GIC RE, IREDA, LIC, REC, RITES, IRCON shares fall up to 6% in PSU selloff; 50 index stocks in thered

Shares of GIC RE, IREDA, Life Insurance Corporation of India (LIC), REC, RITES Ltd and Ircon International Ltd, among other PSUs, fell up to 6 per cent in a broader market selloff that saw the BSE PSU index tumbling 2 per cent. A total of 50 of 56 PSU stocks were trading in the red amid prevailing concerns over valuations of PSUs, which some brokerages believe are factoring in over-optimistic expectations.

GIC RE shares plunged 5.66 per cent to Rs 384.45 on BSE. NLC India was the second-worst PSU performer, falling 5 per cent to Rs 223. The New India Assurance Company (NIA) saw its shares dropping 4.26 per cent to Rs 259.50. Engineers India tanked 4.22 per cent to Rs 204.50. Power Grid shares also declined 3.98 per cent to Rs 280.85. ITI, Indian Bank, HPCL, Union Bank of India, REC, HUDCO fell 3.5 to 4 per cent. IRCON International, Canara Bank, PFC, RVNL and RCF slipped up to 3.5 per cent. \

"Earnings seem to be a clear driver for the PSU rally since 2020. However looking at current trends, we find that analysts have never been so bullish on earnings for PSU names even though actual earnings have not been showing any uptick recently. Hence, either expectations need to come down or actuals need to catch-up for the PSU pack to do well," Bernstein said in a recent note.

IOC, IRCTC, SJVN, IRFC, UCO Bank, SAIL, NHPC, BPCL and Punjab National Bank fell up to 2.6 per cent. After a decade of underperformance, the India PSU Index has made a strong comeback, up about 280 per cent since October 2020 and outperforming the broader BSE500 by 90 per cent. Bernstein said while the PSU pack looks better vis-a-vis history fundamentally, but the consensus looks too bullish. In the case of PSU banks, considering PSBs’ valuation history, their trading multiples may look constrained now. But Motilal Oswal Securities said the quality of earnings, growth outlook, and broader re-rating in public sector enterprises will enable steady performance for the sector.

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