Thursday, July 2, 2009

PSU stocks eyed as budget nears; index gains 31%

After May 16, the day result of the general election was announced, there has been increased investor participation. Since May 18, markets have seen a good run up with Nifty registering 16% rise. But its performance has been beaten by BSE PSU Index that registered gain of 31% till June 30.

In this journey, public sector understandings (PSUs) turned out to be better performers over last one year as well. Compared to 10% return generated by Nifty, BSE PSU Index rewarded investors with stellar 45% return for the year ended June 30, 2009.

As the market awaits the next positive trigger, Union budget, PSUs have again emerged as centre of attraction as there is expectation that the government may take a relook at divestment after a long gap and Bharat Earth Movers (98%), STC India (86%) and MMTC (82%) have emerged as the top three performers from the BSE PSU constituents post May 16.

There is no sectoral bias for the good performers within PSUs but there is a common thread among the poor performers. Highly regulated energy sector companies have not done well. Though there was talk of dismantling the administered price mechanism, there is little interest in the oil marketing companies.

Barring ONGC and Neyveli Lignite, other energy sector plays such as GAIL, NTPC, PFC and PCGIL have underperformed both the Nifty and BSE PSU Index. Stocks such as Nalco and Container Corporation along with Syndicate Bank and Canara Bank also appear in this list of underperformers.

"ITI, SCI and Hindustan Copper are to be watched for any divestment announcement from the government," said Shaishta Shaikh, research head with a broking firm. A few fund managers hold the view that PSU banking stocks would gain prominence.

No comments: