Govt suffered Rs 3.79 lakh crore Loss, Know reason

A significant drop in the value of stocks belonging to public sector units (PSUs) has caused the Indian government to incur a substantial loss of approximately Rs. 3.79 lakh crore. This decline has occurred at a critical juncture when the government is striving to enhance the worth of state-owned enterprises and initiate a disinvestment campaign.

Loss Incurred by Investors:

In the recent three trading sessions, various categories of investors have faced significant losses:

• Institutional investors experienced a loss of Rs. 93,590 crore.
• Non-institutional investors witnessed a decline of Rs. 45,300 crore.
• Individual investors incurred a loss of Rs. 36,440 crore.

Government’s Stance on PSU Performance:

During a recent address on February 7, Prime Minister Narendra Modi highlighted:

• A remarkable 78% increase in the net worth of India’s PSU firms since 2014, now surpassing Rs. 17 lakh crore compared to Rs. 9.5 lakh crore in 2014.
• The rise in the number of PSUs from 234 in 2014 to 254, indicating expansion in this sector.
• The government’s commitment, as expressed by Finance Minister Nirmala Sitharaman during the Interim Budget presentation, to enhance the valuations of PSUs and involve the private sector in “core strategic” areas.

Expert Opinions and Market Outlook:

• Rajesh Palviya, an analyst at Axis Securities, views the profit-taking in PSU stocks positively and anticipates a potential rebound following a correction of 5-10%.
• Some experts predict that not all PSU stocks may recover, identifying sectors like railways, power, defense, and oil and gas as potential areas of interest for buyers.
• Despite the recent decline, PSU stocks have shown consistent growth momentum since 2021, with the BSE PSU index surging by 41% in CY2021, 23% in CY2022, and over 55% in CY2023.

In the latest budget, Finance Minister Nirmala Sitharaman announced the government’s target to raise Rs 50,000 crore from stake sales in public sector companies in fiscal 2024-25. The Union Budget for the current fiscal year revised down the divestment revenue target to Rs 30,000 crore from Rs 51,000 crore. IDBI Bank and CONCOR were key divestment targets for FY24, but faced obstacles and were put on hold. With divestment estimates for FY25 exceeding street expectations, there is optimism in the market that these targets will be achieved in the next fiscal.

Conclusion:

The decline in PSU stocks has not only impacted investor sentiments but has also raised concerns about the government’s disinvestment plans and efforts to enhance the performance of state-owned enterprises. Expert opinions suggest potential opportunities for recovery, particularly in specific sectors, but the overall market outlook remains uncertain amidst these fluctuations.