Indian State-Owned Companies' Stocks Soar in FY24
In a remarkable performance during the fiscal year 2024, stocks of Indian state-owned companies have witnessed a significant surge, majorly outstripping the gains seen in mid- and small-cap stocks. The BSE PSU index, a pivotal benchmark for public sector undertakings, nearly doubled its value, indicating a robust 92.4% increase from 9,497 points to 18,274 points.
This stellar performance comes in the wake of increased government capex spending and the buoyant expectations tied to the Bharatiya Janata Party (BJP) securing another tenure in the impending Lok Sabha elections. These factors, alongside a buoyant market sentiment, have catapulted PSU stocks into a league of their own, with remarkable gains across various sectors including railway, power, defence, and oil.
Crucial Drivers of Growth
The government has been instrumental in steering this unprecedented wave of growth, primarily through a marked acceleration in capex spending. In the FY24-25 interim budget, the capital outlay was escalated by 11.1% to an impressive ₹11,11,111 crore, equivalent to 3.4% of the GDP. Such governmental maneuvers are pivotal in sustaining the upward trajectory of these stocks.
Political stability, with strong prospects of a BJP victory, has further solidified the bullish outlook for PSU stocks, amplifying investor confidence in the continuous growth of capex. Additionally, PSU stocks have benefited from a high demand coupled with limited liquidity, primarily because the government holds substantial stakes in these enterprises, creating a lucrative supply-demand imbalance that has boosted stock prices.
Sector-Specific Highlights
The railway sector emerged as one of the frontrunners in FY24, leveraging the government's focus on transformation and modernization, thereby attracting substantial order inflows for railway companies. Similarly, the power sector thrived, bolstered by a substantial increase in demand, positively impacting the stocks of power generators, distributors, and financiers alike.
The defence sector too witnessed significant gains, driven by increased budget allocations, notable order acquisitions, and initiatives aimed at promoting domestic procurement and reducing dependence on imports. Oil PSUs also enjoyed a period of remarkable performance, benefitting from stable fuel prices, until the recent cut in petrol and diesel prices.
Multibagger Returns: A Testament to Growth
Multibagger Returns stand as a testament to the growth witnessed in the BSE PSU index, with 37 stocks, accounting for 66% of the index, delivering returns ranging between 100% and 460%. This not only highlights the potential of PSU stocks but also underscores the resilience and growth prospects of India’s public sector in the dynamic economic landscape of FY24.
In conclusion, the FY24 fiscal year has been a watershed moment for Indian state-owned companies, with multiple sectors exhibiting impressive gains. Backed by robust governmental strategies, political stability, and sector-specific growth drivers, PSU stocks have not just outperformed but have also set a new precedent for performance in the Indian stock market landscape.
Indian state-owned companies continue to manifest resilience and potential, underpinning the economic growth trajectory and reinforcing investor confidence in the public sector's prowess.
Analyst comment
This news is positive for the market. The surge in stocks of Indian state-owned companies, outpacing gains in mid- and small-cap stocks, indicates a robust market performance. The increase in government capex spending and the expected victory of the Bharatiya Janata Party (BJP) in the upcoming elections are crucial drivers of this growth. Sector-specific highlights, such as the railway, power, defense, and oil sectors, further contribute to the positive outlook. Overall, this news suggests a bullish market for PSU stocks in the near future.
