Don’t Write off the Modi Stocks

IN 2020, SUPPLY-CHAIN disruptions post-Covid, China at loggerheads with India, and the need to reinvigorate the econo­my through indigenisation, formed the genesis of the Centre’s Atmanirbhar Bharat policy.

Beginning with an import embargo on 101 defence products in 2020, extended to over 5,000 products since, the government announced the infrastructure push in Budget 2021, providing a fillip to the defence and railway public sector undertakings (PSUs).

The Bombay Stock Exchange’s PSU index has more than doubled to 18937 as of January 1, 2025, against 7275.59 as of January 1, 2019, and profitability has zoomed.

Total net profit of the defence PSUs has witnessed compounded annual growth rate (CAGR) of 22.05 per cent between FY19 and FY24. Railway PSUs’ net profit CAGR stood at 17.89 per cent while government banks have posted a profit of ₹1,50,691 crore against a loss of ₹32,520 crore during the period, bolstering investor wealth.

Amid choppy markets, PSUs in defence, railways and banking may not run out of steam any time soon. The defence ministry has set a target of ₹3 lakh crore produc­tion and exports worth ₹50,000 by 2029—more than double the FY24 numbers.

“We stay optimistic on India defence space with key catalysts at play—huge localization push to dependence on disrupted global supply chain, continued modernization effort with larger programs coming ahead of expected timelines,” said Nuwama Institutional Equities in a report.

Railways, too, have mega plans. The railway ministry has identi­fied 434 railway corridor projects spanning 40,900km with an investment of ₹11 lakh crore in the next five years, say sources.

Additionally, green energy and select public sector banks (PSBs) may offer good opportunities.

With investments lined up for the next five years, it may be too early to rule out the sector-specific PSU stocks—which have earned the sobriquet of ‘Modi stocks’, given the benefits accruing from government investments. The time is ripe for value picks.

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