On Monday, Power Finance Corp dropped 3.7% to βΉ525 and REC declined 2.6% to βΉ592. In last five days, the stocks fell around 5% each while the benchmark Nifty shed 1.3% during the same period. Analysts see these stocks falling further as investors are shifting money from recent favourites like PSUs and power stocks to the so-called defensive sectors.
“In the last one and a half years, the PSU theme has played out very well, but is now witnessing profit booking,” said Hemang Jani, director, Finazenn, an investment advisory.
Traders have been quick to pounce on the weakness in these stocks, creating bearish positions in their September futures contracts. “PFC and REC have witnessed addition in open interest with price correction which indicates short build-up,” said Rajesh Palviya, senior vice president research – technical and derivatives at Axis Securities. “Further price correction is likely in the near term as the stocks struggle to cross the previous highs.” PFC faces a strong hurdle at βΉ550, while for REC, it is at βΉ615, said Palviya.
“Most of the shorts have been created around those levels,” he said. “The stocks moved up in the last couple of months and are facing supply pressure currently as the broader markets are also in a corrective phase.”
So far this year, Power Finance Corp jumped 32.9% while REC gained 39.3%.”The best of the re-rating in PSU stocks seems to be behind us although some companies could attract interest based on business models and government impetus,” said Jani. “PFC and REC are likely to see further corrections and would depend on market sentiment and investor appetite for PSU names.”
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