Budget 2022, LIC IPO update can spark up to 11% rally in insurance stocks

Shares of the major private insurers, HDFC Life and ICICI Prudential are seen testing key support levels currently.

The insurance segment is one sector that is likely to remain in limelight, both prior and post Union Budget given the anticipated action around the sector.

For starters we have the mega Life Insurance Corporation of India's IPO, which is also going to be one of the biggest market-related event of this calendar year. Investment bankers and bureaucrats are currently in race against time, to roll out the initial public sale before the end of FY22.

Off late, non-life insurers in particular are battling with higher claims owing to the ongoing Covid-19 pandemic. One ofthe country's largest private sector insurer, ICICI Prudential Life Insurance, reported a tepid 2.5 per cent YoY growth in Q3FY22 net profit at Rs 312 crore.

Further, insurers are seeking various tax sops from the central government in the upcoming Union Budget to encourage Indians to buy more pure-risk products. Traditionally, tax exemptions have acted as a catalyst for people to buy insurance products. However, there is an organic demand too for insurance products, especially pure-risk and guaranteed income products, given the uncertainty associated with the pandemic.

Meanwhile, here's what the charts how to suggest about the likely future trend for insurance related stocks:

SBI Life Insurance Company Limited (SBILIFE)
Likely target: Rs 1,400 and Rs 1,450 (breakout above Rs 1,300)
Upside potential: 7% to 11%

While the shares of SBI Life Insurance Company have struggle to sustain above the resistance range of Rs 1,280 to Rs 1,250 levels, the support at Rs 1,200 is strongly protected. In future, a positive move above Rs 1,300 level could open doors for the upside towards Rs 1,400 and Rs 1,450 levels, according to the daily chart. The stock has gradually risen higher with average volumes highlighting the robustness of the “stock price” itself.  CLICK HERE FOR THE CHART
 
HDFC Life Insurance Company Ltd (HDFCLIFE)
Outlook: Needs to hold Rs 640 level

The stock did make efforts to cross the hurdle at Rs 670 level recently, but failed to sustain above the same. It does reflect some weakness; however the stock make take support around Rs 640 may see recovery and reversal in trend. The Moving Average Convergence Divergence (MACD) is turning downward breaching the zero line, if the stock manages to uphold the support of Rs 640, then it may also regain the upward momentum. CLICK HERE FOR THE CHART

 
ICICI Prudential Life Insurance Company Ltd (ICICIPRULI) 
Outlook: Need to cross 200-DMA and 100-DMA

After conquering the 200-day moving average (DMA) at Rs 603 levels, the stock crossed 100-DMA as well. This move suggests an overall positive trend. However, the counter slipped below both the averages showing volatility and uncertainty. Now, to regain the positive bias, the shares need to again cross Rs 604 and Rs 646 levels, its 200-DMA and 100-DMA. The present scenario has a support of Rs 540 levels.  CLICK HERE FOR THE CHART
 
Star Health and Allied Insrnce Com Ltd (STARHEALTH)
Outlook: The trend is positive with gradual upside, needs to defend crucial support

The last two candles show bearish formation that has engulfed the previous major / big bullish candle. This scenario demonstrates a weakness and a negative bias. The immediate crucial levels are Rs 800 and Rs 775, where the significant accumulations were observed lately. The trend suggests a gradual upside with mild declines, which appears to stay intact until the support levels are defended, as per the daily chart. CLICK HERE FOR THE CHART
 
Max Financial Services Limited (MFSL)
Likely target:  Rs 1,100
Upside potential:  11%

After breaking out of the “Double Bottom” formation, the stock is testing the support of the neckline at Rs 1,000 levels. The next immediate support is placed at Rs 950 levels and as long as this mark is held firmly, the reversal may display a sharp up move in the direction of Rs 1,100 levels, as per the daily chart. CLICK HERE FOR THE CHART