HDFC Life Insurance shares hit fresh 52-week low, down 18% in 4 sessions

Shares of HDFC Life Insurance Company continued to decline for the fourth straight session in Friday's trade. The stock fell 2.35 per cent to hit a fresh 52-week low of Rs 481.15 over its previous close of Rs 492.75. HDFC Life had slipped to its one-year low level in the previous trade. At today's low price of Rs 481.15, the scrip has lost 18.12 per cent in four days.

Life insurance companies came under pressure after the Union Budget 2023 proposed to limit income tax (I-T) exemption from proceeds of insurance policies in certain cases. As per the Budget documents, an individual will have to pay tax on the maturity amount of life insurance policies (other than ULIP) where the aggregate annual premium exceeds Rs 5 lakh.

Technical charts hinted that the counter looked largely oversold as it has breached the support level of Rs 500 and may remain under pressure, analysts said.

Osho Krishan, Senior Analyst- Technical and Derivative Research at Angel One, HDFC Life has seen a massive correction post the Budget announcement. The stock has breached the pivotal support of the Rs 500 mark and plunged below all its major moving averages on the daily chart to disrupt the technical chart. For the time being, Rs 470-480 levels should be watched closely and are likely to act as the pitstop for the bears. On the contrary, Rs 520 is the immediate resistance, and until it decisively reclaims the same, the stock is expected to remain under pressure."

AR Ramachandran from Tips2trade said, "HDFC Life is extremely oversold on the daily charts with strong resistance at Rs 513. A daily close below Rs 485 could lead to a fall till Rs 447 in the near term."

The stock was last seen trading lower than 5-day, 20-, 50-, 100- and 200-day moving averages. The counter's 14-day relative strength index (RSI) came at 16.37. A level below 30 is defined as oversold while a value above 70 is considered overbought.

That said, HDFC Life has an average target price of Rs 686.25, Trendlyne data showed, suggesting a potential upside of 41.80 per cent. The scrip has a one-year beta of 1.05, indicating average volatility.

Around 1.95 lakh shares changed hands today, which was lower than the two-week average volume of 2.10 lakh shares. Turnover on the counter stood at Rs 9.53 crore, commanding a market capitalisation (m-cap) of Rs 1,03,910.25 crore. There were 1,44,939 sell orders on BSE, against sell orders of 1,15,219 shares.

BSE has sought clarification from the company over the movement in volume. In response, HDFC Life said that the movement in share price "is purely market-driven".

"We have been receiving various queries on the taxation of income from non-linked life insurance policies issued on or after April 1, 2023 and having premium of above Rs 5 lakh per annum, as announced in the Finance Bill 2023. As disclosed in our financial results for 9M-FY2023, our product mix based on the Annualised Premium Equivalent (APE) is well diversified across different product segments. We are in the process of analysing the impact of the announcement on prospective business. Our initial assessment indicates that the business at risk could be approximately 10-12 per cent of the total APE an impact on value of new business would be lower than impact on total APE. We will be working on mitigating measures to deal with the impact in due course," HDFC Life stated.

On the earnings front, HDFC Life Insurance reported a 15 per cent year-on-year (YoY) rise in net profit for the quarter that ended December 2022 at Rs 315 crore.

Meanwhile, Indian equity benchmarks rose sharply in late afternoon deals, led by gains in financials, banks and consumer durables.

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