LIC shares at an all-time low. Should you buy, sell or hold?

Shares of state-owned insurance behemoth Life Insurance Corporation (LIC) of India extended their fall for the sixth straight session on Tuesday, making a new low of Rs 751 on the NSE. After a gap down start, LIC shares hit its intraday low of Rs 751 breaching the previous low of Monday.

After breaching below Rs 5 lakh market cap on Monday, LIC market capitalisation has further come down to Rs 4.78 lakh crore. In fact, LIC shares now are down over 20 per cent from the issue price of Rs 949. 

In an interaction with Business Today TV, Avinnash Gorakssakar, Director-Research, Profitmart Securities, said, "It is true that LIC has not delivered the kind of performance market was expecting and has disappointed retail investors. Even the dividend of Rs 1.5 per share has come far below investors' expectations. However, I believe it is too early to write off LIC". 

Speaking on what the future holds for LIC investors, Gorakssakar said that there is limited downside from here for LIC and while short term traders may be in for some more disappointment, the company remains a long-term story. 

"I don't think LIC shares will slip below Rs 700, but it will also not give handsome returns too soon unless we see a very strong rate in their persistency ratios and in their profitability ratios. I'd say that long term investors should stay invested and not get perturbed by short-term volatility. Usually for business models to pan out and for these changes in strategy to play out, it takes a lot of time", Gorakssakar said, adding that it would be unfair to compare LIC to the new age businesses which have also seen sharp erosion of investors wealth after their big-bang IPOs and mega listings.  

"One should not compare LIC with the new age businesses as LIC is still a business that conserves cash, builds cash flows and which is profitability-based not a cash-burn business”, Gorakssakar said, adding that he sees LIC growing to be a four-digit stock over the next two years timeframe. 

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