The S&P BSE PSU index experienced a strong resurgence in recent trading sessions following a period of stagnation since mid-July. Over the past six sessions, the index has climbed nearly 5 per cent, largely driven by rallies in metal and power stocks
Leading the charge is NALCO, which increased by an astonishing 16.70 percent throughout this time. It was closely followed by NMDC, which rose 13.2%, while SAIL and Power Grid Corporation also gained 14% and 8.5%, respectively. GAIL and Bharat Heavy Electricals also contributed to the index’s revival, with each increasing 13%.
What triggered the rally?The rally in PSU stocks is driven by various factors, such as the resumption of new order flows, China’s monetary stimulus (boosting metal stocks), and the finalisation of the country’s National Electricity Plan (NEP) for 2023-2032 which aims to meet a peak demand of 458 GW by 2032 with an investment of ₹9.15 lakh crore (driving power sector stocks)
Mohit Khanna, Fund Manager at Purnartha, emphasized that PSU enterprises have been key benefactors of the government’s increased capital expenditure, garnering a large chunk of the order inflows and keeping the PSU stocks healthy.
He noted that during the first quarter of FY25, project announcements and tendering from the government were halted due to the general elections. It wasn’t until the new government presented its Union Budget in late July 2024 that order inflows resumed around mid-August, with the government working in a more normalised manner.
Furthermore, as the government’s Capex spending has increased by +17% YoY (3.4% of GDP) to Rs. 11.1 trillion in the current fiscal year, we anticipate significant order inflows. The recent recovery in the PSU index confirms this,” Khanna said.
The present budgeted capital investment of ₹11.1 trillion for FY25 must be finished by March 2025. However, full-fledged ordering/spending began around August 24. The positive trigger is larger spending in less time.