PSU Goverenment Stocks

When we talk about government stocks in India, we're referring to the shares of companies that are either owned or controlled by the central or state governments. These entities are Public Sector Undertakings (PSUs) or Public Sector Enterprises (PSEs).

So, what makes a company a PSU or PSE? The defining characteristic is the government's ownership stake. If the government owns at least 51% stake in the company, it's classified as a government stock. Ownership less than that or cases where the government once may have held more than 51% stake but divested its holdings over time below that threshold does not count.

Government stocks are traded on the stock exchanges of India, NSE and BSE. These companies have a particular index in the stock exchanges such as NIFTY PSE, NIFTY PSU Bank, S&P BSE PSU, etc. These indexes constitute a list of government companies or PSUs and will track the performance of these stocks. 

Types of Government Companies in the Share Market

• CPSEs or Central Public Sector Enterprises: The two types of CPSEs are Strategic CPSEs and Non-Strategic CPSEs. Military, arms, aircraft, other defence-related businesses, atomic energy and the railway sector are the strategic CPSEs. All other remaining CPSEs are called Non-Strategic CPSEs. 
• PSBs or Public Sector Banks: PSBs encompass banks, insurance companies, and financial institutions where the Central Government or another PSB owns at least 51% of the stake. 
• SLPEs or State Level Public Enterprises: SLPEs are entities that contribute to regional development and economic growth. The state government or other SLPEs hold a stake of 51% or more. 

Government Stocks: How to Invest in Them?

The process of investing in these stocks is similar to investing in any other stock. The list of all government companies' shares can be easily accessible on any online stock exchange website, or you can simply invest in government stocks through INDmoney.. 

• Create a Demat account with INDstocks by INDmoney to sign up. Enter your phone number and the OTP to register successfully.
• Complete a quick digital KYC process by uploading your PAN and Aadhaar details.
• Then, browse for your preferred government stock and read about its fundamentals.
• Add funds to your INDstocks account with a simple UPI transaction and start investing!

Things to Consider Before Investing in Government Stocks

• The performance of these government stocks needs to be measured and watched with great attention because they are highly dependent on the government's fiscal decisions. The investor should closely check if there is any disinvestment or buyback of any particular government enterprise. These companies will have a share in the GDP, capital formation, and employment generation. Therefore, they are not just for the profits but also work for the welfare of society. 
• The best government share to buy now will depend on various factors, such as free cash flow, return on capital and equity, competitive advantage, valuation, etc. As an investor, it is necessary to see the industry outlook for making investments.

Advantages of Investing in Government Stocks in India

Investing in government company stocks can provide numerous benefits to an investor and, at the same time, diversify their portfolio.

• Regular Income with Decent Dividends: Government stocks often provide a steady income through high dividends, especially in the case of PSUs. These dividends can be a reliable source of income, which is beneficial for investors looking for regular earnings alongside their investment growth.
• Stability with Comparatively Low Risk: Government stocks are supported by the government, which adds a layer of security. While it doesn't eliminate risk entirely because no investment is ever risk-free, the likelihood of a government defaulting is generally lower than a private company.