ENS ECONOMIC BUREAU
As the weakening rupee and bleak domestic fundamentals take their toll on the markets, the one major casualty has been the government-run entities that have taken a major hit on their stock prices over the last month.
The fall in their stock price paints a dismal picture when these companies are ranked with private companies within their sectoral groups. This is so, because investor sentiments on these companies remain weak primarily due to the disinvestment overhang and lack of clarity on their cash utilisation.
While capital goods, FMCG and banking indices have been the major losers over the last one month, the public sector companies within them have led the fall and market experts feel that the trend is likely to continue. The Sensex at the BSE lost over 340 points on Wednesday to close at an 11-month low of 17,905.91. The index has fallen by 11 per cent over the last one month.
However, the capital goods index at the BSE fell by 21 per cent and the FMCG index by 17.4 per cent during the same period. The banking and the power indices, too, have fallen by 16.6 and 16.5 per cent, respectively.
The only gainer from the depreciating rupee during this period is the IT sector that is reflected in the BSE IT index that has risen by 1.5 per cent.
In the capital goods sector, while Larsen & Toubro has lost 21.4 per cent, BHEL has fallen by 35.2 per cent. Similarly, in the banking sector, while HDFC Bank and ICICI Bank have fallen by 13 and 14.9 per cent, major public sector banks have fallen by over 30 per cent, as illustrated in the table.
“Government wants to disinvest but currently it will only fetch lower price and therefore the investors are selling now as they can buy them cheap later,” said the chief investment officer of a leading mutual fund. Experts also feel that the government may go ahead and take away cash from these companies in the form of higher dividends. “Private sector companies have better ability to manage in times of weakness,” said the CIO.