There was a time when Public Sector Undertaking (PSU) stocks were the first choice for investors in the Indian share market. However, the landscape has changed considerably in recent years. In 2025, PSU stocks have not delivered the robust returns that investors had come to expect, with only select sectors showing significant growth.
Underwhelming Returns So Far in 2025
The Nifty CPSE Index, which tracks major central public sector enterprises, has risen by just 4.14% up to 14 May 2025. This is slightly lower than the 4.3% gain posted by the broader Nifty 50 index in the same period. The contrast becomes even starker when compared to previous years: in 2024, the CPSE Index surged by 25.25%, and in 2023, it soared by an impressive 73.7%. Clearly, the performance of PSU stocks has been subdued in 2025, with most stocks failing to match the returns of the past two years.
Defence and Shipbuilding Sectors Shine
Despite the overall lukewarm performance, the defence and shipbuilding sectors have emerged as bright spots. Shares of companies such as Bharat Dynamics, Bharat Electronics, Mishra Dhatu Nigam, Hindustan Aeronautics, Mazagon Dock, and Cochin Shipyard have seen gains ranging from 10% to 59% so far this year. The primary drivers behind this rally are ongoing tensions between India and Pakistan, as well as the government’s push for indigenisation and local manufacturing in defence.
The shipbuilding sector has also benefited from government initiatives aimed at strengthening India’s maritime infrastructure. These policies have not only improved the outlook for shipbuilders but have also attracted significant investor interest.
Other Notable Performers: NBCC, SAIL, and More
Apart from defence and shipbuilding, a few other PSU companies have delivered impressive returns in 2025. NBCC (National Buildings Construction Corporation), SAIL (Steel Authority of India Limited), BPCL (Bharat Petroleum Corporation Limited), IOC (Indian Oil Corporation), NMDC (National Mineral Development Corporation), and MOIL have all posted gains of up to 15% so far this year. These companies have benefited from sector-specific tailwinds and government policies supporting infrastructure and resource development.
PSU Banks Outperform
PSU banks have also shown resilience and outperformed the broader market. Union Bank, Indian Bank, Bank of India, and Canara Bank have all delivered returns between 5.5% and 12% in 2025, surpassing the Nifty 50’s performance. The banking sector’s strength can be attributed to improved asset quality, better credit growth, and government support.
Where Should Investors Focus?
According to stock market experts, investors should keep a close watch on PSU banks, oil refining companies, GAIL, and Coal India. These companies are known for offering attractive dividend yields and tend to be relatively insulated from market volatility. Experts believe that PSU banks remain the safest option, while stocks like GAIL and Coal India are less affected by global crises.
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