LIC extends losing streak to 7th straight session, hits record low

LIC made stock market debut on May 17, 2022, and is trading 40 per cent below its issue price of Rs 949 per share

Shares of Life Insurance Corporation of India (LIC) hit a record low of Rs 568.25, down 3 per cent on the BSE in Monday's intra-day trade, amid heavy volumes. The stock of the state-owned life insurer has fallen below its Budget day i.e. February 1, 2023 low of Rs 582.45, and is quoting lower for the seventh straight trading day.

In the past one month, the stock price of LIC has dipped 14 per cent, as compared to 0.19 per cent decline in the S&P BSE Sensex. A combined 841,000 equity shares had changed hands on the counter on the NSE and BSE till the time of writing of this report.

LIC made stock market debut on May 17, 2022. The stock is trading 40 per cent below its issue price of Rs 949 per share.

According to a report, LIC has lost over Rs 20,000 crore of investment value in the Adani Group since January 30. The biggest fall in the value has been in Adani Total Gas and Adani Enterprises. Out of all the Adani Group stocks, LIC holds the maximum in Adani Ports followed by Adani Enterprises and Adani Total Gas. Since January 24, the market value of Adani Group company has fallen by up to 82 per cent.

As on December 31, 2022, LIC's total holding under equity and debt was Rs 35,917.31 crore under Adani group of companies, the company had said in an exchange filing. "LIC's total Assets Under Management (AUM) are over Rs 41.66 trillion as at September 30, 2022. Therefore, LIC's exposure in the Adani group, as on date, is 0.975 per cent of LIC's Total AUM at book value," the company said.

LIC follows a robust procedure for valuation of its liabilities and determination of solvency margin in order to ensure its financial soundness on continued basis. The available solvency margin of LIC as at September 2022 was well above the target solvency level of 160 per cent, the insurer said.

Meanwhile, analysts at Emkay Global Financial Services have 'neutral' rating on LIC. Given its large back book and surplus sitting in the non-par book, LIC has started to deliver strong accounting profit. However, at the same time, there is very little (relative to EV) value creation from the new business and the sustained market share loss in retail business continues, the brokerage firm said in Q3 result update.

On the operating cost front, adjusted for single premium and group businesses, LIC's cost ratio remains inflated and sticky. With ~1.8 per cent of retail annual premium equivalent (APE) coming from more than Rs 5 lakh annual premium, LIC is better positioned when it comes to 10(10D)-related proposed changes in the Union Budget. However, the nudge towards the exemption-less new tax regime could pose a challenge for LIC, analysts said.

Technical View

Bias: Negative

Target: Rs 555

Resistance: Rs 600

Shares of LIC have tumbled over 24 per cent so far this year from a high of Rs 746 hit on January 04, 2023. Further, the stock has been trading below the key moving averages since the start of February, having declined almost 14 per cent so far this month.

On Monday, the stock dipped below the lower-end of the Bollinger Bands, which stands at Rs 571. The near-term bias for the stock is likely to remain bearish, as long as the stock trades below the same.

As per the weekly chart, the stock is likely to test the lower-end of the Bollinger Bands, indicating a downside target of Rs 555.

The key momentum oscillators, both, on the daily and weekly chart are in favour of the bears. Meanwhile, the 14-day RSI is in oversold zone near-about 20-odd level.

In case of a pullback, the stock is likely to face still resistance around the Rs 600-mark, which is where the 20-DMA stands.

(With inputs from Rex Cano)