A pointy fall in state-owned firms on the bourses so far in calendar 12 months 2019 (CY19) has booted out public sector enterprise (PSU) from the top-10 market capitalisation (market-cap) membership.

India’s largest financial institution by belongings, State Bank of India (SBI) and the only inventory to hold on to this elite listing was evicted final week, with its market-cap out falling under that of Bajaj Finance. Reliance Industries, Tata Consultancy Services (TCS), HDFC Bank, Hindustan Unilever, HDFC, Infosys, ITC, Kotak Mahindra Bank and ICICI Bank at the moment are among the many top 10 firms with the best market-cap.

While the S&P BSE PSU index has misplaced round 9.5 per cent for the reason that begin of CY19, the S&P BSE Sensex has moved up round four per cent throughout this era.

“A number of these PSUs are in the mid-and small-cap segment, which has taken a beating in CY19. That apart, the stake sale proposal and the overall operational performance also had a bearing on the sentiment,” explains G Chokkalingam, founder and managing director at Equinomics Research.

In January 2008 when the S&P BSE PSU index was at an all-time excessive, 5 PSU shares – SBI, Oil and Natural Gas Corporation (ONGC), NTPC, NMDC and MMTC have been a component of the top 10 firms by market-cap. Currently, ONGC stand at 17th place, NTPC at 25th, NMDC at 85th rank, whereas MMTC has slipped to 419th place in total market-cap rating, reveals knowledge.

The S&P BSE PSU index ended at 6,544 on Friday and has tanked almost 41 per cent from its all-time document closing excessive of 11,093 touched on January four, 2008. In comparability, the S&P BSE Sensex zoomed 82 per cent from stage of 20,686 to 37,673 throughout this era.

Divestment on playing cards

The authorities, on its half, is now trying to divest some of its stake in choose PSUs.

Bharat Petroleum Corporation (BPCL), Shipping Corporation of India (SCI) and Container Corporation of India (Concor), in response to studies, have been cleared for divestment.

Over the final two years, the federal government’s disinvestment proceeds have ranged between Rs 800 billion to Rs 1 trillion/12 months. In FY20, the goal is steep with greater than Rs 1 trillion earmarked for disinvestment. Analysts say privatisation of PSUs can provide a significant increase to the reforms agenda and is usually a set off for rerating for these shares.

“The NSE PSE index is trading at near- historical lows (both on absolute as well as a relative basis). However, while earnings growth for corporate India has generally been weak, for state-owned enterprises (SOEs) it has been even weaker. With the sector trading at depressed valuations, we believe any news flow on privatisation can potentially drive rerating of the overall asset class,” says a current UBS report co-authored by Gautam Chhaochharia, their head of India analysis together with Dipojjal Saha.

Chokkalingam, however, stays bullish on the PSU shares, particularly these firms which have a wholesome money in hand. “Given the fiscal constraints, the government may ask them to dole out hefty dividends this fiscal. Hence, they become a good dividend play for investors,” he says.

Source: CapitalinePlus