Team Prashant Jain at HDFC MF doubled down on top PSU stock bets in February

MUMBAI: The investment team at HDFC Mutual Fund, led by Chief Investment Officer and Executive Director Prashant Jain, doubled down on non-financial state-owned companies in February amid optimism for the real economy and the government’s roadmap for aggressive disinvestment in the coming years.

Jain has been speaking about his preference for this set of stocks in some of his recent interviews.

In the past, he has come under flak for his bets on certain state-owned companies and public sector banks, and many thought those ideas were largely responsible for the underperformance of some of HDFC Mutual Fund’s top schemes against its peers.

Despite the criticism, Jain has stood by his top conviction ideas in the PSU space, as they aligned with his value investing style and his belief that the real economy would pick up sharply once the Covid-19 pandemic abates.

In February, HDFC Mutual Fund added shares in four out of its top five PSU stock holdings — NTPC, NHPC, Coal India, and Bharat Electronic, data compiled by East India Securities showed.

State-owned companies, whose performance is more closely linked to the real economy, have gained traction over the past few months. Nifty PSE index has risen 18 per cent in 2021 so far and emerged the best-performing sectoral index on NSE after Metal Index.

The investment thesis for PSU stocks is simple: as vaccine rollout is helping the economy return to some form of normalcy, demand for power, natural gas, metals and related materials will boom, since these parts of the economy were among the worst hit by the pandemic.

Additionally, the government’s aggressive pitch for privatization of PSU companies, as laid out in the Union Budget for 2021-22, has made the space more attractive for investors.

Last month, Prime Minister Narendra Modi said the government has “no business to be in business” and his government has rolled out a new policy to privatise most government-owned companies except those belonging to the strategically important sectors.

“There is no doubt that there is a lot of value in most of the PSUs, because they have been incredible businesses with a lot of depreciated value sitting in them. Plus, most of them are great franchises,” Vikas Khemani, founder at Carnelian Capital Advisors, told ETNow recently.