Modi magic! PSU stocks create Rs 7 lakh crore wealth this election season
Modi hi', Dalal Street investors have been hoarding PSU stocks in large numbers ever since voting for the Lok Sabha election began on April 19. During the period, the market capitalisation of BSE PSU index has increased by nearly Rs 7 lakh crore with stocks of state-owned entities, now being categorised as «Modi stocks», rallying up to 87%.
Shares of defence PSUs, one of the key beneficiaries of PM Modi's 'Aatmanirbhar Bharat' policy, dominate the list of election season winners. Cochin Shipyard, Bharat Dynamics and Mazagon Dock Shipbuilders have rallied in between 87% and 56% during the period.
Other top gainers among Modi stocks include Rail Vikas Nigam Ltd (RVNL), Hindustan Aeronautics, HUDCO, REC, Power Finance Corporation, IRFC and Bharat Electronics. In the last 6 months all PSU stocks have outperformed Nifty.
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Business fundamentals and growth outlook aside, a large part of this PSU rally is in anticipation of Narendra Modi returning as the Prime Minister with BJP getting control over anywhere between 300-320 seats.
Modi 3.0 would mean a continuation of policies favouring infrastructure development, manufacturing, modernisation of railways, etc.
«Notwithstanding this anticipation-fuelled rally, a few weeks after the election, investors will be confronted with a reality check that many of the positives these stocks may have started baking-in will be realised only in a gradual manner. This may drive profit-taking
