Best PSU Stocks in India

01 March 2024
8 min read
Best PSU Stocks in India
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(The stocks mentioned in the blog are as per Analyst Ratings and Market Capitalization)

Public Sector Undertaking (PSU) plays a principal role in India’s economic growth. PSUs are basically those companies where at least 51% of ownership is with the Indian government. Such companies have been playing pivotal roles in numerous sectors, such as Energy, Banking, Insurance, Infrastructure, etc.

Public Sector Undertaking (PSU) Industry - A Brief Overview

PSUs are one of the most crucial drivers assisting in the economic development of the country. It has been contributing to employment generation, infrastructure growth, and the overall well-being of society.

The primary objective of the PSU industry is to serve and meet the public interest rather than boosting profits. Indian PSUs operate in numerous sectors, including energy, banking, manufacturing, mining, telecommunications, defence, steel, etc.

PSUs are one of the major employers in India. It has been providing thousands of employment opportunities around all cities across India. Apart from this, PSUs also play an instrumental role in developing government policies and initiatives. They are involved in implementing government programs associated with rural development, poverty alleviation, socio-economic welfare, etc.

On a financial note, the performance of PSU companies varies from sector to sector. While many PSUs have consistently been profitable over the years, some have faced setbacks due to market competition, inefficiency, etc. Therefore, before investing in PSU stocks, you should do complete research and check various factors that affect investment decisions.

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Best PSU Stocks in India 2024 as per Analyst Ratings

PSU or government stocks have always been the favourite of many investors across India. Hence, we have created a list of some of the top PSU stocks as per the BUY analyst rating provided by the I/B/E/S database. These ratings are an aggregation of investment calls that registered stock market analysts furnish.

Now, let’s have a look at the list-

S.No.

Best PSU Stocks in India (as per analyst ratings)

BUY Analyst Rating (in %)

1.

NTPC

94

2.

NHPC

83

3.

Coal India

73

4.

Oil & Natural Gas Corporation

71

5.

Power Grid Corp

60

*Our stock selection criteria for top stocks based on analyst ratings are mentioned at the bottom of this blog.

Top PSU Stocks in India in 2024 (as per Market Capitalization)

Here, we have listed down some of the top PSU sector stocks as per market capitalization.

S.No.

Best PSU Company in India (as per Market Capitalization)

Category

1.

Oil & Natural Gas Corporation

Oil Exploration

2.

NTPC

Power Generation & Distribution

3.

Coal India

Mining

4.

Power Grid Corp

Power

5.

Indian Railway Finance Corp

Finance

*Our stock selection criteria for top stocks based on Market Capitalisation are mentioned at the bottom of this blog.

Overview of Best PSU Stocks in India (as per Analyst Ratings and Market Capitalisation)

For your reference, here we have illustrated a brief overview of the PSU stocks in India as per market capitalisation and analyst ratings mentioned above-

1) Oil & Natural Gas Corporation

Oil & Natural Gas Corporation, commonly known as ONGC, was founded in 1993. It is one of the most renowned PSUs in India, primarily engaged in oil exploration and production. It is a leading crude oil and natural gas company engaged in exploration, development and production of crude oil, natural gas, and other petroleum products.

Some of its key subsidiaries are ONGC Videsh Limited, Mangalore Refinery and Petrochemicals Limited, Hindustan Petroleum Corporation Limited, HPCL Biofuels Limited, Petronet MHB Limited, etc.

2) NTPC

National Thermal Power Corporation (NTPC) is a leading power generating company in India. It was founded in 1975 and since then has actively engaged in the generation and sale of power to State Power Utilities.

NTPC has numerous power stations spread all across the country. From power generation to project management, energy trading, and oil and gas exploration, this PSU has been playing a crucial role in the energy domain for many years now.

PSU Stocks Fun Facts - Groww

3) Coal India Ltd

Coal India Ltd, one of the backbones of the Indian economy, was founded in 1975. It is mainly involved in coal mining and is spread across 8 states in India. The company has over 300+ mines, including underground, opencast and mixed.

It is a Maharatna company and also runs the Indian Institute of Coal Management (IICM), a corporate training institute in India.

Coal India also has various subsidiaries. Some of the prominent ones include Bharat Coking Coal Limited, Central Coalfields Limited, Mahanadi Coalfields Limited, etc.

4) Power Grid Corp Ltd

Power Grid Corporation of India Limited (POWERGRID), is a Maharatna PSU of the Government of India. It was founded on 23rd Oct 1989 and is a listed Company, wherein 51.34% is held by the Indian government, and the remaining is held by public and institutional investors.

It is a power transmission company primarily engaged in the planning, implementation, operation, and maintenance of Inter-State Transmission Systems, telecom and consultancy services.

5) Indian Railway Finance Corp

Indian Railway Finance Corp (IRFC) was established in 1986. It is a Public Sector Enterprise that looks after the Indian Railways’s finances.

The mainline business of IRFC is to borrow funds from the financial markets in order to finance the creation of assets. These assets are then leased out to the Indian railways as finance leases.

6) NHPC

National Hydroelectric Power Corporation (NHPC) was founded in 1975. It is engaged in the generation and sale of bulk power. Some of the core business activities of NHPC are project management, consultancy assignment services, construction contracts, power trading, and more.

Some of its subsidiary companies are Jalpower Corporation Limited, Loktak Downstream Hydroelectric Corporation Limited, Chenab Valley Power Projects Private Limited, etc.

Factors to Consider Before Investing in PSU Stocks in India

You might feel that PSU stocks are immensely appealing for investment. While that may or may not be true, you should consider the factors influencing these before investing. Let’s take you through some critical factors here-

  • Government Policies and Reforms

You should stay attentive to the government policies associated with the sector in which the PSU functions. Many factors, such as privatization plans, government initiatives, and regulation changes, can have an impact on the performance of PSU stocks.

  • Sector Outlook

Before you invest in PSU stocks, it is crucial to understand the prospects of the sector in which the PSU operates. Understand its demand-supply dynamics, technological advancements, regulatory changes, industry trends, and more such aspects.

  • Financial Performance

You should assess the financial soundness and performance of the PSU. Check its revenue growth, debt levels, profitability, etc, along with historical financial statements.

  • Risks and Challenges

To invest in PSU stocks, you shouldn’t forget to identify the risks and challenges specific to the PSU and its respective industry. Risks may come in the form of technological disruptions, regulatory changes, operational challenges, etc.

  • Dividend Yield and Payout Ratio

PSU stocks are usually known for their dividend payouts. Therefore, you must assess the dividend yield and payout ratio to determine a PSU’s capability to generate consistent dividends and adhere to the shareholder’s commitment.

Should You Invest in PSU Stocks?

India has various PSUs, each operating in a different sector. From telecom to mining, finance to energy, PSUs cater to almost every sector of the economy. Though PSU stocks appeal to be promising, their performance may be affected due to regulatory changes, privatization, political agendas, etc.

Therefore, it is essential to conduct thorough research before investing in PSU stocks. Moreover, you should stay alert about market developments and review your investment decisions periodically so they align well with your financial objective and risk appetite.

Concluding Note

Public Sector Undertakings (PSUs) are said to be one of the strongest pillars of the Indian economy. They are spread across diverse sectors, serving the most essential needs of the society.

Be it finance, insurance, telecom, energy, power, or coal mining, PSU have been leading the respective sectors in which they operate. 

While you may feel tempted to invest your money in PSU stocks, given its government share and consistency, you must not forget that they may easily get impacted due to changes in government policies, market underperformance, competition from private companies, etc. Therefore, you should be cautious when investing in government stocks by assessing your investment horizon and risk tolerance.

*Stock Selection Criteria for Top Stocks Based on Analyst Rating

Investors must carefully read through the following information on stock selection criteria while running through the stocks based on analyst ratings-

These stocks have been shortlisted as per Analyst ratings provided by the I/B/E/S (The Institutional Broker’s Estimate System) database, further aggregated by Refinitiv. Ratings are determined by analysts' forecasts of company performance, taking into account metrics like earnings per share, sales, and net income. These ratings should not be construed as investment advice/recommendations/offer/solicitation of an offer to buy/sell any securities by Groww Invest Tech Pvt. Ltd. (formerly known as Nextbillion Technology Pvt. Ltd.).  

Before investing, investors must conduct independent research and not solely rely on the information provided here. This will allow investors to make appropriate investment decisions based on their financial goals, investment objectives and risk tolerance.

*Stock Selection Criteria for Top Stocks Based on Market Capitalisation

These stocks are chosen based on their market capitalization, which represents the total value of a company's outstanding shares. The selection is arranged in descending order, placing the largest companies first and the smaller ones later. This helps prioritize stocks based on their market size. 

It is important to note that market capitalization in no way guarantees a company’s performance or the returns from its stocks. However, it can be used as a criterion for shortlisting companies from within a sector. Investors should recognize that other factors, such as financial health, management efficiency, and market trends, play crucial roles in determining the actual success of an investment. 

This stock selection should not be construed as investment advice/recommendations/offer/solicitation of an offer to buy/sell any securities by Groww Invest Tech Pvt. Ltd. (formerly known as Nextbillion Technology Pvt. Ltd.).

Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory.

To read the RA disclaimer, please click here
Research Analyst - Aakash Baid

Disclaimer

The stocks mentioned in this article are not recommendations. Please conduct your own research and due diligence before investing. Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. Groww Invest Tech Pvt. Ltd. (Formerly known as Nextbillion Technology Pvt. Ltd) Ltd. do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.
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