Mutual funds trimmed stakes in PSUs such as Canara Bank, Bharat Dynamics Ltd (BDL), Punjab National Bank (PNB) and The Jammu & Kashmir Bank Ltd in the June quarter while they were seen buying shares of Housing & Urban Development Corporation Ltd (HUDCO) and Ircon International Ltd, data compiled from corporate database AceEquity suggests. Foreign portfolio investors (FPIs) were seen adding Canara Bank and GAIL (India) Ltd shares while trimming exposure to PSU stocks such as Hindustan Aeronautics Ltd (HAL), Container Corporation of India Ltd (Concor) and Mangalore Refinery and Petrochemicals Ltd (MRPL).
Retail investors were gung ho on shares such as BDL, Canara Bank, HAL and The Jammu & Kashmir Bank Ltd, as they trimmed stakes in Rashtriya Chemicals and Fertilizers Ltd (RCF), HUDCO and Ircon International Ltd. This is as per the June quarter shareholding data available for 22 PSUs so far. Analysts are increasingly turning cautious on the overvalued PSU sements such as defence, railways, oil & gas and utilities.
"An important trend in the market now is that segments like railways and defence are booming unabated on hopes. The trend is a bit overdone. Investors can think of moving some money from the overvalued segments to segments which are attractive from the valuation perspective," V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
In the case of MFs, they cut stakes in PSU banks such as Canara Bank (down 233 basis points), Punjab National Bank (down 152 basis points) and The Jammu & Kashmir Bank Ltd (down 139 basis points). MFs reduced their exposure to defence player Bharat Dynamics by 226 basis points to 5.67 per cent in Q1 from 7.93 per cent in Q4. Ircon International Ltd was the only stock among 22 where MFs upped stake by 100 basis points QoQ. MFs held 1.67 per cent stake in Ircon at Q1 end against 0.45 per cent in Q4FY24, up 1.22 per cent.
In the case of FPIs, buying was seen in Canara Bank (up 134 basis points), GAIL India (105 basis points) and HUDCO (up 79 basis points). They cut stakes to HAL, Concor, MRPL, Ircon International, RCF and MMTC by 10-73 basis points.
BDL (up 284 basis points), Canara Bank (163 basis points), HAL (131 basis points), Jammu & Kashmir Bank Ltd (108 basis points) and BHEL (up 88 basis points) were some of the retail investors picks in June quarter. They cut stakes to Ircon International, HUCO, RCF, Mazagon Dock Shipbuilders and SJVN are some of the stocks where they either trimmed or stayed status quo sequentially.
Kotak in a recent note argued that the recent PSU rally has been quite broad-based, with almost every PSU stock delivering superlative returns over the past 12-15 months. But contrary to narratives, most PSU stocks have not seen a proportional improvement in their fundamentals relative to the increase in the stock prices, it said.
In the case of PSU banks, FY24 was a solid year. After years of uncertainty, an environment of comfortable asset quality prevails, with lower stress baggage and improving revenue traction.
"PSBs thus saw a cascade of strong financial performances, recording an improvement in return ratios – the best in a decade. The moot question is around interplay between earnings momentum, regulatory changes, government policy actions (mergers & FII limit hike) and the scope for further valuation rerating, if any," Elara Securities said.
In the case of oil & gas PSU, Kotak said it has cautious view on oil & gas PSUs. Despite the strong run-up of PSUs, the Street seems to be giving high multiples and ignores large capex with likely weak returns, it said in a note.