Shares of PSU stocks dropped by up to 13% as RBI imposed stricter regulations on project loans during the construction phase, with provisions set at 5%. Power financing companies like PFC and REC witnessed sharp declines.
Indian state-owned companies stocks surged in FY24, outperforming mid- and small-cap stocks. BSE PSU index nearly doubled, boosted by govt s capex spending hike and anticipated BJP victory. Railway, power, defence, and oil sectors also showed impressive gains.
Unlike dividend yield, value portfolio has limited room for earnings upgrades to continue and the trade looks relatively more crowded. Hence, dividend yield seems to a better way to play value within PSUs, accotding to Bernstein.
PSU re-rating, however fast and furious, should not be taken lightly, believes brokerage house Emkay. With elections coming soon and investors remaining open to all ideas, as long as a risk/return playoff makes sense - Unless you are averse to buying PSUs, this seems like a no-brainer, it said.