New Delhi: India’s state-run stocks may extend their outperformance versus the broader market, according to investors watching the Feb. 1 budget for signals on whether the government will revive stake sales to raise funds and support economic growth.
Prime Minister Narendra Modi’s administration may ramp up share sales in the fiscal year starting April 1 to offset a slowdown in revenue growth following earlier tax cuts, according to market participants. Attractive valuations are also adding to the appeal of state-run companies, according to Smartsun Capital Pte and DRChoksey FinServ.
Key gauges tracking state-owned firms have been steady this year, while the benchmark is down about 3.4%. The BSE’s PSU index, a gauge of government companies, is on track for back-to-back monthly outperformance against the BSE Sensex, a first since mid-May 2024.
“PSU stocks are now extending their outperformance as some investors are expecting disinvestments to pick up,” said Sumeet Rohra, a fund manager at Smartsun in Singapore, referring to stake sales in state firms. “Budget is a place where they can give color on strategic sales.”
Key gauges tracking state-owned firms had risen between 2% and 5% before Tuesday’s global selloff erased some of those gains. The benchmark NSE Nifty 50 Index fell 1.4% on Tuesday, the biggest drop since May 2025.
Some state-run firms dominate their industries, and further gains may bolster a market that lagged Asian peers last year. Many of these companies operate in commodities, defense and infrastructure, sectors where sentiment has improved in recent months on expectations of higher government spending in the budget.
Coal India Ltd., the state mining giant, has risen 4% this year, while NTPC Ltd., the nation’s largest power producer, is up about 3%. State-owned banks have been leading the broader benchmark this year as they expand market share and repair balance sheets.
State firms “already make one-third of India’s profits roughly and they are trading at a substantial discount to their asset prices, particularly in the oil and gas space,” Rohra said.
The BSE PSU Index trades at about 11 times one-year forward earnings, roughly half the valuation of the Sensex, according to data compiled by Bloomberg.
“Stocks are rising as traders expect the government to announce a road map for monetization and consolidation of state-owned firms,” said Deven Choksey, managing director at DRChoksey FinServ.
Still, any renewed push on disinvestment is likely to be gradual rather than sweeping. Past privatization efforts have stumbled on political and execution hurdles, and gains could fade if the Feb. 1 budget fails to outline a clear timeline for stake sales.
For now, optimism over asset sales is buoying state stocks on expectations of improved governance from induction of strategic investors and better capital payout policies.
“I am all in favor of disinvestment,” Arjun Divecha, a senior advisor for Grantham Mayo Van Otterloo & Co., said in an interview. “When you have an SOE, it has to serve two masters. I much prefer a company to serve one master, which is the investor.”
–With assistance from Alex Gabriel Simon.
Disclaimer: This report is auto generated from the Bloomberg news service. ThePrint holds no responsibility for its content.
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