This has been the best year for public sector unit (PSU) indices in a decade. The PSU index, comprising 56 listed firms, rallied over 53% in CY23. The other public sector index, BSE CPSE index with 57 stocks, has done even better, rising 71.7%.
This is more than double of the benchmarks’ Sensex and Nifty-50, which have risen 17.3% and 18.4%, respectively.
The combined market cap of all PSUs stocks surged by Rs 16.1 trillion or 49% to Rs 48.7 trillion in 2023. There has been a pleasant turnaround in fortunes for PSU stocks in the last three years, with the index delivering positive returns of between 23% and 53%. Before that between 2018 and 2020, the index was in the red zone for three consecutive years.
According to experts, this is a result of the government’s increased focus on key areas like defence, infrastructure and railways. Sudip Bandyopadhyay, group chairman, Inditrade Capital, said: “Significant focus and proactive action by the Centre in multiple areas like defence, infrastructure, railways, construction and others have rejuvenated the PSUs. Such calibrated action on multiple fronts by the government has never been seen earlier and naturally, PSUs are benefiting.”
Jitendra Gohil, chief investment strategist, Kotak Alternate Asset Managers, said: “The Indian economy has demonstrated marked resilience since Covid and the economic boom has surprised many. This is clearly reflected in the stark re-rating of PSUs as their performance is largely dependent on political stability, policies and governance.”
A fund manager, who did not wish to be named, explained that the market in the past few years has started recognising government’s initiatives across sectors.
He pointed out that the main problem with PSUs has always been the fear that things in the companies could be changed at the quirks of the owners – the government. So, there was a lot of diffidence among both institutional and domestic investors to go long on these companies.
Moreover, while many good things were happening on various fronts, the investing community was not aware of them. “There was a dual problem ‘ownership’ and ‘lack of packaging the product’. Now things seem to be improving. So, like any other sector, good stocks are beginning to get noticed,” he said.
Going forward, Gohil added that a large part of the PSUs still offer some more valuation upside as they are relatively undervalued and under-owned, even after this stupendous rally.