SJVN, IRFC, RVNL, NHPC, IRFC: 18 PSU stocks in bear grip! Selloff leaves investors off-guard. What's next?

A total of 46 of 56 PSU stocks hit their 52-week highs this month while nine others kissed their one-year peaks in January. As things stand today, at least 18 of those PSU shares are in a bear hug, falling over 20 per cent, leaving investors off-guard. SJVN Ltd shares have plunged 36 per cent from February 5 high of Rs 170.45, only to see some respite on Wednesday.

NBCC (India) Ltd shares have tanked 29.43 per cent from February 5 high, Rail Vikas Nigam Ltd (RVNL) is down 29 per cent from its January 23 high while The New India Assurance Company Ltd has slipped 26 per cent from its one-year high hit on February 9, as per data compiled with AceEquity.

"Typically, sell-offs occur when stocks are overvalued or when there's a deterioration in fundamentals. However, in the case of PSU stocks, which encompass various sectors such as defence, power, and railway infrastructure, neither have the fundamentals changed nor is the entire pool overvalued. In fact, some companies within the financial services and power sectors that experienced corrections were trading at significant discounts to their intrinsic value," said Ashwini Kumar Shami EVP and Portfolio Manager, Omniscience Capital.

Shami said the sell-off could be interpreted as profit booking, especially considering that many of these stocks had rallied in the past.

Not everybody agrees. Kotak in a recent strategy note said that the assumptions surrounding the medium-to-long-term growth and profitability of PSUs in certain sectors are highly optimistic. "We doubt much has changed in most sectors," it said.

"The market is overly focused on near-term ordering and profitability, while ignoring the large downside risks to medium-term profitability, business model challenges and disruption risks," it said.

In a post on X, founder of ithought Financial Consulting Shyam Sekhar said 2024 is probably going to decisively teach investors, who came into equity investing post Covid, their most important lesson --  "buying the dips blindly is not a strategy."

To this, a Twitterati posted: "You mentioned the same advice for 2023 as well, sir."

"Then, people bought the dip in specialty chemicals. Now in PSU. I am convinced it won't end well," Sekhar replied.

NHPC Ltd, Mishra Dhatu Nigam Ltd, IRCON International Ltd, Engineers India Ltd, MMTC Ltd,  ITI Ltd, General Insurance Corporation of India, Indian Overseas Bank and Rashtriya Chemicals and Fertilizers Ltd are some of the PSU shares that have fallen over 20 per cent from their 52-week highs.

KIOCL Ltd, Steel Authority Of India Ltd, Housing & Urban Development Corporation Ltd and Indian Railway Finance Corporation Ltd are also in the bear grip.

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