Life Insurance Corporation of India (LIC) might be one of the country's smartest domestic institutional investors. The stock portfolio of the public sector insurer, which is also the country's largest institutional investor, has outperformed the benchmark index in the last three years as well as in the current calendar year by a wide margin.

An index of LIC's top 100 stock holdings, compiled by ET, has returned 89 per cent on an absolute basis since September 1, 2014 against Sensex's absolute returns of 68 per cent and BSE-100's absolute returns of 87 per cent.

About 75 of the top 100 stocks in LIC's portfolio have given a return between 25 per cent and 900 per cent in the past three years as compared with Sensex's gain of 24 per cent during this period, according to an ET study.

"LIC is one the savviest and genuine contra institutional investor in India as their policies which run for decades allows them to invest for very allows them to invest for very longer period," said jay Bodke, CEO, Prabhudas Lilladher "They buy quality stocks when there is a panic in the market and sell those shares in the peaks."

The ET-compiled index LIC's top 100 stocks have given annualised returns of 9 per cent since September 2014. The equity large-cap mutual fund category has returned 9.2 per cent during the same period.

Currently, LIC holds stakes in nearly 375 listed companies worth Rs 5.14 lakh crore. Among its top 50 holdings in terms of value, stocks such as Maruti SuzukiBSE 0.08 % and Indian Oil CorporationBSE 1.62 % rallied 313 per cent and 213 per cent, respectively, in the three years. LIC Housing FinanceBSE 0.99 %, Grasim IndustriesBSE 2.50 %, HDFC BankBSE 0.56 %, Asian PaintsBSE 1.27 %, Nalco and HDFC among others gained between 100 per cent and 200 per cent respectively during this period.

LIC's top midcap bets like Bajaj Finserve, HPCLBSE 3.08 %, BritanniaBSE 0.42 %, Ashok LeylandBSE 0.99 %, Bharat ElectronicsBSE 2.32 %, Piramal Enterprises have gained over 400 per cent in the past three years.

"In the last few years, LIC has adopted a stringent criteria for buying stocks," said a fund manager. "Unlike in the past, they don't buy random stocks under any pressure from the government".

However, most of LIC's investments in the PSU stocks have been disappointments.

In the ONGCBSE -0.52 % share sale in 2012, LIC had picked up over 40 crore shares, or 93 per cent of the shares sold, at a price of Rs 175 (adjusted for bonus) apiece, but currently stock is trading at Rs 161. In the NTPCBSE -0.15 % issue in February 2013, LIC picked up 12 crore shares worth Rs 1,765 crore, but the stock has moved between Rs 144 and Rs 167 (currently). The insurer's investments in share sales of SAILBSE 0.63 % and Coal IndiaBSE -0.49 % have been disappointing.

However, LIC's investment in State Bank of India's QIP in January 2014 has almost doubled.

In FY16, LIC had booked profits in stocks worth Rs 11,000 crore. Thanks to higher profit from its huge portfolio, LIC has decided to pay 40 per cent higher bonus and dividends to the government and its customers for 2016-17.