In a remarkable turnaround, Indian public sector companies, once dismissed by market observers, have staged an impressive comeback in the stock market. Over recent years, renewed interest in Indian PSUs has resulted in substantial returns for shareholders across various sectors.
The resurgence of interest in PSUs gained momentum following remarks by Prime Minister Narendra Modi during an interview with TV channel NDTV last week. PM Modi highlighted the increasing value of PSUs, particularly banks, in the stock market. He noted the significant rise in market indices since his government took office, citing the surge from 25,000 to 75,000 points. PM Modi also hinted at potential market movements post the vote count on June 4, following the conclusion of the seven-phase Lok Sabha elections.
Defending his government’s stance against criticism from opposition parties, PM Modi pointed to the success story of state-run entities like Hindustan Aeronautics Ltd (HAL). HAL’s robust financial performance, including a quarterly profit of Rs 4,000 crore ending in March 2024, underscored the resurgence of PSUs in the market.
HAL’s remarkable growth, with its shares soaring over 200 percent in the past year and over 1,300 percent in the last five years, mirrors the broader trend in the defence sector. Other defence PSUs like BEL and BDL have also witnessed substantial gains, buoyed by government initiatives promoting indigenous defence manufacturing.
Industry experts, including N Jayakumar, MD and Group CEO of Prime Securities, highlighted the tailwinds supporting the PSU sector’s growth. Factors such as technology transfer, multinationals collaborating with Indian manufacturers, and government initiatives like Make in India and Production-Linked Incentives have bolstered order flows in the defence sector.
Echoing optimism, Abhay Agarwal, Founder of Piper Serica Advisors, emphasized the significant opportunities in sectors like defence and mobility within the PSU space. He underscored the importance of incentivizing private capital formation for sustained economic growth.
Amidst the resurgence of PSUs, the BSE PSU index has surged over 100 percent in the past year, outperforming the broader market. Looking ahead, experts foresee substantial opportunities in sectors like mobility and green energy, aligning with the government’s vision of energy independence and reducing emissions.
India’s commitment to renewable energy, as evidenced by the “Panchamrit” pledge at COP26, underscores the potential for growth in the green energy sector. With ambitious targets to increase non-fossil electricity capacity and reduce emissions intensity, the green energy sector presents significant opportunities for both large players and investors with access to substantial capital and execution capabilities.