As the Indian markets have headed to record highs on Covid 19 vaccine optimism, one pack that has made a comeback only lately after underperformance for last three year is the PSU pack. Many analysts in fact are suggesting investors to pay attention to the sector for several reasons such as favorable economic scenario going ahead, policy reforms and others. Leading brokerage firm ICICI Securities is of the view "The recovery in this space is currently at initial phase and offers extremely favourable risk-reward setup, as NIFTY PSE index is just resolving above three year falling channel indicating resumption of fresh up move".
Here are the top ICICI Securities PSU picks from large caps to even small caps. And the selection has been done based on both fundamental and technical analysis. This is indeed a medium term portfolio that offers a high risk-reward ratio.
1. Hindustan Aeronautics (HAL):
This defence sector PSU has been assigned the highest weight of 23.3 percent, which translates to 4 equity shares of the firm. The company's last traded price is around Rs. 864, up 30% since November. However, significantly down from its 52-week high price of Rs. 1423 per share
2. Bharat Electronics Limited (BEL):
The scrip has been given the weightage of 19.8% with suggested 25 stocks in the portfolio. In the September ended quarter, BEL reported a 16% YoY growth in revenue after supply chains normalized post easing of coronavirus led lockdowns. It has also scaled up order wins and is aiming to increase contribution from non-defence areas.
3. Container Corporation of India:
Another pick of the brokerage firm is CONCOR with a weightage of 19.3 percent that translates to 7 stocks. Since March the stock has gained more than 40% and was last trading at Rs. 405 per share. In a earlier note, the brokerage firm said the transport and logistics entity is likely to see recovery in the next fiscal.
4. Cochin Shipyard:
This company has been assigned a weight of 19.3 percent. The stock last closed on the BSE at a price of Rs. 369.35, while its 52-week high price is Rs. 491.15.
This diversified PSU company has been assigned a weight of 18.3% in the PSU stock portfolio, which could translate to 10 shares of the firm. Since November, shares have gained as much as 14%.
ICICI Securities expects the total investment in the PSU stock portfolio to be in the range of Rs 14,800- Rs 15,100 with a six-month time frame. And returns expected from the PSU portfolio range between 8-15%. The portfolio has 43.2% allocation to large cap stocks, 19.3% in mid caps, and 37.5% in small cap stocks.