LIC Shares Rise for Third Day in a Row; What Should Investors Expect Next?

LIC share price today: Shares of Life Insurance Corporation (LIC) rose for the third day in a row, continuing to climb to an intraday high of Rs 678.80 apiece, rising about 2 percent on Wednesday morning since yesterday’s close of Rs 665 .20 per share. This comes after the LIC script hit a new low of Rs 650 per share on the NSE on Friday.

According to stock market experts, such a surge in LIC shares should be viewed as a setback that could arise from shortcovering. They said LIC shares have been nosedive before the end of the lock-in period for anchor investors. They added that the stock’s fundamentals are still weak and one should avoid taking new positions in the life insurance stock until it breaks through.

JPMorgan has started to cover the LIC stock with an overweight stance and a price target of Rs 840. “Thesis is about the 0.75 times the price of LIC to the embedded value – a measure of the market value of the current and future policies of an insurer,” according to the global brokerage.

“LIC’s new business value is only 1 percent of current policy. Therefore, at 99 percent of the value of old policies, we consider 0.75x P/EV to be overly hard, even if there is no growth. In reality, LIC has grown lately,” said JPMorgan.

It forecast 6 percent growth in FY22-24 for the public sector insurer.

“LIC gained 44 percent market share in FY22, but has lost market share to industry peers over the past five years, JPMorgan said in its report. LIC’s retail premium is growing faster than the industry and is above 2019 levels. LIC is targeting addressing whitespace in portfolios. It also creates a distribution thrust through agencies and other channels, opening up an upside risk,” the report said. LIC used to work primarily in the national interest. The surplus was paid out in full to policyholders and the government. the regulations are now allowing LIC to retain more profits,” said JPMorgan.

In early June, Emkay Global Financial Services brokerage began covering the stock with a hold rating with a target price of Rs 875, up about 8 percent from those levels.

“Without this bifurcation exercise, LIC’s H1FY22 EV would have been Rs 1.25 trillion, instead of Rs 5.4 lakh crore. Furthermore, a very significant portion of this EV is in the form of mark-to-market (MTM) gains in equity investments backing non-joint liabilities, driving EV sensitivity to stock market fluctuations to a significantly higher level, Emkay added. †

Ravi Singh, Vice President and Head of Research, Share India, said: “LIC stocks have witnessed short cover and made slight gains. However, this is not a trend reversal and investors should wait for the stock to consolidate before taking new positions. those with a high risk appetite can hold their positions. LIC’s business stats are good and the stock will deliver a good return on investment at lower levels. The temporary pullback in LIC may hit the levels of Rs 720 but is unsustainable. The stock is seeing looking attractive for value purchases around Rs 650 – just Rs 620 levels, for the long term.”

The expert opinions and investment tips in this report are their own and not the website’s or its management. Users are advised to contact certified experts before making any investment decisions.

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