How much more can LIC shares fall?

Shares of Life Insurance Corporation hit fresh lifetime lows on Tuesday following another bout of selling.
 
At Rs 751 per share, the stock of India’s insurance behemoth is now down 21% from its issue price of Rs 949 per share.

This, essentially, means investors, who bid for the stock during its IPO, have lost wealth worth Rs 1.24 trillion.
 
With this, the company’s market capitalisation has also slipped below the crucial Rs 5-trillion mark as it settled at Rs 4.76 trillion on the BSE yesterday.
LIC, now, stands at 7^th position among the top-10 companies on the BSE based on m-cap ranking. It is only ahead of SBI, HDFC and Bharti Airtel.
 
According to analysts, a number of concerns are plaguing the stock. Emkay Global, for instance, pointed out in a recent report that LIC’s embedded value will likely go down to 1x from IPO valuation of 1.1x.
That’s because LIC adds merely 1-1.5% of EV from Value of New Business segment as against 8-11% in the case of private life insurers.
 
Moreover, LIC’s September, 2021, EV consisted of almost 70% of equity mark-to-market gains.
Therefore, the sensitivity of EV to equity-market corrections is far higher than private-sector peers.
Secondly, Emkay claims that LIC’s dominant share in the single-premium group fund management business artificially inflates its market share and deflates some of its cost ratios.
 
Despite its massive scale, the brokerage feels LIC’s commission and opex ratios are on the higher side relative to cost-efficient larger private players, if seen on the basis of adjusted premium basis.
Adjusted for the group single-premium business and LIC’s almost ULIP-less product mix, its persistence and surrender ratios are not impressive either.
 
Another concern that global brokerage Macquarie pointed out was doubts over scale up of bancassurance business.
According to the brokerage, “While LIC’s highly productive 1.3 million agents remain a formidable force, the scale up of bancassurance business remains doubtful considering the 3 largest banks -- HDFC Bank, ICICI Bank, and SBI -- are not a partner for bancassurance"
 
Besides, LIC’s presence in other channels, like direct or online, has been insignificant.
 
Therefore, the question that’s haunting LIC shareholders is whether there’s more pain in the offing for the stock, especially when its anchor investors’ lock-in period is set to expire in about a fortnight?
 
Audio byte in> [Ambareesh Baliga, Independent Market Analyst]

Technically, too, the stock has an immediate trendline resistance at Rs 831. This is lower than Emkay Global’s target price of Rs 875 per share, and Macquarie’s target price of Rs 1,000 per share.
 
The near-term trend for LIC, therefore, remains sombre with nervousness in the market further dismantling any likely rally in the stock.
 
On Wednesday, all eyes will be on the Reserve Bank of India’s monetary policy outcome.
The markets are pencilling-in a repo rate hike of up to 50 basis points, but they will eye the central bank’s fresh outlook on inflation and GDP growth for FY23.