There are sectors which are discovered on the street, then thrown in dumps and then rediscovered. Probably, in the last three years, the street is more in a mood to rediscover the sectors. On top of the rediscovery mission is the power sector. This rediscovery has happened after a gap of close to 15 years and probably companies and their promoters have learned many lessons. The players who are able to survive tend to get more attention because they have learnt the art of surviving a tough phase which is one most important feature for long-term survival. While phase one of the re-rating has taken place, the question is that as the sector continues to show improvement in performance, will there be another round of re-rating. As far as the basic demand matrix is concerned, power is a sector where demand will always be higher than supply.
Emkay Global said loan growth for top PSU banks compounded annually over the last three years has been about 13.5 per cent. State Bank of India (SBI) will earn about 18 per cent return on equity in FY24, it estimated.
PSU stocks have rallied, partly supported by the govt s capex push but sector-specific reasons have also helped. The PSU Bank index has advanced 78% YoY, outperforming the private banks by 70 ppt, while oil PSUs have seen a sharp rally since October 2023 as the govt chose not to cut auto fuel prices despite a busy election calendar and a drop in crude oil prices.
PSUs in the capital goods sector, Kotak said, have seen a sharp rerating in their multiples over the past year, driven by a sharp increase in order books and elevated profitability and returns.