Government stake in BSE 500 falls to record low in Q2

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Mumbai | Published: October 25, 2018 3:09:11 AM

Amid poor performances of a large number of public sector undertakings (PSUs), the combined value of shares held by the government has declined to a record low of 9% during the quarter ended September 2018.

BSE, Nifty PSE Index, Bharat Electronics, HPCL, OMCAmong the PSUs, Indian Oil Corporation (IOCL) witnessed the largest erosion in market capitalisation so far this year.

Amid poor performances of a large number of public sector undertakings (PSUs), the combined value of shares held by the government has declined to a record low of 9% during the quarter ended September 2018. Barring Coal India, all constituents of the Nifty PSE Index have lost value since January, with Bharat Electronics declining as much as 53.5%, followed by Bharat Petroleum Corporation at 45.6% and Hindustan Petroleum Corporation at 44.4% during the period.

“Due to the poor performance of PSU stocks, the government’s share of the BSE500 fell to an all-time low of 9% in the quarter ended September 2018,” Credit Suisse said in a note on Tuesday. While the Nifty PSE index declined 21.5% so far in 2018, the gauge for state-owned banks — Nifty PSU Bank — has dropped 28.7% during the period.

Oil refiners led the erosion of market value in state-owned firms after the government cut excise duty by Rs 1.5 per litre in early October and asked state-run oil marketing companies (OMCs) to absorb another Rs 1 per litre on the sale of petrol and diesel.
Among the OMCs, shares of BPCL and HPCL, which are mostly reliant on marketing and refining for their earnings, fell the most in 2018.

Though inventory gains boosted Q1FY19 earnings of the OMCs, the core operational businesses of these companies were hit due to weaker gross refining margins, lower fuel margins and a weakening rupee. The rupee has lost nearly 13% between January and now against the US dollar.

Among the PSUs, Indian Oil Corporation (IOCL) witnessed the largest erosion in market capitalisation so far this year. While the market value of IOCL declined by Rs 55,090 crore since January, BPCL and ONGC saw their market cap eroding by Rs 51,228 crore and Rs 48,060 crore, respectively.

The massive sell-off in OMC stocks eroded a combined market capitalisation of the Nifty PSE index to the tune of `3.2 lakh crore.
While the government holds 56.75% in IOCL as of September 2018, promoter holding of BPCL stood at 53.93%. In HPCL, the government holds 51.11% through ONGC. The Brent crude, which was hovering at $76.3 per barrel, has climbed to $86.3 per barrel in October to hit a near four-year high. However, oil prices have cooled off since then and is down by 11.4%.

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