Placing PSUs in the Limelight

The onset of this fiscal year witnessed a continuation of the bullish momentum seen in the Indian equity market last year. Major stock indices soared to new heights, with Nifty 50 reaching record levels, propelled by an atmosphere of optimism. However, this surge encountered a temporary setback in recent weeks due to a convergence of factors. Geopolitical tensions cast a looming shadow, while crude oil prices surged unabatedly. Foreign institutional investors (FIIs) embarked on a significant selling spree, offloading equities worth billions in the last few weeks of trading sessions.

The uncertainty surrounding potential interest rate hikes by the US Federal Reserve and higher bond yields has further exacerbated market volatility. In the interim, volatility is expected to persist, and the aforementioned factors may continue to influence market sentiment. Adding another layer of complexity to the equity market is the impending general elections in India, a pivotal event considered by many as the most consequential in five years. Despite opinion polls favouring the ruling NDA (National Democratic Alliance) coalition, market sentiments remain cautious.

Akin to an intense cricket match, the election outcome remains uncertain until the final vote is cast. While investors anticipate favourable returns under the current government, an unexpected election outcome could trigger knee-jerk reactions and market fluctuations. Memories of the volatile aftermath of the 2004 elections still haunt investors, and market stability appears contingent on the continuation of the NDA government and positive monsoon forecasts. For long-term investors, specific sectors remain poised for sustained growth irrespective of the election outcome.

Sectors such as capital goods, infrastructure, real estate, healthcare, tourism, automobiles, new energy, e-commerce and telecom are anticipated to continue their upward trajectory. Therefore, a prudent strategy should involve capitalising on market downturns while exercising caution until the election dust settles. Amidst the current volatility, income-focused investors may find solace in high-dividend-yielding stocks. These stocks provide a degree of security as their consistent dividend payouts act as a buffer against market fluctuations.

Our cover story delves into the five best dividend-yielding options, encompassing both government and private entities. These companies boast a proven track record of dividend payouts, offering investors stability and income generation across diverse portfolios. Meanwhile, in recent years, exposure to PSU (public sector undertaking) stocks has proven to be one of the most rewarding investment strategies. PSU equity indices have significantly outperformed the broader market benchmarks. Recognising the potential of these public sector entities early on, we have consistently campaigned about their significance.

Our annual feature in this issue ranks Indian PSUs based on various metrics, empowering investors to make informed decisions by assessing the financial health and future prospects of these companies. Further, while the ongoing March 2024 quarterly earnings season has generally met expectations, there have been some surprises. Heavyweights like Bajaj Finance have reported disappointing results, while others like Tech Mahindra have exceeded expectations. Of the 210 companies that have declared their Quarterly Results so far, approximately 130 have witnessed positive profit growth.

While the overall strength of the Indian equity market in the long term remains strong, the increased volatility is a short-term concern where one may want to delay or at least stagger making aggressive fresh investments. Our team is continually scanning the investment space for opportunities that you could gain from. So, let’s be on the same page. We welcome your feedback in our pursuit to make our service world-class. In the meantime, we will keep our ear to the ground about both the local and global scenarios as they unfold over the next few days.

RAJESH V PADODE
Managing Director & Editor