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Below the Quote on Navigating the Recent Sell-off in PSU Stocks By Mr Ashwini Kumar Shami EVP and Portfolio Manager, Omniscience Capital

The recent sell-off in PSU stocks appears to be more of a trading action rather than a response to any fundamental triggers. Typically, sell-offs occur when stocks are overvalued or when there's a deterioration in fundamentals. However, in the case of PSU stocks, which encompass various sectors such as defense, power, and railway infrastructure, neither have the fundamentals changed nor is the entire pool overvalued. In fact, some companies within the financial services and power sectors that experienced corrections were trading at significant discounts to their intrinsic value.

This sell-off could be interpreted as profit booking, especially considering that many of these stocks have rallied in the past, or it may be viewed as consolidation. However, from a long-term fundamental investment perspective, this is perceived as merely a trading action and not expected to persist for long. The policy framework supporting these companies remains unchanged, facilitating strong order books and focused execution.

It's crucial to recognize that companies involved in railway infrastructure, defense, and power typically undertake long-term projects with extended execution timelines. This exposes them to quarter-on-quarter volatility in execution or new order wins. While short-term market fluctuations may persist, they present buying opportunities and favourable entry points at reasonable valuations for both new and existing investors, particularly within the railway infrastructure and defense sectors.

Amidst this volatility, it's essential to reinforce the importance of patience and a long-term outlook in equity investments. Additionally, diversification across multiple growth vectors is crucial when constructing a portfolio. Moreover, maintaining significant allocations to long-term core portfolios can help navigate market volatility with confidence.

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