LIC shares jumped nearly 6% on NSE: What investors should do now?

Life Insurance Corporation (LIC)
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The Constitution of India passed the Life Insurance Corporation Act on 19 June 1956.  The Life Insurance Corporation of India was established on 1 September 1956, with the objective of spreading life insurance on a large scale, especially in rural areas, so that adequate financial assistance could be provided to every citizen of India at reasonable rates.

Life Insurance Corporation (LIC) of India is a Small Cap company with a market cap of Rs 418,841.35 crore. The major products of Life Insurance Corporation of India include amount transferred from policyholder account, interest, dividend and rent, profit/loss on sale/redemption of investments and other operating revenue.

Achievements and milestones of LIC:

1818: Oriental Life Insurance Company, the first life insurance company on Indian soil, started functioning.

1870: The Bombay Mutual Life Assurance Society, the first Indian life insurance company, began its business.

1912: The Indian Life Insurance Companies Act became the first law to regulate life insurance business.

1928: The Indian Insurance Companies Act was enacted to enable the government to collect statistical information on both life and non-life insurance businesses.

1938: The Insurance Act consolidated and amended earlier legislation to protect interests.

1956: 245 Indian and foreign insurance companies and provident societies were taken over by the central government and nationalized.  LIC was incorporated by an Act of Parliament, the LIC Act 1956 with a capital contribution of Rs 5 crore from the Government of India.

LIC stock History:

LIC India has a lengthy and wealthy records in the Indian insurance plan sector.  Over the years, LIC India has elevated its product providing to include a wide range of insurance products such as life insurance, health insurance plan and funding linked insurance plans.

LIC’s stock was first listed on the Bombay Stock Exchange (BSE) in May, 2022 and considering then, it has grow to be a popular investment option for both retail and institutional investors.  Though the issue price of LIC India was ₹949 per share, the stock has declined through 40% or extra after listing.

Over the previous two quarters, LIC’s financial performance has been strong, which has contributed to the upward jostle in its share price, which is presently buying and selling at Rs.  641, up 20% from its 52-week low.  530.

Financial performance of first quarter of FY23-24:

LIC has generated a total income of ₹ 2,00,927.81 crore in the first quarter of the financial year 2023-24, which means that there has been a growth of 1.49% in income. There has been an increase of 6.20% in total expenditure.  There has been a growth of 58% in PAT which we call Profit After Tax i.e. PAT has been ₹ 52,41.28 cr and there has been a growth of 6.56% in Net Profit i.e. LIC has got a net profit of ₹ 13,180.8 cr.  There has been a growth of 7.6% in total assets of LIC and an increase of 6.7% in total liabilities but it is less than the total assets.

Shares of Life Insurance Corporation (LIC) jumped nearly 6% on NSE:

Shares of Life Insurance Corporation (LIC) jumped nearly 6% on NSE in Friday’s trade after FY24 June quarter earnings as LIC reported nearly 14 times jump in its net profit.  LIC stock was also bought with heavy volumes as around 17.90 lakh shares of LIC stock traded on NSE at 9:35 am.

LIC on Thursday reported that its standalone net profit has increased manifold to Rs 9,544 crore in the first quarter of the financial year 2023-24 from Rs 683 crore in the same quarter last year.

Current stock performance of LIC on Friday:

LIC stock price has reached ₹661.80 on NSE at 1.44pm on Friday, which is ₹20.10 more than the previous closing price of the stock i.e. an increase of 3.13% in the stock price.  On Friday, the high price of LIC stock was ₹679 and the low price was ₹658.60.

Also Read : RPG Life Sciences Ltd Stock of Pharmaceuticals sector: Potential to give 314% returns.

Debt free:

The company has become debt free for the first time in the last 5 years.

Shareholders in LIC’s portfolio:

LIC’s portfolio promoters hold 96%, FII holds 0.08% and DII holds 0.71%, MF holds 0.57%.  The shareholding of others has been 2.71%.

Two fundamental analysis for investing in stock:

Value Investing:

 See, whenever we go to any market, first of all we think that we should get a good value item at a cheap price, exactly the same happens in the share market. In the stock market also, we should invest in such stocks whose price is less than its intrinsic value. There are many shares in the stock market whose price is very high but the intrinsic value of the stock is not that much, which can cause you loss.

Here I understand you price and intrinsic value:

Suppose you went to the vegetable market where very fresh coriander was available in one shop and its price was ₹ 10 and the same fresh coriander was available in another shop but its price was ₹ 30.  Now tell me which coriander will you buy, see we are getting fresh coriander in both the shops but there is a difference in price, one is more expensive and the other is less, so you will buy only ₹ 10 fresh coriander because it is available there at a cheaper price.  We are getting the value of fresh coriander.

Thus

Stock price < intrinsic value of stock

Low stock price = high intrinsic value of stock.

Current Ratio :

In this, the current total assets are divided by the current total liabilities.  The higher the current ratio, the more the stock can be worth investing in.

Current Ratio = Current Total Assets / Current Total Liabilities

Example

LIC stock has FY2024 current ratio of 3.32%. An ideal current ratio should be 2:1, this LIC ratio is around 3:1.

LIC : Small cap stock

There are many such small cap companies listed in the stock market, in which the growth potential is very high. There is a specialty of small cap stock that if the market is going very high, then the price of the stock also increases rapidly and the same.

If the market is falling, then the prices of small cap stocks fall as fast as possible. If we want to invest for short term and get good returns, then the best option for that is the stock of small cap companies. But in small cap  There are both high return and high risk. 

Analyzing for small cap stock

If you have a good knowledge of stock market, then you can easily analyze in which year which small cap index or stock will be on its high pick and when on low pick and which stock has the potential to move forward,  Accordingly, you can invest in Small Cap Index for 1 year or 3 years.

frequently asked questions (FAQs)

How has LIC’s stock performed since its listing?

Despite an issue price of ₹949 per share, LIC’s stock has declined by over 40% or more since its listing.

How has LIC’s stock price performed recently?

LIC’s stock price recently increased nearly 6% on the National Stock Exchange (NSE) after reporting a significant jump in net profit for the June quarter of FY24.

Is LIC a debt-free company?

Yes, LIC has become debt-free for the first time in the last 5 years.

What is the current shareholding pattern in LIC?

LIC’s portfolio promoters hold 96% of the shares, while FII holds 0.08%, DII holds 0.71%, MF holds 0.57%, and others hold 2.71%.

What are the risks associated with investing in small-cap stocks?

Investing in small-cap stocks can be rewarding, but it also comes with higher volatility and risk due to their relatively lower market capitalization and susceptibility to market fluctuations.

Disclaimer:

The information provided here is for informational purposes only and should not be considered as financial or investment advice. Investing in stocks and financial markets involves risk, and decisions should be made after conducting thorough research and consulting with a qualified financial professional. The accuracy, completeness, or reliability of the information is not guaranteed, and any actions taken based on this information are at your own risk.

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