Public Sector Undertakings (PSUs) have defied tradition by surging during a recent market rally. This surge, coinciding with broader market volatility, warrants closer examination. While the rally lifted many PSUs, their inflated valuations and weak fundamentals raise concerns about sustainability. Now is the time for selective investment, focusing on PSUs with strong performance to capitalize on the ongoing rally.
Let us first understand what has led to this rally and whether it is sustainable.
The recent rally in India’s PSU stocks has been a remarkable phenomenon, with the Nifty PSU index delivering a staggering 79% return in 2023 compared to the benchmark Nifty’s 19.8% return. Several factors have contributed to this surge, creating a perfect storm of bullish sentiment.
INCREASED GOVERNMENT CAPEX
The Indian government has significantly ramped up infrastructure spending in recent years, with the latest budget allocating a record ₹10 trillion ($120 billion) for capital expenditure in 2024. This massive investment directly benefits PSU companies involved in sectors like construction, power, oil & gas, engineering, and transportation, fuelling optimism about their growth prospects.
About two years back when private capex was down due to Covid-related stress, the government and PSUs increased significant capex to drive growth. Capex-led growth and expansion in earnings resulted in a huge re-rating of PSU stocks.
IMPROVING FINANCIALS
هذه القصة مأخوذة من طبعة March, 2024 من Beyond Market.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 8500 مجلة وصحيفة.
بالفعل مشترك ? تسجيل الدخول
هذه القصة مأخوذة من طبعة March, 2024 من Beyond Market.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 8500 مجلة وصحيفة.
بالفعل مشترك? تسجيل الدخول
IMPORTANT JARGON
The phase-wise voting in India for general elections began on 19th April.
BACK IN BUSINESS
Buoyed by post-pandemic travel trends and rising disposable incomes, India's hotel industry is expected to maintain its growth momentum, going forward
SCOOPING UP SUCCESS
Investments are hot, but innovation and competition are the next scoops to conquer for ice cream companies
PLAYING THE LONG GAME
Small and mid-cap surge in India raises regulatory concerns, but long-term investors with risk strategies may benefit from these volatile stocks given positive economic and interest rate forecasts
MAGNIFIED PRESSURE
While the asset quality of banks is anticipated to remain largely stable, challenges persist in the form of mobilizing deposits and peaking profitability
OPPORTUNITY KNOCKS, BUT CHALLENGES AWAIT
INDIA'S BOOMING PE MARKET ATTRACTS INVESTMENTS IN CONSUMER AND INFRASTRUCTURE, BUT CHALLENGES LOOM. CAN FIRMS PRIORITIZE VALUE CREATION TO NAVIGATE THE RISKS?
CHARLIE MUNGER BEYOND THE MONEY, A LEGACY OF WISDOM
Charlie Munger's principles - overcoming adversity, patience, and lifelong learning - are success cornerstones for investors and followers
GREEN SHOOTS FOR GLOBAL GROWTH
Global growth surges on US strength, upgrades, and India's rise, but China's shadow looms
AIMING HIGH
India's economy expects strong GDP growth, backed by optimistic forecasts
IMPORTANT JARGON
MONETARY POLICY COMMITTEE (MPC) MAINTAINS STATUS QUO ON INTEREST RATES; HOWEVER, STAYS VIGILANT ON INFLATION