The Nifty PSU index is up about 10% during the month, compared with 3% gains in benchmarks Sensex and Nifty. As many as 28 PSU stocks have offered double digit monthly returns and seven of them returned over 20% during April, according to an analysis by ET Markets.
Rail Vikas Nigam Ltd (RVNL) along with other railway stocks were among the top gainers from the PSU pack. RVNL shares have rallied over 50% in the last one month on large orders and strong technical outlook.
RVNL, in consortium with Siemens, has bagged two separate orders from Gujarat Metro Rail Corporation. Meanwhile, Indian Railway Finance Corporation (IRFC) stock has gained 20% during the same period and Ircon International has gained 32.68%.
Analysts say massive railway infra spending in the Budget and overall order inflows helped railway stocks gain momentum.
“On the railway side, there is no question with the 2.5 lakh crore kind of capex budget that the government has announced or the overall railway budget, there will be a lot of order flow coming through,” said Anand Tandon, an independent Analyst.
Some of the companies like RVNL etc, which are largely consulting businesses, will obviously be beneficiaries because you will have a lot of studies to be done before this capex is going through, but they should have been lead indicators, they should have been making the money before the capex was really announced and therefore what you are likely to see is the end role that they are playing today.”For RVNL, technical analysts expect the stock to surge past Rs 150 in the next six months.
“Technicals look great for RVNL after a breakout above Rs 77. Now the next target is Rs 188 in the next 6 months. The stop loss can be kept at Rs 75,” said Ravi Singhal, CEO, GCL Broking.
Other PSU stocks Punjab & Sind Bank have rallied 40%, Ircon International gained 32%, Central Bank Of India rose 25%. From the PSU banking pack, UCO Bank surged 23%, followed by Bank Of Maharashtra gaining 22%, and Indian Overseas Bank stock increased 14%.
Only two PSU stocks have delivered negative returns in the last one month. While Steel Authority Of India Ltd (SAIL) has offered -0.28% returns, NTPC has given -2.11%.
What should investors do?
Despite the current rally, analysts are confident, but at the same time, quietly cautious about PSU stocks going forward with the government factor lurking around the corner.
“A momentum play is on course as far as PSU companies are concerned and more so with the railways, considering the overall ambitious plans. My only worry as far PSUs, more so in the rail segment or even some of the other PSUs, is that the moment they start doing well, the government which is strapped off cash will definitely go for an IPO and there will be an OFS,” said Dilip Bhat, a market expert.
“So I think that overhang will always remain as a potential threat, in an otherwise sector which is doing well on the expectations of good order book and maybe the performance that may continue in the near future,” Bhat said.
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