PSU stocks: Do not chase them purely on recent bull-run

Research reports suggest that the PSU pack looks better now and the consensus looks too bullish, however, actual earnings have been flattish for a while

- ARSHAD KHAN

PUBLIC sector undertaking (PSU) stocks are on a roll. Consider this, LIC shares, which were one of the biggest wealth guzzlers for more than a year after launching the country's biggest IPO in May 2022, have gained about 75% in the last 3 months, helping the insurer to become one of the most valuable listed companies on the exchanges. Likewise, shares of the country's largest public sector lender- SBI- have gained 44% in one year time while shares of the largest private lender - HDFC Bank - have given a negative return of 11%.

Stupendous rally

According to a brokerage firm, PSU stocks over the past 12 months have generated a return of 20-440%. Capital goods, electric utilities, financials and oil, gas & consumable fuels have led the rally in the PSU pack. "There is a positive sentiment for PSU stocks now. Some PSU segments are doing very well like PSU banks where the turnaround is sharp. PSU banks which reported losses of ₹87000 crore in FY 2018 will be making estimated profits of around 1.3 lakh crore in FY24.

Even after the run-up in prices, PSU banks are fairly valued," said V K, Vijayakumar, Chief Investment Strategist, at Geojit Financial Services. He added that many defence-related PSU stocks like shipbuilders have run up too much too fast on order bookings and the Make In India theme.