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

LIC Share Price Today: LIC shares opened upside for the third day in a row and surged on to hit an intraday high of Rs 678.80 apiece levels, logging around 2 per cent rise on Wednesday morning from its yesterday’s close of Rs 665.20 per share. This comes after the LIC scrip hit a fresh all-time low of Rs 650 per equity share on the NSE on Friday.

According to stock market experts, such a rise in LIC shares should be treated as a mere bounce back that might have emerged due to short covering. They said that LIC shares have been nosediving ahead of the end of the lock-in period for anchor investors. They went on to add that the fundamentals of the stock are still weak and one should avoid taking a fresh position in the Life Insurance stock till it gives a breakout.

JPMorgan has initiated coverage on the LIC stock with an overweight stance and target price of Rs 840. “Thesis centers on LIC’s 0.75 times price to embedded value – a measure of market value of an insurer’s current and future policies,” the global brokerage said.

“LIC’s new business value is only 1 per cent of its policies in force. Therefore, with 99 per cent of value from old policies, we see 0.75x P/EV as unduly harsh, even assuming no growth. In reality, LIC has picked up growth recently,” JPMorgan said.

It has forecasted a growth of 6 per cent in FY22-24 for the public sector insurer.

“LIC logged a 44 per cent market share in FY22 but has lost market share to peers over the last five years, JPMorgan said in its report. LIC’s retail premium is growing faster than the industry and is above the 2019 level. LIC is focused on addressing portfolio white spaces. It is making a distribution push as well in agency and other channels, opening upside risk,” mentioned the report. LIC worked primarily in national interest earlier. Its surplus was entirely distributed to policyholders and the government. Regulatory change now ensures LIC retains more profit,” said JPMorgan.

Ravi Singh, Vice President and Head of Research, Share India, said: “LIC stock is witnessing short coverings and made slight gains. However, this is not a trend reversal and investors must wait for consolidation in stock before entering any fresh positions. The high-risk appetite investors may hold their positions. LIC business metrics are good and the stock will give good returns on investment at lower levels. The momentary pullback in LIC can touch the levels of Rs 720 but is staking not sustainable. The stock looks attractive for value buying around Rs 650 – Rs 620 levels only, for long term.”

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