Now it’s PSU stocks’ turn to join the bull party

KS Badri Narayanan Chennai | Updated on February 19, 2021 Published on February 18, 2021

Privatisation, dividend, buyback, are some reasons for attractiveness

Public sector stocks, including from the banking space, hogged the limelight even as the benchmarks closed in the red for the third straight day on Thursday. PSUs were the dominant winners with gains in Bank of Baroda, ONGC, GAIL, BPCL, IOC, NTPC and Coal India.

Marketmen started seeing the PSU space afresh since the Budget presentation in view of the Government’s determination to privatise some public sector entities.

“While Indices ended in the red on Thursday, the under-ownership in PSU stocks was evident today also as several of them across sectors posted smart gains. The PSU bank index, which rose 6 per cent on Wednesday, recorded huge gains for the second day in a row led by privatisation hopes,” said S Ranganathan, Head of Research at LKP Securities.

According to analysts, PSU stocks have also not participated in the current bull rally. Profit bookings in other stocks entered the PSU space, which are now attractive due to various others reasons such as dividend yield, buyback, turnaround and steep slide in stock price, they added.

In the Budget, Finance Minister Nirmala Sitharaman said the disinvestment target for fiscal year 2021-22 is ₹1.75 lakh crore. As per the Centre’s new disinvestment policy, every Public Sector Undertaking in all but four strategic sectors will be privatised.

“A number of transactions namely BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, Bharat Earth Movers Limited, Pawan Hans, Neelachal Ispat Nigam Limited among others will be completed in 2021-22. Other than IDBI Bank, we propose to take up two Public Sector Banks and one General Insurance Company in the year 2021-22,” she said in the Budget speech.

The five top gainers on Nifty 50 were ONGC (up 7.6 per cent), GAIL (up 7.0 per cent), BPCL (up 4.7 per cent), IOC (up 4.2 per cent) and NTPC (up 4 per cent),

For instance, Government just concluded buyback in Engineers India while GAIL buyback will open for subscription on February 25 at ₹150 a share. Shipping Corporation has received bids from various players including Great Shipping, for Government stake.

”We reiterate our Buy rating and OW stance on ONGC on the back of buoyant oil prices and potential overhaul in nominated block (APM) gas pricing,” said Emkay Global.

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Published on February 18, 2021
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