3 PSU Stocks to Watch Before Union Budget 2026

Investors watch PSU (public sector undertaking) stocks closely ahead of the Union Budget because it often brings announcements and policy changes that directly affect these companies.

Many PSU companies operate in sectors like railways, defence, infrastructure, energy, and banking. These areas are funded and influenced by government budgetary allocations.

Higher allocations for infrastructure, railways, or defence typically mean more contracts and revenue prospects for related PSUs.

The Budget often includes policies or reforms such as disinvestment plans, recapitalisation strategies, and regulatory changes, that can change how investors value PSU stocks.

Here are three top PSU stocks you can add to your watchlist ahead of Union Budget 2026.

#1 Bharat Heavy Electricals (BHEL)

BHEL is India's top engineering and manufacturing enterprise in the power and infrastructure sectors. The company serves customers with a comprehensive portfolio of products, systems, and services in the areas of power-thermal, hydro, gas, nuclear, solar, transmission, and more.

The Union Budget has consistently prioritised higher capital expenditure on infrastructure - roads, railways, power, transmission, and industrial corridors - which creates demand for capital goods and equipment that BHEL manufactures (turbines, generators, transformers, industrial machines).

Higher capex generally translates into more orders for BHEL.

This apart, PSU capex encouragement, faster payments from government utilities and policy support for domestic manufacturing, if announced, should help Bharat Heavy Electricals.

Financial Numbers

Source: Equitymaster

In Q3 FY26, BHEL recorded an increase in revenue, reaching Rs 84,731 m, up from Rs 72,771 m in the corresponding period of the previous year.

The consolidated net profit also saw significant growth, rising to Rs 3,742 m in Q2 FY26 compared to Rs 895 m during the same period last year.

A recent investor presentation disclosed an impressive order book valued at a substantial Rs 2,190 billion (bn). This order backlog ensures revenue visibility over the next 3-4 years.

The company has been making concerted efforts to diversify its order book. By the close of Q2 FY26, 27% of the order inflow came from exports and industries beyond the power sector.

Key contributors to this diversification include railways (such as Vande Bharat components), defence manufacturing, industrial equipment, and EPC services.

#2 Coal India

Coal India holds a near monopoly position in India's coal mining and production sector. It commands over 80% of the country's coal production, making it the largest coal producer in the world.

According to a report in the Financial Express, the government is reportedly planning a nearly Rs 500 bn incentive package (through viability gap funding and other support) for coal gasification project.

This move would create new, higher-value demand for Coal India's coal beyond power generation and traditional uses if announced in this Budget 2026.

Coalbed methane extraction, solar power projects, and critical minerals exploration are part of Coal India's declared strategy. A budget prioritising energy transition could provide funding or incentives for such initiatives.

Financial Highlights of Coal India

Source: Equitymaster

In Q2 FY26, Coal India reported a drop in consolidated revenue to Rs 301,867 m, compared to Rs 311,819 m in the same period last year. The consolidated net profits were placed at Rs 40,534 m compared to Rs 61,377 m in the same period last year.

With a projected annual growth rate of 8% beginning in FY25, Coal India has laid out a strategic plan to reach a production target of 1.23 bn tonnes by FY35. This path seeks to keep the company's net profits and revenues steady.

The company has made improvements to its infrastructure, such as the construction of coastal stockyards and new railway sidings at Kusmunda and Khadia.

Delivery schedules have been greatly accelerated by these efforts, especially for coastal power plants. These improvements also minimise distribution delays and improve the company's ability to react to unexpected spikes in demand.

#3 Mazagon Dock Shipbuilders

Mazagon Dock Shipbuilders Limited is one of India's oldest and most strategic defence public sector shipyards, operating under the Ministry of Defence.

Analysts expect the Union Budget 2026-27 to continue a strong focus on the defence sector with boosted allocation and indigenous capability building - part of India's broader self-reliance strategy. Defence capital outlay and procurement are anticipated to grow, helping state shipyards.

Increased budgetary support for naval capital procurement lifts prospects for warship and submarine orders executed by the company.

Financial Highlights

Source: Equitymaster

The company achieved revenues of Rs 29,292 m in Q2 FY26, compared to Rs 27,568 m in the same period last year.

Mazagon Dock Shipbuilders recorded net profits of Rs 7,099 m, an increase from Rs 5,528 m year-on-year (YoY). As of October 2025, the company's order book was Rs 274.15 bn.

The management anticipates that in FY26, the revenues would be around Rs 125 bn. In the subsequent years, the management expects 5% growth.

Beyond that, once the submarine projects kick in, it's expected that there would be considerable improvement both in revenues as well as profits.

A defence-centric Union Budget combined with dedicated shipbuilding incentives and government packages can strengthen Mazagon Dock's revenue prospects, technological capability, financing edge, and competitive positioning in India's expanding naval industrial base.

Investors should evaluate the company's fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.

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