Market expert Arun Kejriwal on Tuesday shared his views on select PSU stocks, including a few from the railway pack. "Within the PSU theme, there have been three segments: Defence, railways and power. This is where I believe the bulk of retail money or new investors just put in their money and purchased shares. Some of these stocks went up to 7x in a span of three-and-a-half years. They came to levels which were ridiculous under all circumstances," he told Business Today.
"Let me single out two particular examples. One is IRFC (Indian Railway Finance Corporation Ltd) and the other is IREDA (Indian Renewable Energy Development Agency Ltd), two different PSU stocks. IRFC is a company which caters to the railways but is a company which organises the finance that the railways need for their capex plans. They are not involved in manufacturing activity of any kind as it is a financial company. As a part of their activity, they arrange for the funds and these funds are taken on the balance sheet of the government of India. By doing this, they get a commission. Now, if this share quotes at P/E multiples of which the railway stocks are catering to and not for what valuations are looked at by say the finance companies. Then, it is a misnomer. When the stock price dropped, it fell so sharply that people are still wondering what has happened. The tragedy that hits such a share is that there are apparently more buyers on the downside because they believe one should buy at every dip."
Switching to IREDA shares, he said, "It was again a company thought to be in solar power generation. People bought it as a power generating company not realising this also is a finance company which is catering primarily to renewable energy and within renewable energy, focusing on solar. It's again like a bank or an NBFC but dedicated to a particular activity. From Rs 32 to 320, a 10x jump from listing to its high and now it's around 150 or thereabouts. This was the kind of madness that happened in these shares. So, I believe there is still some pain left in these counters."
Within the railway space, the market specialist said RVNL (Rail Vikas Nigam Ltd) and IRCON (IRCON International Ltd) looked attractive. "These two are good manufacturing companies which are part of the ecosystem which would benefit with the spending that the railway does," he mentioned.
Sharing views on the mid- and small-caps, Kejriwal said, "These are typically high-risk and high-return items. But when the chips are down, you need to move to safety, which only the large caps can offer. It's now a question of rebuilding your portfolio after witnessing a strong rally over the last four-and-a-half years and a sharp correction over the last four to five months. In such a scenario, you have to make some tough decisions about what you've been holding in the mid-, small- and micro-cap segments and decide whether you've bought those stocks as fundamental or as momentum plays. If you've bought them as fundamental plays, I suggest you can still continue to hold because, at some point of time, good value will always get recognition back again even after a fall. If you have got stuck into momentum plays, nobody can help you even when the market rallies. It is a new set of stocks that become momentum plays every time there is a momentum rally. Old ones normally never come back into reckoning."