How to trade PSU stocks after knee-jerk reaction? Analyst views

Shares of public sector undertakings (PSUs) have witnessed a sharp decline after the 2024 Lok Sabha election results. Prime Minister Narendra Modi-led BJP secured a third term but without a majority of its own.

A majority of PSU stocks continued their downward trend in Wednesday's trade despite a rebound in domestic benchmarks.

A few analysts largely suggested that the state-owned lenders may see a dip in the short term, but has potential to bounce back 'soon'. From a long-term view, traders can consider those PSU stocks which have corrected, an analyst said.

"From a long-term view, one should deploy some capital in public sector stocks, primarily which have corrected," Gaurang Shah, Senior VP at Geojit Financial, told Business Today TV.

"PSU stocks may lose some momentum in the short term, but they should return to the limelight soon. The uncertainty might create initial apprehension, but there's potential for significant positive developments once the new government settles in and starts implementing its policies," said Vikram Kasat, Head of Advisory at Prabhudas Lilladher (PL).

Foreign brokerage Citi said while there could be some near-term volatility the PSU space given the sharp rerating in shares over the past year. However, it continues to prefer private sector banks over PSUs.

Analysts at CLSA  said that BJP lacking a majority raises doubts over a stable government and policy-making styles. The brokerage remained "overweight" on consumer staples.

Meanwhile, Indian equity benchmarks today saw a rebound of around 2 per cent after recording a near 6 per cent crack in the previous session.