Indian PSU Stocks Plunge To 11-Month Low, Rs 15.4 Lakh Crore Wiped Out Since July; What Caused Sell-Off?

Public sector companies (PSUs) in India have seen their share of the stock market capitalization tumble to an 11-month low in November, following sharp corrections across the sector. The PSUs' contribution to India's total market capitalization dropped to 15.34% in November, the lowest since December 2023. This is a decline from the seven-year high of 17.77% recorded in May 2024.

Massive Erosion in Market Value

The combined market capitalization of 103 listed PSU firms stood at Rs 66.06 lakh crore in November, a sharp fall of Rs 15.4 lakh crore from their all-time high of Rs 81.38 lakh crore in July. The erosion has been steep, with their market cap falling from Rs 75.04 lakh crore in September and Rs 69.31 lakh crore in October.

The decline has been widespread, with five PSU stocks losing over 50% from their recent 52-week highs. Twenty-one firms recorded losses of 40-49%, while 40 firms saw their valuations drop by 30-40%. Another 24 companies experienced corrections of 20-30%, while 13 firms faced smaller declines ranging from 5-20%.

The BSE PSU Index has fallen 17.5% from its peak, outpacing the nearly 10% decline seen in benchmark indices like the Sensex and Nifty. Among the worst-performing PSU stocks, Mahanagar Telephone Nigam (MTNL) led the decline, plunging over 57% from its recent 52-week high. Cochin Shipyard and Chennai Petroleum Corporation followed closely, dropping 56% and 55%, respectively. Garden Reach Shipbuilders and Ind Bank Housing each shed 50%, while MSTC and MOIL lost 49% apiece.

Weak Earnings Drag Sector Sentiment

The poor performance of PSU stocks is mirrored in their underwhelming September quarter earnings. Of the 100 reporting firms, nearly half underperformed. Fourteen PSUs posted losses, while 29 saw a year-on-year decline in net profit. Around 20 firms reported marginal or single-digit sequential growth in net profit.

On the operational front, 39 companies recorded a sequential decline in operating profit, while 25 reported flat or single-digit growth. Year-on-year, 42 PSUs saw a drop in operating profit, and 14 reported minimal growth.

The PSU sector, which delivered robust double-digit returns over the past two years, now faces significant headwinds. The recent corrections highlight growing investor concerns over weak earnings, operational inefficiencies, and sector-specific challenges.