The recent downturn in the stock market prices has shocked Investors alike. With a probability of more dip in the future due to various economic and geopolitical reasons, investors feel confused about their future course of action. Out of all the stocks, the public sector firms have taken a huge hit. Sharp corrections could be seen in almost every public sector enterprise stock price, including BEL and RVNL. Serving as the two most heavily invested stocks, the public sector undertakings have witnessed major fluctuations, thereby worrying investors. Analyzing the recent price movements, the following article explores how investors should move further with their investments in RVNL and BEL by understanding their share price movement:
1. Rail Vikas Nigam Limited (RVNL)
Rail Vikas Nigam Limited or RVNL is a public sector enterprise working in the development of railway infrastructure and other associated projects. The RVNL share price has witnessed serious share price fluctuations and downturns in recent months. Despite giving returns of more than 131%, the price has fallen from its 52-week high of ₹647 to 348.85, witnessing a 46% fall. Low profit margins, decrease in profitability, and negative investor and overall market sentiment are the main reasons behind this downfall. Reporting a decline of 27% in profits, the company has cited low profit margins, a decrease in revenue, and low contracts as the main reasons behind this fall. Moreover, with investors rapidly pulling out investments, the share price has fallen further leading to serious price downfalls.
2. Bharat Electronics Limited (BEL)
A leading company working in the defense electronic sector, Bharat Electronics Limited has witnessed sharp price movements. The BEL share price has witnessed fluctuations and has gone down by 16% from its 52-week high price of ₹340.35. The main reason behind this downfall is the rapid selling by foreign institutional investors or FII and other geo-political reasons. However, due to overall strong performance, robust profitability, and continuous support from the government in the form of defense contracts, the share price has been stable and showing signs of improvement. With a CAGR of 64.6% and 57% in the last 5 and 3 years respectively, the BEL share price has delivered exponential returns to the investors. Strong and favorable policy decisions in the defense sector by the government and strong financial performance and revenue growth have helped the company’s share price to stabilize itself.
Investor consideration:
Investors invested in RVNL and BEL stocks or planning to invest in the same must take into consideration the following factors which can affect future stock price movements:
1. Government policies:
Favourable government policies in the defence and Railway sector can help both companies in terms of better contract and overall profitability. This in turn can improve the investor sentiment and help gain more investment.
2. Positive financial health:
Investors must keep a close look on the overall profitability and financial health of the companies. Debt levels, profit margins and other essential aspects must be analysed to ensure financial stability.
3. Market conditions:
Favourable market conditions in terms of better GDP, foreign investment inflow and positive geo political factors can help stabilize price fluctuations and help improve investors sentiment.
Conclusion
Despite the serious price fluctuations in the stock prices of both companies, favourable market conditions, positive market sentiment and contracts inflow can help stabilize the prices in future. Investors must opt for complete research and analysis considering the economic factors and company revenue statistics before investment in the PSU stocks.
