Operation Farzi Bull Run: Rally in PSU stocks comes to a sudden stop after special Zee Business report

PSU shares took a beating on Wednesday after Zee Business, in a special report named Operation Farzi Bull Run, questioned the authenticity of a recent stunning rally in the space. While stocks such as Scooters India, STC, Andrew Yule, FACT, MMTC and MRPL tumbled as much as 4-10 per cent after the release of the report, counters like UCO Bank, IOC, Central Bank of India and PSB also succumbed to selling pressure, denting the overall market sentiment.

Here are some of the biggest and most dramatic stock moves in the PSU space on Wednesday:

Upon investigation, there was a sharp correction of up to 10 per cent seen in these counters, which, until 10:30 am on Wednesday (October 18), were trading with gains of up to nine per cent.

The PSU space has been the talk of the town on Dalal Street for the past few weeks, with stocks of some of the public enterprises having delivered returns to the tune of 100–200 per cent in the past two months and up to 45 per cent in three days alone.

Why the sharp run-up in these stocks?

The report primarily took into account PSU stocks with government holding of over 90 per cent. This means retail shareholding is anywhere between 1-10% in these counters. Zee Business Managing Editor Anil Singhvi is of the view that, as there is no dearth of capital in the market, by deploying small amounts of funds in such counters, floating stock which was already at very low levels in these stocks can be eliminated, thereby sucking out the liquidity in these counters. And thus, it gets easier to lift prices by cornering shares.

The Operation Farzi Bull Run report covered a string of stocks that have rallied in the recent past without any apparent reason, and sought to protect the interests of small retail investors, especially those with little knowledge of the share market.

Zee Business के ऑपरेशन FARZI BULL RUN का बड़ा असर

ज्यादातर शेयरों में लगा लोअर सर्किट

Scooters India, MMTC, STC, Andrew Yule, KIOCL, FACT और HMT में आई तेज गिरावट

स्पेशल इन्वेस्टिगेशन में कम फ्री फ्लोट वाले PSU Stocks की फर्जी तेजी का हुआ पर्दाफाश... … pic.twitter.com/aAfbiNMKiU

— Zee Business (@ZeeBusiness) October 18, 2023

Here are some of the other findings of the Zee Business report:

The list of stocks covered as part of the investigation includes names like HMT, KIOCL, Punjab and Sind Bank, Fertilisers and Chemicals Travancore, ITI Ltd, Indian Overseas Bank, UCO Bank, and Scooters India. Zee Business Managing Editor attributes the bull run in these counters to the process of eliminating free float, wherein the available supply is absorbed and cornered, giving a chance to effectively control the market price.

Further, while most of these PSU counters are loss-making, the run-up is also seen in profitable PSUs with low free float.  For instance, Punjab and Sind Bank that commands a market capitalisation of Rs 29,497 crore, has a free float of just Rs 324 crore. The stock over the last 3 months has gained by 30 percent. Similarly, another profitable entity Indian Tourism Development Corporation that has a free float of Rs 463 crore as against its market valuation of Rs 4220 crore, has also shot up substantially. Other profitable PSUs also have delivered returns between 30-75 per cent during the 3 month period, signifying a relatively lower activity.

Loss-making PSUs with low float including the likes of Scooters India, Andrew Yule, ITI, HMT Ltd, MMTC and KIOCL among others rallied up to 190 per cent in the past 3-months. 

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