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The shares of life insurance sector behemoth Life Insurance Corporation of India (LIC) continued its bear momentum for the ninth successive session and fell to a fresh all-time low during the intraday trade Friday.
The LIC stock hit a fresh record low of Rs 708.05 on the NSE and Rs 708.80 on the BSE in the intraday session on Friday. Following its consecutive declines over the past nine sessions, the script has now fallen over 25 per cent from its issue price of Rs 949 apiece. Eventually, it ended at Rs 709.70, down 1.70 per cent from its previous close on the BSE and at Rs 710.20, down 1.59 per cent on the NSE.
The company’s market capitalisation has fallen from Rs 6 lakh crore to Rs 4.49 lakh crore (Rs 4,48,885.09 crore) at the end of trade on Friday, data on the BSE showed. This means that LIC shareholders have lost over Rs 1.51 lakh crore in less than a month of its listing.
LIC got listed on May 17 on the stock exchanges, making a lacklustre debut on Dalal Street. It listed at over an 8 per cent discount from its issue price despite a successful Rs 21,000 crore initial public offering (IPO) which got subscribed 2.95 times.
Speaking on the fall in LIC stock, Ravi Singh, vice president and head of research at Share India Securities told indianexpress.com that he anticipates the stock to fall further up to Rs 650 apiece level. He advises investors to exit their earlier positions and wait for the turnaround of the sentiments.
“The high-risk appetite investors may hold their positions. It is expected that in the long run, the business metrics of LIC will improve steadily. Investment done at lower levels will deliver good returns in long term,” Singh said.
Vishal Wagh, head of research at Bonanza Portfolio explained that the insurance giant has been facing stiff competition from private players and has been slowly losing market share. Speaking with indianexpress.com, Wagh said that LIC’s premium prices are slightly higher than the competition which impacts user behavior.
He further pointed out the low penetration across the country and said that while there is immense potential for growth and LIC does have a bigger market share, its online presence across insurance aggregators needs to increase significantly to compete with the private players.
Speaking about the stock, Wagh said that he believes LIC shares should bottom out somewhere between Rs 650-700 and stay rangebound for some time.
Santosh Meena, head of research at Swastika Investmart in a note said, “We believe India’s highly underserved life insurance market is still in its infancy and is well-positioned to capitalise on the enormous growth potential. The company has plans to address concerns like low VNB margins, loss in market share, high reliance on agency channel, etc. Additionally, the company’s issue was priced at a Price to Embedded Value of 1.1x, which was already at a discount compared to its global as well as Indian peers, and the current dip provides further valuation comfort. Another point we’d like to make is that investors should be aware that insurance is a long-term business; therefore wealth development and compounding occur only over time.”
