Mumbai: Shares of Life Insurance Corporation of India (LIC) are back in focus after the Government of India’s Offer for Sale (OFS), with estimates suggesting the move could unlock nearly ₹6,600 crore (around $800 million) in passive inflows through potential inclusion in key domestic and global indices. The development is being closely tracked by market participants as it could mark a turning point for the insurer’s stock, which has seen sustained declines over the past year.
According to Motilal Oswal Financial Services, the OFS is expected to improve LIC’s free float — a critical factor for index eligibility. A higher free float increases the weight of a stock in benchmark indices and enhances its attractiveness to passive funds that track these indices.
Index inclusion prospects
The brokerage noted that LIC could see immediate inflows of nearly ₹150 crore following rebalancing in benchmark indices such as the Nifty 50. Beyond this, the company is likely to emerge as a strong contender for inclusion in broader indices like the Nifty Next 50 and Nifty 100 during the March 2027 review cycle. Such inclusion could potentially bring in over ₹800 crore in additional passive flows.
On the global front, LIC may also qualify for inclusion in indices maintained by MSCI, provided the greenshoe option under the OFS is exercised. MSCI’s rules allow companies undergoing public offerings or similar corporate actions to be considered even if their free float is below 15%, as long as their overall market capitalisation and free-float market capitalisation exceed 1.8 times the required threshold.
If these conditions are met, LIC could be included in MSCI indices within 10 working days after the OFS concludes. This inclusion alone could result in inflows ranging between ₹3,700 crore and ₹4,100 crore.
Additionally, the insurer is also expected to find a place in indices managed by FTSE Russell, which could generate another ₹1,600 crore in passive investments. Taken together, domestic and global index inclusions could significantly improve liquidity in LIC’s stock.
Impact of OFS on free float
The government’s OFS is aimed at diluting its stake in LIC, thereby increasing the stock’s public shareholding. A higher free float not only improves compliance with regulatory norms but also makes the stock more investable for large institutional investors, especially passive funds that strictly track index compositions.
Market experts believe that LIC’s large market capitalisation positions it well for index inclusion once the free float hurdle is addressed. This could enhance investor confidence and potentially stabilise the stock’s performance over the medium term.
Share price under pressure
Despite these positive triggers, LIC’s share price has remained under pressure. The stock closed 8.68% lower at ₹391.30 on August 4. Over the past three months, it has declined by 51%, while losses over six months and one year stand at 53.4% and 56.1%, respectively.
The sharp correction reflects broader concerns around valuation, growth visibility, and market sentiment. However, analysts suggest that increased institutional participation through passive inflows could provide some support to the stock.
Outlook
Going forward, the success of the OFS and subsequent index inclusions will be key factors influencing LIC’s market trajectory. While near-term volatility may persist, the expected inflows from domestic and global indices could improve liquidity and gradually restore investor confidence.
In conclusion, LIC’s potential entry into major indices represents a significant opportunity to attract large-scale passive investments. If realised, this could mark an important milestone in the company’s post-listing journey and contribute to long-term value creation for shareholders.