PSU Index gains 10% in last 9 sessions, outperforms Sensex, Nifty

The BSE PSU index has outperformed the broader markets in the last nine sessions, gaining nearly 10 percent, as against aroud 7 percent decline in Sensex and Nifty. Since the start of the month, the index gained 7 percent, while the two benchmark indices shed 3 percent and 3.6 percent. Bharat Dynamics Ltd advanced 51 percent since beginning of April, MRPL climbed 40 percent, Mazagon Dock Shipbuilders Ltd 31 percent, NHPC Ltd 22 percent, NLC India Ltd 22 percent, Mishra Dhatu Nigam Ltd 21 percent, MMTC Ltd 20 percent, and NTPC Ltd surged 19 percent. Other PSU stocks such as Bharat Electronics Ltd, Rashtriya Chemicals & Fertilizer Ltd, Cochin Shipyard Ltd, Hindustan Aeronautics Ltd, Shipping Corp Of India Ltd, HUDCO,  Indian Oil Corp Ltd, Hindustan Copper, Gail India Ltd, HPCL, Coal India Ltd, ONGC are up between 9 percent and 20 percent. Both the Sensex and the Nifty declined eight out of nine trading sessions following the Ukraine war. The prospect of aggressive Fed tightening to rein in inflation also kept investors on the edge. Weaker earnings from Infosys and HDFC Bank Ltd also left investors worried. Analysts believe the gains in the PSU Index was due to the composition of the index which has finance, oil and gas, power and metals companies weighing more than 85 percent. No companies from IT (the largest loser in MTD April  -9.5 percent) are present in the PSU Index, analysts said. "PSU banks have remained uppish due to better Q4 results expectation, commodities (metals and oil & gas) stocks have done well in times of inflation in prices of commodities. Power stocks have done well due to rising demand for power," said Deepak Jasani, Head of Retail Research, HDFC Securities. Demand for power spiked since early April as heatwave arrived in India, driving the share price of NTPC and Power Grid Corp up 19 percent and 5 percent. Additionally, gas stock prices rallied due to the hike in prices of natural gas, while oil stocks rallied mainly on the news of Russia willing to offer crude oil to India at significant discount to pre-war price. "Considering the power demand outstripping the supply, domestic coal scarcity and Russia-Ukraine conflict getting stretched, we believe these higher energy prices will be sustained in the near term," said Omkar Mistry, Research Analyst of Choice Broking. Stocks like HAL, BEL are also in focus as the government aims to reduce the country's dependence on imports of defence equipment and have a more 'self -reliant' defence sector under the Aatmanirbhar Bharat initiative which has led to a rally in defence stocks. According to Mohit Nigam, Head - PMS, Hem Securities, the major reason for this rally is the cheap valuation. Some analysts say that the government is looking to sell stakes in PSU firms aggressively after Air India privatisation. "With the Air India disinvestment, GoI has made its intent clear that it will leave no stone unturned to sell stake in companies which are inefficient. Recent media reports suggesting privatisation of public sector banks has added fuel to the fire," said Vinit Bolinjkar, Head of Research, Ventura Securities Ltd.