Navigating the investment landscape in 2023: A closer look at India's PSU sector
The year 2023 has brought about significant developments in India's stock market, with midcaps, smallcaps, and PSU sectors showing remarkable gains.
In 2023, the Indian stock market has witnessed a remarkable rally, with midcaps and smallcaps indices surging by an impressive 28 percent, outpacing the Nifty, which has managed a modest 9.9 percent gain year-to-date. This bullish trend has sparked renewed interest in various segments of the market, with a particular focus on the Public Sector Undertakings (PSUs). Within the midcaps, the PSU index has been a standout performer, rallying by an astonishing 35 percent.
Among the myriad of PSU stocks, there have been some remarkable gainers that have caught the attention of investors. Notable among these are the PSU railway stocks, including RVNL (Rail Vikas Nigam Limited) and IRFC (Indian Railway Finance Corporation), which have witnessed gains of an impressive 138-140 percent each.
The power PSUs have also capitalised on this bullish wave, with SJVN (Satluj Jal Vidyut Nigam) and transformers and rectifiers companies posting gains ranging from 122 to 200 percent year-to-date.
The PSU banking sector has not been left behind, with several banks showing significant gains in the range of 47-55 percent. Prominent names like Bank of Maharashtra, Central Bank, Indian Overseas Bank (IOB), UCO Bank, and Indian Bank have all contributed to the sector's upward trajectory.
“Barring two banks, which is SBI and Bank of Baroda (BoB) where the credit cost has fallen below 100 bps, I think there is still room for a lot of the others,” he said.
Shedding more light on this phenomenon in an interview with CNBC-TV18, Sridhar Sivaram, Investment Director at Enam Holdings, emphasised that the PSU space is not as attractive as it was three years ago. It implies that the investors should exercise caution.
“I think it is no longer as attractive as it was three years back,” he said.
However, he pointed out that he began investing in PSU banks in November 2020, indicating his belief in the sector's potential for growth.
One of Sivaram's key takeaways is that it is a mistake to view the PSU banking sector as a homogenous entity. Instead, he emphasized that some of the PSU banks are remarkably efficient, indicating that investors should focus on banks with lower costs of funds.
“We do have some of the private sector banks in our portfolio,” he said.
Furthermore, he suggested that certain PSU banks still have room to grow, hinting at their potential for further gains. However, he cautioned that investing in PSU banks is not a long-term structural story but more of a cyclical play, meaning that market conditions and economic cycles will significantly influence their performance.
Sivaram also revealed his diversified approach to portfolio management, stating that he includes midcap private sector banks alongside PSU banks.
For more details, watch the accompanying video
(Edited by : C H Unnikrishnan)
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
Over 50 onion farmers detained in Nashik ahead of PM Modi's visit
May 16, 2024 11:14 AM
Why Google CEO is cautiously optimistic about the election year
May 16, 2024 9:51 AM
Mark Mobius reveals how markets will react if NDA wins 400+ Lok Sabha seats
May 15, 2024 8:09 PM