Mutual funds incurred substantial losses of Rs 90,000 crore in the market value of public sector firms over the past two trading sessions, triggered by a sharp correction in Indian markets following the unexpected election outcome.
Initially, as of June 3, mutual funds held shares worth over Rs 5.71 lakh crore in 84 state-run firms. However, post-election results, this value plummeted to Rs 4.83 lakh crore, reflecting a significant decline.
On June 4, mutual funds continued to hold substantial stakes in State Bank of India (SBI), NTPC Ltd, and Bharat Electronics Ltd, albeit at reduced values compared to June 3. Notably, MFs’ holding in SBI shares alone witnessed a decrease of Rs 13,040 crore from the previous day.
The overall share of PSU stocks in the total market capitalization dropped to a six-month low of 13.1%, down from a seven-year high recorded in May. The collective market capitalization of Indian listed PSU firms plummeted by nearly Rs 10 lakh crore over the last two sessions, reaching Rs 55 lakh crore.
The recent downturn in PSU stocks follows a period of overvaluation, prompting a market correction to align with fundamental realities. Moving forward, the outlook for PSU banks appears promising, while other sectors may witness rotational interest, contingent upon government spending priorities outlined in the upcoming budget.
Investment experts caution against overexposure to PSU and capital goods stocks, citing increased risk and poor reward-risk balance. Instead, they advocate focusing on sectors like consumption, healthcare, and value retail, anticipating potential growth opportunities.
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