PSU names recover, analysts advise stock-specific buying

Most PSU stocks, including railways and banking names rebounded from the sharp correction in the last session.

Shares of most public sector undertakings (PSUs), including banking and railway firms, recovered from the previous session’s sharp to end higher on February 13.

RVNL, UCO Bank, IRFC, Indian Overseas Bank, Central Bank of India, Canara Bank, Bank of Maharashtra, Bank of India, and Bank of Baroda rebounded up to 17 percent, lifting the BSE PSU index over a percent higher.

Shrikant Chouhan, head of equity research at Kotak Securities, expects a good rebound in PSU stocks after the recent correction, which has offered a good opportunity to investors who missed the rally.

Most PSUs have robust prospects, at least for the next couple of years, he said. Chouhan, however, also took note of the exuberant multiples at which stocks like IOC, BPCL, RVNL or NHPC are trading. It is likely to trigger stock-specific activity, he said.

Like Chouhan, Kranthi Bathini, director-equity strategy, WealthMills Securities, also said profit-booking in PSU stocks was inevitable after the rally through the last year.

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Though Bathini sees ample opportunities in the space in the medium-to-long term, he, too, said investors need to exercise some caution and be selective.

"PSU stocks are in momentum currently but one needs to exercise strict stop-losses when trading in these stocks in the short term. But going ahead, we can see some kind of value in the defence and railway stocks," he added.

Chouhan is bullish on railway and PSU bank stocks, expecting a strong performance.

He said NHPC has already surged quite substantially from its OFS price and should now stabilise around Rs 75. If the market starts to look for fair value, NHPC may correct to Rs 60, he said.

He also likes Railtel and said the correction in the counter is unlikely to last more than one to two weeks. He also advised investors to look at adding IRCTC when the stock corrects.

Also Read | PSU shares recover from sharp correction, but pressure remains on some stocks

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