New Delhi, Jan. 29 -- Defence and public sector undertakings' (PSU) stocks surged 5-7% on Wednesday as risk appetite improved ahead of the Union budget, driven by a confluence of supportive triggers. Stronger-than-expected earnings from Bharat Electronics Ltd, optimism around domestic defence manufacturing policies and hope of announcements on PSU divestment in the FY27 budget lifted investor sentiment, market experts said.

"Sentiment had already improved after the latest EU-India free trade agreement announcement," said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services. "The recent market correction created further tactical pre-budget opportunities in select defence and public sector names."

Oil and gas sto...