PSU stocks rally; RITES, Indian Bank, Bharat Dynamic, RVNL surge up to 13%

At 10:20 AM, the BSE PSU index, the top gainer among sectoral indices, was up 3.5 per cent at 19,856, as compared to the 1.5 per cent rise in the BSE Sensex

Shares of public sector undertaking (PSU) companies, including banks, rallied by up to 13 per cent on the BSE in Monday’s intraday trade on expectation that the central government will now focus on spending after the ruling NDA alliance’s emphatic victory in Maharashtra.

 

The BSE PSU index, the top gainer among sectoral indices, was up 3.5 per cent at 19,856 at 10:20 AM, as compared to the 1.5 per cent rise in the BSE Sensex. The PSU index hit a record high of 23,019 on August 1, 2024.

 

RITES, Indian Bank, Bharat Dynamics (BDL), Central Bank of India, NBCC (India), UCO Bank, Punjab & Sind Bank, Rail Vikas Nigam (RVNL), Housing & Urban Development Corporation (HUDCO), Indian Overseas Bank, Bharat Electronics, Oil and Natural Gas Corporation (ONGC), and Bharat Petroleum Corporation (BPCL) rallied between 5 per cent and 13 per cent on the BSE in the intra-day trade so far. 

 

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With elections now behind and the BJP getting a strong boost from Haryana and Maharashtra elections, brokerage firm Motilal Oswal Financial Services (MOFSL) expects the government to now focus on spending (H1FY25 government spending is flat year on year (Y-o-Y) and is down 17 per cent for capex spending). 

 

This poll result, coupled with a recovery in rural spending (on the back of a good monsoon and expected strong kharif output) should improve the demand narrative at the margin. The wedding season in H2FY25 (30 per cent higher weddings Y-o-Y) will also provide a fillip to demand, the brokerage firm said.

 

The staggering victory of the ruling NDA alliance in Maharashtra should bring the undercurrents back in the markets, MOFSL said. Markets have seen a decent correction in the last two months on the back of moderate corporate earnings in H1FY25, relentless foreign institutional investors (FII) selling since October 2024 (approximately $14 billion), a fragile geopolitical backdrop, and a strengthening dollar index after the victory of Donald Trump in the US elections. The anxiety around Maharashtra elections had further muddied the waters, the brokerage firm said.

 

Among individual stocks, RITES’ share price surged 13 per cent after the company informed that it had received a revised estimate of Rs 532 crore for an electrification project under the Northeast Frontier Railway. The revised total cost for the project now stands at Rs 531.77 crore, excluding GST, which marks an increase from the original cost of Rs 288.44 crore.

 

The electrification work is to be carried out on a turnkey basis at the Lumding junction and Badarpur junction section of the Lumding division of Northeast Frontier Railway, it added. RITES is a leading player in the transport consultancy and engineering sector in India, having diversified services and geographical reach.

 

Shares of BDL soared 8 per cent to Rs 1,014.60 after CRISIL Ratings reaffirmed its rating on the short-term bank facilities of the company. According to the rating agency, BDL’s revenue in the near term is expected to grow by 28-30 per cent in FY25 and 13-15 per cent on year in the medium-term, led by a stable order execution rate and healthy order book addition expected which stood at Rs 19,434 crore as of March 2024. 

 

BDL has been focusing on indigenisation of components and reducing its dependence on imports. Operating margins, on the other hand, are expected to moderate and remain range bound between 17-18 per cent in the near- to medium-term, on the back of normalisation of product mix and ramp-up expected in R&D spends, CRISIL Ratings said.

 

Apart from that, RVNL shares gained 10 per cent to Rs 462.75 after a joint venture (JV) between RVNL and SCPL received Rs 837 crore projects from Eastern Railway. RVNL is the lead member and holds a 74 per cent stake in the JV, while the remaining 26 per cent is held by SCPL.