Life Insurance Corporation of India (LIC) is one of the oldest and most powerful institutions operating within the historical process of the Indian financial services sector. It was founded in 1956 and is already in more than six decades of operations. LIC has become so popularly known amongst the Indian public that it has become a trusted household name with regard to insurance. It has a variety of life insurance plans, investment products and other services. Gradually, it has been instrumental in ensuring the economic security of countless Indians.
LIC is classified as a small-cap company and with a market cap of Rs 599,514.91 crore as of 2024. The company mostly operates in the financial services’ area, where the majority of earnings are generated from the premiums collected and from other operating incomes. Owing to its huge size and power, it has become the largest and most active player in the life insurance market of India and has made a considerable contribution to the wealth of the nation.
Looking ahead at some of the latest news that was released on 15th Oct 2024, LIC announced a reduction in its shareholding in Vakrangee Ltd. This is as per a disclosure made under Regulation 30 of SEBI's Listing Obligations and Disclosure Requirements Regulations, 2015. LIC dropped its stake from 69,640,256 shares to 47,815,583 shares. This has effectively lowered its ownership from 6.429% to 4.414% of Vakrangee's paid-up capital.
This change indicates LIC intention to cut down on its stake in Vakrangee. This is perhaps a way of restructuring its portfolio in line with some external market forces or internal capital allocation policies. The disclosure was made in compliance with SEBI's regulatory guidelines, therefore providing transparency to investors.
As at close on 15th October 2024, LIC’s share price was Rs 947.85. This is a 1.21% drop from the previous day's closing price of Rs 948.85. In the last week the share price has dropped by 1.72% indicating a short-term downward trend.
From the date of its IPO on May 17th 2022, with a price range set between Rs 902 to Rs 949, the stock price of LIC has shown and maintained great stability with new highs and lows. Initially the stock witnessed strong demand reaching above Rs 900 per share shortly after its debut. On the other hand, it also met some stages of turbulence caused by the general market conditions, regulatory changes and the performance of the financial services sector.
At the beginning of 2024 and close to the end of January, LIC broke out in the price level above the initial IPO price of Rs 949. However, it dropped thereafter, with prices dipping below in February. Throughout these highs and lows, the company has managed to sustain its high market cap with institutional and individual investors remaining interested in the center.
Apart from internal factors, external changes such as the implementation of new economic policies in India, competition in the business of selling insurance and other external factors also contributed to these shifts. For example, rising interest rates and inflationary pressures have impacted investor sentiment. LIC’s quarterly earnings and its ability to maintain profitability, as seen in its latest financial reports also play a crucial role in influencing stock prices.
When compared to its peers like SBI Life, HDFC Life and ICICI Prudential Life over a period of six months. It is evident from the available figures that the performance of all the stocks under analysis is on the rise, but in the impact of short-term fluctuations, there are declines and growths as well.
In particular it can be seen that SBI Life managed to surpass all other measures, especially claiming a noticeable market share after July 2024. The movement of LIC’s stock (red line) population can be characterized as upward but less rapid when compared to other measures in the last few months which is slow in comparison to other competitors in the given period.
52-Week Range: During the past 52 weeks LIC’s stock price has been at its highest Rs 1,222 and Rs 597.35 at its lowest.
Market Cap: Currently at Rs 5,99,515 crore, making it the highest-ranked stock within the financial services sector.
Price-Earnings (PE) Ratio: Currently at 14.33, indicating a moderate valuation compared to the broader market.
Price to Book (PB) Ratio: Currently at 7.32, a higher market valuation relative to the company’s book value.
LIC total income for the quarter that ended June 30th 2024 was Rs 212,953.15 crore. This represented a 15.82% drop in comparison to the previous quarter's income of Rs 252,965.31 crore. However, this income compared to the previous year’s same period marked an increase of 12.31% from Rs 189,604.30 crore. Despite the revenue dip LIC posted a net profit after tax of Rs 9,179.10 crore, a proof of its strong financial resilience.
These metrics suggest that LIC, even in the light of short term fluctuations, is still a powerful player in the financial services sector with significant earnings and thus a reasonable level of valuation for the company.
Speaking of shareholder remuneration, LIC announced a 60% equity dividend (equivalent to p6 per share) on 27 May 2024. The ex-dividend date was also on July 19, 2024 also rewarding shareholders of the company with regular dividend payments.
Earlier this year on February 21, 2024, LIC paid a dividend of Rs 4.00 per share.
The performance of the stock is analyzed further based on the ownership structure of the stock. 96.5% of shares are held by promoters, with domestic institutional investors (DIIs) and foreign institutional investors (FIIs) holding 0.88% and 0.19% respectively, as of September 30, 2024.
The overall trend for LIC stock still remains an uptrend. With a rise and series of higher highs and higher lows. However, the market has been on a correction after hitting an all time high of Rs 1,222 on August 1st 2024. This correction is part of the Dow theory market structure cycle, where prices correct before resuming their overall trend.
As of writing LIC is trading around Rs 947. This represents a correction mode following the decline from its recent highs. The stock seems to be trading towards a key support zone at around Rs 880, a level that has acted as a previous low and support zone several times. This support could offer a potential buying opportunity for long-term investors if price action shows signs of recovery from the correction around that level.
Looking at the short-term trend, it is currently bearish. However, the long-term bias remains bullish due to the overall uptrend, with the price having made higher highs and higher lows over time.
Looking at the targets, If the market finds support at Rs 880 zone, we could expect the stock to attempt a new bullish move, potentially targeting Rs 1,000 as the first psychological resistance. This is to be followed by a retest of the recent high of Rs 1,221. On the downside, failure to hold the Rs 880 level could see the stock revisit the lower levels at Rs 800 and Rs 740.
Even though the near term chart action suggests more of the same corrective action, the longer-term perspective is still in play. LIC could resume its upward trajectory after testing the lower support levels. Watch the Rs 880 level closely as it could determine the next phase of movement.
With respect to fundamental factors, LIC's stock price predictions are closely tied to its core financial health. As of the June 2024 quarter, LIC reported a total income of Rs 212,953.15 crore and a net profit of Rs 9,179.10 crore, indicating that it remains financially strong despite market volatility. Analysts use key metrics like the Price-to-Earnings (PE) ratio of 14.33 and the Price-to-Book (PB) ratio of 7.32 to gauge LIC’s future price trajectory.
On top of that, LIC's portfolio of insurance premiums, together with its stable investment income ensures that it remains a low-risk, long-term bet. As LIC keeps changing its business model to cater more to the market, these fundamentals are expected to ensure that the stock appreciates at a steady rate.
LIC Price Prediction
Sentiment regarding LIC stock has thus far been ambiguous. This is apparent from its high promoter holding of 96.5% and the fact that institutional investors are still rather bullish over LIC being a market leader. In addition, domestic institutional investors have somewhat replenished their holdings over the last few quarters.
However, trends in the economy such as higher interest rates and higher competition may have an unfavorable impact on LIC’s share. Conversely, LIC’s enormous portfolio and effective management of the investment portfolio provide a cushion against some of the adverse market conditions. On the other hand, if the company is able to capture more of the new-age insurance business and its associated growing middle class in India, its stock price is likely to have good appreciation.
As one of India's largest and most prominent financial institutions, LIC's stock presents a unique opportunity for investors. Though its recent price movements suggest short-term corrections are evident, its long-term growth potential remains intact. Its solid fundamentals, high market cap and consistent dividends make it a potential long-term investment.
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