Underperformance of BSE PSU Index - Chart Of The Day 10 October 2018 - Equitymaster

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Underperformance of BSE PSU Index
Oct 10, 2018

Since we are talking about PSUs, I thought, it would be an interesting to compare how these stocks performed compared to the frontline index - BSE Sensex.

The BSE-PSU index, which includes many companies from the PSU space, considerably underperformed the BSE Sensex.

For three out of five years, the BSE-PSU index considerably underperformed the BSE Sensex. From 2014 till date, the BSE-PSU index gave a meagre annualised return of 3%. Whereas, the BSE Sensex delivered 14%.

This underperformance can be attributed to sector specific events such as non-performing assets (NPAs) in the banking space and rising oil prices that impacted OMCs, among others.

In Smart Money Secrets, we are not yet comfortable with the PSU space. We prefer owner-operator driven companies run by excellent management.

This month's upcoming recommendation is one such example. It fares very well on our proprietary tool - Smart Money Score.

A long runway for growth, strong sectoral tailwinds, negative working capital, strong brand recall, undervaluation of two of its business segments, and corporate restructuring of one of its business units to unlock shareholder value are some the key triggers for this company.

Watch this space!

Data Source: BSE India
2018* - Data till 8 October

This Chart Of The Day was published in The 5 Minute WrapUp - My Letter to PSU Companies: Why We're Not Recommending Your Stocks

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