PSU stocks see sharp movements after Nifty CPSE index rejig; IOCL, PFC dip

Experts say companies added into index could attract large investor flows

Government-owned firms saw sharp share price movements on Monday, following exclusion and inclusion of certain stocks  in the Nifty CPSE index, which acts as an underlying portfolio for the CPSE Exchange Traded Fund, which is used by the government to monetise its PSU holdings.
 
The share price of Indian Oil (IOCL) closed 4.2 per cent lower, while price of Power Finance Corporation (PFC) slipped 7.9 per cent. Effective from January 24, IOCL and PFC will be excluded from the index, while Cochin Shipyard, NHPC, NMDC, and Power Grid Corporation of India will be added to the index. The share price of Cochin Shipyard ended 3.5 per cent higher. Hydropower player NHPC (11.8 per cent), NMDC (7.1 per cent) and Power Grid (3.7 per cent) posted robust gains on Monday.  “Shares of these firms gained as they can now attract large institutional investor flows after being part of an ETF,” said Vinay Khattar, head of research, Edelweiss Broking. 

The eligibility criteria for the CPSE index was also changed. Earlier, stocks where the government held over 51.5 per cent stake were eligible for inclusion. Now, stocks where the government holds more than 51 per cent stake are eligible.  With strategic sales in firms like BPCL, Air India and Container Corporation looking unlikely in this fiscal, investment bankers say the Centre plans to raise Rs 9,000 crore-Rs 10,000 crore through the next tranche of CPSE-ETF in February.   Experts say that the Centre has included stocks where there is enough cushion over the 50 per cent holding-mark. At the end of December, the assets under management for the CPSE ETF managed by Nippon India MF stood at Rs 10.459.53 crore.