For the second day in a row, PSU stocks continued their downward spiral, prompted by unexpected election results that contradicted earlier exit poll predictions. This downturn, sparked by uncertainty surrounding the BJP’s majority, has left investors concerned about policy stability, leading to a sharp decline in Indian stocks, particularly in the PSU sector.
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PSU stocks, which had previously enjoyed investor confidence due to government initiatives like Make in India and increased capital expenditure, suffered significant losses as official election results revealed a shortfall in BJP’s expected mandate. Despite the likelihood of the BJP forming a government with ally support, investor apprehension persists, contributing to the ongoing decline in PSU stocks.
During today’s trading session, the BSE PSU index witnessed a notable decline of 4.5%, with Bharat Dynamics hitting its lower circuit limit for the second consecutive day. Other PSU stocks like NBCC, Indian Bank, Cochin Shipyard, and Engineers India also experienced significant losses, while some, like Mazagon Dock Shipbuilders and NALCO, staged recoveries from the previous day’s slump.
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Although the BSE PSU index rebounded from its intraday low, it is still trading with a modest gain, reflecting ongoing market volatility and uncertainty regarding the formation of the cabinet. Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, anticipates continued volatility in the market until there is clarity on key government portfolios. However, he advises investors to consider high-quality largecaps in sectors like IT, financials, autos, and capital goods as potential investment opportunities amidst the market correction.