Sparking a bull run in multiple sectors, the Narendra Modi government’s spending on infrastructure which has been growing at 30% CAGR in the last 4 years would be under investor radar when Finance Minister Nirmala Sitharaman presents the interim Budget tomorrow. While the pace of spending may slow down, the government is expected to raise allocation towards rail, roads and other infrastructure projects.

Infrastructure-related companies, particularly in construction, cement, and steel, could benefit from increased government spending. Railways capex is expected to further increase to 20% growth YoY while defence spending growth may be in single digits.

Here are stocks and sectors that could be in focus when Nirmala Sitharama presents the Budget:

Infrastructure stocks
Market watchers expect the major focus will be on key infrastructure segments such as roads, railways, airports, and urban infrastructure. “With the government focusing on increasing the road network, we expect a 10%-15% higher allocation YoY for the ministry of road transport & highways. Similarly, Railways should also witness higher budgetary allocation in 2024,” Axis Securities said.

“We expect the government capex will further increase by 10-15% in FY25. In the last fiscal (FY24), the government pegged the capex target of Rs 10 lakh crore. Focus is likely to continue on developing the country’s public infrastructure such as roads, water, metro, railways, defense, digital infrastructure, and green technologies. Its overall focus would also be on creating more jobs and achieving investment-driven growth. Furthermore, the private Capex, which has been sluggish for the last several years, is expected to receive a much-needed push in the upcoming budget,” it said.Infra stocks on watchlist include L&T, PNC Infratech, Dalmia Bharat, KNR Construction, PNC Infratech, RITES, KEC International, Ahluwalia Contracts, Astral and Tata Power.Rural stocks
The Budget might unveil a few sops, like potential tweaks in tax slabs and enticing incentives aimed at reviving economic activity, especially in the rural economy, Sharekhan said. The Budget may also increase allocation under various rural schemes including MNREGA (was Rs 60,000 crore in Union Budget 2023) and various skill development schemes such as Pradhan Mantri Kaushal Vikas Yojna 2.0 (budgetary outlay is Rs 12,000 crore).With the rural economy still not showing a sign of 100% recovery to pre-Covid levels, higher rural spending is likely in the upcoming budget, with more focus on affordable housing.

A boost to rural consumption would also support discretionary spends and thereby benefit rural-focused two-wheelers and entry-level four-wheeler OEMs, along with auto ancillary companies supplying to such OEMs, analysts say.

Rural-themed stocks in focus include Maruti Suzuki, Minda Corp, Hero MotoCorp, M&M, Escorts Kubota Ltd, Hindustan Unilever, ITC and Dabur India.

Defence stocks
Indigenisation of defence and defence exports may also receive a push in the Budget. Defence capex is expected to increase 5–8% YoY with higher allocation towards R&D, UAV/drones, anti-drone systems, etc as some key large systems are already in the pipeline, Nuvama said.

Stocks in focus include BEL, BHEL, HAL, Mishra Dhatu Nigam, Mazagon Dock and Cochin Shipyard.

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