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Why govt wants mutual fund managers to recommend PSU stocks as DIPAM pitches a PSU makeover

Corporate governance reforms, improved risk appetite and dividend strength form the Centre’s pitch. Mutual fund managers remain cautious on valuation gaps and growth concerns.

April 16, 2025 / 12:46 IST
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The price-to-book ratio of PSUs continues to trail

The government has said it will actively nudge mutual fund (MF) managers to allocate a larger share of their portfolios to Public Sector Undertakings (PSUs), hoping to reposition these state-owned enterprises as credible long-term investment options. MF managers, however, are cautious.

On April 9, Department of Investment and Public Asset Management (DIPAM) Secretary Arunish Chawla had emphasised the government’s intent to increase retail participation in PSUs through MFs.

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“While PSUs account for only 10 percent of the market cap, they deliver nearly 25 percent of the overall dividend payout,” he said.

This comes amid a broader strategy to improve PSU valuations. By improving market perception and driving demand from institutional investors, the Centre hopes to unlock more value from PSUs.