Retail favourite PSU stocks were sent tumbling during the trading session on Monday as the Indian benchmark indices were hammered by a slew of negative cues on the opening tick. Recent darlings of the investors like RVNL, Indian Railway Finance Corporation (IRFC), Mazagon Dock, NBCC were among the biggest losers in the PSU pack.
Headline indices BSE Sensex and Nifty cracked more than 2 per cent each, while the BSE midcap and smallcap indices tumbled about 3 per cent each. Fear gauge India VIX spiked nearly 21 per cent to 17.26-level. The BSE PSU and CPSE indices crashed up to 4 per cent each in the early trading sessions, with all stocks in the indices trading in red.
The rally in the global stock markets has been driven mainly by consensus expectations of a soft landing for the US economy. This expectation is now under threat with the fall in US job creation in July and the sharp rise in US unemployment rate. Geopolitical tensions in the Middle East also are a contributing factor, said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
"Valuations in India, driven mainly by sustained liquidity flows, continue to be high particularly in the mid and smallcaps segments. The overvalued segments of the market like Defence and Railways are likely to come under pressure. The buy on dips strategy which has worked well in this bull run, is likely to be threatened now. Investors need not rush to buy in this correction" he said.
Rail Vikas Nigam Ltd (RVNL) was the biggest loser in the PSU pack, falling nearly 7.75 per cent to Rs 544.30 on Monday. Indian Railway Finance Corporation Ltd and IRCON International Ltd crashed 7 per cent each to Rs 178.85 and Rs 265.10, respectively during the early session. RailTel Corporation of India also plunged nearly 6.9 per cent to Rs 467.25.
NBCC India (Ltd) tanked over 7 per cent in the early session, while MMTC was also down 6.5 per cent to barely hold Rs 100-mark. Housing & Urban Development Corporation (Hudco), Punjab & Sind Bank and Mazagon Dock Shipbuilders also cracked 6 per cent each in the early session.
Other PSU counters including Andrew Yule, BEML Land Assets, Balmer Lawrie, Cochin Shipyard, BHEL, Life Insurance Corporation of India, NLC India, SAIL, Shipping Corporation of India, Garden Reach Shipbuilders, Bharat Electronics, Hindustan Aeronautics and more tumbled more than 5 per cent each.
The global market is reeling as bears enter with a cocktail of bad news. Fears of a recession in the US after extremely poor job data, which spooked market sentiment. China and Europe are already grappling with slowdowns, and escalating geopolitical tensions are adding further pressure on the markets, said Santosh Meena, Head of Research at Swastika Investmart.
"We are witnessing signs of the first meaningful correction in global markets after an extended bull run. Investors and traders should be cautious and avoid rushing in immediately, as better entry levels may emerge. The outlook for our market remains very bullish, but the potential for a correction means investors should consider taking profits where valuation concerns exist," he said.
PSU stocks have been the latest fancy for the investors as the total market capitalization of all BSE listed companies topped at Rs 100 lakh crore mark. Majority of the PSU counters have delivered Multibagger returns to the investors in the last few years, raising the concerns over stretched valuations.