India’s government-owned companies may be at risk of a sharp recession earning speed Wasteful expenditure and technicalities show that the run now seems to be dragging on.
in companies BSE PSU Index It fell just 1% below analysts’ expectations in the three months ended December, the slowest pace in six quarters, according to data compiled by Bloomberg. That’s not enough to justify a rally that pushed the gauge to a new record on Thursday, and the measure’s market value has more than doubled to $750 billion in the past year.
“The risk-reward is not very good, so don’t bet on a broad rally. It’s time to be selective,” said Ruchit Jain, analyst at brokerage 5Paisa Capital Ltd. Avoid taking bullish calls in the short term.
Recent earnings for many government-owned stocks provide little support. Power Utility SJVN LimitedThe renewable energy leader surged 65% in the month after announcing its results last week, but third-quarter net income fell 53% and missed analysts’ estimates.
Similarly, Rail Vikas Nigam LimitedThe company’s shares rose more than 50% after its earnings report on Thursday, but the company reported a decline in profit.
Certainly, Jefferies sees the ongoing “re-rating” of state firms as giving the company more of a foothold, given the government’s growing infrastructure spending and focus on maximizing the value of state assets.
“Improved governance could boost rerating in the longer term,” Mahesh Nandurkar, a Jefferies strategist, wrote in a note on Tuesday. He said returns on equity for state companies are set to improve further from the multi-year low of 4-6% to 12-13%.
For now, the PSU index’s relative strength index – a gauge of price momentum – is at the highest level in more than two decades. That could predict the kind of selloff that wiped out about $57 billion in market value earlier this week.
“The market is focused on near-term profitability, while ignoring the risks of a major downside to medium-term profitability,” Sanjeev Prasad, co-head of institutional equities at Kotak Securities Ltd., wrote in a note last week. “We find it difficult to subscribe to the new market narrative.”
in companies BSE PSU Index It fell just 1% below analysts’ expectations in the three months ended December, the slowest pace in six quarters, according to data compiled by Bloomberg. That’s not enough to justify a rally that pushed the gauge to a new record on Thursday, and the measure’s market value has more than doubled to $750 billion in the past year.
“The risk-reward is not very good, so don’t bet on a broad rally. It’s time to be selective,” said Ruchit Jain, analyst at brokerage 5Paisa Capital Ltd. Avoid taking bullish calls in the short term.
Recent earnings for many government-owned stocks provide little support. Power Utility SJVN LimitedThe renewable energy leader surged 65% in the month after announcing its results last week, but third-quarter net income fell 53% and missed analysts’ estimates.
Similarly, Rail Vikas Nigam LimitedThe company’s shares rose more than 50% after its earnings report on Thursday, but the company reported a decline in profit.
Certainly, Jefferies sees the ongoing “re-rating” of state firms as giving the company more of a foothold, given the government’s growing infrastructure spending and focus on maximizing the value of state assets.
“Improved governance could boost rerating in the longer term,” Mahesh Nandurkar, a Jefferies strategist, wrote in a note on Tuesday. He said returns on equity for state companies are set to improve further from the multi-year low of 4-6% to 12-13%.
For now, the PSU index’s relative strength index – a gauge of price momentum – is at the highest level in more than two decades. That could predict the kind of selloff that wiped out about $57 billion in market value earlier this week.
“The market is focused on near-term profitability, while ignoring the risks of a major downside to medium-term profitability,” Sanjeev Prasad, co-head of institutional equities at Kotak Securities Ltd., wrote in a note last week. “We find it difficult to subscribe to the new market narrative.”
