Pvt cos outperform PSUs in terms of annual growth

MUMBAI: A recent Motilal Oswal wealth creation study states that over the past five years, PSUs in aggregate terms underperformed the private Indian companies in terms of earnings compounded annual growth rate. As per the report, only 25 state-owned companies could make it in to the 'top-100 wealth creators' list.

"PSUs sometimes tend to be the handmaidens of the government. Hence, it is advisable to have a large weight for the private sector in any portfolio. However, select PSUs like SBI, BHEL and ONGC, which are dominant in their respective sectors cannot be ignored," the wealth report said.

During the 5-year period, PSUs in aggregate underperformed the Indian companies in terms of earnings CAGR. However, led by commodity companies such as ONGC, NMDC, MMTC and SAIL, PSUs matched their private sector counterparts in terms of price CAGR.

At noon, investors were selling PSU majors like ONGC (down about 3% at Rs 690), NMDC (down about 1.3% at Rs 164.50), SAIL (down over 3% at Rs 80) and SBI (down over 1% at Rs 1,256) in large numbers.

"Sectors with lesser government intervention do well. Companies in regulated sectors like oil & gas, fertilisers, sugar and cement would be impacted by 'politically-driven' decisions, as the nation moves towards general election," equity analysts maintain.

However, a section of analysts feel, PSU stocks are ideal to invest in volatile markets as they have low beta levels. Moreover, if investors prefer safer investments to quickfire returns, PSU stocks should give out a decent return over a longer term.