Anil Singhvi: Sell PSU stocks on every jump in markets; privatisation set to create stiff competition

Government's decision to allow FDI (Foreign Direct Investment) up to 74 per cent through  the automatic route in the defence sector against the earlier limit of 49 per cent is a good step, Zee Business Managing Editor Anil Singhvi opines. He said that India will gain on the technology front. The good thing is that weapons will be made in India, he added. 

He however recommends that the investors should sell PSU stocks when they are on a high, indicating that these companies do not inspire a lot of confidence.

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On Saturday, the government had announced a hike in foreign investment limit in defence manufacturing and opened up the space sector while giving a new push to old reforms of commercial coal mining, mineral block auction and privatisation of power distribution companies.

On the impact of this decision on the stock prices of the companies in the defense sector, Singhvi said that the impact could be seen only after sometime. As the investment will not start immediately. First a list will be made which will identify the weapons to be made here. The companies will then look for partners to collaborate with. The foreign investors will also weigh on how much profit they can make through the partnerships in India. All this will take time, he said.

Most defense sector companies are government enterprises and creating a new joint venture could take a long time.

In terms of sentiments, the move by Centre is good, which is why the defence sector stocks  have gained today. The situation might be same tomorrow. Singhvi, however, cautioned investors not to get trapped in the cash market. He said if investors are buying with a 1 or 2-day view, then they can earn profits from these stocks.

The government has decided to keep just one government company in strategic sector while the PSU companies in non-strategic sector will be privatised. This will increase competition for the government companies. He also said that it will not be easy for the government to do strategic sale of the companies. You need a small capital market to get good value out of the government companies.

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Anil Singhvi also said that the government should remove Long Term Capital Gains Tax to revive sentiments in the Indian markets.