Stocks went vertically up so price correction was inevitable; PSUs still fundamentally strong, says Prashant Jain

Prashant Jain, CIO, 3P Investments

When something goes up vertically, the corrections are not time correction but price corrections, Prashant Jain, CIO of 3P Investment said citing that as the cause for the dip in PSU stocks over the past two sessions.

PSU stocks took a hit in the past two sessions after election results indicated that the BJP would need to form a coalition government, raising questions among investors about policy continuity. The revival in the capex cycle, government spending on infrastructure, and other factors had led to a drive in capex-related stocks.

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Shares of PSU companies staged a strong comeback on June 6, surging 4-14 percent in trade. The BSE PSU Index which fell over 15 percent on June 4, gained 3.5 percent today.

In an interaction with Moneycontrol, Jain said that PSUs are likely to see varied performance in the stock market based on their underlying fundamentals. "We should start approaching them as standalone businesses based on their individual merits," he said.

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Jain said that PSUs are fundamentally strong businesses and emphasised the importance of differentiating them across sectors, as a PSU bank operates differently from a utility, oil company, or defense company. "I think we should start approaching them as standalone businesses on individual merits," Jain said.

Jain said that he is overweight on capex as India is in the "early cycle of a long cycle of robust capex growth." However, he cautioned that valuations in this sector are demanding and urged investors to proceed with caution.

Additionally, Jain highlighted his 'Overweight' stance on the power sector, particularly on power NBFCs and PSU NBFCs, driven by their growth prospects and reasonable valuations.

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