NEW DELHI/MUMBAI: P Chidambaram, the newly appointed finance minister, is planning to revive share sales of listed PSUs, primarily those in which public holding is less than 25 per cent, hoping to send out a strong signal of his intent to improve government finances and boost investor sentiment.

Companies whose shares could be sold include steelmaker SAIL, India’s largest power generator NTPC, and mining companies Coal India and NMDC. An official familiar with the minister’s thinking said he was of the view that partial privatisation, referred to as disinvestment, could boost markets.

The Sensex has been the thirdbest performer among major Asian economies so far this year, generating a return of around 14 per cent since January 1, 2012, compared with 18 per cent and 16 per cent by Thailand and Singapore, respectively, while Hong Kong’s equity markets went up 9 per cent during the same period. But the markets have fluctuated wildly, largely on account of global factors, though some of the see-sawing has been driven by the market’s views on the government’s capacity to enact reforms. The primary market is virtually frozen, with Rs 1,369 crore raised since the beginning of the year, reflecting the pessimism that has gripped Indian business about the future of Asia’s third-largest economy. Besides listed state-run companies, some unlisted PSUs could also be listed, boosting the primary market.

“The valuations are not stretched in case of most blue-chip companies; FII flow has been positive; redemption in mutual funds has gone down; and Irda is soon expected to raise the investment limit in a single company,” said Rajesh Cheruvu, chief investment officer-India at Royal Bank of Scotland Private Banking.

Road Map for Fiscal Consolidation

Chidambaram, who was switched to the finance ministry from home, has already held several rounds of discussions in order to come up with a plan for disinvestment, the official said. The 66-year-old politician from Tamil Nadu is keen to avoid the fiasco that characterised the disinvestment programme for the year ended March 31, 2012, when receipts fell well short of the budgeted Rs 40,000 crore, contributing significantly to the fiscal slippage.

Despite a rushed, and hugely controversial auction of ONGC shares subscribed largely by LIC, the state-owned life insurer, the government could raise only Rs 13,894 crore last year, adding to the fiscal deficit that widened to 5.9 per cent of GDP from the 4.7 per cent budgeted, prompting an outlook downgrade from Standard and Poor’s, a ratings agency.

The government has budgeted Rs 30,000 crore from disinvestment in the current year, but does not have much to show four months into the financial year apart from cabinet approval for a stake sale in SAIL. The budget for 2012-13, presented by the then finance minister Pranab Mukherjee, now President of India, had pegged fiscal deficit at 5.1 per cent of GDP for 2012-13.