LIC shares extend fall for third straight session; should you buy the dip? 

Shares of Life Insurance Corporation of India (LIC) extended their fall for the third straight session on Thursday amid the ongoing volatility in the domestic equity market. The scrip trading 1.88 per cent down at Rs 859.75 in the morning trade at around 10.05 am (IST), while the benchmark BSE Sensex was down nearly 1,000 points, 1.83 per cent, at 53,215 at around the same time. 

Market sentiment took a hit on Thursday after the United Nations said India is expected to grow 6.4 per cent in 2022, well below the 8.8 per cent growth in 2021, as higher inflationary pressures and uneven recovery of the labour market are likely to curb private consumption and investment. 

Adding more pessimism, India Ratings and Research said the average headline inflation is set to accelerate to a nine-year high at 6.9 per cent in FY23, and the Reserve Bank may go for more rate hikes during the fiscal. It added that the RBI will hike rates by another 75 basis points and possibly up to 125 basis points (1.25 percentage point) as well if the turn of events and data are very adverse. Weak global cues further dampened the sentiment in the domestic equity market. 

Earlier, LIC made its debut on bourses on May 17. The scrip got listed at nearly a 7 per cent discount at Rs 886.20 on the BSE against the issue price of Rs 949. At present, shares of LIC traded 9.5 per cent lower than the issue price. The initial public offering of the insurance behemoth opened for subscription from May 4 to May 9. Market watchers believe that the insurer will perform well once there will be a recovery in the market. 

Parth Nyati, founder, Tradingo said, “The company’s weak listing on May 17 can be attributed to high volatility in the markets and negative market sentiments. LIC is synonymous with insurance in India and enjoys a phenomenal brand recall. We believe India’s highly underpenetrated life insurance space is still at a nascent stage and is attractively positioned to capture the huge growth opportunity.” 

He further added that LIC enjoys many competitive advantages like strong brand value, extremely large scale of operations, a huge network of agents, and an envious distribution network, further, the company’s issue was priced at a price to embedded value of 1.1 times, providing a valuation comfort, so investors can stay with the company for the long term. 

On the other hand, Vinod Nair, head of research, Geojit Financial Services said, “We believe that LIC is a decent investment opportunity in the short to medium-term considering its strong market presence, improvement in future profitability due to the changes in surplus distribution norms and strong sector growth outlook. LIC can perform well when we have a bounce in the market and positive performance in the insurance sector.” 

Also read: LIC stock makes tepid market debut, lists at 9% discount to issue price

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