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Saturday, January 7, 2012

Fabulous returns by PSU stocks on SEBI’s ruling

With Securities and exchange board of India (SEBI) relaxing the rules for state-owned public sector undertakings (PSU) enabling them to sell their stakes though auctioning, resulted in miraculous returns by smaller PSUs especially those where governments holding exceeds 90%.
MMTC topped the list with 80% surge in just 11 trading-days followed by NFL and Hindustan copper with 72 and 70 per cent returns respectively.  

But let me warn my blog readers that in MMTC government holds more than 90 percent stake and its free float is very thin on the bourses.
And because of this stock price can be manipulates easily by a few players. delivery percentage of last few days was below 5 percent. That means less than 5 shares were delivered for the trade of 100 shares.
More delivery percentage ensures conviction in the price.The stock is trading at a price to earning multiple of 2133, which is just unimaginable. value investors should strictly stay away from this exorbitant stock.
Government is desperate in raising funds to plug its burgeoning fiscal deficit and to meet it disinvestment target of Rs. 40,000 crore. Oncoming food security bill which is considered as a populist major to woo voters in the wake of forthcoming assembly elections and general election, is supposed to widen the fiscal deficit further.


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