The Hindu Business Line : PSU stocks turn active on divestment hopes

“PSU stocks are doing well partly because now with the Left withdrawing support, there is a possibility that in future disinvestments may happen,” said Ms Anita Gandhi, Head of Institutional Business, Arihant Capital Markets Ltd.

Many analysts were in agreement with this. There was little scope for disinvestments when the Left was supporting the Government. But now expectations are on the rise and PSU stocks are on the upside, said analysts.

The country is running a huge fiscal deficit and one of the ways to get rid of this would be to sell of the assets it holds in form of PSUs, said one of them.

There has been a sharp rise in fiscal deficit in April-May, according to the figures released by the Comptroller General of Accounts on June 30.

The fiscal deficit was Rs 73,201 crore, 54.9 per cent of estimated fiscal deficit of Rs 1,33,287 crore for the fiscal, mainly on account of the rising oil import bill.

If the Government divests part of its stake in PSUs, those companies in which the floating stock is low would stand to gain, said an analyst.

However, the Government will not divest at any price; in fact it is only if there is not much divergence between the fair value and the market value of those shares that disinvestments can happen,” said Mr Saurabh Sonthalia, Vice-President-Equity Strategy, Motilal Oswal Financial Services.

All PSU companies do require capital for their expansion plans and disinvestment is a more profitable way of acquiring capital, said Mr Sonthalia.

Currently many PSU stocks, (for examplebanks) are trading at discounts, and they could rise substantially should there be disinvestment in these companies, said an analyst.

Amongst the PSU stocks, NTPC, BHEL, and SAIL are up by 7 per cent from Monday’s close. (The Left Front withdrew support to the Manmohan Singh government on Tuesday.)

MMTC Ltd is up by 18 per cent, NMDC by 15 per cent, SBI by 5 per cent, IOC by 4 per cent, Power Grid by 14 per cent, BPCL by 16 per cent, GAIL by 8 per cent and NALCO by 3 per cent during the same period

MMTC hit the 10 per cent upper circuit on Thursday.

Another reason for PSU stocks finding favour is that having been battered a bit in the recent past, they are now being seen as value buys, said an analyst with a brokerage firm.

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