Interim Budget 2024: Capex growth to moderate? Infra, road, railways, defence stocks in focus today

Many capex-linked sectors such, especially railways and defence, have seen steep rally in the past one year on the Modi government's record capex allocation at Rs 10 lakh crore mark in Budget 2023, 36 per cent above 2022 Budget allocation. This time around, there are hopes that that capex spending growth may not be that strong, as the government looks to ease rural stress and sharply  on the needs of the people at the bottom of pyramid.

YES Securities said the government will have to do a tightrope walk in allocating resources for capital expenditure, the incremental pace of which can reduce. "Support to economy through capex push will continue, though growth in capex expenditure will be more sober at 12-13 per cent," it said.

Capex could moderate and consumption in terms of rural spending and tax breaks could be supported. "For markets, fiscal prudence is welcome, but lower capex spends could weigh on earnings. Hence, for 2024, value lies in quality," Nuvama said while expecting capex spend growth at 15-16 per cent YoY.

In its interim Budget preview, Jefferies anticipated a mere 7-8 per cent growth in the government capex budget for FY25 and suggested that such a move could disappoint the stock market, adding that shares exposed to the government capex program could see some correction.

“That's the reason why we have lowered Larsen & Toubro Ltd ’s weight in our model portfolio to neutral and transferred the same to Adani Ports. Some stocks exposed to railways and defence capex program may also be subdued," Jefferies said.

That said, analysts sees higher outlay for roads, railways, Jal Jeevan Mission and roadmap for higher rolling stock procurement in railways, which could be positive for EPC players and rolling stock companies such as  Titagarh and Texmaco Rail. Railways capex is seen rising 15-20 per cent while defence capex is seen growing 5–8 per cent YoY.

Suman Bannerjee, CIO, Hedonova a Paris based hedge fund said he would be expecting a surge in railways, investment, with the FM likely unveiling transformative projects and introducing 300-400 Vande Bharat trains.

"The commitment to new highways holds promise for enhanced connectivity and economic vitality. The manufacturing sector anticipates a visionary PLI scheme, fostering innovation and global competitiveness. Finance Minister Nirmala Sitaraman's budget is poised to be a catalyst, propelling India towards a future of modernised infrastructure, efficient railways, robust highways, and a thriving manufacturing ecosystem," he said.

Also read: Budget 2024 live: FM's speech at 11 am, taxpayers, investors wait with bated breath

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