Stocks

PSU stocks to buy: Showstopper stocks! 7 out of top 10 October performers are PSUs. Should you flow with the wind?

NEW DELHI: Often shunned by investors due to issues related to management efficiency, growth prospects and competitiveness, PSU stocks have been taking revenge and how! In the last one month alone, out of the top 10 best-performing BSE500 stocks, seven of them are ‘sarkari’ companies.

The top four best-performing stocks –

, , and – are all PSUs with monthly returns going up to about 50%.

Barring

, which is up almost 29% in a month, all the other top-performing PSU stocks in the top 10 list are either from the defence sector or banks.

top performing stocksETMarkets.com

Sectoral data also shows that Nifty PSU Bank (19.6%) and Nifty CPSE (10.8%) have been the top gainers in the last one month. The headline index Nifty is up around 5.5% during the period.

With the days of making easy money on Dalal Street gone due to central bank rate hikes and quantitative tightening, investors have been rotating capital to focus more on valuations and dividend yields. PSU stocks score high on both these counts.

While defence PSUs have been in the limelight due to the government’s increasing thrust on indigenisation, PSU banks are turning the new darlings of Dalal Street amid a pick-up in the corporate loan cycle.

PSU bank stocks

Analysts say the worst of asset quality issues for PSU banks have been left behind in the new cycle. “Further, these banks are more focused on better-rated corporates and granular loans, which provides some comfort on the asset quality here-on. While the restructured book remains slightly higher than comparable PVT peers, it remains lower than the previous cycle, which provides additional comfort,” Haitong Securities analyst Darpin Shah said.

The international brokerage is bullish on

, , Canara Bank and Indian Bank. also likes SBI, BoB and Canara Bank.

The spellbound rally in PSU bank stocks has eclipsed the lure of large private bank stocks in the near term as

has been reduced to a ‘sulk pot’.

Defence PSU stocks

On the back of an impressive order book, export prospects, geopolitical situation and indigenisation, investors have been gunning for defence PSU stocks which are now being regarded as a multi-year theme.

“More items are coming under the prohibitory list as far as defence procurement is concerned. And companies like

, , Bharat Dynamics, Mazagon Dock and Cochin Shipyard are likely to get more orders from the defence ministry. Thereby, their earnings will also improve not only domestically but internationally as well,” said Gaurang Shah, Sr. Vice President at .

(With data inputs from Ritesh Presswala)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)


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