LIC’s weak listing: Should IPO investors hold, sell stock? Should you buy if you missed IPO? Analysts say this
Life Insurance Corporation of India (LIC) shares made a tepid debut on stock exchanges today. The stock got listed at Rs 867 on BSE, against the IPO price of Rs 949 apiece, eroding over Rs 43,000 crore overall investor wealth. At listing, LIC had a market capitalisation of Rs 5.57 lakh crore, as compared to Rs 6 lakh crore market value at the issue price. Soon after the LIC share listing, Macquarie analysts initiated coverage of the stock with ‘Neutral’ rating, and with a price target of Rs 1,000 – a 14 per cent upside from the listing price. The government of India sold 3.5 per cent stake to the public through the issue, down from 5 per cent that was earlier announced.
What should LIC investors do now after a weak listing?
Hold LIC shares allotted in IPO
Shares of state-run life insurer LIC listed at Rs 867.2 on BSE, a discount of 8.62 per cent over its issue price. On the National Stock Exchange (NSE), the counter listed at a discount of 8.11 per cent at Rs 872. Since the close of LIC IPO on 9 May, markets have witnessed correction. “The IPO was reasonably priced however sentiments are bad. Those who have got allocations should hold on,” Sandip Sabharwal, investment advisor, told FinancialExpress.com.
“Those who got IPO allotment, they have no option but to hold on for some more time. It would be pointless to exit at a loss as getting in IPO was anyway with a medium term horizon as listing gains were anyway not expected,” Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst and founder, Gemstone Equity Research & Advisory Services, told FinancialExpress.com.
LIC stock may see buying interest from investors
Despite tepid listing, Hemang Jani, Head – Equity Strategy, Broking and Distribution, Motilal Oswal Financial Services said that given the attractive valuations and stability in the markets, some buying interest in the stock both from retail and institutional investors can be expected. “Since a large amount of money has been released post listing of LIC, part of this money could get diverted into equity markets,” he added.
Akhilesh Jat, analyst at CapitalVia Global Research, advised long-term investors to hold the position as the insurance business is long-term in nature. Jat added that in the short term some correction can be seen amid market volatility.
LIC has listed way below expectations due to the very high inflationary environment created by rising crude prices thereby ensuring sustained weaker economic sentiment, AR Ramachandran, Co-founder & Trainer, Tips2Trades, said. “Long term investors should hold for much better returns as fundamentally LIC remains a very strong company & prices of 1100-1150 could be seen in the coming months,” he said.
Missed LIC IPO? What should you do now?
Sandip Sabharwal suggested investors who missed the IPO to wait for 8-10 days to see where the stock settles and then make the buying decision. While Milan Vaishnav advised to wait before making a fresh purchase. He noted that it would be prudent to let the price stablise, and discover its valuation. “Fresh entry not advised as of now until a trend appears,” he said.
Akhilesh Jat from CapitalVia Global advised investors who missed the IPO to buy on dips for the long-term only. Mohit Nigam, Head – PMS, Hem Securities believes that personal savings and awareness regarding insurance will increase enabling the sector to outperform in the long run and will indirectly benefit LIC as it is the market leader in this sector. “We feel long term investors should continue to hold the scrip while short-term investors can wait to enter at a lower price,” Nigam said.
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