PSU stocks return to limelight

The stocks of the public sector companies, especially public sector banks and oil marketing companies, are slowly garnering investors interest, feel analysts.

The stock prices of PSBs and state-owned OMCs have seen an uptrend in their stock price in the past one month. The Nifty PSU Banks index has risen 7.03% in the past 30 days compared to Nifty Bank index, which grew 5.94% in the past one month. Nifty Energy index has increased 1.58% in the past one month, whereas the broader Nifty 50 grown 4.24% in the past 30 days. Nifty PSE index, however, has fallen 2.23% in the past one month.

According to analysts, the PSU basket is garnering a positive sentiments, mainly driven by a few PSU banks and OMCs.

According to Rahul Shah, VP -- equity advisory group, Motilal Oswal Financial Services, the overall scenario is better for PSU stocks, and among them, one should look at PSU banks which are offering good value from the current level. State Bank of India, Bank of Baroda, Canara Bank and Indian Bank are some of the PSU stocks, which are not likely to see any major downside, he said.

According to him, the corporate sector is reviving along with lending, while inflation is under control. And, historically, when there is a liquidity squeeze in the system, non-banking financial services (NBFCs) have underperformed but corporate banks have done well.

"The PSU banks are likely to be the beneficiaries," he said.

A K Prabhakar, head – research, IDBI Capital, said the PSU stocks are beaten because of the upcoming elections. However, things are expected to change with a stable government at the Centre, he said.

"Normally PSU stocks give good returns in the first two years of the government, but one has to invest in good quality growth stock," he said.

However, he said that is uncertainty over banks' merger and the process to complete will take two years. Hence investors looking to invest in PSU banks should be cautious and may look at stocks such as State Bank of India and Bank of Baroda.

Meanwhile, oil marketing companies are finally breathing a sigh of relief, according to a recent research report by Motilal Oswal.

The report said the petrol and diesel retail prices have dipped by 9.6% and 5.4%, respectively, since early October, led by lower oil prices, rupee appreciation and excise cut. The sharp decline in oil prices has also helped the OMCs to recoup their marketing margins in petrol to Rs 2.7 per litre and in diesel to Rs 2.8 per litre in the third quarter year-to-date, as against Rs 2 and Rs 2.8, respectively, in the second quarter of the current fiscal.

"We expect EPS CAGR of 3-15% for the OMCs over FY19-21," the report said, adding that the slight increase in the marketing margins with respect to 2QFY19 is also to take care of the inventory losses that would come in the quarter due to the decline in oil prices.

Shah of Motilal Oswal said that OMCs offer a good value proposition coupled with a good dividend yield. Among the other stocks in the PSU basket, he said companies like ONGC, Engineers India and Coal India offer good value.

REVERSAL OF FORTUNE

• The Nifty PSU Banks index has risen 7.03% in the past 30 days compared to Nifty Bank index, which grew 5.94% in the past one month
   
• Nifty Energy index has increased 1.58% in the past one month, whereas the broader Nifty 50 grown 4.24% in the past 30 days