Why LIC Share Price is Falling

Share price of Life Insurance Corporation of India (LIC) fell to a new all-time low of Rs 535 on Tuesday. The stock extended its fall for the second consecutive session.

LIC shares have fallen sharply since their tepid market debut in the mid of last year. The recent correction comes amid a continuous drop in Adani Group shares.

Over the last two months, following the Hindenburg report publication, the stock has experienced a decline of little over 23%.

The weakness and significant market cap erosion in Adani stocks have also affected the LIC counter.

However, that is not the only reason dragging the stock lower.

There are other reasons contributing to the current downturn in the stock. Let's find out.

Falling market share

The current correction in the stock can be attributed to the falling market share of the company.

LIC's market share has been declining in the last few months. The company's market share declined by 4%, from 67.7% at the end of November 2022 to 63.8% at the end of February 2023, with 1% decline in market share in February alone.

Another concern for investors is the new taxation norms on large-ticket savings life insurance companies introduced by the government.

In the recent budget announcement, the government lifted tax exemption on life insurance policies issued with an aggregate premium of over Rs 500,000 in a year, with effect from 1 April 2023.

This was done as high net-worth individuals were taking undue advantage of this exemption.

It has come as a big blow to high-value policies, especially market-linked policies, as it makes products less appealing from a tax-saving perspective.

This put LIC's shares under pressure.

What next?

Moving ahead, LIC plans to invest a record Rs 2.4 trillion (tn) across markets, including shares of locally traded companies, starting 1 April 2023.

The investment by LIC is expected to be the biggest ever and has the potential to enhance returns for policyholders and generate profits for shareholders. Additionally, it could serve as a crucial support system for Indian markets during the financial year of 2024.

Around 35% of the total investment, or Rs 80 bn, would be allocated in shares of listed companies in India.

Also, according to media reports, LIC is reportedly planning to impose caps on its debt and equity exposure to companies.

This is being done to lower the concentration of risk after the insurer faced criticism over its investment in Adani Group companies.

The insurer cannot invest more than 10% of the outstanding equity in a company and 10% of the outstanding debt.

If the LIC board approves the caps, the investment exposure of the company will be further restricted.

How LIC shares have performed recently

LIC shares have declined by more than 7% in a month. Over the past week, the company's shares are trading lower by 6.5%.

On a YTD basis, LIC share price is down 24%.

LIC touched its 52-week high of Rs 918 on 17 May 2022 while it touched a 52-week low of Rs 535 on 23 March 2023.

About LIC

Life Insurance Corporation of India (LIC) is an Indian statutory insurance and investment corporation headquartered in the city of Mumbai, India. It is under the ownership of Government of India.

The company was established on 1 September 1956, when the Parliament of India passed the Life Insurance of India Act that nationalized the insurance industry in India.

Over 245 insurance companies and provident societies were merged to create the state-owned Life Insurance Corporation of India.

Today LIC functions with 2048 fully computerised branch offices, 113 divisional offices, 8 zonal offices, 1381 satellite offices and a corporate office.

It's wide area network covers 113 divisional offices and connects all the branches through a metro area network.

LIC has also tied up with some banks and service providers to offer on-line premium collection facility in selected cities.

For more details, see the Life Insurance Corporation company fact sheet and quarterly results.

You can also compare LIC with its peers.

LIC vs HDFC Life Insurance

LIC vs ICICI Prudential Life Insurance

LIC vs SBI Life Insurance

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...