Last month, Prime Minister Narendra Modi said in a jest that stock market investors should invest in PSUs which were criticised by the Opposition in the past. "Here's a guru mantra for those who follow the stock markets: Place your bets in those PSUs which they (the opposition) abuse. Your money will surely grow," the PM had said on August 10.
Prime Minister Narendra Modi's light-hearted advise on the floor of the Lok Sabha led to PSU stocks surging over the last one month as shares of some PSUs seem to have caught the eyes of investors who saw an opportunity. It appears that investors have taken PM's words seriously, which has led to a rally in several public sector companies' stocks
According to share market analysts, what makes this rally in PSU stocks even more remarkable is that it is not confined to a specific group or sector. It is a broad-based rally where most PSUs have seen buying interest across the board. Data suggests that nearly 80% of the 55 PSU stocks that comprise of both BSE PSU and BSE PSU Bank index have seen their shares surge anywhere between 10% to as high as 85% over the last month.
MMTC stock jumped up to 85%, Gujarat Mineral Development Corporation (up 50%), Shipping Corporation of India (62%), State Trading Corporation of India (up 46%), BHEL (up 42%), Jammu and Kashmir Bank (up 44%), Central Bank of India (up 28%), NMDC (up 28%), Punjab & Sind Bank (up 25%) and BEML (up 22%) were some of the top gainers.
Other PSU stocks that saw a good rally over the last one month since the Prime Minister's address include Uco Bank (up 28%), Indian Overseas Bank (up 24%), Hindustan Copper (up 12%), and even MTNL (up 26%). Meanwhile, despite some profit booking in the stock post the recent MSCI rejig, PFC share price has rallied around 10% in the last one month.
There have been a few underperformers as well. Shares of Oil Market Companies (OMCs) like HPCL (down 3%), BPCL (down 0.14%), Indian Oil (down 0.22%) have been under pressure due to the sharp fluctuation in Crude Oil prices. Brent Crude has surged to a 10-month high following Saudi Arabia and Russia's decision to extend production cuts till the end of the year.
PM Modi had said that despite superficial criticism of his government on PSU companies, PSUs are delivering robust numbers and are competing with their peers in style. A recent report from ICICI Securities also spoke about how some PSUs have broken out from years of underperformance and are set for a long growth runway ahead. In fact, the share of PSUs in the country's overall market capitalisation is at its highest in four years.
Market observers believe that the pattern of government spending in the past few years has triggered a re-rating in PSU stocks. Though the upward momentum in PSU stocks may continue till the bullish sentiment lasts, share market analysts urge investors to be cautious as stocks could be overvalued. The BSE PSU Index gained 8% in the one month as against the 1% advance in the benchmark Sensex.
Credit: Axis Securities
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