Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs) have reduced their stakes in public sector undertakings in the last one year even though PSUs have experienced notable growth in market capitalization, now comprising 15% of India’s total market cap, according to a study by YES Securities.
PSU Market Cap dominance in Listed Universe despite no notable change in Share of Earnings
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PSUs occupy a significant portion of the listed universe despite relatively stable earnings. -
The increase in market capitalization is primarily attributed to higher valuation multiples, suggesting that investors are willing to pay more for PSU shares. -
Core financial metrics like revenue, EBITDA, and profit after tax (PAT) have remained relatively unchanged for PSUs compared to the broader listed universe.
” This indicates that the PSU market cap dominance is primarily driven by an expansion in valuation multiples rather than their earnings outperforming the listed universe,” noted Yes Securities.
The analysis further revealed that valuations within the PSU basket are diverging. While some PSUs are trading at higher multiples despite slower earnings growth, others are undervalued compared to their historical averages.
Key Findings:
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PSUs with slower forward earnings growth are being valued at higher multiples than those with stronger earnings potential. -
Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs) have reduced their stakes in PSUs, particularly large-caps. -
Rising Return on Equity (ROE) and increased capital expenditure (Capex) among PSUs are positive indicators for future growth. -
Projections indicate that PSUs will dominate Capex within the NSE 200
In FY25, FPI add Capital Goods and Auto, while sell Financials and Oil
Increase in FII Sectoral weight – FY25 (till Jul’24)
Decrease in FII Sectoral weight – FY25 (till Jul’24)
FPIs Buy IT and Metals, sell Financial Services over the last two fortnights
Top 5 Sector wise fortnights Inflow (USD mn)
Top 5 Sector wise fortnights Outflow (USD mn)
First Published: Aug 23 2024 | 1:27 PM IST
