LIC was seen cutting stakes in BHEL, SAIL, Coal India, Oil India, Mahanagar Gas, MOIL, SBI, Canara Bank, HPCL, NMDC Steel, NMDC, Shipping Corporation, IOC, Container Corporation Of India, ONGC and NTPC in Q4, shows data pulled from ACE Equity.
Interestingly, all these stocks have witnessed double-digit gains so far in the calendar year which indicates profit booking by LIC. The ongoing bull run has made the market value of LIC’s investments, which has more than 300 stocks, soar by Rs 1.6 lakh crore so far in the calendar year 2024 to Rs 14 lakh crore now.
The PSU insurer was found deploying a sell on rise strategy in several other stocks like Tata Power, Vedanta, JSW Energy, Voltas, Tata Motors and L&T.
At the same time, it went on to raise bets on at least 9 other PSUs – NLC, IGL, Bank Of Baroda, NHPC, HAL, SJVN, IRCTC, Power Grid Corporation and RVNL.
Other stocks in which LIC holding went up are Navin Fluorine, Bata India, Swan Energy, LTIMindtree, Asian Paints, Apollo Tyres, Patanjali Foods, Infosys, Nestle, Sona BLW, Kotak Mahindra Bank, etc.
The value of LIC’s investment in Adani Group, has soared from Rs 52,779 crore at the end of the December quarter to Rs 61,660 crore now, a rise of nearly Rs 8,900 crore.
In the entire FY24, the value of LIC’s holding has increased 59% or Rs 22,378 crore despite trimming of holdings during the year. In value terms, Adani Ports and Adani Enterprises are among the biggest bets for LIC within the conglomerate.
The PSU which owns 7 Adani stocks in its multi-billion dollar portfolio had earlier faced political criticism after a report by US-based short-seller Hindenburg alleged stock manipulation and accounting fraud by billionaire Gautam Adani.
Also read | FIIs raise bet on TCS, Infosys, 4 other IT stocks in Q4. Time for a U-turn?
Is it time to reduce stake in PSU stocks like LIC?
On the back of favourable government policies and reforms, balance sheet restructuring in public sector banks and attractive valuations, PSU stocks have been re-rated with many of them giving multibagger returns in the last 2-3 years.
The aggregate market capitalization of PSU stocks has surged to Rs 67 lakh crore, accounting for approximately 17% of India’s total market capitalization, up from Rs 37 lakh at the beginning of 2023.
Not just LIC, many investors have turned cautious on the PSU space due to valuation concerns and have been gradually trimming their PSU holdings.
“Over the past three years, PSUs have moved from being one of the cheapest segments in the market to a situation where some of the PSUs are today overvalued. This has been largely possible owing to the good work done by the PSU managements coupled with the way the government has ensured that these companies worked in the interest of the shareholders,” says Anish Tawakley, Deputy CIO – Equity, ICICI Prudential AMC.
In some PSUs, especially those in railways and defence, order execution and actual earnings growth will become more important going forward in FY25.
“We have not found many opportunities within PSU space given our criteria listed above, mainly that of consistent returns on capital greater than cost of capital and strong balance sheet. Over the last few years, PSU banks also benefited from normalization of non-performing assets and low starting valuations. However, it remains to be seen if they can overcome some of the structural issues seen in the past and reclaim market share losses from their private bank peers,” says Krishnan VR, Chief of Quantitative Research team at Marcellus.
(Data: Ritesh Presswala)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
