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Indian equities continued their losing streak for the second consecutive week, with Nifty and Sensex falling by a little more than 1 per cent for the week. A hawkish message from US Fed and selling by foreign institutions caused a sharp fall in the last two days of the week.
Even as the broad market remained weak, several stocks bucked the overall weakness. Several public sector undertakings have seen their stock price grow multi-fold over the past year. Last week too, PSU stocks occupied the top three positions. Interestingly, the rally was not accompanied by any fundamental development and hence was possibly driven by the continuing interest in PSU stocks on hopes of disinvestment and higher government spending.
Topping the returns chart last week was the stock of State-owned fertiliser maker The Fertiliser and Chemicals Travancore Ltd (FACT). The stock had gained a whopping 70 per cent in the last five trading sessions. While there has been no news about the company, hopes around disinvestment and turn around of operations, after reporting significant losses over the last several years, may have triggered the rally in the stock. The company’s product segment includes fertilisers, chemicals such as caprolactam etc and by-products such as soda-ash, nitric acid, anhydrous ammonia etc to name a few. The stock currently trades at about 26 times its trailing twelve-month earnings of ₹8.63 a share. In the latest September 2022 quarter, the company managed to double its operating profit to ₹237 crore and grow its net profit four-fold to ₹145 crore.
The other major gainer last week was the stock of state-owned bank Indian Overseas Bank. 2022 has been the year of PSUs and PSU banks. Several PSU banks have seen their stocks brace for a life high, including the county’s largest PSU bank State Bank of India. Last week, the stock of IOB, gained an impressive 30 per cent. While there has been no company specific news, the general interest in PSU banks and that the stock had underperformed other PSU peers so far, possibly has driven up the stock. Even as the company reported revenue growth of about 10 per cent in the September 2022 quarter, it managed to grow its net profit by an impressive 33 per cent, year-on-year. Net NPA declined from 2.77 per cent last year to 2.56 per cent in September 2022 quarter. The stock currently trades about 2.7 times its book value of Rs 12.2.
The stock of State-owned reinsurer, General Insurance Corporation of India ranked third in the winners’ list last week, posting 17 per cent gain over the five-day period. While the stock moved up initial part of the week, it did shed a good portion of the gains on Friday. Being the sole reinsurer in the domestic market, GIC provides reinsurance across many business lines like fire (property), marine, motor, engineering, agriculture, aviation/space, health, liability, credit and finance, and life insurance.
Though GIC in the latest September 2022 quarter reported a marginal decline in revenue by 8 per cent compared to the same period last year, its operating profit grew 67 per cent to ₹1,993 crore in 2QFY23, compared to ₹1,192 crore in 2QFY22. At the net profit level, the company reported 84 per cent increase to ₹1,860 crore. The stock currently trades about 6.8 times its trailing twelve-month earnings.
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