SBI Life, HDFC Life tumble up to 7% despite Budget 2025 announcing 100% FDI; here’s why

The fall in insurance stocks can be attributed to concerns about the rising shift among taxpayers to the new tax regime after the major tax relief announced in Budget 2025.

FM Sitharaman announced no income tax payable for individuals earning up to ₹12 lakh under the new regime (₹12.75 lakh for salaried taxpayers with standard deduction).

According to experts, the proposed tax changes aim to make the new tax regime more attractive by offering exemptions for individuals. As a result, this may make life insurance and health insurance policies less appealing as tax-saving tools under sections 80C and 80D.

Currently, a significant portion of the premiums (estimated between 5-7%) is paid with tax savings in mind. If the new tax regime becomes more favourable and people shift to it, they might no longer see the same incentive to buy life insurance for tax benefits. This could hurt the premium income of life insurance companies.

However, the increase in FDI to 100% is seen as a potential boost to the sector by bringing in foreign capital; it doesn’t have an immediate positive effect on listed life insurance companies. This is because the minimum public shareholding norms prevent these companies from benefiting directly from foreign investments.

Shares of HDFC Life declined 6.7% intraday to a day low of ₹595.25 per share, while SBI Life stock tanked 7.4% to an intraday low of ₹1,372 per share.