NTPC, Titagarh Rail Systems, L&T and Ultratech: Morgan Stanley picks 4 stocks to play infra theme 

Morgan Stanley in its latest note said India's infrastructure has materially improved in recent years and there is significant scope for further improvements through recent government initiatives such as PM Gati Shakti (PMGS). Efficient infrastructure, the foreign brokerage said, can lower logistical costs and improve India's manufacturing competitiveness.

"Key stocks to play this theme (arranged alphabetically) include Larsen & Toubro, NTPC, Titagarh Rail Systems, and Ultratech Cement," it said.

Morgan Stanley said there would also be positive implications for the equity market and that beneficiaries fall into three buckets: enablers, developers (asset owners), and adopters.

It talked about enablers such as energy players BPCL, HPCL, ONGC, Oil India and Reliance Industries; financials such as Axis Bank, Bank of Baroda, ICICI Bank, SBI and HDFC Bank; industrial players such as Astral, Havells, Kajaria Ceramics and Polycab; and companies in materials sector such as ACC, UltraTech, JSPL, SAIL, Tata Steel, Ambuja Cements and Grasim Industries. 

Among developers, it talked about telecom operator Bharti Airtel, Industrials such as Adani Ports, Amara Raja Batteries, BHEL, CCI, Exide, L&T and Titagarh Rail Systems. It also see real state developers such as DLF and Macrotech Developers and utilities such as GAIL, Gujarat Gas, Gujarat State Petronet, Indraprastha Gas, NTPC, Petronet LNG, Power Grid and Tata Power as developers to benefit from infra theme. 

Among adopters, it counts consumer discretionary players such as Asian Paints, Avenue Supermarts, Berger Paints, FSN E-Commerce Ventures and Kansai Nerolac; and financials such as Cholamandalam Investment, Mahindra and Mahindra Financial Services and Shriram Finance.

Besides, it sees industrials such as Ashok Leyland and Delhivery, IT firms such as Dixon Technologies, Kaynes, Syrma SGS and chemical players Aarti Industries, Deepak Nitrite, Navin Fluorine, PI Industries, SRF and Tata Chemicals among adopters that can benefit from government initiatives.

India has not only increased its investments on infrastructure in the last decade but also has worked on improving their productivity, the brokerage said. 

"Nonetheless, there is still much headroom for increasing both size and productivity – and recent government policies have been a step in the right direction. From the investment perspective, we expect a 15.3 per cent  CAGR in infrastructure investments, resulting in cumulative spending of US$1.45tn over the next five years. Regarding productivity improvement, we see the well-orchestrated and centralized approach under PM Gati Shakti driving faster execution of infra projects while reducing cost overruns. It should also unleash productivity gains, leading to higher efficiency," it said.