The Nifty PSE (Public Sector Enterprises) index surged 8.4% in May 2026, making it the best-performing sectoral index for the month, as government capital expenditure data showed a 24% year-on-year jump in April infrastructure spending. The index was led by BHEL, NTPC, BEL and ONGC which gained between 10-15% during the month on order book and earnings upgrades.
The government spent Rs 1.84 lakh crore on capital expenditure in April 2026, accounting for about 12% of the full-year budget allocation of Rs 15 lakh crore in a single month — indicating strong execution focus at the start of the fiscal year. Orders from NHAI, Railways, Defence and Urban Development ministries have been flowing at a record pace to public sector companies.
Institutional investors have been aggressively rebuilding positions in PSU stocks after a period of profit-booking in early 2026. The dividend yield of several PSEs in the 3-5% range provides a floor for valuations. Analysts caution that earnings delivery will be key — many PSUs are trading at 20-25x earnings, leaving limited room for disappointment in order intake or execution targets for FY27.
