Insurance stocks see a strong run in June, expert says it is correctional move as tax impact was minimal

Diwan noted that as the first quarter panned out, the market has woken up to the fact that there has been very little impact of the tax regulations on the insurance premium.

"When you saw the data come through for VNB, which is value of new business, from most of the players, suddenly everybody started noticing the impact is probably less than three-four percent and on a yearly basis, this quarter is not one of the best but you still had growth clocked by most of the large private sector players and that gave the assurance that we are probably looking at this sector with a little bit of a very strong dose of scepticism and that is where the move is correctional. So what you see is a pullback of sorts where most companies started correcting and people started adding them back again into the portfolio especially the institutional investors," he said.

The insurance sector performance is largely dependent on regulatory changes as it influences the affordability, accessibility and attractiveness to individuals. The regulatory changes also impact the availability of insurance products by imposing new requirements or restrictions on insurers in terms of capital, solvency, governance, pricing, distribution, etc.

The full-year guidance of insurance companies indicate steady growth in FY24, which has belied post-Budget fears. If the volume normalcy is established for a longer time, there can be a positive rally in life insurance stocks, according to a report by ICICI Securities.

The management of HDFC Life Insurance in an interaction with CNBC-TV18 expressed optimism of growing the value of new business (VNB) in mid teens in the ongoing financial year, while the margins are expected at 28 to 30 percent. Peer, ICICI Prudential Life insurance has Anup Bagchi taking over as MD and CEO, who focuses on growing premium.