BSE PSU index shows strong recovery; climbs over 3,600 points since June 4 with 20% gains

PSU stocks have shown a remarkable recovery, rebounding strongly from what was one of their bleakest intraday performances on June 04, triggered by the unexpected outcome of the Lok Sabha 2024 results.

The market downturn, however, proved short-lived, as the formation of a BJP-led NDA government at the center reassured investors of policy continuity and political stability.

The BSE PSU index, tracking 55 companies, has surged from its June 04 low of 18,011 points to its current level of 21,643, marking a robust gain of 3,632 or 20.16%.

PSU stocks have garnered significant investor interest, buoyed by government initiatives such as Make in India, increased capital expenditure, and efforts to revitalise the banking sector. These initiatives have propelled PSU stocks to unprecedented heights, resulting in elevated valuations during the BJP government's second term.

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With the BJP forming the government for the third consecutive term, a coalition government this time, investors anticipate a continued strong focus on capital expenditure, leading to a rebound in PSU stocks.

Analysts maintain a bullish outlook on PSU stocks despite the significant rally, pointing to compelling factors indicating these sectors are poised for substantial transformation.

Meanwhile, the frontline indices, the Nifty 50 and Sensex, have also rebounded sharply from their June 04 sell-off. The Sensex recently surpassed the 80,000 mark for the first time, while the Nifty 50 approached the 24,500 level. Both indices have gained 10% since June 04 lows.

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Despite weak global sentiment, including heightened tensions in the Middle East, surging crude oil prices, a strengthening dollar, and reduced expectations for Fed rate cuts, investors remain optimistic about the Indian equity market. The country's robust fundamentals have overshadowed these global concerns, reinforcing investor confidence.

Defence stocks lead sharp recovery

Defence stocks have spearheaded a notable recovery since June 04, with Mazagon Dock Shipbuilders emerging as the top performer, surging by 109% to date. This impressive rally has propelled the company's market capitalisation to surpass the ₹one lakh crore mark in today's session.

In late June, the company received Navratna status from the Department of Public Enterprises (DPE). It received Miniratna Category I status in 2006.

Similarly, Cochin Shipyard has also shown robust performance during this recovery phase. The stock has surged by 60%, rising from ₹1,684 on June 04 to the current level of ₹2,679 apiece.

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The government's Atmanirbhar Bharat initiative has significantly prioritised India's defence sector, aiming to bolster indigenous production and reduce reliance on imports. This initiative underscores the defence industry's pivotal role in achieving self-reliance.

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Upon assuming office, there was anticipation that the new coalition government would pivot towards prioritising rural spending over capital expenditure, marking a departure from previous strategies. This expectation has notably impacted stocks in the housing and fertiliser sectors.

Indeed, the government met these expectations by releasing a farmer installment of ₹2,000 and announcing financial assistance to build 30 million new houses in rural and urban areas. These measures indicate a clear policy shift towards enhancing expenditure in rural markets.

Also Read: Budget 2024: Defence, railways, renewable energy sectors to remain in focus

Amid this backdrop, shares of Rashtriya Chemicals & Fertilizers have rallied 45% over the last one month. Similarly, NBCC (India) and HUDCO have also experienced substantial gains of 43% and 42%, respectively.

Disclaimer: We advise investors to check with certified experts before taking any investment decisions.