The government-owned insurance major, Life Insurance Corporation of India (LIC), often comes to the government's rescue by supporting stake sale in State-run companies. This time, LIC bought 86 percent shares of the Indian Oil Corp (IOC) sold by the government, NDTV Profit reported.

Last week, the government had decided to sell 10 percent stake in IOC on Monday, but unfortunately the sale coincided with a plunge in the benchmark equity index by over 1,600 points. The Sensex faced its biggest one-day fall in the past seven years on the day. 

The stock market tumble failed to generate enough buying interest in Rs 9,100 crore or $1.4 billion government stake sale in IOC and LIC had to step in to make the offer successful.

The State-owned insurer has also helped the government's stake sale offers in the past, buying shares in banks and mining firms that were divested earlier.

In January, LIC had bought more than 28.47 crore shares or 4.51 percent stake in Coal India, amounting to nearly half of the divested stake worth Rs 22,558 crore. It also participated in Steel Authority of India's (SAIL) stake sale last year.

The investments made by the insurer have turned out to be fruitful in some cases. LIC had invested in the State Bank of India (SBI) stake in January last year and the bank's stock price have gone up by 60 percent since then. LIC's stake in IOC has now risen to 11.11 percent from 2.52 percent.

But the scale of support offered by LIC on Monday is likely to lead to a debate on the government's divestment plans. "The way the government has structured the sales so far, they are on target unless the market conditions really deteriorate. In that case, even LIC can't save them," said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance Co.

The government had very few options to step back on IOC stake sale on Monday, given that the schedule was announced only on Friday. "We have to rethink our strategy," divestment secretary Aradhana Johri said after the sale.

NTPC, Bharat Electronics, Hindustan Copper and Coal India are next in the line of the government's stake sale offers.