Low Valuations and Disinvestment Helps PSU Stocks to Offer Good Returns
Investors who are looking for good returns can add the public sector undertaking stocks to your mutual fund portfolios. The investment experts said that the low valuations, possible stake sale and the disinvestment makes public sector undertaking units to offer good returns in the market. According to the report, government stocks have a strong position and a better executive order for disinvestment at this time. The fund managers also felt that PSU stocks may offer good returns even in this position.
As of the certified stock expert analysis, the S&P BSE PSU Index is trading at 10.11 which is almost 20 percent discount to its decade average of 12.01. On the other hand, it is trading at 0.81 on the price-to-book base which is an average of 1.61 to the last 10 years.
Besides, S&P BSE Sensex is traded at 22.68. Moreover, the public sector undertaking Index is trading at a 55 percent discount to the latest Sensex level and a 38 percent discount to a decade average of the benchmark.
On the price-to-book base, the Sensex is trading at 2.88 which is a 78 percent discount for the PSU index at the current level and a 45 percent discount to the 10 years average.
According to the reports, the Maximum of public sector undertakings has been reordered in the last 10 years. IRCTC, Midhani, MSTC, and RVNL are also considered PSU stocks. But, these have unique business models. Hence, these PSU stocks offer high returns even in tough market conditions.
PSU Fund Details
|Fund Name||1 Year (%)||3-year percentage||5 Year (%)|
|Invesco India PSU Equity Fund||20.29||5.87||9.46|
|SBI PSU Fund||12.3||1.06||1.95|
|Bharat 22 ETF||3.71||NA||NA|
Nippon India Mutual Fund officials said that disinvestment or stake sale of public sector undertakings was an event, that is closely observed by the market. In any chance the government demonstrates its capability in doing one or two sales, the entire PSU pack could be rerated.
As of the report, Invesco India mutual fund has launched its Invesco India PSU Equity Fund in 2013. It has given a return of 20.2 percent in the last year. SBI, Bharat 22 ETF, and CPSE ETF PSU funds are offering 12.3%, 3.71 percent, and 2.08 percent with respectively.
According to the source, the government is in the thoughts to sell its stake in Bharat Petroleum to a strategic buyer. Moreover, the company has already started a bidding process to find out an asset valuer to estimate the fair value of the company.