Thanks to a strong rally in the past 24 months, listed public sector undertakings (PSUs) have seen a 4 percentage points surge in market capitalisation (m-cap) as percentage of total listed universe. Listed PSUs now account for 15 per cent of India's total m-cap against 11 per cent earlier. The number of PSU firms, among the top 200 by m-cap, has risen to 39 now, with 12 new entries in the last two years, data showed.
Return on equity (RoE) for PSU stocks has been on the rise, partially justifying the re-rating in valuation multiples, said YES Securities. It noted that expected positive trend in earnings, given the substantial capital expenditure (capex) undertaken by state-run companies also supported the recent rally. "Projections indicate that PSUs will dominate the Capex within the NSE 200, signaling a higher future growth and potential improvement in efficiency," it said.
That said, core financial metrics such as revenue, Ebitda, and PAT of PSU basket as a percentage of the total listed universe have remained unchanged. This indicates that the PSU market cap dominance is primarily driven by an expansion in valuation multiples rather than their earnings outperforming the listed universe, YES Securities said.
FPI, DII trends: Data showed foreign portfolio investors and DIIs have reduced their stakes in PSUs, with FPIs largely offloading large-caps but increasing their investments in small and mid-caps.
In the last one year, FPIs bought 5.9 per cent additional stake in Union Bank of India, 5.8 per cent in NMDC, 5 per cent in J&K Bank, 3.7 per cent in Punjab National Bank Ltd (PNB), 3 per cent in Canara Bank and 2.5 per cent in BPCL.
They largely cut stakes in Concor (down 5.4 per cent), Nalco (4.5 per cent), Power Grid (4.5 per cent), Oil India (1.7 per cent), GMDC (1.5 per cent), REC Ltd (1.5 per cent and Ircon International (1 per cent).
In the case of DIIs, stakes were increased in NLC India (5.8 per cent), Bank of India (5.6 per cent), Indian Bank (5.3 per cent), J&K Bank (4.6 per cent), HUDCO (4.5 per cent), CONCOR (4.2 per cent) and IRCTC (3.8 per cent).
Hindustan Copper saw 6.6 per cent cut in DII holding. It was followed by Canara Bank (4.8 per cent), Engineers India Ltd (4.6 per cent), RITES (4.5 per cent) and Bharat Dynamics (4.3 per cent).