PSU stocks soar as investors bet on PM Modi’s return

Investors’ confidence in Public Sector Undertaking (PSU) stocks remains steadfast as these stocks continue to outshine in the market, buoyed by the anticipation of Prime Minister Narendra Modi’s re-election.

Over the past few months, PSU stocks have emerged as darlings of the stock market, delivering substantial returns and garnering significant investor interest. According to Madhusudan Kela, founder of MK Ventures, the market capitalization of PSU stocks has witnessed a remarkable surge from approximately Rs 13.5 lakh crore in March 2020 to around Rs 75 lakh crore presently, accompanied by a six-fold rise in government holdings.

Kela emphasizes the substantial contribution of PSUs to India’s growth narrative, highlighting their increased share in the Indian market cap, which has risen to 18 percent from 12 percent in March 2020. This growth, he attributes, reflects the government’s investor-friendly initiatives and a cultural shift towards PSU investments.

Cochin Shipyard, India’s largest shipbuilding and maintenance facility owned by the government, has witnessed a surge of over 35 percent in its shares in the last five trading sessions, providing investors with a staggering return of 248 percent over the last six months.

Similarly, Hindustan Aeronautics Limited (HAL) has seen its stocks soar over 200 percent in the past year, attributed to the government’s emphasis on indigenous defence manufacturing. Other defence PSUs like Bharat Dynamics Limited (BDL) have also witnessed significant gains, with shares surging over 57 percent in the past six months. Bharat Electronics and Indian Railway Finance Corporation (IRFC) have also joined the rally, delivering returns of over 108 percent and 147 percent, respectively, in the last six months.

Prime Minister Modi highlighted the stellar performance of PSU stocks in a recent interview, citing HAL’s record profit of Rs 4,000 crore in the fourth quarter as a testament to their resurgence in the market. The bullish performance of PSU stocks mirrors broader trends in the Indian market, characterized by a focus on domestic manufacturing and infrastructure development, supported by favourable government policies and optimistic market sentiment.