LIC investors faces massive loss in one year
2023-05-18The much hyped listing of state-run Life Insurance Corporation of India (LIC) in 2022 in the Indian equity market has become a wealth destructor event for investors.
The stock which was listed last year has gone down to around 40% from its IPO issue price of Rs 949 per share, at present, taking the total erosion of market capitalisation to about Rs 2.5 lakh crore.
With the government continuing to own a mammoth 96.5% stake in LIC even after its listing, the free float of the stock is miniscule and as a result it has not been able to make it to either Nifty or Sensex despite being among the top 15 companies by market value.
As the life insurer has turned out to be one of the biggest largecap wealth eroders in the last one year, both mutual funds and FIIs have reduced stakes in the counter. The March shareholding pattern shows that the ownership of mutual funds in LIC lowered to 0.63% from 0.66% in December.
The holding of FII also went down from 0.17% in Q3 to 0.08% in Q4. However, retail investors chose to buy the dip as their ownership rose from 1.92% to 2.04% quarter-on-quarter.
Though the retail ownership has increased but the total number of retail investors in LIC has gone down. The number of retail investors at the time of IPO was 39.89 lakh, as defined by those with investments less than Rs 2 lakh.
The March quarter shareholding pattern highlights a reduction in the number of retail investors in LIC. The number has reduced to 33 lakh, a loss of 6.87 lakh investors in one year. Retail behaviour indicates that many small investors have been trying to average down their losses in LIC in the hope that the elephant will start dancing one day.
“We had a buy recommendation during the IPO subscription and after that, we have a standalone recommendation to buy with a long-term time horizon. We believe there is a huge market as far as 'Insuring the Uninsured' is concerned. This will not only create opportunities for LIC but also for the other related entities like HDFC Life, ICICI Prudential and SBI Life,” said Gaurang Shah, Senior Vice President at Geojit Financial Services.
At Rs 21,000 crore, LIC IPO is by far the largest public issue to have hit Dalal Street. Due to the extensive reach of the PSU across the length and breadth of the country, LIC IPO was believed to be a milestone event that could attract scores of first-time investors to the Street.
While LIC shares have disappointed investors from Day 1, trouble aggravated after the Union Budget introduced a new tax proposal on higher premium annuity products.
“There might be a slight deceleration in growth due to the concerns outlined in the Budget by the Finance Minister. However, considering the long-term perspective, it remains a sound investment,” Shah said.
On the weekly charts, LIC stock has given a trend breakout from its bearish channel pattern around Rs 540-550 zone. Momentum indicator MACD has also shown an upward reversal in this stock. “So at the current juncture, investors can buy LIC with a stop loss at Rs 535 for a target price of Rs 610 in the coming weeks,” said Ganesh Dongre of Anand Rathi.
Out of the 15 analysts with a coverage on LIC, a majority 12 of them have buy calls while the remaining 3 recommend hold, according to Trendlyne data.
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