A host of PSU shares surged on Tuesday extending their recent rally.

Some of the low-priced PSU stocks were the big gainers. HMT was up 9% to Rs 19.30, RCF was up 6% to Rs 24.40 and ITI was up 3.2% to Rs 19.35. Other gainers included National Fertilizer (up 3.4% to Rs 35), Bharat Electronics (up 3.2% to Rs 244.50), Neyveli Lignite (up 2.6% to Rs 31.15), Shipping Corporation of India (up 2.5% to Rs 63.40), Bharat Earth Movers (up 1.4% to Rs 74.85), Hindustan Organic Chemicals (up 1.6% to Rs 18.50) and National Aluminium Company (Nalco) (up 1.9% to Rs 86.50).

Some of these PSU shares like RCF, SCI, BEML, Andrew Yule, BEL and Nalco have witnessed a sharp surge on the bourses in the last few trading sessions. Government's recent initiatives on divestments has once again led to optimism for PSU shares for whom divestment remains a key trigger. PSU shares have also been benefited from the shift in investors' focus from tech stock to Old Economy stocks. Investors have shunned tech stock in the last few trading sessions after Infosys came out with muted earnings guidance for FY 2004 citing pressure on billing rates.

After dillydallying for a while, the government finally initiated divestment of HPCL. On the block is its 34% stake in HPCL for divestment through strategic sale and the last date for submitting initial bids for acquiring government control got over recently. A host of foreign companies like the US-based ChevronTexaco, Malaysia's Petronas, Ango-Dutch oil major Shell, British Oil major BP and Saudi Aramco are reported to have put in initial bids for acquiring government control in HPCL. Domestic oil and gas and petrochemicals major, Reliance Industries, is also reported to have put in a bid and so has Ruia group oil company Essar Oil. A successful divestment of HPCL (being a big ticket divestment) will provide a positive trigger for the market.

In a meeting held on 15 April 2003, the cabinet committee on divestment has also put on block through strategic sale 51% stake in fertiliser major Rashtriya Chemicals and Fertilisers. The CCD also decided to start a fresh divestment of the long delayed divestment of shipping major Shipping Corporation of India. In a change of its previous decision, the CCD has allowed foreign companies to bid for SCI unlike last time when the foreign equity in SCI was capped at 25%. The government has 80% stake in SCI and it has put on block 51% stake. However, the CCD put off divestment of Air India and Indian Airlines.