Exit PSU holdings, says Kotak Institutional Equities questioning euphoria in many stocks [Video]

Brokerage firm Kotak Institutional Equities has advised investors to exit their public sector undertaking (PSU) holdings and not get carried away with the rally in these stocks. “We would recommend investors to use the rally in PSU stocks to exit most of their positions,” the note said.

Kotak said that the rally in state-run names like IRFC, BHEL, SJVN and most others is driven by top-down bullish sentiment for PSUs in general, instead of any major bottom-up structural fundamental developments. This is evident from the fact that no PSU has delivered negative returns in the financial year 2024.

“We see several problems with the euphoric sentiment for PSU stocks,” Kotak Institutional Equities wrote in its note, highlighting bullish short-term profitability and volume assumptions, incorrect valuation methodologies and unrealistic narratives as the major issues.

Kotak believes that the government’s benign policies and regulations may benefit PSU stocks in the short-term, but …