From Street darlings to sell-off targets, PSUs feel the heat
PSUs) tanked in Tuesday's trading as investors worried about their prospects after the Bharatiya Janata Party failed to secure a thumping majority in the general elections — considered key for further gains in these stocks. Investors are concerned that a weakened BJP-led coalition government's focus on reviving state-owned companies could hit a roadblock in its third term.
The BSE's PSU index tumbled 15.7%, its highest single-day losses ever, while the Sensex and Nifty dropped between 5% and 6%. Power financier REC slumped 24%, followed by Power Finance Corporation, Container Corporation of India, Bharat Electronics, BHEL, SAIL which have declined between 18-22%. Most PSU stocks tanked over 10% during the day. The sell-off eroded ₹10.62 lakh crore of PSUs' market capitalisation in a day.
«Over the last 18 months, the valuation gap between the PSU and their private counterparts had been narrowing as a result of massive rerating fuelled by optimism surrounding the BJP's development agenda,» said Vinit Sambre, Head — Equities, DSP Mutual Fund. «However, the unexpected election result has affected this narrative, leading to a swift unwinding of the positive sentiment that had been built up.»
Shares of most public sector companies have been the market favourites in recent times. BHEL, Cochin Shipyard, Mazagon Dock Shipbuilders, Hindustan Aeronautics, REC and Power Finance Corporation have returned between 150 and 550% in the past year. The run-up in these shares also resulted in their valuations becoming rich.
«PSU
