PSU banks, power stocks still offer upside ahead of Budget: Neeraj Dewan

As markets head into the Union Budget, investor sentiment remains cautious yet selectively optimistic, with broader participation now visible across segments. While expectations from the Budget are muted, concerns around sustained foreign institutional investor (FII) outflows are keeping market participants on the sidelines for now.

Speaking to ET Now, market expert, Neeraj Dewan said investors have been selectively buying stocks at lower levels but are now adopting a wait-and-watch approach ahead of the Budget.

“Yes, actually, one has been picking up, buying stocks at lower levels, but now we are very close to the budget and though expectations are very low from this budget, but the kind of FII outflow that we are seeing, it is better to see what happens in the budget, if there are some measures to control that kind of outflow and then take a call,” Dewan said.

He added that valuations in the broader market have become more reasonable, creating opportunities across segments.

“I think though there are opportunities across midcap, smallcaps also, there valuations have again become better, though which were expensive a year back. So, there is opportunity in infrastructure, capital good space. PSU banks have been doing well, so that I still feel has legs to go. So, there are opportunities across market cap but one now for couple of days more can… let us see what happens in the budget and then take a call,” he said.

Power and T&D Remain in Focus

Within the power sector, Dewan continues to remain constructive, particularly on transmission and distribution (T&D) players, even as generation companies have lagged.

“Yes, I like power space as a whole. Though if you see generation companies, in the last one year they have underperformed. But T&D space is one you still see better results. GE Vernova last quarter also results were good and this quarter also they good results. I continue to be positive on this space,” he said.

He also sees emerging opportunities in power generation, with stocks having corrected and valuations becoming more attractive.

“But now you need to look at broader power space also, power generation companies. I feel there is opportunity because stocks have consolidated, they have corrected and they are available at a decent valuation now. So, power is one space where you see some demand also improving,” Dewan added.

Financials, PSU Banks Still Offer Value
Financials remain one of the better-performing pockets, with PSU banks standing out on asset quality and valuations.

“Yes, financials have done well, so that is one space. What stands out there are the PSU banks. There I feel the kind of performance and the balance sheet that they are sitting on and they are still improving asset quality, recoveries are still happening, and they are not expensive on valuations,” Dewan said.

He believes PSU banks still offer further upside, while select private sector banks also look reasonably valued after recent corrections.

“So I think that is one space where still there are more legs, there is still some valuation gap which is there and even the private sector bank, barring couple of name which did not do that well this quarter results but HDFC Bank was also decent. Kotak or Axis Bank they also are doing, the valuation-wise they are not very expensive and they have corrected from their highs, so this is also one space one can look at,” he said.

On NBFCs, however, Dewan advised caution and stock-specific selection.

“NBFCs one, again has to be very-very stock specific there. So, there you have seen Bajaj Finance has not been able to perform and which is one of the used to be the darlings of everyone's portfolio. So, one has to be very-very stock specific as far as NBFCs are concerned but there is still a lot of scope left in PSUs and some private sector banks,” he added.

Realty: Accumulation for Long Term, Not Momentum
The real estate sector has remained under pressure for much of 2025, and Dewan said visibility on demand recovery is still limited, even in key markets like NCR.

“Real estate space has been under pressure. I am from Delhi, so NCR also market has been under pressure. You saw very swift up move before this lull period that started last year. There one would have expected that interest rates being low, some demand pickup will happen, but till now you are not seeing that kind of demand pickup,” he said.

He pointed to weak pre-sales numbers as a sign that momentum has not yet returned.

“So last quarter pre-sales are very low. So, one needs to see couple of good launches and good reaction to that and then take a call whether pickup is happening in real estate or not,” Dewan said.

While he sees value for long-term investors, he does not recommend realty as a near-term momentum or trading play.

“I think one for investment for a long-term two- to three-year period one can start accumulating at these levels because they are good levels, they have corrected a lot. But for momentum play or just for trading, I will not really recommend it as of now. Let the momentum come back and then one can take,” he said.

Prefer Micro-Market Players Over Diversified Names
Within real estate, Dewan prefers niche, micro-market-focused developers over large, diversified players at current valuations.

“I think better to play the niche market. If you are studying the Mumbai market or the NCR market, if you see revival in those markets to play those stocks because there we have seen more correction than what you have seen in the larger players which are well diversified like Prestige,” he said.

He added that region-focused developers could offer better risk-reward if local market conditions improve.

“So, I would rather play the micro market like even in NCR there are stocks which are only operating in NCR and there are some which are just concentrated in Mumbai Pune. So, I would rather play those micro markets,” Dewan said.