LIC IPO Investors See Positive Signs as Share Price Rallies to Cross Rs 720. Know the factors driving the rise

LIC Share Price Gains 4% to Hit 3-month High amidst a Subdued Market

LIC gains 4 Percent on BSE

Life Insurance Corporation of India (LIC) debuted in the stock market in May this year. Its offer price range of Rs 902 – Rs 949 now seems overpriced in the hindsight. Not only did it get listed at a discount, but it has also stayed mostly below Rs 700. On 12 December 2022, LIC's share price touched the Rs 700 mark for the first time in nearly five months. 

Also Read: Holding LIC shares. Understand expert’s opinion

A look behind the recent positive performance by LIC share price 

  1. Regulatory changes – The government recently proposed the introduction of a single license for all insurance businesses. Insurance companies will find it flexible to sell multiple insurance products. They wouldn’t need to set up different companies to carry out different lines of insurance businesses, viz. life, general and health. The proposal also seeks to enable insurers to sell other financial products. Notably, banks are allowed to sell insurance and mutual funds, but insurance companies are allowed to sell one line of insurance products only.
  2. Business performance – In the quarter 2 results, LIC posted an increase in its quarter-on-quarter premium receipt by 27%. Income from investments, assets under management, revenue and net profit also showed improvement. After the quarter results came out, LIC's share price saw a recovery of Rs 40 on 14 November 2022. Since 23 November, LIC's share price has had a steady climb. 
  3. Management change – Largely as a reaction to the disappointing stock market performance of LIC, the government is planning to appoint a private sector executive as CEO. This is expected to modernize the insurance behemoth. The government is planning to widen the eligibility criteria in an attempt to enable private-sector employees to participate in the selection process.
  4. Bonus issue/dividend expectations - In late October, the news was reported that LIC would be transferring funds to the tune of $22 billion from the policyholder’s funds to a different fund. This other fund will be used possibly for bonus issues or dividend distribution.

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The investors had the time to react to the news of the policyholder fund transfer and positive Q2 performance. However, this positive news has been revived with the above-mentioned fresh developments, resulting in a rally in LIC share.

Following a one-month low of Rs 621 on 23 November 2022, LIC shares have gradually climbed to finish the month at around Rs 650. Since 9 December 2022, the stock has surged to reach Rs 724 on 14 December 2022. Notably, several market analysts had given a positive outlook for LIC share in the last few months. Choice Broking had predicted the stock to touch Rs 700 while IIFL Securities had given a near-perfect target price of Rs 720.

LIC IPO investors would hope for a prolonged rally in the share price so that their investment turns green at the earliest.

Also Read: Top 5 stock market gurus in India

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.



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