LIC shares touch fresh lows as market-cap slips below Rs 5 trillion mark; what should investors do with this stock?

Selling pressure continued on stocks of Insurance-behemoth Life Insurance Corporation of India (LIC) on Monday as the stock hit a fresh low of Rs 777.1 per share since its market debut on May 17, after slipping by nearly 3 per cent on the BSE intraday during Monday’s trading session. 

In the process, the market capitalistion of the state-owned insurer also breached below the Rs 5-trillion-mark with the stock touching a new low.  

The stock was trading lower for the fifth straight session, tumbling by over 4.5 per cent during the period as compared to a 0.24 per cent rise in the S&P BSE Sensex during the same period. 

While explaining the factors for the correction in LIC shares, the market analyst and TradeSwift Director Sandeep Jain said that the LIC is domestic institutional investor (DII), which makes it a direct market participant as it earns the majority of its income through the investing in indices.  

He added that it’s likely that the public insurer’s shares would see correction given the market’s weak sentiment. Besides, LIC is also treated as a rescue entity by the government and the company’s business gets affected, and the public sector units have been an underperformer, Jain also said. 

Despite weakness in the stock, the market analyst recommended to Hold for exiting investors on the back of strong fundamentals and inexpensive valuations of the company. 

LIC shares earlier in May had made a weak stock debut, listing at nearly 8 per cent below its issue price. However, the stock has slumped over 18 per cent below its issue price of Rs 949 per share. 

The Rs 20,557-crore public offer of LIC was subscribed just 2.95 times. While retail investors got the allotment at Rs 905 per share, LIC’s policyholders allotted shares at Rs 889 per share. 

Similarly, Emkay Research initiated coverage on LIC with a Hold rating with a target price of Rs 875 per share (over 11% upside). The brokerage’s neutral view is underpinned by three factors: 1) low VNB relative to EV, 2) lower APE growth and margin prospects versus private sector peers, and 3) inherent volatility in EV.