Year-end special: What made Sarkari stocks beat MNCs for first time in 5 years

NEW DELHI: Shares of public sector companies have often proved wealth destroyers for investors, but it has been a different story this time around.

Calendar year 2016 has seen CNX PSE index, a gauge for 20 PSU stocks, jump 17.10 per cent against just 1 per cent rise in the much-trusted stocks of the multinational corporations in the same period.

If the gains are maintained through December, this would be the first time since 2011 when the PSU index would beat the MNC index in a calendar year.

Stocks of PSU firms, often perceived as less productive and less competitive as their decision making is often under excessive government control, have jumped up to 110 per cent this calendar compared with a 36 per cent drop in 10 of the 15 CNX MNC index shares, which are perceived to be more competitive, have better business fundamentals, offer high returns on capital and have high dividend payout ratios.

Amarjeet Maurya, Senior Equity Research Analyst at Angel Broking, said valuations of PSU companies in select sectors such as banking, metals and oil & gas, which carry good weightage in the index, had became attractive vis-à-vis other sectors. Hence, these stocks saw massive buying interest.

“In the banking space, RBI’s move to clean up bank balance sheets and early recognition of stressed assets via AQR brought in lot of clarity. Further, the government move to provide more capital for recapitalisation of PSU lenders and rate cuts by RBI brought fresh hope of growth for the banking sector,” Maurya said

Indian Bank emerged the top wealth creator for investors from the PSU pack, with a 110 per cent rise so far this year. Shares of State Bank of Bikaner, Canara Bank and Vijaya Bank have soared between 30 per cent and 34 per cent year-to-date.

“Metals and mining have shown good performance after a rise in the prices of ferrous and non-ferrous metals, while the oil and gas sector saw positive sentiment on recovery in crude oil prices from last year’s lows,” Maurya said.

MOIL, producer of manganese ore, has seen its stock spurt 70 per cent to Rs 1,040-odd level. Aluminium maker Nalco has climbed 54.18 per cent, while NMDC, the producer of iron ore, jumped 37 per cent this calendar.

PSU oil marketing company (OMC) HPCL has rallied 57 per cent, refiner MRPL jumped 47.24 per cent, while BPCL has jumped 37 per cent during the same period.

“A whole host of PSUs – NTPC, Power Grid and Coal India – are going to be bellwethers. PSUs, which have been neglected so far, will be outperformers. You can add NBCC and Engineers India, which have been two our top picks for last three years. They can be double your wealth from here on as strong expansion of the construction and hydrocarbon sectors is on the cards,” Sanjiv Bhasin of India Infoline said in a recent interview with ETNow.

Meanwhile, the presence of MNCs in the consumer space has weighed on the performance of the MNC index.

Shares of United Spirits have slumped 36 per cent year-to-date. Cummins India has tanked 25 per cent, while Oracle Financial, Ashok Leyland and Castrol India have dropped 19 per cent, 11 per cent, 10 per cent and 6 per cent, respectively, during the same period.

Among others, Siemens, ABB and Colgate-Palmolive could not offer positive returns to shareholders. Hindustan Unilever, Britannia and Ambuja Cements have failed to beat market return. Vedanta was an exception, which jumped 154 per cent in the ongoing calendar.