While nobody is baking in the possibility of big-bang announcements in the Interim Budget 2024 to be presented by Finance Minister Nirmala Sitharaman on February 1, it is unlikely to be a non-event for investors in rail, defence and other capex-related stocks – many of which have given multibagger returns since last Budget.

In the last five years, central government capex has already surged 3 times and investors are expecting the Budget, which would be a vote-on-account ahead of the Lok Sabha elections later in the year, to continue its focus on infrastructure to develop ports, airports, railways, and highways.

Last year’s Budget allocated 19.5% of expenses towards capex, marking the highest in two decades, indicating the government’s long-term planning approach.

“There may be an increased emphasis on power, utilities, and renewables. Railways, infrastructure, and capital goods companies are poised to remain in the spotlight with higher capex spending. Automobiles and FMCG are likely to get a boost from higher rural spending,” said Pranav Haridasan, MD and CEO, Axis Securities.

Rail stocks

In FY24, government spending in railway infrastructure had surged to Rs 2.4 lakh crore with expectations for it to further increase to Rs 3 lakh crore in FY25. This is projected to directly contribute to a robust order book for companies engaged in manufacturing railway equipment, Axis Securities said.Railway industry players anticipate a carry forward of the previous year’s postulates with undeterred throttle. Railways capex is expected to further elevate to 20% growth YoY led by further expansion of DFC, rolling stock, HSR networks, etc as outlined in the National Rail Plan.”The infrastructural boost towards improvement of the National Rail Network needs to continue and the 3000 MT mission must not get diluted by any means. Rolling stock-up upgradation and modernization need to fast-track for better efficiency in revenue generation. Procurement of Rolling Stock assets to remain a high-priority subject. The number of wagons going to be overaged between 2024 and 2031 is anticipated to be around 45000 and it is essential that the new stocks must be added at a much higher rate,” Vivek Lohia, Managing Director, Jupiter Wagons.In the last one year, rail stocks like IRFC, Titagarh Rail, RVNL, Ircon, Texmaco Rail, RailTel, Jupiter Wagons and RITES have delivered multibagger returns.

Defence stocks

With India aspiring to become an export hub for defence, the government is expected to raise defence capex 5–8% YoY with higher allocation towards R&D, UAV/drones, anti-drone systems, etc.

“It has become a significant part of the economy and the market over the last five years inspiring tremendous excitement,” Ashwini Shami of OmniScience Capital said.

Analysts say the medium to long-term outlook of defence stocks remain intact as orders from the defence ministry would continue to flow. Among PSU defence stocks, Cochin Shipyard, Mazagon Dock Shipbuilders, Mishra Dhatu Nigam, HAL and Bharat Electronics have more than doubled money since the last Budget.

Other infra stocks

Analysts are expecting the government capex to further increase by 10-15% in FY25. In FY24, the government had pegged the capex target at 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, private capex, which has been sluggish for the last several years, is expected to receive a much-needed push in the upcoming budget,” Axis Securities said.

Sharekhan expects government spending on infrastructure to grow at a slower pace at high single to low double-digit compared to over 30% CAGR witnessed over the past four years.

The allocation for infrastructure spending, as a percentage of GDP, has surged from 1.13% in FY 2019-20 to a projected 3.3% of GDP in FY 2023-24.

(Data: Ritesh Presswala)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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