The Indian stock market has been experiencing strong volatility due to the US-Iran war, soaring crude oil prices, the rupee’s weakness, and heavy foreign capital outflows. The prevailing market condition seems to have nudged investors towards PSU stocks.
The BSE PSU index is up over 4% this year, while the equity benchmark Sensex is down over 10%. On a monthly basis, the Sensex is down over 6% in March, looking set to extend losses for the fourth consecutive month. On the other hand, the BSE PSU index is down over 4% in March after gaining over the last three consecutive months.
PSU stocks can offer some stability amid geopolitical and geoeconomic uncertainties, as many operate in key strategic sectors such as banking, defence, power, and energy. In these sectors, demand visibility remains strong despite global uncertainty.
Another important factor that favors PSU stocks is dividend yield, as several large PSUs offer yields of 4–7%. Investors who seek stable cash flow find these dividend-yielding stocks more attractive.
Can PSU stocks offer a safe haven?
Experts underscore that PSUs, especially companies in strategic sectors such as power, defense, and energy, can act as relatively defensive bets in uncertain times.
However, they are not free from risks.
“PSUs should not be considered completely risk-free because their performance may sometimes be influenced by government policies, regulatory decisions and commodity price movements,” said Ravi Singh, Chief Research Officer at Master Capital Services.
“Moreover, many PSU stocks have already seen a strong rally in the past few years, and valuations in some cases have become relatively high. Because of this, investors should remain cautious and selective in the PSU sector,” Singh said.
On the other hand, Vinit Bolinjkar, the head of research at Ventura, believes that despite the strong rally seen in PSU stocks over the past couple of years, many large-cap PSUs still trade at reasonable valuation multiples compared to their private-sector peers.
Bolinjkar underlined that with the government’s continued focus on infrastructure development, energy security, and the Atmanirbhar Bharat initiative, several PSU companies have strong order books and predictable earnings visibility that are relatively insulated from short-term global volatility.
However, he also added that there are risks that investors should consider.
Bolinjkar highlighted that certain PSU segments remain sensitive to external and policy-related factors. For instance, oil marketing companies (OMCs) are currently facing margin pressures due to elevated crude oil prices and the need to maintain domestic price stability.
Similarly, public sector banks can sometimes remain sensitive to foreign institutional investor (FII) flows and currency volatility, particularly during phases of global risk aversion.
“Overall, while PSU stocks may experience intermittent volatility due to macro and policy factors, select companies with strong fundamentals, strategic relevance, and consistent cash flows continue to remain attractive long-term investment opportunities,” said Bolinjkar.
“Improving balance sheets, better capital discipline, and attractive dividend yields further strengthen the long-term case. However, risks such as policy intervention, commodity cyclicality, and bureaucratic inefficiencies remain,” said Jahol Prajapati, a research analyst at SAMCO Securities.
PSU stocks to buy
According to Singh, investors may consider selective PSU segments for the long term where demand visibility and policy support remain strong.
“Investors can consider PSU banks, as they have shown a significant improvement in asset quality, capital adequacy and profitability that is supported by steady credit growth in the economy,” said Singh.
“Power generation and power transmission companies may also benefit from India’s rising electricity demand, infrastructure expansion and increased investment in renewable energy and grid networks. In addition, defense PSUs could continue to see growth due to the government’s focus on defense indigenisation and higher domestic procurement,” Singh said.
According to Bolinjkar, from a long-term investment perspective, investors may consider fundamentally strong PSU companies such as State Bank of India (banking), NTPC Limited (power generation), Bharat Electronics and Hindustan Aeronautics (defense), and Coal India (mining and energy).
“These companies benefit from strong market positioning, robust order books, and improving operational efficiency,” said Bolinjkar.
SBI, NTPC, HAL, Power Grid, and PFC are the top long-term PSU picks of Prajapati.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
