Public Sector Undertaking (PSU) stocks have been a hot topic for investors, thanks to the government’s push on initiatives like Make in India, increasing capital spending, and boosting the banking sector. These efforts drove PSU stocks to high prices, and investors were optimistic, expecting a strong win for the BJP and continued capital investment benefits.
However, the actual election results surprised everyone. The BJP, led by Modi, got 240 seats, missing the halfway mark in the 543-member house by 32 seats. Although the BJP is likely to form a government with allies, investors are worried about policy stability, causing a sharp drop in Indian stocks, especially PSUs.
Stock Meltdown Continues
Today, the BSE PSU index dropped another 4.5%. Bharat Dynamics hit its 10% lower limit for the second day at ₹1,293 per share. NBCC fell 7% to ₹127. Other PSU stocks like Indian Bank, Cochin Shipyard, Engineers India, Mishra Dhatu Nigam, and IRFC saw losses between 2% and 5%.
On the bright side, Mazagon Dock Shipbuilders bounced back with an 8% gain after a 15% fall the previous day. NALCO, Hindustan Copper, SAIL, Container Corporation, ONGC, HUDCO, and NMDC are also seeing gains between 3% and 6.5%.
At the time of writing, the BSE PSU index rebounded from its intraday low and is now up 0.60% at 19,078 points. The Nifty PSE index, which fell 20% in the previous session, is also up 0.60% at ₹9,498 points. The Nifty PSU Bank basket is trading slightly up by 0.10% after Monday’s sharp decline.
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, commented, “The market needs time to absorb the surprising election results. Stability will return soon, but expect volatility until there’s clarity on the new cabinet and key roles. A sharp market rebound is unlikely in the short term, but sectoral preferences might shift. Sectors like FMCG, healthcare, and IT will gain more interest, and market momentum will slow down. One good thing about the sharp market correction is that high valuations have come down, which will attract institutional buying once the new cabinet is clear.”
Vijayakumar advised, “Investors can start buying high-quality large-cap stocks in IT, financials, autos, and capital goods.”
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