PSU stocks, The relentless rise, shows no signs of slowing down. This surge is driven by expectations of increased government investments in railway infrastructure and the growing demand for power in India.
The increased capital expenditure (capex) allocation by the government over the past few years reflects its commitment to stimulating economic growth and bolstering key sectors. The consistent rise in capex allocation, from Rs 5.5 lakh crore in 2020-21 to a record high of Rs 10 lakh crore in 2023-24, underscores the government’s focus on infrastructure development, public sector investments, and other growth-oriented initiatives.
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This surge in capex allocation is expected to have a significant impact on various sectors, including infrastructure, transportation, power, and manufacturing. It is likely to drive demand for goods and services, create employment opportunities, and enhance the overall economic productivity of the country.
Railway PSUs have been on the rise since the government announced a significant capital outlay of ₹2.40 lakh crore for the Indian Railways in the Union Budget 2023-2024. This historic investment is nearly nine times the amount allocated in 2013–14, indicating strong government support for railway development.
Analysts are optimistic about future investments in the sector, given the government’s commitment to transforming the Indian Railways. In addition, the impressive performance of IRFC shares has propelled the company’s market capitalisation to surpass that of M&M, Tata Steel, and Jio Financial Services, cementing its position as the ninth PSU firm to achieve this milestone.
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Power stocks are also experiencing a surge in today’s trade, driven by the increasing power demand in India. Union Power Minister R K Singh predicts that India’s peak power demand is expected to exceed 400 GW by 2030, leading to the establishment of more generation capacity to meet this rising demand.
Several public sector undertaking (PSU) stocks have been garnering premium valuations compared to their private sector counterparts, indicating investor confidence in their growth prospects. For instance, the stock of Container Corporation of India (Concor) is currently trading at a forward price-to-earnings (PE) ratio of 36.4, significantly higher than Adani Ports and Special Economic Zone’s 26.4 times PE multiple, as highlighted by analysts at Kotak Institutional Equities.
Similarly, the major steel producer, Steel Authority of India, commands a one-year forward PE ratio of 13.4, surpassing Tata Steel’s 13.1 times. Additionally, National Aluminium Company’s one-year forward PE ratio stands at 14.2, exceeding Hindalco’s 11.7 percent, as noted by analysts. Over the past five years, shares of Fertilisers and Chemicals Travancore and Gujarat State Financial Corporation have emerged as the top performers on the BSE PSU Index, witnessing remarkable surges of over 1,800 percent and 1,300 percent, respectively.
Other notable gainers on the BSE PSU Index include Orissa Mineral Development Company, Garden Reach, Bharat Electronics, BHEL, Ircon International, and Tamilnadu Telecommunications, all delivering returns exceeding 500 percent.
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