More steam left in PSU stocks; will see healthy correction, says Sandeep Tandon of Quant MF

Sandeep Tandon, CIO of Quant Mutual Fund

The PSU run is not a short- or a medium-term move, rather it has more legs to it, said Sandeep Tandon, founder and chief investment officer of psu strock in an interview with CNBC TV18.

PSU stocks will see sharp corrections and pullbacks like the recent ones, said Tandon. He said that some of the junk stocks in the PSU basket has rallied significantly and hence it will have a healthy correction. After which the PSU stocks may carry its upward track, said the founder.

There was a sharp correction in PSU bank stocks on February 12 after Indian Overseas Bank, Central Bank, PSB, Maharashtra Bank, UCO Bank and Indian Bank stocks fell up to 10 percent intraday. The Nifty PSU bank index was down over 3 percent on the same day.

Tandon said that something about public sector undertakings (PSUs) has changed from a India perspective given the size and scale that PSU companies currently have. He said that governance levels have become far more superior and capital allocation for PSUs has also improved.

Also read Paytm pains far from over, but Sandeep Tandon of Quant MF sees digital banking new reality

Defense PSUs
Defense stocks have rallied a lot on the basis of order books but their earnings are still weak, said Tandon. "We have to understand up to what extent the upside is priced in the stocks," said Tandon. "A ferocious move in defense stocks is not expected, so they might stagnate, consolidate, or wait for the earnings to come back," said the chief investment officer.

He said that his focus will remain on the large PSU companies rather than the low-float smaller PSUs, which have seen extraordinary euphoria and ridiculous moves. "The larger PSUs have multiplied but are relatively cheap as compared to the benchmark or the sector where they belong," said Tandon.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.