CPSE index hits over 3-year high; REC, PFC, CIL, Power Grid up 5% each

Shares of public sector undertaking (PSU) companies were in focus as the S&P BSE CPSE index hit an over three-year high following a strong rally in REC, Power Finance Corporation (PFC), Coal India and Power Grid Corporation, which were up 5 per cent in an otherwise weak market.

At 11:14 am, the S&P BSE CPSE Index was up 2.3 per cent, as compared to a 0.45 per cent fall in the benchmark Sensex. The CPSE index was trading at its highest level since June 2018.

The S&P CPSE index is designed to measure the performance of Central Public Sector Enterprises (CPSEs) listed at BSE. CPSEs are companies in which 51 per cent or more of the direct holding belongs to the Central Government of India.

Shares of Oil and Natural Gas Corporation (ONGC), PFC, Coal India, Indian Oil Corporation and NTPC from the CPSE index were trading at their respective 52-week highs level on the BSE.

ONGC hit a fresh 52-week high of Rs 142.45, up 2 per cent amid bullish momentum in global natural gas prices. Shares of state-owned electric utilities company NTPC too registered a fresh 52-week high at Rs 132.10, up 4 per cent on the BSE in Tuesday’s intra-day trade after the company confirmed that it has won 1.9 GW solar projects under Central Public Sector Undertaking (CPSU) scheme.

Coal India rallied 5 per cent to hit a 52-week high of Rs 176.30 on improved outlook. In the past one month, the stock has soared 26 per cent, as compared to a 7 per cent rise in the S&P BSE Sensex. India's coal mining sector is dominated by Coal India and the scenario is unlikely to change in the immediate future. Even after the opening up of the coal sector to private commercial mining by the government of India, the proportion of coal supply from Coal India is likely to dominate the Indian market, according to analysts.

"Demand has been improving with coal reporting a 33 per cent YoY increase in offtake for 1QFY22. With improving offtake and realisations, we see operating leverage coming into play in FY22. Notwithstanding any further negative shocks, we expect coal’s profitability to recover in FY22E (+24 per cent YoY). The capex run-rate is likely to increase in the near term, but higher dispatches and some normalisation in receivables should aid cash generation and maintain dividends (dividend yield: 12 per cent)," the brokerage firm Motilal Oswal Financial Services said in the June quarter result update.

According to a Business Standard report, the National Land Monetisation Corporation will soon be set up under the Companies Act and be 100 per cent owned by the government. The entity will be able to rent, lease and develop assets to monetise them for a fee.

The new special purpose vehicle (SPV) for monetising assets of public sector enterprises may also get powers to acquire and develop land and other assets on a case-to-case basis, besides renting and leasing them out. As the SPV would get power to acquire and develop idle land assets of PSUs that can’t be sold, it would look at converting such lands into revenue-generating, and financially viable projects, the report suggested. CLICK HERE FOR FULL REPORT