Shares of several state-run firms are hogging the limelight on the bourses since Prime Minister Manmohan Singh took charge of the finance ministry last month, as investors are hoping the change of guard could result in greater policy action
Since June 27, the day Singh took charge of the ministry after Pranab Mukherjee resigned to stand for the Presidential election, the index representing public sector undertaking (PSU) stocks has performed largely in line with key indices. The BSE PSU index has gained 4.09 per cent since June 27, while the 30-stock Sensex added 4.2 per cent during the same period.
In contrast, the BSE PSU index rose just 0.70 per cent till June 26 after the Congress-led United Progressive Alliance (UPA) came to power for the second time in May 2009, severely underperforming the Sensex that jumped 18.36 per cent during the same time.
| NARROWING THE GAP | |||
| UPA-I | |||
| Date | BSE-PSU Index | Nifty | Sensex |
| 12-Jul-04 | 3,049.72 | 1,556.95 | 4,944.54 |
| 15-May-09 | 6,038.18 | 3,671.65 | 12,173.42 |
| % chg | 97.99 | 135.82 | 146.20 |
| UPA-II | |||
| 18-May-09 | 7,029.35 | 4,323.15 | 14,284.21 |
| 26-Jun-12 | 7,078.72 | 5,120.80 | 16,906.58 |
| % chg | 0.70 | 18.45 | 18.36 |
| 26-Jun-12 | 7,078.72 | 5,120.80 | 16,906.58 |
| 10-Jul-12 | 7,368.59 | 5,345.35 | 17,618.35 |
| % chg | 4.09 | 4.39 | 4.21 |
| Data compiled by BS Research Bureau | |||
During the UPA-I period (July 12, 2004 to May 15, 2009), too, the BSE PSU index had underperformed the Sensex, data compiled by the BS Research Bureau showed.
Since June 27, stocks like HMT, OMDC, Power Finance Corporation, REC, Shipping Corporation of India, MTNL, NBCC, BHEL, NMDC and Engineers India have gained over seven per cent each.
| RIDING ON POLICY HOPES | |||
| Share price on BSE in Rs More From This Section | %chg | ||
| 26-Jun | 10-Jul | ||
| HMT | 37.29 | 47.05 | 26.17 |
| OMDC | 27584.75 | 33349.80 | 20.90 |
| Power Finance | 165.15 | 188.55 | 14.17 |
| REC | 177.35 | 199.10 | 12.26 |
| Shipping Corp | 53.60 | 59.75 | 11.47 |
| MTNL | 22.75 | 25.30 | 11.21 |
| NBCC | 93.55 | 100.75 | 7.70 |
| BHEL | 219.25 | 235.85 | 7.57 |
| NMDC | 179.60 | 193.15 | 7.54 |
| Engineers India | 221.15 | 237.20 | 7.26 |
| Data compiled by BS Research Bureau | |||
Citigroup India economist Rohini Malkani is of the view that the change of guard at the ministry could result in greater action, but not as much as the market may be inferring. “Structurally, not much has changed. The dual leadership model in the government remains intact and consequently non-populist reforms may not be implemented.
Nonetheless, small fuel price hikes, coupled with measures that are largely execution in nature, could make the environment conducive for investment,” she said in a report.
According to Malkani, these measures could also help reduce the number of projects being stalled. She lists addressing coal availability concerns and state electricity board losses in power, clarity on land acquisition and sorting out mining issues, fast tracking clearances on infrastructure investments in the oil space, Delhi Mumbai Industrial Corridor, clearing doubts on the inconsistencies in the taxation policy both on retrospective taxation and the general anti-avoidance rule (GAAR), among such measures.
Soon after taking charge, Singh had told finance ministry officials to “revive the animal spirits in the country’s economy” and “reverse the climate of pessimism.” However, except draft guidelines on GAAR, nothing much has materialised so far.
“There have been some hopes that with PM Manmohan Singh now taking over the finance ministry portfolio, the pace of reforms in India will pick up markedly. While the country’s long-term economic prospects continue to be enticing, we are less convinced that there will be any dramatic move on the policy front just yet,” said Wellian Wiranto, Asia investment strategist at Barclays Wealth, in a note to clients. “Pending clearer signs of market-friendly policy initiatives, we remain neutral on India as an investment call.”