PSU stock sell-off erodes government wealth by Rs. 3.8 trillion
What's the story
A significant drop in public sector unit (PSU) stocks has resulted in a loss of nearly Rs. 3.79 lakh crore for the Indian government. This comes at a time when the government aims to enhance the valuations of state-owned enterprises and launch a disinvestment campaign. Institutional investors, non-institutional investors, and individual investors witnessed a loss of Rs. 93,590 crore, Rs. 45,300 crore, and Rs. 36,440 crore, respectively, in the last three sessions.
Growing PSU sector
India's PSU firms valued at over Rs. 17 lakh crore
On February 7, Prime Minister Narendra Modi mentioned a 78% growth in the net worth of India's PSU firms since 2014, currently exceeding Rs. 17 lakh crore compared to Rs. 9.5 lakh crore in 2014. He also said that the number of PSUs have increased from 234 in 2014 to 254. In the Interim Budget presentation, Finance Minister Nirmala Sitharaman had also stressed the government's dedication to improving PSU valuations and allowing private sector involvement in the "core strategic" sectors.
Rebound possible
Analysts expect PSUs to rebound
Rajesh Palviya, analyst at Axis Securities, believes profit-taking is a positive sign for the market and anticipates a rebound in PSU stocks following a potential 5-10% correction. Some experts think that not all PSU stocks may recover, with sectors such as railways, power, defense, and oil and gas likely to draw buyers. PSU stocks have been gaining momentum since 2021, with the BSE PSU index surging 41% in CY2021, 23% in CY2022, and over 55% in CY2023.