PSU stocks were warmly greeted by the broad market on Thursday as talk gained ground that they may declare special dividends to bolster government receipts.
National Aluminium Company (up 3.60% to Rs 83.25), Sail (up 2.62% to Rs 9.80), Bhel (up 2.70% to Rs 178.70), ITI (up 1.54% to Rs 19.75), Shipping Corp (up 1.65% to Rs 58.50), HPCL (up 1.40% to Rs 290.30), Gail (up 1.19% to Rs 72.50), BPCL (up 0.89% to Rs 227.50) and MTNL (up 0.22% to Rs 90.20) were headed the list of PSU gainers.
As per market talk, apart from operators, whose names were not known, insurance companies and domestic mutual funds were buying PSU stocks. Insurance companies like GIC and New India Insurance were reportedly buying stocks like HPCL, BPCL and ONGC.
Dealers say the buying on counters of state-run companies is taking place on hopes that these will make huge interim dividend pay-outs for financial year 2002-03. They say before disinvestment takes place in some of these PSUs, they may make hefty dividends due to their cash-flush positions. A pointer to that, is the fact that the government asked VSNL to make a huge special dividend to shareholders before its divestment.
Another reason could be that funds are needed as the government is running a huge deficit. Till November 2002, India's fiscal deficit at Rs 83,394 crore (Rs 833.94 billion), was 61.5% of the Union Budget estimate of Rs 1,35,524 crore (Rs 1,355.24 billion) for the entire fiscal (2002-03). The deficit till November 2002 works out to 3.26% of the gross domestic product.
In contrast, revenue generation is comparatively lower. With the Centre already completing 83% of the borrowing till November 2002 as against the target of Rs 95,859 crore (Rs 958.59 billion) for the entire fiscal, more revenue will be needed.
Earlier, the government planned to mop up revenues from its divestment programme, but sustained roadblocks, political as well as from labour, has stalled the programme. The government, the largest shareholder in PSUs, sees dividend as a sort of means to offset the lack of funds generation as a result of its delayed divestment programme.
In the 14 sessions between 26 December and 15 January 2002, the BSE PSU index rose 27% or 345.37 points to 1,622.75 to 1,277.38.