After the UPA?s success in the election, investors are taking more interest in the public sector units in the expectation of divestment. This is being reflected in the share prices of the PSUs. Wealth of the public sector units’ promoter (the government of India) increased by 42% during the last one year. This has happened probably due to the better sentiment of PSU stocks prices.

Though the market sentiment was in favour of PSU stocks, the navaratnas too are in great demand. Owing to that, the government is richer by nearly Rs 3.25 lakh crore on its holdings in 54 listed public sector units (excluding public sector banks), all in a space of 12 months (up to May 29, 2009).

DR Dogra, deputy managing director, CARE, said: “The clear victory of the UPA in the general elections 2009 has led to change in sentiments in the Indian stock market. PSU stocks have surged in expectations of divestment, listing of the unlisted PSUs and fast-pace reforms. Talks of market-driven pricing of motor fuels had a positive impact on the PSU OMCs. Expectation of reforms in the power and infrastructure sectors has also led to price rise of many state-owned power and engineering companies.”

At the current market prices (as on May 29, 2009) of the shares of these PSUs, the government holding is worth around Rs 10.97 lakh crore. But at the start of the study period (May 29, 2008), it was only Rs 7.72 lakh crore.

NMDC has fetched the largest increase in wealth, with the government stake in the company is now worth Rs 1.69 lakh crore, more than it did at the beginning of the study period. The share of the company is currently worth Rs 449.10, from Rs 428.3 in May 29, 2008. And the government’s stake in the company also increased from 13 crore on March 31, 2008 to 390 crore on March 31, 2009.

In hot pursuit is another company in the public sector, GAIL, where the government stake gained an extra Rs 9,190 crore during this period under consideration.

The environment for PSU stocks has been extremely favourable, with most of them recording substantially higher returns than the market as a whole. While the BSE Sensex decreased by 10.3% to 14,625.25 on May 29, 2009, from 16,316.26 on May 29, 2008, the BSE PSU Index gained by 18.5% to 8427.44 from 7112.52.

Though the rise in share prices has been spectacular in some other cases, it has not translated into larger wealth for the government given the inherently small size of these PSUs.

Thus, a PSU such as Andrew Yule has seen its rise by over Rs 12.50 in terms of the absolute share price, but that added Rs 1,407 crore in wealth. An increase of Rs 180.85 in share price in the case of Bharat Electron translated into Rs 1,097 crore in incremental wealth.

Not surprisingly, NMDC has topped the chart, with a gain of Rs 1.69 lakh crore in the last 12 months. Significant contributors are also ONGC and NTPC, which were placed second and third, respectively, in terms of incremental wealth.