Runaway rise in PSU scrips spurs worries

Sensex's returns pale in comparison to the rally over 3 months

- Ram Sahgal & Mayur Bhalerao

Euphoria has gripped stocks of government-owned companies, with their rally over the past three months making the benchmark Sensex’s returns pale in comparison, and prompting notes of caution from analysts.

The latest leg of the rally from 26 October has seen the BSE PSU index return 52.6% to 18,123.77 against the Sensex’s modest 13.6% gain to 71,731.42 on Monday. Investor frenzy for the stocks drove the index up to a RECord 18,428.25 during the day.

Life Insurance Corp. of India, for one, which traded at ₹605 apiece on 26 October, way below its IPO price of ₹949, hit a record ₹1,028 on Monday. Others which hit new peaks include Coal India (₹450), BPCL (₹588.80), HPCL (₹517.35) and Gail (₹186.50).

"One needs to be a tad cautious as PSU stocks have run up significantly and profit-booking could lead to volatility and shakeout in certain segments of the index," said Siddhartha Khemka, retail research head, Motilal Oswal Financial Services.