BSE PSU index hits 16-month high, surges 27% since Budget

Shares of public sector undertaking (PSU) firms continued to be on a roll with the S&P BSE PSU index hitting a 16-month high in Tuesday's intraday trade. The index has rallied 27 per cent since February 1 as the PSU companies and banks got a new lease of life after the government presented the budget for the financial year 2021-22 (FY22).

The S&P BSE PSU index hit an intra-day high of 7,292, its highest level since November 2019. In the month of February, the PSU index had posted its biggest monthly gain in nearly seven years. The index rallied 22.5 per cent in February 2021, recording its biggest monthly rally since May 2014, when it had zoomed 24.05 per cent.

Investors have been buying PSU stocks after the government announced a plan to privatize two PSU banks and increase spending on infrastructure, healthcare and farm sectors without resorting to higher taxation.

In the Union Budget FY22, Finance Minister Nirmala Sitharaman announced a capital expenditure of Rs 5.54 trillion for FY22, up 26 per cent, as against Rs 4.39 trillion for FY21. Further, she announced the FY22 disinvestment target of Rs 1.75 trillion. The budget also outlined the additional financial avenues to attain the same, through setting up Development Financial Institution (DFI), monetization of infra assets and divestment plans of a non-core asset.

Meanwhile, speaking at a webinar on privatisation by the Department of Investment and Public Asset Management (DIPAM), Prime Minister Narendra Modi said that the government has an ambitious plan to monetise around 100 government-owned assets as part of the monetisation plan.

Among the individual stocks, in the past one month, the market price of Hindustan Copper has zoomed 146 per cent on improved outlook.

For the first nine months (April-December) of the financial year 2020-21 (9MFY21), Hindustan Copper posted a consolidated net profit of Rs 147 crore against a net loss of Rs 55 crore during the same period of last fiscal. In the entire previous financial year 2019-20 (FY20), the company had posted a consolidated net loss of Rs 569 crore.

Growing demand from the power sector in view of the government laying thrust on renewable energy and increasing demand from the households for consumer durables increased demand for copper in India. The manufacturing of electric vehicles (EV) also augments well for the consumption of copper as EV use four times more copper than traditional internal combustion engines.

Shares of Rashtriya Chemicals and Fertilizers (RCF) have rallied 76 per cent in the past one month. Last week, the rating agency ICRA reaffirmed credit ratings of the company’s instruments and revised outlook to 'positive' from 'stable'. The revision in outlook to ‘Positive’ factors in the disbursal of additional subsidy announced under the Atma Nirbhar Bharat Package 3.0 for the fertilizer sector which is expected to reduce the subsidy arrears of RCF which would, in turn, lead to a decline in short-term borrowings and interest costs and consequently, strengthen the debt coverage metrics, ICRA said in rating rationale.

Among the other individual stocks, MMTC, NBCC, Indian Overseas Bank, Bank of Maharashtra and Bank of India were rallied between 50 per cent and 76 per cent in past one month. In comparison, the S&P BSE Sensex was up 0.94 per cent during the same period.