Foreign fund managers have shown their faith in public sector undertakings after a long break. Although they pulled ₹2.27 lakh crore out of Indian equities so far this year, 30 out of the 50 odd listed state-owned firms saw foreign ownership rising in the period, reported The Economic Times.
These include three firms owned by the Gujarat government.
Foreign portfolio investors’ (FPIs) stake in National Aluminium increased from 13.30% to 16.71% between January and June, while in Hindustan Aeronautics, their stake rose from 3. 15% to 5.56%.
In Oil India, FPIs raise their stake from 10.11% to 12. 42%. Similarly, these investors increased their stake in RCF, BEML, Chennai Petro, Engineers India, Shipping Corporation, Bharat Dynamics, and Mazagon Dock, among others.
As fund managers are chasing value stocks, PSUs have managed to attract some of these flows due to strong balance sheets, higher dividends, lower valuations, and strong business prospects.
“Fund managers globally have shifted strategy from growth to value stocks,” Amisha Vora, joint MD, Prabhudas Lilladher told ET. “Most PSUs that enjoy monopoly are valued at low PE multiples and have defensive business models with attractive dividend yields. This has led to increase in FPI holding,” he added.
Some of the undertakings in which foreign portfolio investors have increased stake, such as National Aluminium, NMDC, SJVN, and Indian Oil, are currently trading at a dividend yield between 5% and 11%, while the majority of them, including GSFC, GNFC, National Aluminium, Oil India, RCF, Chennai Petro among other are trading at a Price to Earnings (PE) ratio of below 10 times.
The Nifty is trading at a PE ratio of 20.11 times.