Union Budget 2025: Railway, defence stocks in focus; here are key expectations

Railway and defence stocks will be in focus in the next two weeks, as the Street is expecting a slew of measures that could boost order flows for the two sectors. The railway sector is poised to receive a substantial boost in FY26 with a projected 15-20 per cent increase in capital expenditure, said Asit C Mehta Investment Interrmediates. In its Budget preview note, the domestic brokerage expects the total railways capex to exceed Rs 3 lakh crore, compared with Rs 2.65 lakh crore for FY24.

Focus areas may include laying new tracks, upgrading existing ones, and  commissioning upgraded railway stations, it said adding that enhanced funding for the Mumbai-Ahmedabad High-Speed Rail Corridor (bullet train) to accelerate its completion is likely.

Besides, investments in locomotives, wagons, and Vande Sleeper trains for improved passenger comfort during long journeys could also be on Finance Minister Nirmala Sitharaman's radar.

Also, Asit C Mehta sees continued emphasis on Public-Private Partnerships (PPP) for infrastructure development, with higher  targets for private investments. Among railway stocks, shares of RITES Ltd have declined 10 per cent while those of Indian Railway Finance Corporation Ltd (IRFC) are down 6 per cent in 2025 so far; Rail Vikas Nigam (RVNL) and Ircon International are down 2 per cent each while IRCTC and RailTel have fallen 1 per cent each. 

Defence budget expectations
Asit C Mehta said the market is anticipating moderate increase in Budget allocations for the  defence sector as the government continues to focus on modernisation and self-reliance.

The government is likely to continue emphasising the "Aatmanirbhar  Bharat" initiative, further incentivising private sector participation and  defence start-ups through policy support and enhanced domestic procurement targets, Asit C mehta said. 

Increased funding is likely for research and development in defence technology, including cyber warfare, and drone systems, is anticipated.

"Continued emphasis on modernising the armed forces with advanced military platforms, including  Nuclear-Powered Attack Submarines, Nilgiri-class frigates, Rafale multirole aircraft, Tejas Mark 1A  aircraft, Prachand Helicopters, and Zorawar main battle tanks," the brokerage said. 

Among defence stocks, BEML has tumbled 11 per cent, Data Patterns (India) 7 per cent, Bharat Electronics Ltd (BEL) 6 per cent and Hindustan Aeronautics Ltd (HAL) 3 per cent in 2025 so far. Bharat Dynamics Ltd is up 13 per cent during the same period. 

Garden Reach Shipbuilders & Enginers Ltd (down 6 per cent), Cochin Shipyard Ltd (3.3 per cent) and Mazagon Dock Shipbuilders Ltd (up 4.91 per cent) fared mixed.