Shares of government companies have been in the headlines for the last one year. Due to the government’s disinvestment scheme, investors are bullish on these stocks and are buying in them.
So far, the BSE PSU index has seen a rise of 38 percent in 2021. At the same time, since June 12, 2020, there has been a jump of 66 percent in this index.
There are at least 16 stocks out of 60 in the BSE PSU index, which have seen more than double growth in the last one year. Of these, there has been an increase from 106% to 465 percent.
So far this year, Hindustan Copper, MMTC and Bank of Maharashtra have seen double growth. These shares have run up to 173 per cent.
What is the reason for this acceleration?
The government’s focus on infrastructure, steps towards disinvestment, recovery in the economy and the end of the corporate NPA cycle are some of the important reasons that have increased investor interest in public sector stocks.
Prashant Jain of HDFC Asset Management CompanY Utility, Energy, many government companies and many stocks under EPC are seen below their long term average valuation. On the other hand, companies belonging to the consumer-oriented sector are seen above the long-term average valuation.
Overall valuations of PSU companies are looking very good. In such a situation, the market’s eye is on the undervalued stocks.
What should be the investment strategy in PSU shares
Market experts say that the second wave of Covid-19 has created financial difficulties in front of the government. The government is forced to go ahead with the disinvestment process to raise funds. Apart from this, most of the PSU companies are associated with the core economy of the country. With the decrease in the cases of corona, there will be a gradual recovery in the economy and these government companies will get the benefit of this recovery. Apart from this, disinvestment and privatization are also expected to improve these companies.
Hemang Jani of Motilal Oswal says that despite this uptrend, we should not get involved in the blind race of buying PSU shares and bet only on selected quality stocks. Keeping in mind the future prospects of companies, money should be invested in them.
Jitesh Ranawat of Marwadi Shares It says that investors should now book profits there. Where they have achieved growth of more than 300 percent. Because such growth is not expected in the future.
Ranawat further said that as the economic activities pick up pace, we will see companies working at full capacity and they can also work on new capacity building, so that we can see higher credit growth in the second half.
Jitesh Ranawat recommends that investors should bet on stocks related to power, banking, cement, infra, capital goods sectors. These companies will benefit from the increasing expenditure on infra and other schemes of the government.
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