Global volatility, not govt, may revive investor interest in PSUs

Experts warn that high dividend yields may mislead investors into choosing underperforming PSU stocks

- Abhinaba Saha

There is a growing buzz around public sector undertaking (PSU) companies in D-Street. The global uncertainty unleashed by the US tariff tantrums has reinvigorated investor interest in these domestic-focused, state-backed players, especially after the recent bouts of market correction.

In fact, Arunish Chawla, secretary of the government's department of investment and public asset management (Dipam), recently urged fund managers to include PSUs in their portfolios during a media briefing, touting their high dividend-generating capabilities.

He pointed out that state-run firms delivered a record ₹1.5 trillion in dividends to the government in FY25. For FY26, the government expects to receive ₹69,000 crore in dividends from PSUs. However, experts caution against the allure of high dividend yields, as they can lead investors astray to pick non-performing companies at a time when a broad-based rally in PSU stocks is highly unlikely.

This comes as retail investors continue to reel under the BSE PSU Index's 19% drop from its 52-week high, a peak reached during an overhyped two-year surge. Their enthusiasm for PSUs has waned since then, despite the index currently outperforming the Sensex. Hence, luring them back into PSUs with the promise of dividends might create misguided return expectations, noted experts.