Buyers find PSU stocks attractive on divestment hopes

PSU stocks witnessed targeted buying as market expected fresh Government initiative for divestments.

Of the 45 listed PSU stocks, those with negligible or very small public holding evoked increased interest from the market.

“If the Government plans to sell its stake up to 51per cent in the listed PSUs, the total sale proceeds could be over $95 billion, based on the current market prices of listed PSUs. This works out to about 9.48 per cent of the current GDP,” according to Mr Jagannadham Thunuguntla, equity head of SMC Capitals.

Mr Saurabh Mukherjee, head of the Indian equity at Noble, said investors have appetite for PSUs, most of which have strong fundamentals and high growth prospects. “But there could be resistance by unions, particularly bank unions, against Government holdings going below 51 per cent. Limited resistance, however, is likely if divestments are restricted to 51 per cent.”

There are several PSUs with Government holding above 75 per cent. But those with holding at 90 per cent and above – such as Hindustan Copper (99.59 per cent), MMTC (99.33 per cent), NMDC (98.38 per cent), Neyveli Lignite (93.56 per cent), Rashtriya Chem & Fertilisers (92.50 per cent), State Trading Corporation (91.02 per cent) and Engineers India (90.40 per cent) – are likely to be considered for divestments in the short term.

NMDC, with the highest market capitalisation among the PSU pack, moved up 4.06 per cent on Tuesday. On weekly terms, however, it is still trailing by 4.78 per cent. It clocked a traded quantity of 2.19 lakh shares on the BSE.

MMTC, thinly traded and priciest among the State-owned companies, continued its appreciation spree and gained 10 per cent to close at Rs 37,229.

Hindustan Copper improved 5 per cent with surge in volume (over one lakh on BSE against fortnightly average of 83,190 shares).

REC gained 6.45 per cent with a BSE volume of over 10 lakh shares. Power Finance Corporation was 2.56 per cent with a traded quantity of 2.58 lakh changing hands on BSE.

NTPC closed marginally down, but its traded volume of over 30 shares were one of highest on the BSE.