The PSU (Public Sector Undertaking) stocks have become favourites among stock market investors in recent months, with many delivering substantial returns.
The confidence of the investors in the PSU stocks is high as the markets rallied on the hopes of Prime Minister Narendra Modi's comfortable return to office.
It's very interesting to note that the market cap of PSU stocks, which stood at approximately Rs 13.5 lakh crore in March 2020, has now risen to around Rs 75 lakh crore, indicating a phenomenal increase.
This has also led to a six-fold rise in government holdings, from about Rs 8.3 lakh crore to approximately Rs 50 lakh crore," said Madhusudan Kela, founder of MK Ventures.
He further added, "PSUs are contributing immensely to India's growth story, now accounting for around 18 percent of the Indian market cap compared to about 12 percent in March 2020. These numbers clearly highlight the cultural shift, the initiatives taken by the government, and a renewed focus on being investor-friendly".
The shares of Cochin Shipyard have surged more than 35 percent in the last five trading sessions. Cochin Shipyard, the largest shipbuilding and maintenance facility in India, is owned by the government of India. Over the last six months, the company has provided investors with a return of 248 percent, continuing its rally with the markets at all-time highs.
"The Cochin Shipyard stock has been continuously moving northward with no urgency to book profits seen in the recent past. The trend is definitely positive, even after this staggering rally.
However, after such a spectacular rally, the stock may be a bit risky to buy at the current level; therefore, a small correction looks better for a fresh entry," said Rupak De, Senior Technical Analyst, LKP Securities.
Another PSU, Hindustan Aeronautics Limited (HAL), stocks have risen over 200 percent in the past year and over 1,300 percent over the past five years.
This growth is largely attributed to the government's aggressive push for indigenous defense manufacturing. Other defence PSUs, such as Bharat Dynamics Limited (BDL), have also seen significant gains, with shares surging more than 57 percent over the past six months.
Bharat Electronics has joined the rally by delivering a return of over 108 percent in the last six months. Another government company related to railway infrastructure financing, Indian Railway Finance Corporation (IRFC), has seen its shares gain more than 147 percent in the same period.
Recently, Prime Minister Modi highlighted in an interview the impressive performance of state-run companies' stocks.
"Look at where the PSU companies' shares have reached today. PSU shares at the time were synonymous with falling prices. But now, in the stock market, their value is rising several times. Look at HAL (Hindustan Aeronautics Ltd.); it has posted a record profit in the fourth quarter of Rs 4,000 crore," said PM Modi.
The positive performance of PSU stocks is reflective of broader trends in the Indian market, where domestic manufacturing and infrastructure development are receiving significant attention and investment. This has been supported by favourable government policies and an overall bullish market sentiment, contributing to the robust returns observed in these stocks.
