What about PSU stocks?

The Elephant in the room that needs to acknowledged is about the searing rally in public sector enterprise (PSE) stocks. Clearly some valuations in this pack appear stratospheric given the nature of growth in these companies. So why have they been re-rated now?

The government appears to be looking at enhancing asset values for this asset class and that is only logical. In the past this was a sector much maligned due to operational constraints and questions on autonomy. Shareholders also discounted the profits as regulations and sector sensitivities placed public well being above shareholder needs. Case in point – the oil refining and marketing companies.

With some signals appearing to indicate asset sales and granting of greater autonomy, the markets, appear to have taken the cue. However investors should remain cautious given history and the fact that exigencies surrounding pricing and profit for these companies remain the same.

Seemingly cheaper valuation may look like a red herring and a diversified approach may seem more prudent than blindly participating in the upward move in most prices. Fundamental growth and sound managerial background should remain the bedrock for choosing companies in this sector as in any other