Expect good returns in PSU stocks as economic reforms accelerate

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- PSU stocks at attractive levels in terms of margins and valuation

As the election year approaches, good returns are expected in PSU stocks on the hope that the reform process will be accelerated by the government. Moreover, dividend yield also makes PSU stocks attractive. In this case, if investors do not want to take risk directly in PSU stocks, they can opt for PSU Equity Fund. In this segment ipro fund should choose equity and other funds investing in equity related PSU companies.

The scheme invests in sectors/stocks included in the S&P BSE PSU Index. Which includes large and mid and small cap stocks. According to Chintan Hariya of iPro AMC, PSU companies have a significant share in the capital market. As they are operating in various sectors, there is a need for a diversified portfolio. PSUs have been at an attractive level in terms of good margins and on a valuation basis.

In a volatile environment companies also provide capital growth due to high dividend yields. Another positive reason for investing in PSU stocks is that government ownership has been significantly higher than other non-promoters (APPI/DII/Retail). The valuation of PSU stocks has once again become attractive due to the government policy.

Apart from this, the dividend yield also benefits as the average dividend yield percentage of the BSE PSU index has been 2.6 over the last 17 years against the Sensex's 1.3 per cent. Currently, PSU banks are in the middle stage of return on equity and credit cost has come down due to improvement in asset quality.

In the field of defense by the government Rs. 764 billion has been allocated. In addition, the sector will also benefit from the boost given to domestic production and reduce foreign expenditure. PSU sector has been dominant in power generation. As power demand increases and the ROE of power generating stations improves, the benefits will be seen.

As the election year approaches, the government is giving more emphasis to the reform process. Hence, with two years left for the elections, the PSU story can develop. Which can benefit the investors. The credit rating/standing is seen at a decent level as the borrowing cost of PSU funds is low.

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