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PSU Stocks Better Bet To Invest In Coming Future

The power sector which was in doldrums is all charged up due to some more mergers and acquisitions after foreign firms bought into projects recently as expectations of local developers were lowered after being nudged by their respective banks . Around 2 billion dollars have been pumped into hydro and thermal power plants in the last three months by the foreign companies.,

 But these foreign investors are being choosy and are only keen to pick up projects as the cheap valuation is attractive .The foreign investors have little interests in neither operational nor interested in taking the execution risks .When the going was good lot of companies had entered and now they all are trapped.

Not all of them find good buyers .Surfing on the big waves five to ten years back several power companies embarked on the aggressive expansion plans while many other companies had diversified into the other sectors lured by the potential demands. But a sudden change in the economic environment and other local issues affected the companies in this sector with huge debt and put brakes in cash inflows. Both the smaller independent power producers as well  as bigger infra structure giants are seeking equity investments , but investors continue to be cautious about investing in the sector which further creates the defici8ency of basic fuel availability .

Project delays, environment clearance, land acquisition, weak financial conditions of state electricity boards. Some of the Indian are selling their assets after almost four years of doldrums. Many foreign investors are confident that within one and a half years time this sector will come out of all the financial stresses it has been through during the recent past. So this sector has been through the maze of haze of statutory and regulatory approvals which are available at reasonable valuation and would start yielding cash flows pretty soon.

PSU stocks which were off gloss since past few quarters have suddenly found buyers .Almost all government stocks sharply moved despite a lull market mostly. The forecast that a BJP led coalition forming the government and low valuations besides the launch of the PSU exchange traded fund next week which helped the PSU stocks to rally ahead.

 India is a too happening place to be ignored and what happened was that those investors had actually sold I.T.stocks after Infosys reportedly warned of the tough times ahead in this financial year because of weak spending by the top clients and so they brought the undervalued PSU stocks hoping that a better government in the center would manage these companies in a much better professional manner.

It was quite evident that on this Thursday Nifty declined 0.37 %, NSESs CNX Psu index gained by 1.37 % and PSU companies were the top gainers among NSE 200 stocks , and the stocks of MMTC STC and Hindustan Organic Chemicals gained by 10 %  . BPCL, BEML , Hindustan Copper and Power Finance Corporation gained between 5 % to 7 % .
As per the latest Center for Study of Developing  Societies ( CSDS ) opinion polls which says that the BJP will win 203 seats in the coming general elections suggesting a chance of a BJP led majority government in the center is quite high , and the top priority of BJP is to revive the Public Sector units by phasing out subsidies .

In the past few years PSU stocks have destroyed Rs-6.5 lakh crores in investors wealth. The total wealth destroyed by all the PSUs is more than three times the total equity investment of the mutual fund industry .

Presently some of the top PSUs are trading below 10 times trailing 12 months earnings against the sensex PE of 17.75 , for example NTPC is trading at a PE of 10.1 , NMDC at 8.63 , BHEL at  9.3 and GAIL at 8.9  .

The politicians heading the various ministries consider the PSUs as their personal property. What BJP led government would do is to do re-rating of all the PSUs as these stocks have underperformed during last one to two years because of mismanagement and both the policy as well as execution paralysis by the current government. Where this present govt plan bombed was that their decision to sell stakes in state owned companies to meet disinvestments target and comply with SEBI`S minimum public share holding norms has beem a big disaster for lakhs of investors who thought of public sector companies as a safer bet .

Many market expert’s critised the manner in which the government handed the OFS at huge discounts.

Meanwhile the much awaited Public Sector Exchange traded funds will be launched on march 19 - 2014 for the public subscription compromising of ten companies - GAIL,ONGC , REC , COAL INDIA , INDIAN OIL , OIL INDIA , FINANCE , POWER ,BEL, CONCORE , ENGINEERS INDIA to be managed by Goldman Sache asset management company .

That’s for sure that India is for sure marching to a newer horizon.