PSU Stocks Stumble Wiping Rs 1.5 Lakh Crore Investor Wealth

The decline in the market value of stocks from public sector companies (PSUs) on Friday suggested that the selling of these stocks was widespread. Nearly all public sector companies ended the day with losses, with Life Insurance Corporation (LIC) suffering the most significant decline. Without the gains in SBI shares, the losses in the public sector company stocks would have been even greater.

On Friday, LIC's market capitalization dropped by a significant Rs 15,433 crore, while Indian Oil Corporation (IOCL) and Power Finance Corporation also experienced a decrease in their valuations, amounting to Rs 13,980 crore and Rs 13,101 crore, respectively. Additionally, the market capitalization of Indian Railway Finance Corporation declined by Rs 10,782 crore.

In reality, state-owned companies suffered a combined loss of Rs 1.5 lakh crore, representing 81 per cent of the total wealth reduction recorded on Friday. The market capitalisation of BSE-listed companies decreased by Rs 1.85 lakh crore to Rs 386.4 lakh crore.

Some parts of the investor community have expressed worries about the significant surge in PSU stocks. In the past year, PSU stocks have yielded returns between 20 per cent and 440 per cent, led by companies in sectors such as capital goods, electric utilities, financials, and oil and gas.

"We find it hard to subscribe to the market’s new narrative of PSUs that may have contributed to the sharp rally in PSU stocks in recent months," Kotak Institutional Equities in a recent note wrote.

The domestic brokerage also stated that the market is too fixated on short-term orders and profits, overlooking the substantial potential risks to medium-term profits, challenges to the business model, and risks of disruption.

The PSU companies that saw an upturn on Friday include the State Bank of India, Bank of Baroda, PNB Housing Finance, HUDCO, Oil India, Canara Bank, and LIC Housing Finance were among those who went against the prevailing trend.

The stock price of State Bank of India rose by 4 per cent to reach an all-time high of Rs 728.35. The biggest bank in the country increased its market value by Rs 22,936 crore, reaching Rs 6.5 lakh crore by the end of trading on Friday.

The Nifty PSE index, which measures PSU stocks, dropped by 2.7 per cent during Friday's trading session. In contrast, the Nifty50 index finished 0.30 per cent up, closing at 21,782.50 points.

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