Government gains PSU muscle as stocks climb peaks
value of shares held, surged to a seven-year high of 10.38% of total market capitalisation as of March 31, driven by a robust rally in several public sector unit (PSU) stocks.
The value had touched a high of 22% of total market capitalisation of listed firms in June 2009, dropping to a low of 5.1% in September 2020 before doubling since then, according to data from primeinfobase.com. Re-ratings amid large valuation discounts, high dividend yields, record cash flows and news of possible privatisation triggered a sharp rally in public sector companies over the last three years.
Listed state-owned firms have added nearly ₹43 lakh crore in market cap in the three years ended March 31 to hit ₹61.22 lakh crore. To be sure, about ₹6.4 lakh crore was added via six new listings, such as those of Life Insurance Corp. of India (LIC) and Indian Renewable Energy Development Agency (IREDA), among others, during this period.
The Nifty PSE index and Nifty PSU Bank index have seen significant gains of 326% and 493%, respectively, in three years, compared to a 142% return by Nifty.
Share of Pvt Promoters at 5-yr Low
«The PSU re-rating isn't without reason, and the robust stock performance is underpinned by the strong financial resilience of traditional economy sectors during the Covid-19 pandemic, government policies and reforms, such as defence indigenisation, benefiting companies in these sectors,» said Ashish Gupta, CIO, Axis Asset Management. «A heightened focus on corporate governance, including formalised payout policies,
