What fund managers think of the current PSU rally
Public sector undertakings (PSUs) offer investors the opportunity to diversify and manage risk, even as they continue to present potential for capital appreciation. Here is what some fund managers think about the sector and its current rally: “We firmly advocate assessing companies based on their structural growth trajectory, regardless of their public or private ownership. It’s imperative to recognize the significant growth narrative and competitive advantage present in key sectors where PSUs operate.
Overcoming historical challenges like government interference, we have observed a notable shift in management objectives and reduced governmental involvement, enabling PSUs to operate more effectively within their respective sectors. It’s crucial to evaluate each company beyond stock prices and profitability metrics, focusing on the structural story contributing to PSU growth. It is important for investors to emphasise the significance of effective management and alignment with business expectations in determining a company’s valuation, irrespective of its ownership structure.
Notable improvements in metrics like return on equity (ROE) and return on capital employed (ROCE) reflect improving fundamentals, and we anticipate continued earnings growth. A sustained rally in PSU stocks, driven by structural growth and favourable government policies, is foreseeable, provided budgets and policies remain aligned with the PSU narrative. Investors need to evaluate each company based on performance and alignment with business objectives.
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