The government-owned companies saw sharp share price movements on Monday following exclusion and inclusion of certain stocks in Nifty CPSE index, which act as an underlying portfolio for CPSE Exchange Traded Fund (ETF) that is used by the government for monetising its PSU holdings.
The share price of Indian Oil (IOCL) closed 4.2 per cent lower, while the price of Power Finance Corporation (PFC) slipped 7.9 per cent lower.
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 share price of Cochin Shipyard ended 3.5 per cent higher. Hydropower player NHPC (11.8 per cent), NMDC (7.1 per cent) and Power Grid (3.7 per cent) posted robust gains on Monday.
“Shares of these companies gained as they can now possibly attract large institutional investor flows after being part of an ETF. For a company like NMDC, there is also a fundamental reason as ore prices have been on the rise,” said Vinay Khattar, head of research at Edelweiss Broking.
The eligibility criteria for the CPSE index was also changed. Earlier, stocks, where the government held over 51.5 per cent stake, were eligible for inclusion in the CPSE ETF. The new criteria said that stocks, where the government held more than 51 per cent stake, were eligible.
With strategic sales in companies like Bharat Petroleum Corporation, Air India and Container Corporation looking unlikely in this fiscal, investment bankers say government plans to raise about Rs 9,000 crores-Rs 10,000 crores through next tranche of CPSE-ETF in February.
Further, investment bankers say that the government has included stocks where there is enough cushion over the 50 per cent holding-mark. “In companies like NMDC, NHPC and Cochin Shipyard, the government holds more than 70 per cent stake,” an investment banker said.
At the end of December 31, 2019, the assets under management for the CPSE ETF managed by Nippon India MF stood at Rs 10.459.53 crore.
Source: Maalaimalar
