Modi premium: Every 3rd PSU stock up 100% in 2023, what’s in store for New Year?
PSU stocks: Search for relative value in a rapidly rising market seems to be one of the important reasons for the strong performance of PSU stocks in the recent past, said analysts.
- Dec 29, 2023,
- Updated Dec 29, 2023 9:09 AM IST
PSU stocks: One out of every three PSU stocks on the BSE PSU index delivered over 100 per cent return in a year marked by a dream run for battered PSU names, buoyed by Prime Minister Narendra Modi's push for infrastructure capex, defence indigenisation and 'Make in India' in manufacturing, resulting in a re-rating on PSUs as a pack on strong future prospects.
If one go by analysts, PSU shares still have room for further upside.
Shares of power sector lenders REC and Power Finance Corporation have climbed 252 per cent and 241 per cent, respectively, in 2023, so far.
Indian Railway Finance Corporation Ltd, which is engaged in raising financial resources for railways expansion, climbed 197 per cent during the same period.
Mazagon Dock Shipbuilders Ltd, which is among leading defence public sector undertaking shipyard, surged 195 per cent while lignite producer NLC India jumped 193 per cent during the same period.
ITI Ltd, Ircon International Ltd, SJVN Ltd, Rail Vikas Nigam Ltd and Cochin Shipyard Ltd soared 154-190 per cent while Mangalore Refinery And Petrochemicals Ltd, Bharat Heavy Electricals Ltd, Hindustan Aeronautics Ltd, Housing & Urban Development Corporation Ltd, Hindustan Copper Ltd, Engineers India Ltd and NBCC (India) Ltd were some other stocks delivering multibagger returns in 2023.
In most sectors, stocks of government-owned companies were trading at a significant discount to the private-sector peers. Search for relative value in a rapidly rising market seems to be one of the important reasons for the strong performance of PSU stocks in the recent past, said Tanvi Kanchan, Head - Corporate Strategy, Anand Rathi Shares and Stock Brokers,
Kanchan said: "The incumbent government has initiated various measures to increase the operational autonomy of the PSU companies and proposed significant reforms and divestment in these companies. It is being expected that once back to power, the government would initiate many of these measures. This is another factor that seems to be driving the outperformance of PSU companies."
Mishra Dhatu Nigam Ltd, Bharat Dynamics Ltd, NTPC Ltd, Oil India Ltd and Bharat Electronics Ltd gained 80-90 per cent in 2023. Out of 55 BSE PSU index constituents, only Gujarat Gas (down 7 per cent) has delivered negative return in the PSU pack.
Banks such as Punjab National Bank, Bank Of Maharashtra, Union Bank Of India, Indian Bank, Indian Overseas Bank, Canara Bank, Punjab & Sind Bank, UCO Bank, Bank of India and Bank of Baroda delivered 25-62 per cent returns for the year.
Sunil Nyati, Managing Director, Swastika Investmart Ltd said the bullish momentum in railways, defence and PSU banks appears poised to persist, characterized by valuations that have not yet reached euphoric levels. The enduring strength in these sectors can be attributed to robust factors such as a substantial order book, the impetus from the Make in India initiative, and sustained infrastructure development, Nyati said.
"Within the railway and defence stocks, the positive trajectory seems likely to be sustained, bolstered by these ongoing trends. Simultaneously, PSU banks are displaying a commendable financial performance marked by stable asset quality. Nevertheless, it is crucial for investors to exercise selectivity within these spaces, as not all companies may benefit equally from the prevailing market dynamics," he said.
Deven Mehta, Equity Research Analyst at Choice Broking said sectors such as defence, railways and PSU banks demonstrated robust performance in 2023, propelled by strong government policies.
"Looking ahead to 2024, the pivotal event of general elections is poised to influence the trajectory of these sectors. The continuation of existing government policies is anticipated to fuel further outperformance in 2024. Conversely, any alterations in government policies could trigger profit booking in stocks within these sectors. Thus, investors should keenly observe political developments and policy continuity as key factors shaping the performance of Defence, Railways, and PSU banks in the coming year," Mehta said.
One needs to be more selective, said Shrikant Chouhan, Head- Equity Research at Kotak Securities. However, for PSU banks, fundamentally they are relatively cheaper and should do well in the coming year, Chouhan said.
PSU stocks: One out of every three PSU stocks on the BSE PSU index delivered over 100 per cent return in a year marked by a dream run for battered PSU names, buoyed by Prime Minister Narendra Modi's push for infrastructure capex, defence indigenisation and 'Make in India' in manufacturing, resulting in a re-rating on PSUs as a pack on strong future prospects.
If one go by analysts, PSU shares still have room for further upside.
Shares of power sector lenders REC and Power Finance Corporation have climbed 252 per cent and 241 per cent, respectively, in 2023, so far.
Indian Railway Finance Corporation Ltd, which is engaged in raising financial resources for railways expansion, climbed 197 per cent during the same period.
Mazagon Dock Shipbuilders Ltd, which is among leading defence public sector undertaking shipyard, surged 195 per cent while lignite producer NLC India jumped 193 per cent during the same period.
ITI Ltd, Ircon International Ltd, SJVN Ltd, Rail Vikas Nigam Ltd and Cochin Shipyard Ltd soared 154-190 per cent while Mangalore Refinery And Petrochemicals Ltd, Bharat Heavy Electricals Ltd, Hindustan Aeronautics Ltd, Housing & Urban Development Corporation Ltd, Hindustan Copper Ltd, Engineers India Ltd and NBCC (India) Ltd were some other stocks delivering multibagger returns in 2023.
In most sectors, stocks of government-owned companies were trading at a significant discount to the private-sector peers. Search for relative value in a rapidly rising market seems to be one of the important reasons for the strong performance of PSU stocks in the recent past, said Tanvi Kanchan, Head - Corporate Strategy, Anand Rathi Shares and Stock Brokers,
Kanchan said: "The incumbent government has initiated various measures to increase the operational autonomy of the PSU companies and proposed significant reforms and divestment in these companies. It is being expected that once back to power, the government would initiate many of these measures. This is another factor that seems to be driving the outperformance of PSU companies."
Mishra Dhatu Nigam Ltd, Bharat Dynamics Ltd, NTPC Ltd, Oil India Ltd and Bharat Electronics Ltd gained 80-90 per cent in 2023. Out of 55 BSE PSU index constituents, only Gujarat Gas (down 7 per cent) has delivered negative return in the PSU pack.
Banks such as Punjab National Bank, Bank Of Maharashtra, Union Bank Of India, Indian Bank, Indian Overseas Bank, Canara Bank, Punjab & Sind Bank, UCO Bank, Bank of India and Bank of Baroda delivered 25-62 per cent returns for the year.
Sunil Nyati, Managing Director, Swastika Investmart Ltd said the bullish momentum in railways, defence and PSU banks appears poised to persist, characterized by valuations that have not yet reached euphoric levels. The enduring strength in these sectors can be attributed to robust factors such as a substantial order book, the impetus from the Make in India initiative, and sustained infrastructure development, Nyati said.
"Within the railway and defence stocks, the positive trajectory seems likely to be sustained, bolstered by these ongoing trends. Simultaneously, PSU banks are displaying a commendable financial performance marked by stable asset quality. Nevertheless, it is crucial for investors to exercise selectivity within these spaces, as not all companies may benefit equally from the prevailing market dynamics," he said.
Deven Mehta, Equity Research Analyst at Choice Broking said sectors such as defence, railways and PSU banks demonstrated robust performance in 2023, propelled by strong government policies.
"Looking ahead to 2024, the pivotal event of general elections is poised to influence the trajectory of these sectors. The continuation of existing government policies is anticipated to fuel further outperformance in 2024. Conversely, any alterations in government policies could trigger profit booking in stocks within these sectors. Thus, investors should keenly observe political developments and policy continuity as key factors shaping the performance of Defence, Railways, and PSU banks in the coming year," Mehta said.
One needs to be more selective, said Shrikant Chouhan, Head- Equity Research at Kotak Securities. However, for PSU banks, fundamentally they are relatively cheaper and should do well in the coming year, Chouhan said.