying momentum for the last four sessions, with Sensex and Nifty rising nearly 3% during this period amid hope that the government would strike a balance between fiscal deficit, capex for growth and social spending to revitalise the world’s fifth largest economy.

In November last year, the Department of Financial Services had released a proposal to amend the FDI limit in the country’s insurance companies, raising this limit from 74% to 100%, allowing insurers to handle multiple classes of insurance business and insurance activities. The decision was taken following a comprehensive review with IRDAI and the industry.

The government also plans to reduce the net owned funds requirement for foreign re-insurers from Rs. 5,000 crore to Rs. 1,000 crore. Net Owned Funds (NOF) for a foreign re-insurer is the minimum amount of capital or financial resources that the company must maintain to operate in India.