REC, GAIL, BOB, PFC, SJVN, PNB, HPCL, LIC, HAL shares: Modi stocks tank up to 7% today. Here's why

Shares of PSU stocks took a beating in Tuesday's trade as the opposition INDIA alliance giving tough fight to the incumbent BJP-led NDA in the early voting trends. Data showed INDIA was leading with 224 seats against NDA's 289. The NDA tally was down 54 seats vis-a-vis 2019 seat wins.

Stocks with large leverage to the government’s economic agenda such as PSUs delivered spectacular returns in past few months. Many narrative and PSU stocks are trading at outlandish multiples and are factoring in optimistic volume and profitability assumptions, Kotak Institutional Equities said. Only a large BJP victory could help them sustain rich-to-bubble multiples in the PSU space for longer.

"The PSU Index currently attributes 37 per cent of price to long-term growth expectations, above historical highs of 35 per cent in FY17. The overarching bullish trend for PSUs may moderate, but there remain pockets of opportunity that can drive a fresh leg-up to the rally and deliver huge returns," Elara Securities said.

REC shares fell 6.88 per cent to Rs 562.95. Indian Bank declined 6.60 per cent to Rs 566.65. SJVN tanked 6.46 per cent to Rs 133.90. PFC, HUDCO, BHEL and BHEL plunged 5.5-6.5 per cent.  Central Bank, Hindustan Copper, PNB, Canara Bank, NALCO and LIC fell over 5 per cent each. ONGC. HAL, PSB, NBCC and NTPC also fell.

PSUs often play a key role in the domestic economy, and their fortunes are tied to government policies and directives. For example, in the case of defence sector, for instance, the BJP government placed a strong emphasis on national security, which includes bolstering the country's defense capabilities, Nikunj Saraf, Vice President at Choice Wealth said in a BT Markets survey.

If the BJP falls short of a majority but secures control of the government with the help of NDA allies, a sell-off in highly valued domestic-oriented sectors like PSUs, industrials and infrastructure, Saraf said.