By Kiran Jani
The equity market experienced a drop in December 2024, with Nifty50 down by 3.95% and the Dow Jones declining by an even sharper 5.82%. On the other hand, commodities remained resilient, providing a glimmer of hope amid the global turbulence. Gold remained flat to slightly positive, while crude oil surged by a remarkable 13%, demonstrating its status as a hedge against market volatility.
Amidst the continued bearish sentiment in January 2025, the spotlight is turning toward the Union Budget 2025. There is optimism that the government may introduce further measures to bolster the insurance sector. I believe the contrary play in the current budget will be the Insurance sector, and two insurance stocks that could be in focus are SBI Life Insurance and GIC (General Insurance Corporation of India). Let’s dive deeper into their performance and potential prospects.
SBI Life Insurance
Since 2022, SBI Life Insurance has delivered a moderate cumulative return of 31%, translating to an annualised return of approximately 10%. While the journey has been steady, the technical charts now suggest the potential for significant upside.
Source: Investing.com
Technical Observations:
- Rounding Bottom Breakout:
The stock recently completed a rounding bottom pattern, signalling a reversal from its prior downtrend and indicating strength at current levels.
- Falling Channel Breakout:
SBI Life has broken out of a falling channel, a classic bullish signal that suggests the end of short-term selling pressure.
- Bullish RSI Divergence:
The 14-period RSI exhibits a three-bar bullish divergence, where prices make lower lows while the RSI makes higher lows, a strong precursor to upward momentum.
Price Action and Outlook:
The stock corrected sharply from ₹1,930 to ₹1,380 over the past four months. However, this retracement aligns with significant support levels, marking a potential bargain accumulation zone for long-term investors. With robust technical patterns in play, SBI Life appears poised for a potential rebound.
General Insurance Corporation of India
GIC‘s story is one of redemption. After years of underperformance since its 2017 IPO, the stock finally crossed its listing price last year, delivering an impressive 30% return in 2024, rivalling stalwarts like ITC.
Source: Investing.com
Technical Observations:
- Ascending Triangle Breakout:
On the weekly chart, GIC Re has broken out of an ascending triangle, a pattern indicative of a bullish continuation.
- Cup and Handle Breakout:
Another classic bullish pattern, the cup and handle breakout, confirms the stock’s upward trajectory.
- 200-Day Moving Average Support:
The stock is comfortably holding above its 200-DMA, reinforcing its bullish stance.
- Bullish RSI Zone:
The 14-period RSI is firmly entrenched in bullish territory, suggesting sustained buying interest.
Price Action and Outlook:
GIC’s recent performance marks a shift in investor sentiment and the current technical patterns point to a potential upside. GIC has emerged as a compelling pick, with the insurance sector gaining prominence.
Why Insurance Stocks Are Worth Watching
The insurance sector is gearing up as a promising investment avenue, driven by several factors:
- Favourable Policy Environment:
With the budget season approaching, the sector could benefit from government incentives or schemes to boost penetration.
- Oversold Equity Markets:
The Nifty50’s RSI indicates oversold conditions, suggesting a broader market bounce, which could provide tailwinds for insurance stocks.
- Sectoral Resilience:
With their steady cash flows and long-term growth prospects, insurance companies are well-positioned to weather market volatility.
Investment Strategy: SBI Life and GIC on the Radar
For traders and investors, SBI Life Insurance and GIC hold the potential of being promising opportunities. Their strong technical setups, combined with the potential sectoral boost from the upcoming budget, make these stocks worthy of close monitoring.
Disclaimer
Note: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
As per SEBI guidelines, the writer and his dependents may or may not hold the stocks/commodities/cryptos/any other assets discussed here. However, clients of Jainam Broking Limited may or may not own these securities.
Kiran Jani has over 15 years of experience as a trader and technical analyst in India’s financial markets. He is a well-known face on the business channels as Market Experts and has worked with Asit C Mehta, Kotak Commodities, and Axis Securities. Presently, he is Head of the Technical and Derivative Research Desk at Jainam Broking Limited.
Disclosure: The writer and his dependents do not hold the stocks discussed here. However, clients of Jainam Broking Limited may or may not own these securities.
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