Top PSU Stocks to Buy in India for 2024: The Categorisation of PSUs in India

Public Sector Undertakings (PSUs) are companies majority-owned by the government and often attract investors seeking stability, consistent dividends, and growth potential. Investing in government PSU stocks can be strategic for portfolio diversification due to their lower risk profile and attractive valuations. Backed by government support, these PSU companies operate in crucial sectors and offer long-term growth opportunities. In this guide, we will explain what is a PSU stock and provide a detailed list of some of the best PSU stocks to buy now in 2024, including why one must invest in government-owned companies in India, how to invest, factors to consider before investing, risks, benefits, and more about PSU stocks in India.

Top PSU Stocks in India Based on ROE

The following PSU shares list and price includes some of the best government stocks in India in this sector based on their return on equity (ROE):

Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.

Note: The data in the list of PSU stocks is subject to real-time updates.

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Overview of the Top 5 PSU Stocks Based on ROE (2024)

Here is a brief overview of the top 5 PSU in India from our PSU stocks list NSE based on ROE:

Coal India Ltd

Established in 1975, Coal India Ltd is the largest coal-producing company in the world and operates under the Ministry of Coal, Government of India. The company is responsible for more than 80% of India’s coal production, with a wide network of mines and subsidiaries across the country.

As of 22nd November 2024, Coal India Ltd has a market capitalisation of Rs. 2,55,167 cr. and a closing stock price of Rs. 425.00. The company’s price-to-earnings (PE) ratio is 6.82, with a return on equity (ROE) of 51.52%.

Bharat Petroleum Corporation Ltd

Bharat Petroleum Corporation Ltd (BPCL), founded in 1952, is a major public sector undertaking in the refining, marketing, and distribution of petroleum products. BPCL operates refineries and has a significant retail presence across India.

As of 22nd  November 2024, BPCL’s market capitalisation stands at Rs. 1,24,016 cr., with a stock price of Rs. 300.45. The PE ratio is 4.62, and the return on equity is 41.59%.

Hindustan Petroleum Corporation Ltd

Founded in 1974, Hindustan Petroleum Corporation Ltd (HPCL) is a major oil and gas company in India. It focuses on refining, marketing, and distribution of petroleum products, with an extensive network of refineries and retail outlets.

On 22nd November 2024, this PSU company in India had a market capitalisation of Rs. 81,030 cr., and a PSU share price of Rs. 368.50. The PE ratio is 4.79, and the return on equity is 40.45%.

Indian Railway Catering and Tourism Corporation Ltd

Indian Railway Catering and Tourism Corporation Ltd (IRCTC) was established in 1999 and is a public sector company that manages the catering, online ticketing, and tourism services for the Indian Railways. This PSU company in India is a key player in India’s online services sector.

As of 4th November 2024, IRCTC’s market capitalisation is Rs. 64,688 cr., with a stock price of Rs. 824.20. The company has a high PE ratio of 58.22 and a return on equity of 38.93%.

Mazagon Dock Shipbuilders Ltd

Mazagon Dock Shipbuilders Ltd, founded in 1934, is a premier shipbuilding company in India. This PSU company in India specialises in building warships and submarines for the Indian Navy and commercial vessels for various clients.

As of 22nd November 2024, Mazagon Dock Shipbuilders Ltd has a market capitalisation of Rs. 80,523 cr., with a stock price of Rs. 4,144.05. The PE ratio is 41.57, and the return on equity is 35.21%.

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What are Public Sector Undertakings (PSU)?

The PSU stocks meaning is government-owned companies in share market operating in key sectors of the economy. The PSU full form in the share market is “Public Sector Undertaking,” which includes companies providing essential goods and services under government control.

PSUs are vital for economic growth, resource distribution, and advancing government policies. Industries such as energy, finance, and manufacturing are common areas for PSUs. Investors often check the government company list in the stock market to identify govt company shares with potential. The govt company share price can fluctuate based on market conditions and policy changes.

Investing in government stocks in India offers unique opportunities. Keeping track of the list of government stocks in India helps investors make informed decisions when adding government companies to their portfolios in the stock market. Monitoring govt stocks in NSE and govt sector shares ensures awareness of market trends.

Why Invest in PSU Stocks?

Now that we understand what a PSU stock is, here are some features that make them attractive investments:

• Stability and Reliability: PSU shares offer stability due to government ownership and support, making them a reliable option, especially during market uncertainty.
• Long-Term Growth Potential: PSU companies offer gradual, sustainable long-term growth, benefiting investors seeking steady investment appreciation.
• Economic Growth Catalyst: Investing in government PSU stocks supports sectors crucial to economic development, such as energy, telecom, and infrastructure, driving national progress.
• Diversification Benefits: Diversify your portfolio by adding the top 10 government stocks to your portfolio to help mitigate sector-specific risks.
• Government Support and Ownership: Government ownership provides stability to PSU stocks in India, ensuring backing during market turbulence.
• Resilience in Volatile Markets: The best public sector stocks in India tend to withstand market volatility well, thanks to government ownership and conservative management.

The Categorisation of PSUs in India

Public Sector Undertakings (PSUs) in India are classified based on various criteria, reflecting their ownership, role, and strategic importance. Here are a few types of PSU stocks in India:

Central Public Sector Enterprises (CPSEs)

CPSEs are PSUs owned and controlled by the Central Government of India. They are crucial to the country’s economic growth and development across diverse sectors. CPSEs can further be categorised into three groups:

• Maharatna: These are the most significant CPSEs with extensive operations and high profitability. They have greater financial autonomy, can make substantial investments, and make important decisions without government approval. For example, in May 2010, the Indian government granted Maharatna status to NTPC Ltd, established on November 7, 1975. NTPC operates from 70 locations in India, one in Sri Lanka and two in Bangladesh. 
• Navratna: These CPSEs also hold considerable operational and financial autonomy. They are profitable and have the flexibility to invest in strategic initiatives. For example, Container Corporation of India Limited (CONCOR), a Navratna PSU under the Indian Ministry of Railways, was established in March 1988 and began operations in November 1989 by acquiring seven inland container depots (ICDs) from Indian Railways as per the Companies Act.
• Miniratna: Miniratna CPSEs have a more modest level of autonomy. The best government shares to buy in India are further classified into Category-I and Category-II, with differing levels of operational independence. For example, the Airports Authority of India (AAI), a Miniratna Public Sector Unit (PSU), operates under the Ministry of Civil Aviation, Government of India. It plays a crucial role in developing, maintaining, and upgrading civil aviation infrastructure across the country.

State Public Sector Enterprises (SPSEs)

SPSEs are PSUs owned and controlled by state governments. They operate at the state level and contribute to regional economic growth. SPSEs are present across various sectors, such as power, transport, and agriculture. For example, GRIDCO Limited, Odisha Hydro Power Corporation Limited and Odisha Power Transmission Corporation Limited, under the Odisha State Government.

Joint Ventures (JVs)

JVs are collaborations between public and private sector entities, often with the government holding a significant stake. Such partnerships harness both sectors’ strengths for shared goals like infrastructure development or resource extraction. For example, a Public-Private Partnership (PPP) involves collaboration between a government or statutory entity and the private sector to deliver public assets or services. The private sector contributes through investments or management responsibilities.

PSU Bank Stocks

PSU bank stocks refer to Public Sector Undertaking (PSU) banks in India. The government owns and operates these banks, playing a crucial role in the country’s financial sector.

How to Invest in PSU Stocks?

Investing in the best Indian government stocks offers a stable, long-term growth opportunity. With government backing and a focus on essential sectors, government PSU stocks present a unique investment option. Here’s how you can invest effectively:

1. Open a Trading or Demat Account: Start by opening a trading or Demat account with a reliable brokerage firm. You can now open a demat account with smallcase!
2. Research PSU Shares: Use tools like Tickertape Stock Screener to research the best PSU stocks for 2024, focusing on market cap, dividend yield, and financial strength. Narrow down stocks on the PSU company list in stock market with strong fundamentals and growth potential.
3. Check Credentials: Ensure the PSU stock is listed on reputable exchanges like NSE or BSE and is registered with SEBI to avoid fraud or malpractice.
4. Place an Order: Once you’ve chosen a stock among the top PSU in India, log in to your platform, enter the stock symbol, quantity, and order type (market or limit order), and execute the trade. Review carefully before confirming.
5. Monitor Your Investments: After investing in PSU stocks, keep track of your PSU stocks’ performance, staying updated on market trends, company news, and economic developments to make informed decisions.

How to Choose the Best PSU Stocks to Invest in?

When you are choosing the best PSU in India for investing, it might be helpful to explore various avenues to make informed decisions. Here are some steps you could consider when selecting the best PSU stocks to buy in 2024:

• Peer Comparison: You can compare the performance of PSU companies, including the best PSU stocks for dividends, with their industry peers to help you understand how a particular government PSU stock stands in relation to its competitors.
• Sector Analysis: Look into sector-specific dynamics to gauge which sectors might offer the best growth prospects.
• Government Policies: Analysing government policies and initiatives that directly impact PSU sectors can be beneficial. Understanding these policies may help you anticipate the future growth trajectory of PSU shares, as government actions often influence these sectors significantly.
• Historical Performance: Evaluating the historical performance of low price PSU stocks, including revenue growth, profitability, and stock price trends, can provide insights into their long-term potential. 
• Market Sentiment: Considering market sentiment and investor sentiment towards government-owned top PSU companies in India can be essential. You can monitor news, analyst reports, and market trends to understand how the market views these Indian stocks. 
• Risk Assessment: You might assess the risks associated with investing in the top 10 government stocks, including regulatory risks, political risks, and macroeconomic factors.

Advantages of Investing in PSU Stocks

Due to their government backing, PSU stocks offer a level of security and trust that is often lacking in private-sector companies. Here are some key advantages of investing in PSU stocks:

• Stable Returns: Government PSU stocks are generally less volatile and offer stable returns, making them ideal for risk-averse investors.
• Regular Dividend Income: Many PSU companies have a history of paying consistent dividends, providing investors with a steady income stream.
• Long-Term Growth: These stocks often operate in essential sectors like energy, telecom, and infrastructure, contributing to sustainable long-term growth.
• Government Support: With the government’s direct involvement, PSUs benefit from policy support, making them more resilient during economic downturns.
• Lower Risk: Backed by the government, PSU stocks are perceived as safer investments, especially in uncertain market conditions.
• Diversification: Adding PSU stocks to your portfolio provides diversification, spreading risk across different sectors and reducing exposure to market volatility.

Risks of Investing in PSU Stocks

When investing in PSU stocks, it’s crucial to review the list of all PSU stocks in India and consider potential risks. Here are key factors to keep in mind:

• Bureaucracy and Inefficiency: PSUs’ bureaucratic processes can slow decision-making, hindering their ability to adapt and innovate. This inefficiency can impact the performance of even the top PSUs in India.
• Earnings Volatility: Many PSUs, including the top 10 PSU in India, in cyclical industries face fluctuating earnings during economic downturns, making it hard to predict the financial performance of even the top PSUs in India.
• Market Reaction to Disinvestment: Government stake sales in PSUs can create uncertainty and affect stock performance. This may influence the best PSU bank stocks to buy now for 2024.
• Dividend Surprise: While PSUs offer dividends, payouts can be inconsistent due to government policies and company performance, affecting even the best dividend stocks.
• Government Interference: Political and bureaucratic influences can affect even the best PSUs in India. Changes in policies or leadership might not always align with investor interests, impacting stock performance.
• Market Performance: Some Indian PSUs may underperform compared to private firms due to inefficiencies and outdated technologies, affecting the competitiveness of top PSU in India.
• Low Trading Liquidity: Certain PSU stocks in share market may have low trading volumes, leading to liquidity challenges and making it harder to buy or sell shares.
• Limited Focus on Shareholder Value: Government priorities may extend beyond shareholder interests, impacting dividends, mergers, and overall investment attractiveness in even the best stocks in the government sector.

Factors to Consider Before Investing in PSU Stocks

When investing in government stocks in India, several key factors should guide your decision:

• Financial Performance: Assess the company’s financial health by reviewing revenue growth, profit margins, and debt levels. Consistent profitability indicates stability and growth potential. Reviewing the PSU stock list and government sector share list helps identify financially strong companies.
• Government Policies: Policy changes can greatly impact government company shares and PSU listed companies. Monitoring government stocks in the share market and the PSU list in India provides insight into how policies affect stock performance.
• Market Position: Evaluate a PSU’s market share and growth prospects. Checking the PSU companies listed in NSE and comparing them with other government companies in the stock market helps identify the top 10 PSUs in India for investment.
• Management Quality: Strong leadership is crucial. Look at the management team’s experience, especially when selecting the best PSU company to invest in.
• Risk Tolerance: Align your investment with your risk tolerance by considering govt companies in the stock market and their performance in the NSE PSU stocks list.
• Valuation: Compare stock valuations with industry peers by reviewing the PSU company list and government stocks in the share market to identify the best opportunities.

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To Wrap It Up…

Investing in PSU stocks India involves unique risks and considerations, including bureaucratic inefficiencies, earnings volatility, and government interference. To navigate these complexities, you might conduct thorough research on the financial health, market position, and management quality of PSU companies. Staying informed about government policies and market sentiment can also provide valuable insights. By understanding these challenges and opportunities, you may make more informed decisions that align with your investment goals and risk tolerance. It can potentially enhance your chances of a favourable investment outcome in the top PSU stocks in India.

Frequently Asked Questions on PSU Stocks in India