RITES, Rail Vikas Nigam, Container Corporation, NALCO were among major gainers in PSU stock segment. Public sector banks performed well in today's session at Central Bank, Punjab & Sind Bank, IDBI Bank, Bank of India, Union Bank and PNB closing firm. Among losers in PSU segment were BHEL, NHPC, BPCL, HPCL and Dredging Corporation. Overall, public sector stocks are giving mixed signals and there is high volatility in these stocks. Commodity-linked counters such as NALCO and GAIL face valuation gaps and macro headwinds. Investor sentiment is increasingly being shaped by analyst downgrades, technical signals, and a recalibration of growth expectations. Though performance remains sectorally varied, emerging themes include high valuations in railway PSUs, pricing risks in metals, and underappreciated upside in energy-linked plays like GAIL.

NALCO: Volatility in Global Alumina Overshadows Profit Surge

The market's reaction to National Aluminium Company’s Q3 FY25 results highlighted a familiar disconnect between earnings performance and investor expectations. On May 16, shares gained 5%, reversing a brief two-day slump. This put the monthly return at +18.99%, though the stock remains 8.99% lower YoY. Despite a threefold increase in net profit to ₹15.7 billion and a 200.9% jump in EBITDA, the market punished the counter earlier with a 6.8% post-earnings decline, driven by concerns over global alumina pricing.

Expansion delays also add to the uncertainty. ICICI Securities pointed to slower-than-anticipated progress in the company’s alumina refinery expansion, now expected by December 2025, potentially impacting medium-term volume growth.

On the valuation front, sentiment remains mixed:

ICICI Securities: Target of ₹205, citing long-term cost benefits from captive coal but cutting FY26 EBITDA estimates.

Axis Securities: “Buy” rating, revised down to ₹220 (from ₹250) due to production challenges.

Motilal Oswal: Neutral stance with a ₹200 target, valuing the company at 6x FY27 EV/EBITDA.

S&P Global: 70% of analysts retain a “Buy” recommendation, with an average price target of ₹216.6.

The risk? A sustained decline in alumina prices—already evident in Q1—could cap upside despite structural cost advantages.

RITES Ltd: Revenue Contraction, Margin Expansion, and Market Skepticism

Engineering and consultancy firm RITES Ltd experienced sharp movements in May, with shares jumping 11% intraday on May 16 after Q4 FY25 results. The stock has notched up a 26.72% gain in one month, buoyed by optimism over railway modernization spending.

But the headline numbers reveal nuance:

Revenue slipped 4% YoY to ₹6.2 billion, driven by lower turnkey project execution.

EBITDA rose 6.2%, with margins expanding to 30.8%, indicating operational efficiency in non-turnkey segments.

On May 15, the stock dipped 3.2% following a mutually agreed termination of a UP consultancy project—adding some volatility to an otherwise bullish narrative.

Valuation remains a concern. Smart Investing flagged the stock as significantly overvalued, placing its intrinsic worth at ₹110.43, while it trades at ₹256.35—a 160% premium. However, technical indicators suggest continued upward momentum, with a weekly stochastic crossover signaling historical average gains of 7.95% over the next seven weeks.

Looking ahead, the company has guided for 20% revenue growth by March 2026, driven by large-scale public infrastructure contracts in railways.

Rail Vikas Nigam Ltd (RVNL): Momentum Backed by Orders and Technical Tailwinds

The sharp 11% rally in RVNL shares on May 16 came on the back of securing a ₹115.79 crore contract, affirming the company’s strong order inflow trajectory. This surge extended a strong short-term rally and catalyzed positive technical confirmations.

Technical indicators: Weekly MACD and stochastic crossovers suggest bullish momentum. Historically, such formations have preceded average gains of ~18% in seven weeks.

Dividend catalyst: Investors await the upcoming board meeting on May 21, expected to declare a final dividend alongside Q4 results.

On the fundamentals:

Operating cash flow has improved significantly, swinging from a negative ₹4,076 crore in FY23 to a positive ₹2,954 crore in FY24.

However, valuation multiples remain stretched, with a TTM P/E of 69.15 and P/B of 10.23, making the stock susceptible to corrections on any negative triggers.

Moneycontrol maintains a “Neutral” rating, highlighting a high beta of 1.4, underscoring the stock’s volatility.

GAIL (India) Ltd: Underpriced Energy Giant with Green Ambitions

India’s largest gas utility, GAIL, delivered robust Q1 FY25 results, with PAT rising 28% YoY to ₹11,312 crore on the back of increased gas transmission volumes. Revenue was up 7% YoY to ₹1.41 lakh crore, reinforcing the company’s diversified earnings base.

Longer-term strategic positioning is also underway. GAIL has announced a ₹5,000 crore investment in renewable energy projects in Karnataka, in line with its decarbonization objectives.

Despite the strong fundamentals, GAIL shares are down 9.23% YoY, though a 1.55% uptick on May 19 suggests some re-rating may be on the cards.

Analyst sentiment is bullish:

Motilal Oswal maintains a “Buy” rating with a target of ₹265, citing strong P/E valuation at 9.84 and rising domestic gas demand.

CLSA upgraded the stock to “Outperform” in April, betting on potential tariff hikes expected by June 2025.

Currently, the stock trades at a 49% discount to the sector’s average P/E of 31.14**, offering a deep-value opportunity for investors with medium-term horizons.

IRFC: Bond Issuance and F&O Entry Trigger Re-Rating

IRFC shares gained 6% on May 16 after the government approved a ₹10,000 crore deep-discount bond issue, bolstering capital availability. The stock has also benefited from recent inclusion in F&O trading, which enhances liquidity and institutional participation.

Other notable developments:

An interim dividend of ₹0.8 per share was declared earlier (ex-date: March 21).

RSI at 57.2 places the stock in neutral territory, while it continues to trade below the 200-day SMA.

However, despite the recent rally, the stock is still down 18.33% year-to-date, indicating residual market caution.

Analyst views remain split:

Religare Broking’s Ravi Singh remains bullish with a target of ₹150, citing support at ₹132.

Investec has a contrarian “Sell” rating with a lowball target of ₹50, arguing that the stock’s P/B of 2.5x FY26 overstates future growth prospects.

FIGW’s average forecast sees a target of ₹167.50 for 2025, implying 36% upside from current levels.

Summary of Analyst Calls and Price Targets

Conclusion: Investor Takeaways

As PSU stocks continue to dominate market headlines, sector-specific divergences are becoming more pronounced. Railway PSUs like RVNL, RITES, and IRFC have capitalized on public infrastructure push but trade at elevated valuations, prompting some analysts to sound caution. Meanwhile, NALCO and GAIL present attractive opportunities for contrarian investors—both offer cost advantages and deep discounts to sector averages, though they face global headwinds.

For long-term investors, the path forward is nuanced:

Stick to fundamentally sound counters with visible earnings momentum (GAIL).

Exercise caution on overbought infrastructure names unless guided revenue translates into bottom-line improvement.

Watch for regulatory changes, particularly in tariffs and capex announcements, that could shift earnings trajectories.

The narrative is evolving, but one truth remains: in India’s PSU space, value and volatility now walk hand in hand.