PSU stocks decline sharply, worst in three years

Public sector undertakings (PSUs) are wrapping up fiscal year 2025 with disappointing results. This year marks the worst performance for PSU stocks in the last three years, with 73% of these stocks dropping as much as 48%. Only one stock, Mazagon Dock Shipbuilders, has performed exceptionally well, seen as a rare bright spot in a struggling market. As of March 20, 2025, the BSE PSU index is down nearly 8%, showing a stark contrast to the BSE Sensex, which gained 2.4% during the same period. Most stocks in the PSU sector have faced a tough six months, losing value significantly. However, over the previous two and a half years, the BSE PSU index gained impressive returns of 82% and 104% over two and three years, respectively. This earlier success was mainly due to strong government spending and reforms. Among the 46 PSU stocks that declined, a large number fell by double digits. Notable losers include Mangalore Refinery, KIOCL, and NMDC Steel, with losses ranging from 31% to 48%. Other banks and companies like Canara Bank, Indian Overseas Bank, and Indian Oil Corporation have faced losses between 19% and 30%. Some stocks, like GAIL and State Bank of India, have only dropped slightly. On a positive note, as of Wednesday, 17 PSU stocks saw gains, with Mazagon Dock leading at a remarkable 155% increase. Other gains came from companies such as Garden Reach Shipbuilders and Cochin Shipyard, which rose by 76% and 54%, respectively. Recently, there have been signs of recovery in the PSU sector. In the past month, 37 stocks have rallied as much as 21%, while some stocks struggle to stay afloat. Experts recommend that investors take a careful approach to choosing stocks for fiscal year 2026, focusing on companies with strong growth potential and solid financial health, particularly in the infrastructure, defense, and railway sectors. Public sector banks are expected to perform better with improved asset quality and profitability. The government is also predicting higher dividends, signaling optimism for the future. Overall, while PSU stocks face challenges, there are still prospects for recovery, especially in specific growth sectors.