State-Run Lenders REC and PFC Hit Fresh Highs on Heavy Volumes

Mumbai, April 16: Shares of REC and Power Finance Corporation surged to fresh 52-week highs, riding a wave of strong volumes and renewed investor interest. 

Both stocks which surged up to five per cent each have emerged as standout performers in April, with the month shaping up to be one of their best in years. The rally has been accompanied by a sharp spike in trading volumes, signalling institutional participation and sustained buying rather than short-term speculative moves.  

Merger Awaited 

At the heart of the surge lies growing confidence around the long-awaited merger between the two state-run lenders. The proposed consolidation is expected to create a financial powerhouse in the power sector, enhancing lending capacity and improving operational efficiencies. Importantly, clarity that the merged entity will remain under government control has eased concerns around ownership and structure, removing a key overhang for investors.  

The Street is increasingly viewing the merger as a value-accretive move. A combined balance sheet would not only allow for larger project financing—especially in renewables and transmission—but also improve risk diversification and capital efficiency. Analysts believe this could strengthen earnings visibility over the medium term. 

Strong Fundamentals 

Beyond the merger, the rally is also being driven by strong fundamentals. Both REC and PFC have reported steady loan growth, improving asset quality, and robust profitability in recent quarters. Their positioning as key financiers to India’s power and infrastructure sectors places them at the centre of the country’s ongoing energy transition, which continues to attract investor interest. 

Dividend yield remains another major draw. These PSU lenders have consistently delivered high payouts, making them attractive to investors seeking stable income alongside capital appreciation. Combined with relatively low valuations compared to private sector peers, the risk-reward equation continues to favour these stocks. 

Broader Resurgence 

The momentum has also been aided by a broader resurgence in PSU stocks, particularly in the power and infrastructure space. As policy support strengthens and execution visibility improves, government-backed entities are seeing a rerating across the board. 

However, despite the strong rally, some caution persists. Execution of the merger, including valuation and swap ratios, remains a key monitorable. Additionally, exposure to state power distribution companies (DISCOMs) continues to be a structural risk, given their historically weak financial health. 

For now, though, the trend remains firmly bullish. 

Source:

• https://www.nseindia.com/