Mutual funds join multi-billion dollar PSU rally, eye 2014 record in election year
economictimes.indiatimes.comdollar rags-to-riches story of Indian PSU stocks is leaving mutual fund managers with no option but to join the party even if they are late than momentum-chasing retail investors. The ownership of PSUs in mutual funds has just crossed a 3-year high and looks poised to break the levels seen during the 2019 and 2014 Lok Sabha elections.
The first leg of MFs chasing PSU stocks, which was in sync with global revival in value trade, began in 2021-2022 but was restricted to few largecap PSU stocks only.
«This participation has finally started turning broad since October 2023 (also many new PSU names have got listed in the past few years). The proportion of PSU holding has just broken to a 3-year high in January 2024 as more funds start entering the trade (also due to sharp outperformance of many PSU stocks resulting in alpha chasing),» said Sunil Jain of Elara Capital.
Market data shows PSU holding in MFs as a percentage of total AUM rose to around 12% in January. In the last two occasions, it was noticed that MF ownership of PSUs typically go up in election months. In May 2019, MF holding had gone up to 14% while in May 2014 their stake was around 16%.
The sharp outperformance of PSU stocks (Nifty CPSE has doubled in the last one year) means that smart money is hunting for a larger number of PSUs which were once shunned for poor operational performance, sub-par IRRs on re-invested capital and supply overhang coming from OFS.
«There is a desperation to participate in the PSU story. Hence we are seeing players mining
