After having undergone significant correction and being laggards for the last three years, PSU stocks could now be turning the page. Growing number of analysts have been suggesting investors keep an eye out for PSU stocks owing to various reasons, stemming from favourable economic conditions up ahead, changing policies and others. “The recovery in this space is currently at initial phase and offers extremely favourable risk-reward setup, as NIFTY PSE index is just resolving above three year falling channel indicating resumption of fresh up move,” said brokerage firm ICICI Securities.
The brokerage firm has carved out a PSU stock portfolio, picking up five state-owned firms ranging from large caps to midcaps and even small caps. Analysts at ICICI Securities have prepared a medium-term portfolio which has a high risk-reward ratio. The stocks have been narrowed down based on technical as well as fundamental analysis.
Hindustan Aeronautics Ltd (HAL) has been assigned the highest weight of 23.3% translating to 4 shares of the firm. Currently shares of the HAL are trading at Rs 864 per share, up 30% since the beginning of November, although significantly down from its August highs. Bharat Electronics Limited (BEL) has been assigned 19.8% weight with suggested 25 stocks in the portfolio. In the previous quarter, BEL reported a 16% on-year jump in revenue as supply chains normalised after the coronavirus aided disruptions. BEL has managed to ramp up order wins and is focused on increasing contribution from the non-defence sectors.
Further, ICICI Securities has picked Container Corporation of India with 19.3% weight translating to 7 stocks. Currently the stock is trading at Rs 402 per share, gaining over 40% since the end of march this year. ICICI Securities had, in an earlier note, said that Container Corporation of India is likely to see things recover in the next financial year. RITES has been given 18.3% weight in the PSU stock portfolio, which would translate to 10 shares of the firm. Since the beginning of November, shares of the firm have gained 14%. The last stocks recommended by ICICI Securities is Cochin Shipyard with a 19.3% weight.
The brokerage firm expects the total investment in the PSU stock portfolio to be in the range of Rs 14,800- Rs 15,100 with a six-month time frame. Returns expected from the portfolio range between 8% to 15%. The portfolio has 43.2% allocation to large cap stocks, 19.3% in mid caps, and 37.5% in small cap stocks.
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