Stock Market
Stock Market: Amidst the ups and downs in the stock market, shares of many companies have made investors rich. There is a continuous rise in these shares. There are many PSU stocks which have given bumper returns to investors. According to experts, such growth in PSU has come after many years. When such a big boom starts, it can last for a few years.
While replying to the discussion on the opposition’s no-confidence motion in August 2023, PM Narendra Modi had said in the Lok Sabha, ‘There is a Guru Mantra for those interested in the stock market also. You bet on the government companies which these people abuse. Everything is going to be good. After that statement of PM, shares of many government companies rose rapidly. The total market cap of 56 government companies on BSE has now increased by 66 percent to about Rs 60 lakh crore. Shares like NBCC, IRFC, HUDCO, ITI and SJVN have risen 150 to 250 percent. Market experts say that this pace may continue.
Capital Expenditure Factor
Ruchit Jain, lead research analyst at 5Paisa, said, “PSU stocks have been underperformers in the last few years. They could not get as much valuation as private companies because investors believed that PSUs could not get big returns. Many government companies were also in loss for a long time. But the focus of Modi government is quite different. The government laid emphasis on increasing the business of PSUs.
Apart from this, a few months ago, when there was a recession like situation at the global level, many of our government companies made a lot of capital expenditure. There was no such confidence in the private sector because there was a threat of recession in America and Europe. This gave confidence to investors that this government is making PSUs profitable and it will be sustainable.
Comfort zone of valuation
Nitin Kedia, founder of Kedia Fincorp, said, ‘Till some time ago, PSU valuations were very low. PNB was trading at 0.25 of its book value three years ago. Shares like SBI and ITI were also at low valuations. Retail investors and mutual funds saw opportunities in these stocks. Mutual funds invested large amounts of money coming from SIP in these shares. This increased their speed.
What is the free float factor saying?
ITI has increased by about 240 percent in a year. The government has more than 90 percent stake in this. On February 9, the market cap of ITI was Rs 31,445 crore, but its free float i.e. shares available for buying and selling were only so much that their value was only Rs 3144 crore. Similarly, Indian Overseas Bank has increased by around 175 percent in a year. The government has more than 96% stake in it. As against the total market cap of Rs 1 lakh 34 thousand 415 crore, the market cap of its free float is only Rs 5376 crore. Due to low free float, even a little buying makes the shares rise significantly.
Will this momentum continue?
Expert Ruchit Jain says, ‘Such a boom has come in PSU after many years. When such a big boom starts, it can last for a few years. If the same government remains in place, then buying interest in PSU stocks may continue. If we look at it in the short term, these shares have gone up a lot, hence some profit booking may be seen. Long term investors need not worry. Whenever there is a fall due to profit booking, these shares can be bought. (Stock Market)
What do experts say
Expert Nitin Kedia said, ‘The market had already given high valuations to private companies. If even one result is bad, it has a big negative impact. The risk increases there. If we look at PSU, most of the stocks are still running below PE of 10. Compared to private, despite this rise, PSU stocks are still showing a lot of life. Shares like PFC, REC, ITI, SBI, Tourism Finance and GAIL can give good returns in future also. The bull run in PSU stocks is going to last long. (Stock Market)