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Free fall for PSU stocks this calendar bad news for further divestment

Updated: Mar 26, 2013, 22:07 PM IST

Rohit Joshi/Zee Research Group/Delhi

With a single trading session left to mark the completion of January- March quarter of 2013, PSU stocks have nosedived and performed poorly on the bourses. While Sensex has declined by 3.72 per cent in the period under review, S&P BSE PSU Index has fallen by massive 14 per cent eroding shareholders’ value.

Experts believe that weak market sentiment and a spree of disinvestment has been the major dampener for the PSU stocks. They fear this might adversely impact the disinvestment schedule ahead for the public sector entities by the UPA government.

A Zee Research Group (ZRG) study of the data at bourses (as per market closing March 26, 2013) figured out the three months performance of the listed scrips (barring banks) in PSU Index. It was found that out of the remaining 35 stocks in the particular index 30 stocks (nearly 86 per cent) have witnessed sharp meltdown. In this particular index, MMTC emerged as the top loser in 2013 so far declining 68 per cent, followed by BEML (50 per cent), NFL (41.2 per cent), STC (37.4 per cent), and Hindustan Copper (35.4 per cent) respectively.

In terms of shareholder value erosion, measured by fall in market capitalization, BEML has lost about Rs 579 crore to Rs 584.5 crore , while Hindustan Copper has lost Rs 4654 crore to Rs 8503 crore.

Citing the reason for the fall, Ambareesh Baliga, managing partner, Global Wealth Management, Edelweiss Financial Services, said, “Follow on Public Offer (FPO) is the main reason behind the decline. Whenever a FPO is announced, stock price generally corrects and that is what happened this time as well.”

Moreover, most of the laggards belonged to Metal sector and the whole metal sector had underperformed in this quarter, he added.

However, AK Prabhakar, Senior vice-president, equity research at Anand Rathi Financial Services has a different point of view. He argued, “It is not that BSE PSU Index has only witnessed correction. Other indices like BSE Auto, BSE Capital Goods, BSE Metal, BSE Power and BSE Realty have also witnessed correction of 12 per cent, 17 per cent, 22 per cent, 17 per cent, and 14 per cent respectively. Overall, the sentiment of markets is weak and only selected Nifty stocks (IT, Pharma and Oil stocks) are holding.”

Announcement of FPOs have been a major reason behind the fall witnessed in these stocks.

“Government disinvestment programme is also responsible for the fall. More supply of paper forces investor to postpone their investment decision as markets undertone remains weak,” added Prabhakar.

In 2012-13, government has divested stake in companies like Hindustan Copper, NMDC, NTPC, RCF, NALCO, and SAIL via OFS route at a steep discount to the then market price.

Only five stocks have generated positive returns in this index. Amongst the gainers, ONGC has reported positive returns of 13.2 per cent, followed by Container Corporation (12.2 per cent), Oil India (8.9 per cent), BPCL (5.2 per cent), and IOC (1.6 per cent).

Commenting on the gainers, Nipun Mehta, Founder & CEO, BlueOcean Capital Advisors, said, “The upward movement in oil related stocks is clearly news driven. The news of freeing of diesel prices over a period of time was a game changer for this industry. It has brought momentum in stocks like BPCL, IOC, Oil India and ONGC.”

In sync with Mehta, Prabhakar at Anand Rathi, said, “Reforms in Diesel and LPG segment is the main reason behind the upwards move seen in the stocks of Oil companies. This also shows that if government can continue with reforms juggernaut then market could witness good rally.”

Talking about the broad market outlook, Mehta at BlueOcean Capital Advisors, opined, “I don’t think that markets are poised for any significant upturn in the short term. Going forward, movement of markets would depend on two key parameters: announcement of elections and government’s ability to take bold measures in order to improve the infrastructure spending.”