Nifty CPSE index slips 3%; IOCL, Oil India hit 52-week lows

Shares of Central Public Sector Enterprises (CPSEs) were under pressure with Nifty CPSE index falling 3 per cent on the National Stock Exchange (NSE) on Wednesday.

Oil and Natural Gas Corporation (ONGC), Oil India and Coal India dipped more than 4 per cent in the intra-day trade. NTPC, Bharat Electronics, Power Finance Corporation (PFC), NBCC, NLC India and Indian Oil Corporation (IOCL) were down in the range of 1 per cent to 3 per cent on the NSE.

Of these, Oil India (down 5 per cent at Rs 139) and IOCL (down 1.6 per cent at Rs 113) hit their respective 52-week lows.

At 11:53 am, Nifty CPSE index, the top loser among thematic indices, was down 3 per cent at 1,801 points. In comparison, the benchmark Nifty 50 index was down 0.37 per cent at 12,125 points.

The NIFTY CPSE Index has been constructed in order to facilitate government’s initiative to disinvest some of its stake in selected CPSEs.

Effective from January 24, IOCL and PFC will be excluded from the index, while Cochin Shipyard, NHPC, NMDC, and Power Grid Corporation of India will be added to the index.

The eligibility criteria for the CPSE index were also changed. Earlier, stocks where the government held over 51.5 per cent stake were eligible for inclusion. Now, stocks where the government holds more than 51 per cent stake are eligible.

“With strategic sales in firms like BPCL, Air India and Container Corporation looking unlikely in this fiscal, investment bankers say the Centre plans to raise Rs 9,000 crore - Rs 10,000 crore through the next tranche of CPSE-ETF in February,” Business Standard had reported.

At the end of December, assets under management (AUM) for the CPSE ETF managed by Nippon India MF stood at Rs 10.459.53 crore, the report added.

Meanwhile, analysts at JP Morgan have ‘overweight’ rating on ONGC. In the near term, admittedly the Government stake sale is an overhang, but given the stronger 2020 oil price outlook and attractive dividend yield (around 6 per cent), the foreign brokerage firm believes the stock’s underperformance against crude oil should narrow.

“For ONGC, as with other Indian state-owned-enterprises, Government stake sale remains an overhang and we do not expect any near-term resolution to this overhang any time soon. However, with a stronger crude outlook, we would recommend some upstream exposure within the Indian energy sector. ONGC’s volume growth should pick up in gas, while range bound oil prices should allow for reasonable dividend payouts,” the brokerage said in a report dated January 3, 2020.