Top PSU Stocks in India (2025) Backed by Govt Ownership

Public Sector Undertakings (PSU) stocks are shares of companies where the Indian government holds the majority stake – 51 per cent or above. These PSUs operate in various sectors like banking, energy, infrastructure, aerospace, defense, playing a crucial role in building a nation.  

PSU stocks are favored by many investors as they are generally considered as stable investments due to government backing and known for their high and consistent dividend payout. Additionally, PSU stocks are considered safe bets during economic downturns as they are relatively less volatile. This makes them a good choice for investors seeking long-term growth with stable income via dividends. However, PSUs can be directly influenced by government policies and economic factors, requiring investors to stay informed about risk and opportunities.

Some key sectors and prominent PSUs include:

• Energy - Oil & Natural Gas Corporation (ONGC) & Coal India
• Banking - State Bank of India (SBI) & Punjab National Bank
• Insurance - Life Insurance Corporation of India (LIC)
• Railway & Shipping - Indian Railway Catering and Tourism Corporation (IRCTC), Rail Vikas Nigam Limited (RVNL) & Mazagon Dock Shipbuilders Ltd
• Defense - Hindustan Aeronautics Ltd (HAL)
• Infrastructure – NBCC (India), Engineers India & Power Grid Corporation  
• Manufacturing - Bharat Heavy Electricals Limited (BHEL) & Steel Authority of India (SAIL) 

Investing in PSU stocks can be a smart decision. Here are some key reasons to consider adding PSU stocks in your portfolio:

• Stability with Long-Term Growth Potential: PSU companies grow steadily over time while offering stability and reliability due to government ownership and support. This makes them perfect for investors seeking gradual appreciation.

   

• Economic Growth Catalyst: Investing in PSU stocks supports key sectors like energy, telecom, and infrastructure, driving national progress.

   

• Diversification Benefits: Adding PSUs in your portfolio helps you get access to key sectors like defense, shipping and energy, helping you diversify your portfolio.

   

• High Dividends: Many PSUs pay regular dividends, making them perfect investment for income-seeking investors.

   

• Government Support and Ownership: Government backing ensures stability for PSU stocks, even during market turbulence.

   

• Resilience in Volatile Markets: Public sector stocks in India are resilient to market volatility, thanks to government ownership and conservative management. 

   

Once you’ve made your decision to invest in PSU stocks, you can do it through one of the following ways:

1. Direct equity: You can directly buy stocks of PSU companies through a trading and demat account. For this, you need to study the company thoroughly and choose the one that you deem fit for your portfolio growth and risk tolerance.

    

2. PSU mutual fund: Not everyone has the time, expertise or resource to research individual companies. Don’t worry, you can still invest in PSU companies through a mutual fund. There are many PSU themed mutual funds in the market, like the SBI PSU Fund or ICICI Prudential PSU Equity Fund, through which you can buy into several PSU companies with a small amount. An expert fund manager will manage the portfolio on your behalf for a small fee.

    

3. PSU ETF: Exchange traded funds (ETFs) are also a great way to invest in PSU stocks. Unlike a regular mutual fund, ETFs have lower cost and are easy to invest and exit as you can buy them anytime using your trading account. For example, if you believe that banking sector will do well, you can buy Nippon India ETF PSU Bank BeES that invests inleading PSU banks of India. Or buy Groww Nifty India Railways PSU ETF to invest in railway PSUs’ stocks. 

Here is the brief of top 5 public sector undertaking (PSU) companies:

1. State Bank of India

State Bank of India is a Fortune 500 company; a public sector banking and financial services statutory body headquartered in Mumbai. As of 16 April 2025, the company’s market capitalisation is ₹6,88,088 crores, and the stock P/E ratio is at 8.68, denoting share price is undervalued.  

SBI operates 241 overseas offices across 29 countries, including Canada, Brazil, Russia, Germany, France, Turkey, etc. The international business accounted for 15% of the total advances and 4% of the total deposits in 9M FY25.

2. Life Insurance Corporation of India

Life Insurance Corporation of India (LIC) maintains its leadership in the Indian life insurance sector with a 57.42% market share based on first-year premium income for the nine months ending December 2024.  

The company is financially robust, being almost debt-free, which reflects its strong balance sheet and minimal financial risk. LIC delivered good profit growth of 73.2% CAGR over last 5 years and has a good ROE of 63.4%.

3. NTPC Limited

Founded in 1975, NTPC is the largest power-generating company in India, with a total of 89 plants having an aggregate installed capacity of 75.958 GW as of March 2024, constituting around 17.37% of India’s total installed capacity.  

As of April 16, 2025, NTPC Limited's stock has a P/E ratio of 15.8 and a dividend yield of 2.16%. The company is actively expanding its renewable energy portfolio, aiming to install 60 GW of renewable capacity by 2032.

4. ONGC Limited

ONGC was established in 1956 by the Government of India for oil exploration. It holds Maharatna status as the largest crude oil and natural gas company in India, contributing 71% to Indian domestic production. It is also the most profitable PSU in India. 

As of April 16, 2025, ONGC trades at a P/E ratio of 7.64, indicating a relatively low valuation compared to industry peers. The company offers a dividend yield of around 5.10%, reflecting its commitment to returning value to shareholders.

5. Power Grid Corporation of India

Power Grid Corporation of India Limited, established in 1989, is a Maharatna CPSU and India’s largest electric power transmission company. 

As of April 16, 2025, Power Grid’s market capitalisation is ₹2,84,598 crores and stock has a P/E ratio of 18.30 and a dividend yield of 3.69%. The company is actively expanding its infrastructure to meet the anticipated recovery in electricity demand growth, projected at 5.5% to 6% for 2025-26. 

Before, you invest your hard-earned money in PSU stocks, consider the 8 important factors mentioned below:

• Government Policies: Examine and analyse if any current and future policies could impact the company business, it is also important to keep in mind the vision of the current ruling party.  

   

• Industry Outlook: Examine the future plans of the PSU, a positive industry outlook can provide a favourable environment for company’s growth.

   

• Financials: Just like any other company, you need to evaluate if the company is fundamentally strong. Is the PSU making profit? Is the enterprise running with high debt, low debt or zero debt? How is the ROE and profit growth of the company?

   

• Valuations: Find out if the share price of that PSU is fairly valued or not by comparing earnings and book value. Also, compare the P/E ratio with its peer companies. 

   

• Divestment Plans: It's important to know, are they looking to reduce the government state in future? Divestment can lead to changes in management and operational efficiencies.  

   

• Dividend History: Checkout the dividend history and yields. Consistent dividends provide a steady income and indicate financial stability. However, PSUs who pay high dividends often show low appreciation in the stock prices.

   

• Corporate Governance: Before investing in PSU, ensure that the company’s management is good, follows best practices and is transparent. Good governance enhances trust and reduces the risk of malpractices.

   

• Regulatory Environment: Check whether the company follows all sets of regulations or not? Transparency in compliance is essential for smooth operations and legal understanding. 

Investing in the best Indian government stocks offers stable and long-term growth opportunities. With government backing and focus on essential sectors, PSU stocks give a diversification and unique investment option. 

You need a trading and demat account to invest in PSU stocks, which you can open in a few minutes on ArihantPlus. 

From telecom, finance and energy to mining, aerospace and defense, PSUs cater to almost every sector of the economy. Investing in PSU stocks can be stable investments for long term investors due to government backing. However, it involves unique risks and considerations, including bureaucratic inefficiencies, earnings volatility. Therefore, just like any other investment, carefully consider these companies and ensure they align with your risk tolerance and investment goals before investing into them.