Soaring Adani Shares Push LIC To Newer Highs --Check What Experts Say

New Delhi: The Life Insurance Corporation of India stock price hit 52-week high on BSE, NSE on Friday. At 11.50 am, share of the insurer was trading at Rs 794.30, higher by Rs 8.85 or 1.13 on BSE.

LIC on Thursday reclaimed market capitalization of Rs 5 lakh crore-mark after the shares of the company hit a 52-week high on the bourses. With Thursday’s jump in LIC shares, the second-largest PSU by market cap, surged another 19 per cent this week. 

Analysts believe that the strong market capitalisation was witnessed on the back of LIC's Jeevan Utsav plan which is an Individual, Savings, Whole Life Insurance plan with Guaranteed Additions throughout Premium Paying Term. 

Meanwhile, some analysts have also attributed the increase in LIC's M-cap to the rally in the value of Adani Group of companies where the insurer has a significant shareholding. The Adani group of companies have witnessed a significant rally in the last four months.

Shreyansh Shah, Research Analyst, StoxBox told Zee Media, "With LIC holding stakes across Adani Group companies, the recent run-up in the LIC share price can definitely be attributed to the strong comeback by Adani Group shares on the back of ‘clean chit’ from a US agency and increasing hopes of a favourable decision by the Supreme Court. Additionally, we believe that strong response to the LIC’s Jeevan Utsav plan along with a generally improved market sentiment towards PSU stocks following strong performance by the ruling BJP in state elections contributed to the gains. Our sense is that it would be prudent to hold the stock from a medium-to-long term perspective due to the company’s leading position in the life insurance space, attractive valuation and favourable tailwinds such as rising domestic savings and increasing awareness & acceptance of life insurance."

Amit Goel, Co-Founder & Chief Global Strategist, Pace 360 echoed similar views. He said, "Life Insurance Corp’s (LIC) stock price has been rocketing up in the recent past. While there are plenty of factors behind it the most important are growth in premiums collected this year, prospects of better profits because of the rise in stock market and a massive revival in Adani group shares in the last few weeks.  LIC's investment in the Adani Group companies has effectively doubled in value since the Hindenburg report-driven lows. Consequently, the insurer’s share price was also shooting up, extending strong gains this week. LIC’s holdings in Adani stocks have now reached a value of ₹56,629 crore. This marks an impressive recovery of ₹30,300 crore from the company’s lowest point, hit following allegations from short-seller Hindenburg."

As on December 2022, LIC has the following stakes in seven Adani Group Companies --9.1% stake in Adani Ports & SEZ, 4.2% stake in Adani Enterprises, 6.3 percent stake in Ambuja Cements, 6.4 percent stake in ACC, 1.3  percent stake in Adani Green Energy, 6 percent stake in Adani Total Gas, 3.7 percent stake in Adani Energy Solutions.

Adani stocks have been under major pressure following the the US-based short seller Hindenburg Research report, that wiped out $100 billion from its total mcap. However, the clean chit by US agency, which said that accusations against billionaire Guatam Adani-led group by Hindenburg was irrelevant, led to sharp rally in Adani group stocks.

Goel added, "The Adani Group experienced a surge in stock values of up to 20%, following the conclusion of a US agency investigation which found that the accusations made by Hindenburg Research against the Gautam Adani led group were not applicable to Adani Ports. This rebound was further propelled by several factors, including the Adani Group’s debt repayment, recent investment by GQG Partners, clearance from the US government, the Supreme Court’s confidence in an investigation into the group by the Securities Exchange Board of India (SEBI) and a ₹7 lakh crore capex plan."