THIS TIME IT IS DIFFERENT

The rare market transformation that is currently unfolding, occurring once in a decade, will see remarkable resurgence of PSU stocks.

- IE&M Research

IN recent years, the Indian public sector companies, commonly referred to as PSUs (Public Sector Undertakings), have demonstrated a remarkable turnaround in their performance financial as well as in the stock market returns. Share of companies such as RVNL (Rail Vikas Nigam Ltd.) is up by more than 400 per cent in last one year alone. Its share price has jumped from around Rs 34 at the start of October 2022 to Rs 169 currently. So every Rs one lakh invested in the share of the company one year ago would have become Rs 4 lakh today. And this is not the case of a single company, there are many companies in this list. For example, shares of Mazagon Dock Shipbuilders has gained by as much as 3.5 times in last one year.

The list goes on and the list of top gainers in last one year is dominated by PSU companies. Even within the banks in the last one year, 8 government-owned banks have more than doubled investor wealth. UCO Bank has been the top gainer in the list with an unstoppable rally of 270 per cent. Punjab and Sind Bank has also grown over 3 times while Central Bank of India, Bank of Maharashtra, Indian Overseas Bank, Union Bank of India, Bank of India and Indian Bank are other multibaggers in the list.

This is clearly reflected in the performance of BSE PSU, which consists of major Public Sector Undertakings listed on BSE, against the BSE 500. In last one year BSE PSU index is up by 43 per cent compared to 17 per cent by BSE 500. Nonetheless, it has not always been the case. When we analyse the historical performance, we saw that most of the time PSU have underperformed the broader market.

Historical Performance