The recent rally in the stock markets has made the government richer by Rs 5 lakh crore (84.6%) on its holdings in 49 listed public sector undertakings (excluding banks and finance companies), all in a space of one year. This has happened on the back of growing market confidence in PSU stocks and the prospects of a global financial recovery.

The environment for PSU stocks has been extremely favourable, with most of them recording substantially positive returns than the market as a whole.

While the BSE Sensex has increased by 72.0% to 16,810.81 on October 23, from 9771.70 on October 23 last year, the BSE PSU Index gained 81.9% to 8969.48 from 4930.06.

Kishore P Ostwal, CMD, CNI Research, said, ?The PSU disinvestment process started by the BJP government did taste some success. In its last term, the Congress could not pursue the disinvestment programme due to pressure from its political allies. After it received a clear mandate, the government decided to pursue the process in right earnest, which has improved the level of confidence among investors. Consequently, the valuations of PSU stocks have improved substantially. The momentum will carry on. This will address a key concern of foreign investors ? that of high fiscal deficit.?

At current market prices (as on October 23), the government holding in these companies is worth about Rs 10.91 lakh crore. Just a year ago, on October 23, 2008, it was worth Rs 5.91 lakh crore.

Trading gaint MMTC is the biggest gainer, with the government stake in the company now worth Rs 97,000 crore more than it did at the beginning of the study period. From a price of Rs 14,030.25 on October 23, 2008, the share is currently worth Rs 33,732.55. In hot pursuit is another company in the mining and mineral sector, NMDC, where the government stake gained Rs 69,000 crore during this period.

Though the share price increase has been spectacular in some other cases as well, they have not translated into huge wealth creation for the government, given the inherently small size of these companies.

Thus, a company like TN Newsprint has seen an increase of over Rs 16.65 in terms of absolute share price, but that has added only another Rs 40 crore in wealth. An increase of Rs 1,782 in share price in the case of Tide Water Oil has added Rs 43 crore in wealth. Not only did trading companies show significant increase in market capitaliation, companies like ONGC and MTNL have also displayed bullishness over the study period.

The government stake in ONGC increased 51.42%, so did MTNL, which increased by 22.52%. More than 200% increase in market capitalisation was noticed in the case of Engineers India and STC. Less than 50% increase in government wealth was noticed in the case of six PSUs, including BPCL and Scooters India.