PSU stock froth persists: Q4 test for financial endurance

Market volatility prompts scrutiny of PSU stock sustainability in Jan-Mar

- SHIVAM TYAGI

Shares of public sector enterprises have corrected by up to 22 per cent month-to-date until March 19, 2024. Analysts attribute this steep fall to the valuation exuberance seen after a sharp run in these counters last year and suggest investors remain selective regarding the stocks in this space.

"The rally in public sector undertaking (PSU) stocks has been stretched and sharp, although it is somewhat justified by improvements seen in earnings, operations, balance sheets, and overall profitability. Traditionally, PSU stocks have traded significantly lower than their private peers due to unpredictability in state policy and lack of long-term vision," said Narendra Solanki, head of fundamental research-investment services, Anand Rathi Share and Stock Brokers.

Among PSUs, railway stocks such as RITES (formerly Rail India Technical and Economic Service), Indian Railway Finance Corporation, and Indian Railway Catering and Tourism Corporation dipped by 21.3 per cent, 8.1 per cent, and over 2 per cent, respectively, in March, according to ACE Equity data.

Oil and gas companies, including Hindustan Petroleum Corporation, Indian Oil Corporation, and Oil and Natural Gas Corporation, have also shed 13.8 per cent, 8.5 per cent, and over 4 per cent, respectively.