Selloff In PSU Stocks Gives Good Entry Point For Investors, Say Analysts
Analysts expect the markets to oscillate and remain rangebound going ahead.
The downtrend seen in public sector undertaking stocks in the last few sessions has given a good entry point for investors eyeing the space, according to fund managers.
"We have seen some volatility with profit booking taking place in the PSU space," according to Soni Patnaik, assistant vice president, equity derivatives research at JM Financial Services Ltd.
"The correction that has happened has also given a very good opportunity for buy-on-dip strategy, especially in stocks like NTPC Ltd., Coal India Ltd., ONGC Ltd.," she said.
These stocks have come to the level where investors can reinitiate their long positions and ride the momentum for another 5-6% upside, Patnaik said.
PSU stocks are well-poised for further growth, with their third quarter results in line with expectations, according to Dharmesh Kant, head of equity research at Chola Securites.
Rail Vikas Nigam Ltd., Ircon International Ltd., and Indian Railway Finance Corp. are good picks from the railway space, while Hindustan Aeronautics Ltd., Bharat Electronics Ltd., and Mazagon Dock Shipbuilders Ltd. show good potential in the defence sector, he said. In the power space, NTPC Ltd. and Power Grid Corp. of India are among Kant's top picks.
The Sensex and Nifty rebounded on Tuesday after a one-day drop, as ICICI Bank Ltd. and Reliance Industries Ltd. led gains. Analysts expect the markets to oscillate and remain rangebound going ahead.
Sector rotation is the game that is going on in the market. Currently, it is all about liquidity and not valuation, as they are already priced in, Kant said.
"I don't think for the next month we will see any breakout in the market. It is likely to oscillate and thereafter build up, starting with the fourth quarter earnings and elections." But the overall tone of the markets is still positive, he said.
On Tuesday, the NSE Nifty 50 ended 127.20 points, or 0.59%, higher at 21,743.25, and the S&P BSE Sensex gained 482.70 points, or 0.68%, to close at 71,555.19.
"We have seen the Nifty stay in the range, and only if the resistance zone of 21,850 is breached, can we see the index go up to 22,000–22,100," according to Patnaik.
Bank Nifty has its resistance at the 46,000–46,200 levels, according to her. So, as long as the index is taking out the 46,200 mark on the higher side, there may be some selling pressure, she said.
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