PSU stocks rises over 6% on new dividend, bonus norms, Shares corrects by 20%

Shares of public sector companies are witnessing a surge after the government made changes to its capital restructuring norms after eight years. The Nifty PSE index, an index of India's 20 state-run companies, is currently trading with gains of over 2%, with all constituents trading with gains between 0.5% and as high as 5.5%.

Meanwhile, shares of Indian Railways Finance Corporation (IRFC) are the top gainers on the PSE index, trading with gains of 5.5%, followed by those of BHEL (up 4.3%), REC and PFC (up 4% each). IRFC shares will also start trading in the Futures & Options space from November 29.

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The government has revised capital restructuring norms for these companies regarding share buybacks, dividend payouts, bonus issues, and stock splits. CPSEs will now have to pay 4% of their net worth as dividends, as compared to 5% earlier.

Reserves and surplus requirement has been doubled to 20 times its paid-up equity capital, compared to 10 times in 2016. The market price needs to be 150 times the face value of their equity share, compared to 50 times in 2016. Additionally, there also has to be a mandatory gap of three years before two stock splits for these PSUs, according to the new norms.

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The PSE Index has corrected nearly 20% from its recent peak of 11,814, which the index had hit on August 1 this year. Shares of most of these state-run companies have corrected between 20% to 50% from their respective record-high levels.

However, the BSE PSU Index has fallen 17.5% from its peak, outpacing the nearly 10% decline seen in benchmark indices like the Sensex and Nifty. Among the worst-performing PSU stocks, Mahanagar Telephone Nigam (MTNL) led the decline, plunging over 57% from its recent 52-week high.

Cochin Shipyard and Chennai Petroleum Corporation followed closely, dropping 56% and 55%, respectively. Garden Reach Shipbuilders and Ind Bank Housing each shed 50%, while MSTC and MOIL lost 49% apiece.

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