LIC's anchor book lock-in end nears: What should investors do?

Shares of Life Insurance Corporation (LIC) fell to a record low amid bearish market sentiment today. LIC stock declined 1.76 per cent intraday to Rs 709.20 against the previous close of Rs 721.95 on BSE.

The market capitalisation of the public sector insurer fell to Rs 4.49 lakh crore today against a market cap of Rs 6,00,242 crore, going by the upper price band of India's largest initial public offer. The fall in the stock comes a few days ahead of the end of the lock-in period for anchor investors in the country's largest initial public offering (IPO).

The lock-in period will end on June 13, allowing anchor investors to sell their shares in the market.

The insurance behemoth garnered a little over Rs 5,627 crore from anchor investors led primarily by domestic institutions ahead of its mega initial public offering (IPO).

Anchor Investors' (AIs) portion (5,92,96,853 equity shares) was subscribed at Rs 949 per equity share.

Investment was made by some domestic insurance companies and pension funds. Some of the prominent names in this category included ICICI Prudential Life Insurance, SBI Life Insurance, Kotak Mahindra Life Insurance, PNB Metlife Insurance, SBI Pension Fund and UTI Retirement Solutions Pension Fund Scheme.

Foreign participation included Government of Singapore, Monetary Authority of Singapore, Government Pension Fund Global and BNP Investment LLP.

The stock has fallen 18.21 per cent or Rs 158 from its listing price after two weeks of market debut. The share made a weak listing on May 17, opening at a discount of 8.62 per cent against the IPO issue price. The company offered its stock in a price band of Rs 902- Rs 949. It was listed at Rs 867.20 on BSE.

On NSE, the stock listed at Rs 872, 8.11 per cent lower to the IPO price.

Here's a look at what experts said on how investors should approach the stock as end of anchor book lock-in period nears.

AR Ramachandran, Co-founder & Trainer, Tips2Trades

"Despite being a fundamentally sound company & having a decent listing price, a higher inflationary environment coupled with bearish economic sentiment has led to majority of the financials down including the insurance behemoth LIC. Technically, only a daily close above Rs 746 could trigger an uptrend with next support now at 681. Investors can buy if close above Rs 746 or on a dip near Rs 680."

Santosh Meena, Head of Research, Swastika Investmart

"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. LIC has several competitive advantages, including a strong brand value, a massive network of agents, and an enviable distribution network. Further, the company has plans to address concerns with the company 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 1.1 times, 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. One interesting observation that can be witnessed is that the low made on the first day of trade after the 30-day anchor investor's lock-in period may act as strong support for a further rally for quality stocks. If fundamentals are strong, it's a good time to buy on such dips."

Manoj Dalmia, founder and director, Proficient equities Private limited

"LIC has fallen more than 20% after listing, the anchor lock-in ending may cause further selling currently investors should avoid any heavy buying positions as there is no proper uptrend being seen. Investors should wait for some consolidation for some reversal to be seen. If the stock continues like this, it may fall further till Rs 634 levels."

Ravi Singh, vice President and head of Research, Share India

"LIC share prices may drop further till Rs 650 levels and investors are advised earlier to exit their 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."