LIC - Buy on declines

LIC has come out with IPO at 949 and is currently trading at a deep discount

The share is available at a discount of 25% of its issue price.

Long term investors can start accumulating this scrip as it is a market leader in Life Insurance business and has a pretty large investment portfolio and with the market sentiment improving should do well going forward.

The markets are mispricing the stock after the steep fall since listing, said the brokerage. "The stock is 32 per cent below its IPO price. The majority of the correction in the counter is overdone."

"LIC's new business value is only one per cent of its policies in the force," JP Morgan Added. "Therefore, 99 per cent of the value is added from the old policies."

The global brokerage highlighted the further stake reduction from the government as a key risk to insurance majors. LIC was the largest IPO in the Indian primary markets as the government of India sold its 3.5 per cent stake to Rs 20,554 crore.

In an interview with the Economic Times, MR Kumar, Chairman, LIC said people should not be worried over immediate performance and suggested investors to be patient.

Market factors - war, global risk-off in financial assets, monetary tightening - are denting the sentiments, he added. "As the market improves, our share price will also improve. Investors will get good returns in the medium to long term."

On listing, another global brokerage firm Macquarie had initiated coverage on the stock with a 'neutral' rating and a target price of Rs 1,000. Domestic broker Emkay Global has a 'hold' rating and a target of Rs 875 on the counter.