LIC shareholders lose Rs 1.23 lakh crore in 16 sessions, what's next ?

Stock of Life Insurance Corporation (LIC) fell to a record low amid bearish market sentiment today. LIC stock declined 3.24 per cent intraday to Rs 752.15 against the previous close of Rs 777.40 on BSE.

The market capitalisation of the public sector insurer fell to Rs 4,76,556 crore today against a market cap of Rs 6,00,242 crore, going by the upper price band of India's largest initial public offer.

With today's fall, shareholders of LIC have lost Rs 1,23,686 crore in the last 16 trading sessions. The stock has fallen 15.29 per cent or Rs 115.05 from its listing price after two weeks of market debut. The share made a weak listing on May 17, opening at a discount of 8.62 per cent against the IPO issue price. The company offered its stock in a price band of Rs 902- Rs 949. It was listed at Rs 867.20 on BSE.

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On NSE, the stock listed at Rs 872, 8.11 per cent lower to the IPO price.

Here's a look at what experts said on how investors should approach the stock when it has hit record low.

Prasant Bhansaali, Director - Mehta Equities said, "At current price, it can be accumulated with at least 3 years perspective. It will remain under pressure for some more time as anchor investors will be free to exit after 16th June. But considering the relative cheap valuation at lower levels it will find interest from domestic retail and HNI investors. Institutional investor will wait for some more time before they start buying it."

Santosh Meena, Head of Research, Swastika Investmart said, "The insurance giant, LIC Ltd. is currently trading below its IPO price. The issue was priced at a price to the embedded value of 1.1 times, which is a discount compared to its domestic as well as global peers. This valuation discounts concerns with the company like losing market share to private players, lower profitability and revenue growth compared to private players, lower VNB margins and short-term persistency ratios. However, we believe India's highly underserved life insurance market is still in its infancy and is well-positioned to capitalize on the enormous growth potential. LIC has a number of competitive advantages, including a strong brand value, a massive network of agents, and an enviable distribution network. So, investors with a long-term view can buy this stock at current market price and follow a buy on dip strategy."

Sunil Damania, Chief Investment officer, MarketsMojo said, "When LIC recently came out with its IPO, we had advised investors to avoid investing in it. This is because, at that point in time, we believed that the company's valuation and the one that it was asking for was a little rich. Besides, the market would always be cautious that the Govt of India would keep diluting its stake in LIC IPO now and then to meet SEBI guidelines. However, looking at the current market situation and how the stock has corrected post-IPO, we believe that LIC, even at this level, may continue to underperform going forward. Hence, we advise investors to stay away from LIC."

Manoj Dalmia, founder and director, Proficient equities Private limited said, "LIC's share price extended its correction mode and made a new low of Rs751.50 on NSE. After having a gap down opening, LIC's share price made its intraday closing of Rs 753.0 breaching its previous low made yesterday. After making this new low, LIC share price today quoted around 21 per cent below its issue price of Rs 949 per equity share.

The reason for this can be the following

A. Stock has failed to attract the interest of FIIs

B. Q4 results are also were not that encouraging

C. No comparable valuation is available thus making valuation abstract among investors

The outlook for the stock will be bearish considering the anchor investor of lockin ending by mid of this month and the price pattern also conveying the same. The downside levels are Rs 741 and Rs 713 , investors are advised to avoid heavy buying in the stock and avoid averaging unless a reversal in prices is seen"

Ravi Singhal, Vice Chairman, GCL Securities Limited said, "As we can see after listing, stock is steadily declining. The following factors are to blame: The results did not meet expectations, and the listing was below the issue price, trapping many investors, particularly new investors. As market trends deteriorate, so do investment valuations. And the vertical of direct sales is good, but the market is waiting to see if it will move to an online platform, or if it will continue to lose market share. Technically, it appears to be weak as well. It is currently oversold. So, sell on a rise near Rs 777, stop loss of Rs 822 and Target of Rs 677. Long-term investors can keep it, but it will not outperform the Nifty until it enters the online business."