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Business Standard
16-05-2025
- Business
- Business Standard
Banks, defence, OMCs: Which PSU stock to buy now? Analysts pick top bets
PSU stocks to buy: Once Street's favourite, shares of public sector undertakings (PSUs) have not yielded much returns to investors so far this year. Excluding the recent rally in defence shares, only a handful PSU stocks have outperformed the benchmark Nifty50 index during the period. So far in calendar year 2025 (till May 14), the Nifty CPSE index has risen 4.14 per cent, in-line with the Nifty50 index's gain of 4.3 per cent, ACE Equity data shows. By comparison, the Nifty CPSE index climbed 25.25 per cent in CY 2024 and 73.7 per cent in CY 2023 as against the benchmark's rally of 8.8 per cent and 20.2 per cent in the respective years. The trend, analysts believe, may not change much in the coming months and investors should cherry-pick PSU stocks based on valuation comfort along with earnings growth visibility and policy support. "The universe of PSU stocks is huge and diverse. Investors should bet on specific sectors and stocks from the basket as most of them may continue to consolidate after years of outperformance," said Kranthi Bathini, director of equities at WealthMills Securities. Among individual stocks, Bharat Dynamics, Mazagon Dock Shipbuilders, Garden Reach Shipbuilders, Bharat Electronics, Mishra Dhatu Nigam, Hindustan Aeronautics, and Cochin Shipyard from the defence pack have surged between 10.4 per cent and 59.3 per cent this year. While the rally in defence-related PSU counters was on the back of India - Pakistan geopolitical conflict, shipbuilding stocks found favour amid the government's strong focus on improving India's maritime infrastructure and indigenisation push. Outside these baskets, only NBCC (India), Steel Authority of India (SAIL), Bharat Petroleum Corporation of India (BPCL), Indian Oil Corporation, NMDC, and MOIL have outperformed the benchmarks by rising up to 15 per cent during the period. Among stocks, outside of the CPSE basket, PSU banks like Union Bank of India, Bank of India, Indian Bank, and Canara Bank outran the Nifty50 index by rallying in the range of 5.5 per cent to 12 per cent. "PSU stocks are affected a lot by the government policies as the ownership and regulatory control rest with them. Investors should, thus, invest in companies which are, relatively, stable from a policy viewpoint, are non-cyclical in nature, and have high dividend yields," said Deepak Jasani, a stock market veteran. High dividend yield, he added, provides a margin of safety against any decline in stock prices. PSU stocks to buy From an investment perspective, analysts say investors interested in the PSU space could look at opportunities across sectors driven by strong policy support, infrastructure momentum, and improving fundamentals. Industries such as oil and gas, and metals, which are cyclical in nature, may be avoided as cycles are difficult to predict and impacted by macro variables, they advise. "While we have a 'neutral' view on the PSU sector, investors willing to invest in PSU stocks can look at the renewable energy and/or transmission infrastructure sector amid the government's policy push. Defence companies, too, may remain in focus as exports are expected to surge to ₹50,000 crore by fiscal year 2029-30 (FY30) with indigenous production ramping up from ₹1.6 trillion to ₹3 trillion," said Anil Rego, founder and fund manager at Right Horizons PMS. Deepak Jasani, meanwhile, backs PSU stocks from the metal, oil refining, banking space on the back of their dividend yielding potential. "PSU banks are the safest sector to be in. That apart, oil refining companies, and energy-linked companies like Gail (India) and Coal India, which are insulated from global developments, can be a good bet," he said. Echoing similar views, Kranthi Bathini of WealthMills Securities said selective outperformance could be seen in PSU banks, defence, and OMC stocks going ahead.
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Business Standard
05-05-2025
- Business
- Business Standard
Buybacks down to a trickle after tax tweak shifts burden to shareholders
Share buybacks have all but disappeared following a rule change on October 1 last year that shifted the tax burden from companies to shareholders. Under the revised norms, buyback proceeds are taxed as dividends at the shareholders' applicable income-tax rates, significantly increasing the liability for high-networth individuals and institutional investors in the highest tax bracket. Since the change, only two buybacks have been completed: A ₹360 crore repurchase by ferro alloys manufacturer Nava and a ₹72 crore offer by online matrimonial services provider 'Buybacks have dried up since the tax-rule change, which aligned their taxation with dividends. Despite a bear market since October — a period when buybacks typically thrive — activity has been negligible,' said Pranav Haldea, managing director, Prime Database. Dividends and buybacks constitute the primary mechanisms for returning excess cash to shareholders. The new structure seeks to eliminate the tax arbitrage between the two routes. Currently, companies incur no tax outgo on dividend payments, which are taxed solely in the hands of the recipient in accordance with their income bracket. With the parity in tax treatment, market participants are preferring dividends as the more efficient vehicle for capital distribution. Unlike buybacks, dividends do not require the appointment of merchant bankers, face fewer compliance requirements from the Securities and Exchange Board of India (Sebi), and can be executed at a greater speed. Buybacks, in contrast, are administratively heavier and typically take several weeks to complete. Between FY17 and FY19, the share of buybacks in total shareholder rewards increased significantly due to a tax differential. From April 1, 2016, the government introduced an additional 10 per cent levy on dividends, pushing the effective dividend distribution tax (DDT) to 20.6 per cent, while listed company buybacks remained tax-exempt. The proportion of buybacks in total shareholder rewards in FY16 stood at just 1 per cent, rising to an average of 25 per cent over the FY17-FY19 period. To address this tax imbalance, the government imposed a 20 per cent buyback levy from April 1, 2019. Nevertheless, buybacks remained attractive for cash-rich firms as the tax liability rested with the company, not those tendering their shares. The most recent shift in tax incidence has, once again, altered the landscape. A buyback entails a company repurchasing and extinguishing its own shares, thereby reducing its equity base and enhancing metrics such as earnings per share (EPS) and return on equity. 'Companies now prefer dividends to buybacks. The EPS boost from buybacks is marginal, as the buyback amount is small relative to market capitalisation,' said Deepak Jasani, former head of retail research at HDFC Securities. The remaining strategic rationale for buybacks, he said, lay primarily in enabling promoters to consolidate their holdings by not tendering their shares. 'Only firms where promoters seek to raise their stake are likely to pursue buybacks. Otherwise, dividends involve simpler procedures and fewer compliances,' Jasani added.
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Business Standard
23-04-2025
- Business
- Business Standard
Portfolio check: Investors dump this bank stock amid Pahalgam terror attack
J&K Bank share price today: J&K Bank share price tumbled nearly 9 per cent today following a terror attack in Pahalgam, Kashmir, on Tuesday, April 22, 2025. J&K Bank shares declined 8.6 per cent on the BSE in the intraday trade on Wednesday, April 23, and hit a low of ₹103.41 per share. Around 0.70 million shares had changed hands on the stock counter on the stock exchange till 10:30 AM, as against a two-week average volume of 0.52 million shares. Together with the volume on the National Stock Exchange (NSE), 16.10 million shares have changed hands on the J&K Bank counter. Pahalgam Terror Attack: Why are J&K Bank shares falling? J&K Bank shares came under selling pressure on Wednesday after terrorists opened fire at tourists at Pahalgam in Kashmir, in one of the deadliest terror attacks in the valley since the Pulwama Attack in 2019, on Tuesday afternoon. At least 26 people have been killed and several were left injured. ALSO READ | The attack has stoked fears of unrest in the region as searches by the Indian security forces are underway. Besides, the Indian Army killed two terrorists at Sarjeevan, in the Uri Nala region of Jammu and Kashmir's Baramulla district, on Wednesday, foiling their infiltration attempt. "J&K Bank shares saw a knee-jerk reaction on the downside, following the news of a terror attack in Pahalgam. The evolving situation in the region will drive the senitment in the stock over the coming days. The stock may recover with some gap if the situation does not deteriorate further," said Deepak Jasani, a stock market veteran. Meanwhile, Prime Minister Narendra Modi has "strongly condemned" the terror attack in Pahalgam, Jammu and Kashmir. He further vowed that those behind the "heinous" act will be brought to justice. "They will not be spared! Their evil agenda will never succeed. Our resolve to fight terrorism is unshakable and it will get even stronger," he posted on social media platform 'X'. PM Modi will has also returned to India, cutting short his trip to Saudi Arabia, and is scheduled to hold a CCS (Cabinet Committee on Security) meeting later today. J&K Bank latest news The Pahalgam terror attack cut J&K Bank shares' five-day rally. Between April 11 and April 22, J&K Bank shares surged 24.22 per cent on the BSE as against a 5.9-per cent rise in the Sensex index. J&K Bank's market capitalisation has decreased to ₹11,454 crore. The stock hit a 52-week high of ₹147 per share on May 6, 2024, and a 52-week low of ₹82 per share on April 7, 2025. In the March 2025 quarter, Jammu Kashmir Bank recorded a 10.61 per cent year-on-year increase in its Total Business, at ₹2,52,779.14 crore. J&K Bank's total deposits, meanwhile, rose 10.24 per cent Y-o-Y to ₹1.48 trillion in Q4FY25. The bank's gross advances were up 10.32 per cent Y-o-Y to ₹1.06 trillion, and CASA deposits increased 2.6 per cent on year to ₹69,843.5 crore. About J&K Bank Jammu and Kashmir Bank (J&K Bank), a Scheduled Commercial Bank, is headquartered at Srinagar. The bank provides financial services in the Union Territories of Jammu & Kashmir and Ladakh, and is designated by Reserve Bank of India (RBI) as its exclusive agent for carrying out banking business for the Government of Jammu & Kashmir and Ladakh. The bank offers retail credit products, including home, personal loans, education loan, agriculture, trade credit and consumer lending, a number of unique financial products.
