As soon as the toast of stock markets, shares in the public sector have seen their momentum stall in 2025 in 2025. The 63-Stock BSE PSU index has fallen almost 12 percent in the past year, so that the Benchmark Sesex was strongly printed, which the Benchmark Sensex was strongly performed, which increased 1.3 percent.
This has led to a wealth erosion of £ 10-lakh crore, in which the combined market capitalization of PSUs falls to almost £ 64-lakh crore. Matation in profit growth and weakness in segments that are exposed to global raw materials and energy prices have hit the momentum. Only select bags, such as Defense, have lifted the trend.
For the sake of clarity, PSU shares, although favorites of dividend-seeking investors-staying for several years are detained in a reach. The PSU index fluctuated between 5,000 and 10,000 levels from FY10 to FY19. During the COVID crash it dropped to the 4,000 level before a stunning post-Pandemic Rally PSU shares saw on the return. The index rose by 50 percent in FY21, 28 percent in FY22 and 10 percent in FY23. The momentum peaked in FY24 with a huge profit of 92 percent for the index.
Profit
The PSU price rally was supported by profit growth. Between FY20 and FY25, PSUs placed a CAGR of 36 percent in net profit, which increases their collective share in the total income of India Inc to 38 percent, a record high.
Of the underload and being undervalued, many PSU names saw a re-rating powered by strong income, governance improvements and tailwindly guided by reform.
That momentum, however, seems to have been paused. According to capital data, the consolidated profit for the BSE PSU index fell by 2.3 percent in FY25, drawn with a high base (FY24 Pat had risen 49 percent year on year) and a weaker profitability of the oil and gas sector. PSU-Majors such as MRPL, CPCL, IOCL, ITI, HPCL, MMTC, BPCL and ONC booked a sharp drop in profit of 30-90 percent. Oil PSUs seem to have worn the victims of the volatility of the raw price and the refining margin compression.
The recent delay in profit growth, together with the sharp run-up in PSU shares, led investors to make a profit. No fewer than 8 out of 10 BSE PSU index shares yielded a negative return in the past year.
One of the most affected was banks and industrialities, which had previously seen steep re -movements. Punjab & Sind Bank, Uco Bank, Ircon, Ireda, Central Bank of India, IOB, RVNL and KIOCL saw the sharpest decreasing hurk fell 35-50 percent. Despite the correction, many of the worst performing PSU shares still show a double-digit CAGR returns for three and five-year periods, which underlines how steep the earlier rally was.
M-CAP & Valuation
The market capitalization of the BSE PSU index tells the story in phases. The basket hit a record-high £ 74-lakh crore in July 2024, before he slid 31 percent to £ 51-Lakh Crore in February 2025 in a broad correction. A partial rebound has since increased the index to £ 64-Lakh Crore by July, still almost 14 percent under the peak of last year.
As the valuations cooled down, the price of the BSE PSU index to the win (p/e) decreased from 14x in July 2024 to 9.8x in February 2025, before he currently recovered to 12.2x.
Despite the recent silence, there are reasons for optimism. A cyclical rebound in business income, supported by the domestic demand and Government Capex, can help PSU shares. A profit recovery is expected in FY26 and FY27.
According to calculations based on Bloomberg estimates, the EPS of the BSE PSU index is probably £ 1,579.2 in Cy25, which means that the trade on Cy25 PE of around 12.5 times. Although this looks cheap, there are shares such as RVNL, Beml, Bharat Dynamics, BHEL and NTPC Green, which act 60-190 times with PE, according to the capital data. Therefore, value-conscious investor must choose carefully names in the PSU universe. Heavier correction of peaks for some shares indicates that valuations begin to do important at a certain moment.
Industrial PSUs, especially those associated with infrastructure, capital goods and defense, are expected to benefit from stronger order books, better implementation and local policy. Important segments such as BFSI and Oil & Gas are also expected to post stable income.
Published on July 19, 2025
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