A falling Indian rupee (to US dollar), coupled with the sluggish economy, has taken a toll on the performance of the PSU shares (public sector companies), with energy, oil & gas and banking firms retreating the most.
The BSE PSU index, a gauge which measures the performance of leading public sector firms, has slid nearly 29% this calendar year compared with the benchmark BSE Sensex's fall of just 4%. The Indian rupee has fallen about 16% in the year to date.
Energy and oil & gas stocks have contributed the most in dragging down the index. Eight companies belonging to these sectors, and accounting for 44.09% weightage of the PSU index, have declined an average 25.22% during the beginning of CY13.
Analysts said the sharp fall in the Indian rupee elevated fears of increase in under-recoveries and, in turn, the government’s twin deficits, despite the attempt to move towards market-linked prices for diesel. Moreover, global crude oil prices hovering around $110 per barrel would affect the companies' bottom line and act as a “double whammy” for such companies at a time when the rupee has depreciated 16%.
“There is a big correlation between the rupee and the performance of OMCs. Depreciation of the Indian rupee puts stress on the companies’ P&L and directly impacts the balance sheet, as cost of import rises and negates recent measures to reduce under recoveries,” said Sonam Udasi, SVP & head, research, IDBI Capital.
Meanwhile, the Oil & Natural Gas Corp (ONGC) share, which has the highest weightage of 19.64% within the PSU index, is little changed during the year (0.16%). Other major losers this calendar year include Mangalore Refinery And Petrochemicals Ltd (-50.08%) and Chennai Petroleum Corporation Ltd (-54.5%).
Another index heavyweight, Coal India, is down nearly 24% for the year and nearly 12-13% since the start of