IRFC, RVNL, BoB to IRCTC: Is it wise to buy PSU stocks as Nirmala Sitharaman retained FM in Modi 3.0 cabinet?

Modi cabinet 2024: After the formation of the Modi 3.0 government in New Delhi, with Nirmala Sitharaman retained as Finance Minister, the market anticipates continuity in business and economic policies for the next five years.

Indian stock market investors are hopeful that PSU stocks will yield similar returns during this period. They cite the Modi government's focused efforts on the revival of PSU companies, which have enabled them to compete effectively against their peers over the past five years.

With Nirmala Sitharaman's continuation as Finance Minister in the new Modi 3.0 cabinet, there's an expectation for the extension of these policies. Therefore, investors are advised to retain PSU stocks in their portfolios. Additionally, the stock market investors suggest considering high-quality PSU stocks in sectors such as railways, banking, energy, power, and infrastructure.

Modi 3.0 cabinet: PSU stocks in focus

Commenting on the implications of Nirmala Sitharaman's continuation as Finance Minister for PSU stocks, Avinash Gorakshkar, Head of Research at Profitmart Securities, said, "Since the Modi government took over the central government (in 2014), they have been instrumental in the revival of PSU companies, equipping them to compete effectively against their private peers.

“While this transformation took time, it began yielding dividends during Modi 2.0's tenure. Many PSU stocks outperformed their private peers and delivered multi-bagger returns by a huge margin in the last five years,” Gorakshar said. 

Shares like RVNL, IRFC, Bank of Baroda, and NBCC have delivered whopping returns during this period. This success, he said, can be attributed to the policies implemented by FM Sitharaman in the preceding five years.

“With Sitharaman's reappointment as FM for the next five years, the market anticipates a continuation of these policies, with more adaptation and focus on the competitiveness of PSU companies,” Gorakshkar added.

Discussing potential value picks in the PSU segment, Sandeep Pandey, Founder of Basav Capital, highlighted, “In recent years, we have witnessed various PSU banks generating funds, indicating their anticipation of sustained business volume. Despite the high-interest regime having peaked, they are optimistic about sustained business growth.” 

He said this suggests the market may see further potential in the PSU banks, as the lenders have ample liquidity to meet the demand in the next four to five years. Similarly, Pandey said, the power, energy, and infra segment is expected to remain a lucrative sector for the Modi government, with continued policy support driving business growth."

Meanwhile, Gorakshar said that Railway stocks are expected to remain in focus as the Modi government has been particularly proactive in this segment. 

"Modi 3.0 in New Delhi is anticipated to initiate new rail reforms and privatization of Indian Railways operations, potentially boosting railway stocks in the medium to long term," Avinash Gorakshkar said.

PSU stocks to buy

Asked about PSU stocks suitable for value picks, Gorakshkar suggested, “Shares of RVNL, IRFC, and IRCTC in the railway segment, Coal India Ltd and Indian Oil Corporation in the power and energy segment can be good value picks for long-term investors in Modi 3.0 tenure." 

In the PSU bank segment, Gorakshar said, "One should consider the cost of funding. PSU banks like Canara Bank, Union Bank of India, Bank of Baroda, and Punjab National Bank (PNB) are actively managing their CASA. Hence, these PSU bank shares qualify as potential value picks.”

Disclaimer: The views and recommendations above are those of individual analysts, experts, and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.