With just 7 more trading sessions to go, the 63-stock BSE PSU index was down nearly 8% as on Wednesday versus 2.4% gains seen in the BSE Sensex in the same period.
The correction over the last six months has taken some sheen out of the PSU counters. However, their rise over two-and-half years prior to October has been so prolific that the 2-year and 3-year returns of the BSE PSU index are still at 82% and 104%, respectively.
“Over the past two years, PSU stocks have delivered an impressive rally, driven by the government’s aggressive capex push and structural reforms. The BSE PSU Index surged over 80% from 2022 to early 2024, with sectors like defence, power, and railways leading the charge,” Harshal Dasani, Research Analyst at Invasset PMS said.
FY25 PSU laggards
Out of the 46 stocks that have slipped in the red, 37 have fallen in double-digits. Mangalore Refinery and Petrochemicals (MRPL), KIOCL, NMDC Steel, Chennai Petroleum Corporation, Rites, The New India Assurance Company, Ircon International, Punjab & Sind and UCO Bank are the top 10 losers, falling by in the range of 48% and 31%.
Others like The Jammu & Kashmir Bank, Gujarat Gas, Central Bank Of India, Indian Overseas Bank, Punjab National Bank (PNB), Bank Of India, Canara Bank, SJVN, Gujarat Mineral Development Corporation (GMDC), Bank Of Maharashtra, Indian Oil Corporation (IOC), Container Corporation Of India, Indian Railway Catering And Tourism Corporation (IRCTC), MMTC, Union Bank Of India, Engineers India, Bank Of Baroda (BoB) and Hindustan Copper have fallen between 30% and 20%.
Meanwhile, Coal India, NHPC, Bharat Petroleum Corporation (BPCL), Oil & Natural Gas Corporation (ONGC), Indian Railway Finance Corporation (IRFC), Life Insurance Corporation (LIC), Bharat Heavy Electricals (BHEL), Steel Authority of India (SAIL) and BEML are down between 19 and 10%.
Losers in single-digits include GAIL (India), Rashtriya Chemicals and Fertilizers, REC, Oil India, Power Grid Corporation Of India, State Bank Of India (SBI), Indian Bank, ITI and NMDC.
Stocks like NMDC, ITI, Indian Bank, State Bank Of India and Power Grid were down just 2% and a few positive rallies going ahead could put them back into the green. The Indian markets have been on a winning spree for the past three trading sessions ended Wednesday, gaining by over 2%.
Stocks in green
Seventeen stocks were trading in the green as on Wednesday with Mazagon Dock’s returns of 155% so far, eclipsing all its peers. Garden Reach Shipbuilders & Engineers and Cochin Shipyard were next to follow with gains of 76% and 54%, respectively.
Meanwhile, Bharat Electronics, Rail Vikas Nigam (RVNL), Bharat Dynamics, National Aluminium Company (NALCO), General Insurance Corporation of India (GIC), Hindustan Aeronautics (HAL), Indian Renewable Energy Development Agency (IREDA), IFCI, NLC India, Power Finance Corporation (PFC), Hindustan Petroleum Corporation (HPC), Housing & Urban Development Corporation (HUDCO), NBCC (India) and NTPC have gained between 42% and 0.43% in the said period.
Green shoots
PSU stocks have shown signs of recovery in the past one month as 37 stocks (59%) have rallied up to 21% in this period while 27% are still in the red on the basis of 1-month returns. GRSE, Mazagon, BEL and Bharat Dynamics are among the top performers while IREDA, RCF and RVNL remain among laggards.
FY26 outlook and stock investment strategy
Ajit Mishra, Senior Vice President – Research at Religare Broking recommends a bottom-up approach in stock selection as we enter FY26. Focusing on stocks with attractive valuations and strong growth potential remains the key, he said.
“Public sector banks are well-positioned with improving asset quality, profitability, and RoE. Meanwhile, LIC stands out for its strong brand equity and dominant market presence,” Mishra added. In the infrastructure, defense, and railway sectors, investors should prioritise PSUs with solid order books, strong execution capabilities, and efficient management, he suggested.
Echoing a similar sentiment, Dasani Invasset PMS said that in FY26, PSU investing will require a quality over quantity approach, with focus turning on fundamentally strong companies where performance justifies optimism.
Not all PSU stocks are on equal footing, Dasani said, adding that many could see further consolidations until their financials catch up. Citing RVNL as an example, he said that the railway company has delivered over 15X returns since 2022 and yet, its topline CAGR remains under 10%.
In his view, many PSUs are still offering attractive valuations with tailwinds of profitability and government’s capex push. Sectorally, power and defence are potential winners according to him.
“The government projects higher dividends—Rs 69,000 crore for FY26 versus Rs 55,000 crore this year—reflecting strong profitability expectations. Power PSUs like NTPC and Power Grid are ramping up investments, with capex expected to rise 21% to Rs 86,138 crore in FY26. Defence majors like HAL and BEL are also poised to gain from increased government orders,” he added.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
