Mumbai, February27
Shares of Life Insurance Corporation of India (LIC) hit a new record low on Monday, dropping by 3% to Rs 568.25 on the Bombay Stock Exchange. Heavy trading volumes were recorded with a combined 841,000 equity shares traded on the NSE and BSE at the time of writing. The stock has fallen for the seventh straight trading day and is now below its Budget day low of Rs 582.45. LIC’s stock has fallen by 14% in the past month, while the S&P BSE Sensex has declined by only 0.19%. LIC made its stock market debut on May 17, 2022, and is now trading 40% below its issue price of Rs 949 per share.
LIC has reportedly lost over Rs 20,000 crore of investment value in the Adani Group since January 30, with Adani Total Gas and Adani Enterprises experiencing the biggest fall in value. LIC has the largest holdings in Adani Ports, followed by Adani Enterprises and Adani Total Gas. The market value of Adani Group companies has fallen by up to 82% since January 24. As of December 31, 2022, LIC’s total holdings under equity and debt were Rs 35,917.31 crore under the Adani group of companies.
According to a company filing, LIC’s total Assets Under Management (AUM) were over Rs 41.66 trillion as of September 30, 2022. The insurer’s exposure to the Adani group as of that date was 0.975% of LIC’s Total AUM at book value. LIC follows a robust procedure for the valuation of its liabilities and determination of solvency margin to ensure its financial soundness on a continued basis. The available solvency margin of LIC as of September 2022 was well above the target solvency level of 160%, according to the insurer.
Emkay Global Financial Services analysts have a ‘neutral’ rating on LIC, stating that while the insurer has started to deliver strong accounting profit due to its large back book and surplus sitting in the non-par book, there is very little value creation from new business. Additionally, LIC continues to experience sustained market share loss in its retail business, while its operating costs remain inflated and sticky. With only 1.8% of retail annual premium equivalent 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, but the nudge towards the exemption-less new tax regime could pose a challenge for LIC, analysts said.
LIC’s shares have fallen by over 24% year-to-date from a high of Rs 746 on January 4, 2023. The stock has been trading below key moving averages since the start of February and has declined by almost 14% so far this month. The near-term bias for the stock is likely to remain bearish as long as it trades below the lower-end of the Bollinger Bands, which stands at Rs 571. The stock is likely to test the lower-end of the Bollinger Bands, indicating a downside target of Rs 555, according to the weekly chart. The key momentum oscillators on the daily and weekly chart are in favour of the bears, while the 14-day RSI is in oversold territory near the 20 level. If there is a pullback, the stock is likely to face resistance around the Rs 600-mark, where the 20-day moving average stands.
