The PSU stocks have witnessed sharp decline leading to significant wealth erosion for investors across the board. But the heavy loss is incurred to the Government of India in this scenario who is looking to improve valuations.
In the last three sessions, the government holdings in PSU stocks, ranging from 30-90%, have shrunk by around Rs 3.79 lakh crore.
After losing Rs 1.5 lakh crore on Friday, investors lost another Rs 3.5 lakh crore in Monday’s session, taking the total wealth erosion to a whopping Rs 5 lakh crore in two sessions.
While institutional investors lost around Rs 93,590 crore, non-institutional investors saw market cap erosion of about Rs 45,300 crore; and individual holders saw their wealth decline by about Rs 36,440 crore in the last three sessions.
How PSUs in BFSI sector performed?
India’s largest PSU, the Life Insurance Corporation of India (LIC), lost the most in absolute value terms. The insurer has seen its market valuation fall by Rs 52,370 crore in just two days.
Indian Railway Finance Corporation (IRFC), a government NBFC, also lost Rs 30,000 crore in the same period.
On Monday’s session, the public sector bank stocks witnessed a sharp sell-off in today’s trading session as investors engaged in profit booking. All 12 constituents of the index closed in the red, with five of them experiencing declines of over 9%.
Nifty PSU Bank index plummeted by 4.43% to 6637 points, marking the most significant intraday drop in the past year.
Notably, the last such significant intraday drop was recorded by the index in February of the previous year, with a decline of 5.68%.
Banking stocks continued their weak performance following the RBI’s sixth monetary policy meeting.
The absence of cues from the RBI regarding future rate cuts, lack of imminent market triggers, postponement of rate cuts from the US Fed against market expectations, are some of the developments that have led to the impact on banking stocks.
Amid these scenarios, the investors have booked profit and took an exit.
Prime Minister bet heavy on PSU stocks
Last week, Prime Minister Narendra Modi had praised the growing public confidence in PSUs under the BJP-led NDA government.
The PM highlighted that India’s PSU companies have witnessed a 78% increase in the net worth exceeding to Rs 17 lakh crore compared to Rs 9.5 lakh crore in 2014.
He further noted a rise in the number of PSUs from 234 to 254 since 2014, with their shares yielding favorable returns.
Analysts believe that not all the PSU stocks may regain post-correction, but a few working in railway, power, defense, and oil and gas, with high visibility and government support, will likely attract buying.
