Will PSU Stocks Be the Top Investment Theme for 2024?

Last Updated on Jan 30, 2024 by Anjali Chourasiya

Looking ahead to the investment landscape of 2024, India emerges as a key player, presenting

numerous opportunities within its promising economic backdrop. In this dynamic setting, it is crucial to identify and leverage emerging trends for making strategic investment choices.

India attracts investors like a magnet, supported by strong economic fundamentals, a vast market, and enduring growth. The forecasts suggest that the nation’s stock market is poised to achieve record highs, driven by ongoing economic expansion, solidifying India’s status as the fastest-growing major economy. This raises the question: ‘What sector seems most attractive and promising in 2024?’ Let’s explore.

Table of Contents

The rise of the Nifty PSE Index

The Nifty PSE Index, a gauge that includes some of the nation’s largest power utilities, miners, and oil refineries, has surged 77% in 2023 as against the Nifty 50’s return of 20%. This impressive rise of the Nifty PSE Index is not just a temporary trend. Its current trading at a Price-Earnings (PE) ratio of 10 indicates there’s a lot of room for further growth. This strong performance highlights the great potential in these sectors.

Government initiatives and their impact on PSUs

Investors are betting on the government’s efforts to build India. In 2023, listed Public Sector Undertakings (PSUs) experienced a resurgence, resulting in an exceptionally successful period. Fueled by the government’s increased capital expenditure in areas like railways and defence and the overarching emphasis on ‘Make in India’, these companies collectively saw a substantial boost, contributing to an increase of nearly Rs. 20- lakh cr. in market capitalisation.

Companies associated with rail infrastructure witnessed an impressive performance, driven by substantial government investments in rail and metro initiatives. IRCTC, Rail Vikas Nigam, IRCON International, and Indian Railway Finance Corporation saw their stocks surge, achieving gains of 44%, 215%, 235% and 341% respectively. The performance of PSU stocks is significantly impacted by the expectation that the current government will win the 2024 general elections. Additionally, their strong performance is boosted by their solid order books. Many of these stocks have orders that are 4-10 times greater than the company’s revenue, showing strong economic conditions and a high demand for products and services in the public sector.

Performance of public sector banks

Coming to Public Sector Banks, we see a similar story. The Nifty Public Sector Bank Index has given a year-to-date return of 31% as against the Nifty Private Bank Index,, which gave a 13% return in a similar timeframe. Sustained credit growth, significant improvement in asset quality, and stable to higher margins drove the robust earnings performance of state-owned banks and, subsequently, the share prices. The majority of banks express confidence that the ongoing double-digit credit growth will persist in 2024, thanks to the domestic economy’s resilience and a gradual increase in demand from rural regions. The sector’s consistent performance is expected to be sustained due to the quality of earnings, positive growth prospects, and a broader re-evaluation of PSU entities.

To wrap up

As per the above discussions, it is very clear that PSU stocks are still good for investments as there is continuous top-line and bottom-line growth, and they are trading at attractive valuations. Navigating the investment landscape in India in 2024 requires a strategic and well-informed approach. As with any investment, due diligence is crucial, and investors should carefully consider their risk tolerance and investment goals.

Disclaimers

Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL and certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors. The content in these posts/articles is for informational and educational purposes only and should not be construed as professional financial advice nor to be construed as an offer to buy/sell or the solicitation of an offer to buy/sell any security or financial products. Users must make their own investment decisions based on their specific investment objective and financial position and use such independent advisors as they believe necessary.

Disclosures

The research and reports express our opinions, which we have based upon generally available public information, field research, inferences and deductions through are due diligence and analytical processes. To the best of our ability and belief, all information contained here is accurate and reliable and has been obtained from public sources we believe to be accurate and reliable.

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Shailesh Saraf

Managing Director at Dynamic Equities Pvt Ltd

With over two decades of experience in equity markets and focusing on generating high alpha at substantially lower risk through his excellently devised strategies and stocks, he has played a significant role in building the "Small Cap High Growth Low Valuation Strategy" which has beaten the benchmarks comprehensively. His emphasis on long term quality and growth as foundational principles for equity investing has greatly benefited the investor community.

Mr. Shailesh Saraf is a highly acclaimed figure in the world of finance and has a distinguished career that spans over several decades. His remarkable achievements and his mantra of "Growth Lena Hai, Sasta Lena Hai" have solidified his position as a prominent fund manager and industry leader.

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