HUDCO, IREDA, PFC, REC rally up to 5%: Why PSU financiers are surging after RBI policy

Shares of state-owned financial institutions including Hudco, IREDA, PFC, REC and others jumped up 5 per cent during the trading session on Wednesday after the RBI’s monetary policy, where it announced measures for reducing risk weights for infrastructure financing, supportive for the PSU non-banking players.

Besides keeping the rates unchanged, RBI Governor Sanjay Malhotra announced a measure on infra financing out of five key measures, where risk weights for NBFC lending to operational, high-quality infrastructure projects will be reduced, lowering financing costs. The announcement triggered a rally in PSU financiers.

Housing & Urban Development Corporation (Hudco) led the gains as the stock jumped more than 5.15 per cent to Rs 235.25 during the Wednesday, compared to its previous close at Rs 223.70. It was followed by Indian Renewable Energy Development Agency (IREDA) which surged 4.45 per cent to Rs 155.30 in the early trade for the day.

Utilities financing twins REC and Power Finance Corporation (PFC) rose 4.65 per cent and 3.9 per cent to Rs 390.40 and Rs 426.35, respectively after the RBI’s announcement. Indian Railway Finance Corporation (IRFC) gained nearly 2 per cent to Rs 125.35. Other NBFCs including Gujarat State Financial Corporation and IFCI Tourism Finance Corporation of India also rose up to 1 per cent each.

For NBFCs, risk weights on lending to operational, high-quality infrastructure projects will be reduced to lower funding costs, said SBI Securities. “Monetary action will depend on clearer evidence on the durability of low inflation and global financial stability. The monetary policy remains Neutral to Positive for the overall equity market,” it said.

Infrastructure sectors cane also expect additional financial support for capital investment, said Akhil Puri, Partner, Financial Advisory, Forvis Mazars India. “Global uncertainty such as tariffs and geopolitical tensions will be absorbed by the RBI's financial stability, liquidity and demand-based approach to recovery, indicating a serious but balanced approach to advance development.”

The reduction of risk weights for infrastructure lending by NBFCs is a clear positive, potentially lowering the cost of capital for critical sectors, said Sachin Sawrikar, Managing Partner at Artha Bharat Investment Managers IFSC LLP. “Overall, the direction is pragmatic, growth-supportive, and clearly aimed at improving financial sector efficiency and business ease,” he said.