New Delhi, Feb. 21 -- Stocks of public sector undertakings (PSU) have had a sterling rally this year. The 56-stock BSE PSU Index's doubling outshines the Sensex' modest 24% return this fiscal amid a valuation re-rating backed by earnings. But this rally isn't a mere bubble. Mint explains:

The BSE PSU Index has doubled to 18,918.03 in the current fiscal year through 20 February as mutual funds and retail investors have stepped up buying stocks with relatively lower free float. From a cumulative 12.57 trillion PSU shares as of June end, active and passive mutual funds' holding had jumped to 12.94 trillion shares at the end of January, says Fisdom research. That's an incremental 370 billion shares over seven months. PSU holdings jumped 56% ...