Investors hammer down PSU, bank shares

‘‘The weakness in PSU shares follows a disappointment over the outcome of the meeting of the Cabinet Committee on Disinvestment (CCD) on Saturday. None of these companies – HPCL, BPCL, MTNL and VSNL – were considered for disinvestment of government stake in them during the latest CCD meeting. This was against the expectations that some decision would be taken on their disinvestment at the meeting,’’ said an NSE dealer.

The fall in bank shares follows the government’s recent decision not to give away control over PSU banks even as it proposes to dilute stake in PSU banks to 33 per cent from 51 per cent. Most of the PSU and bank shares have gained substantially in the last few trading sessions.

Among banking stocks, United Western Bank (Rs 45.85) hit the 8 per cent lower limit of the circuit-breaker. Corporation Bank fell from Rs 81.20 to Rs 76.65, Oriental Bank of Commerce from Rs 33.85 to Rs 32.55 and Dena Bank from Rs 9.10 to Rs 8.55. Bank of Baroda, Bank of India, HDFC Bank and Nedungadi Bank were subdued since last Friday.

Bharat Petroleum Corporation had risen 7.25 per cent to Rs 207.70 last week while Hindustan Petroleum Corporation gained 18.58 per cent to 140.10 on expectations that the meeting would discuss the sale of government stakes in them. Corporation Bank had shot up by over 12 per cent last week to cross the Rs 90 mark. However, bank shares started falling as soon as the government clarified that it would retain control over banks even after divesting up to 33% of its equity capital.

‘‘There’s no meaning in divestment if the management control still vests with the government. Things will remain the same if the government continues to manage banks,’’ said BSE dealer Pawan Dharnidharka.

The Cabinet Committee, which dropped plans to privatise Mahanagar Telephone Nigam and Videsh Sanchar Nigam, decided to set up a panel of bureaucrats to oversee the disinvestment of India’s largest car maker, Maruti Udyog Ltd.

Fund managers said the decisions will dampen market sentiment already worried that the government is not doing enough to speed up reform. “The sale of IPCL’s Baroda unit to IOC is not privatisation. IOC is also a PSU. How can the government say this is privatisation? This kind of reforms in the name of avoiding monopoly will not serve any purpose,†said an analyst.

The markets had expected the meeting to discuss the sale of stakes in other government firms, which did not happen. The biggest disappointment was the postponement of equity sale in MTNL and VSNL. Marketmen feel that the government is facing stiff opposition from some partners in the ruling front and trade unions.