Budget 2024: Infra sector stocks in focus & expectations from Nirmala Sitharaman's Budget speech

The NDA government is likely to continue its focus on the infrastructure in Union Budget on July 23. FM Nirmala Sitharaman may hike capex for public investment in infrastructure with specific focus on renewable energy, City Gas Distribution and water. Here’s a look at how the government is likely to promote the infra sector, leading to an exponential growth of the  Indian economy.

Brokerage Anand Rathi  in its Budget preview said, “The approach of the budget is more likely to be to stimulate job creation through public investment in infrastructure, improving conditions of doing business, policy support for industry, reforming education and training systems to enhance job skills, and easier access to finance for entrepreneurs.”

It expects continuation of huge allocations for public investment in infrastructure with specific focus on renewable energy, CGD and water. The brokerage also expects the government to continue spending on roads and railways, special focus on housing, renewable energy and water infrastructure. It tops picks in the infra sector are NCC, PNC Infra and HG Infra.

JM Financial in its Budget Preview said the government is likely to announce an increase in infrastructure capital outlay. Such a move will affect stocks such as KNR Construction, PNC Infratech , RITES, Ahluwalia Contracts.

The FM may announce a dedicated larger allocation to large water projects like Jal Jeevan Mission, Nal Se Jal and Inland Waterways Development.  Shares such as NCC, VA Tech Wabag, Finolex Industries, Ratnamani Metals and Welspun Corp will be affected after such a proposal.

Rumki Majumdar, economist at Deloitte India said in her Budget expectations said, “Within infrastructure, we would expect changes in allocation priorities this year leading to a higher allocation towards improving the port and shipping; energy, especially green and sustainable energy; and urban infrastructure. The Budget is expected to highlight the importance of expanding digital public infrastructure to support the nation's digital future. With an aim to make India a USD 1 trillion digital economy by 2025-26, the government will prioritise investments in digital infrastructure, cybersecurity, and skill development to achieve better financial inclusion and digital literacy. We might also see tech leaders collaborate with the government to enhance IT and digital infrastructure, supporting the nation's digital transformation journey.”

Mehta Equities has listed out seven expectations from the Infra sector, which are listed below.

1. Public investments and enhanced infrastructure investment need to be stepped up as the burden for economic growth in FY25 would fall again on the government. Along with fund allocations, the government should also ensure sustained monitoring.

2. The Ministry of Road Transport and Highways has requested a budgetary allocation of Rs 3.25 lakh crore for FY 2024-25, marking a 25% YoY increase.

3. Enhance opportunities for private investment in infrastructure that will assist all stakeholders for more private investment in infrastructure, including railways, roads, urban infrastructure, and power. The industry anticipates heightened government emphasis on safety and timely infrastructure upgrades in the country.

4) There is an urgent need to improve technology and digital adoption in construction industry. Dependence on unskilled labour is one of the vulnerabilities of the infrastructure sector. The sector needs to invest in skilling, modern machinery, automation and digitization. Please note, in the developed markets and most importantly, in China the large infrastructure projects rely more on technology and automation and less on manual labour.

5) The introduction of schemes like the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) 2.0 and Swachh Bharat Mission (SBM) 2.0 in recent years, higher allocations for these sub-sectors are expected this time.

6) Removing obstacles and speeding up process for land acquisition for infrastructure projects

7) Prioritise rural and urban connectivity, railways, ports, aviation, and highways for their significant impact on growth and employment.

Best Plays in the infra sector according to Mehta Equities are stocks of Larsen and ITD Cementation.