Nifty index opens with positive boost, 0.91%, PSU stocks still recovers low margin

BSE Sensex and Nifty 50, initiated on Monday morning with opening gains, both climbing around 1 percent by midday on October 28, fueled by buying in the financial and oil & gas sectors. At 11.22 AM, the Sensex was up 793 points or 1 percent at 80,196, and the Nifty was up 217 points or 0.9 percent at 24,398. About 2,288 shares advanced, 1,083 declined, and 131 remained unchanged.

Despite this, some Public Sector Undertaking (PSU) stocks, have encountered significant headwinds. An Unprecedented trail-wind among Public Sectors is raising concerns about valuations and growth prospects.

Oil Marketing PSUs like Oil India, ONGC, and Petronet LNG are still witnessing red zones, pro-lasting for a few weeks. Notably, 64 state-owned enterprises have collectively lost Rs 8 lakh crore in market capitalization. This decline has particularly affected various sectors across the board.

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Many Defense stocks like Bharat Dynamics have fallen over 40% from their peak, reflecting broader sector concerns. Similarly, Garden Reach Shipbuilders has witnessed a 26% decline, while Mazagon Dock shares have retreated 21% from their yearly highs.

Infrastructure PSUs have not escaped the downturn sweeping through the market. Engineers India has dropped 18%, while BEML shares have declined 19%. Furthermore, MTNL and MMTC have seen their valuations erode by nearly half from their 52-week peaks, highlighting investor concerns about operational efficiency.

Despite having a multi-bagger tag, Rail Vikas Nigam reported a significant profit decline, with their net profit falling to Rs 224 crore from Rs 478 crore in the previous quarter. This performance has triggered widespread reassessment of PSU valuations.

 

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Cochin Shipyard’s performance is also worried to market participants and analysts alike. Despite showing year-on-year growth, their quarterly profits dropped 32% sequentially. The shares are also facing volatility and substantial pressure while trading at a low of 0.6%.

Banking sector PSUs face unique challenges in the current market environment. Many struggle with low-cost deposit growth and competitive pressures. Additionally, their valuations now reflect concerns about sustainable earnings growth. Consequently, institutional investors have begun reducing their exposure to these traditionally stable investments.

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