The 56-pack BSE PSU index has seen its total market value soaring 66% to Rs 59.5 lakh crore, giving investors a profit of Rs 23.7 lakh crore on current market prices. None of the PSU stocks in the list have given negative returns since PM’s speech less than 6 months ago. Even the worst performer SBI is up 12% while the top gainer NBCC has skyrocketed 249% in no time.
NBFC IRFC, which is a play on the modernisation and upgradation of Indian Railways, has rallied another 225% since PM’s parliament speech. Other top PSU multibagger stocks include HUDCO, ITI, SJVN, Cochin Shipyard, MMTC, BHEL, REC, Mangalore Refinery, RVNL, PFS, NMDC, NLC India, Ircon, The New India Assurance and General Insurance Corporation.
PSU banks Indian Overseas Bank, Punjab & Sind Bank, Central Bank Of India and UCO Bank have also doubled wealth during the period.
When screened on a one-year timeframe, the number of PSU multibaggers increases to as many as 35 with IRFC turning out to be a four-bagger. For the purpose of this study, we have taken only BSE PSU stocks but if other state-owned stocks are also taken into account, the list of winners would only grow longer.
While responding to a no-confidence motion in the Lok Sabha earlier in August, PM Modi had taken a jibe at the Opposition asking investors to safely bet on PSU stocks which are ridiculed by others.”Share market mein ruchi rakhne wale ko yeh guru mantra hai ki jin sarkari companiyon ko yeh log gaali de na, aap uspe daav laga dijiye. Sab acha hi hone wala hai. (This is a guru mantra for those who have interest in stock markets – invest in PSU companies ridiculed by the Opposition and everything will be good),” he had said in Lok Sabha. You can watch his speech here.As it was probably for the first time that a PM had reassured investors about the future outlook on PSU stocks and that too in the Parliament, it triggered a fresh wave of buying in PSU bank stocks as well as other ‘sarkari’ stocks the very next day.
Recalling the speech, Dalal Street veteran Ramesh Damani said he was ecstatic when the PM made a bullish case on public sector stocks.
“My personal feeling is that the leadership is very much intact with public sector stocks. They probably have a long way to go because typically, in the bull market leadership, the stocks go up 10x 20x after some point. So I would remain invested in good quality businesses,” Damani said.
Modi had specifically mentioned insurance giant LIC, whose stock has since then rallied 56%, and Tejas-maker Hindustan Aeronautics Limited (HAL), the shares of which are up 55% in between.
“You know what people said about LIC. They said LIC is finished and that poor people who invested their hard-earned money will lose. People said whatever came to their imaginative minds and whatever was told to them. But LIC has been continuously gaining strength,” PM Modi had said.
On the back of attractive valuations, hope of growth revival in FY25 and exemption from complying with 25% minimum public shareholding norms till 2032, LIC shares have now crossed above its IPO price for the first time.
The PSU boom isn’t just about sentiments and Modi’s fan following among investors. A large part of the rally is attributed to the improving orderbook of state-run companies on the back of heavy thrust on capex as many infrastructure projects are managed by PSUs and also financed by PSU banks or NBFCs.
The Modi government has also been trying to keep investors happy with stock splits in defence PSUs like Cochin Shipyard and HAL. A higher dividend payout has been the cherry on the top.
(Data: Ritesh Presswala)
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