Since the Indian government announced a budget plan of ₹11.2 lakh crore for capital expenditure (capex) in the next financial year, stocks related to government spending have dropped. However, a report by CLSA suggests that if we include the money states will spend, the real budget for capex is actually ₹15.5 lakh crore, which shows a healthy growth of 19% compared to last year.
CLSA’s expert, Bharat Parekh, noted that there is a strong push for infrastructure projects, which will help the economy. The government’s focus is on improving how states can access funding for projects, which has gone up by 43% compared to last year. This budget also emphasizes sustainability, including support for water projects, renewable energy, and electric buses.
The capex for FY26 is now set at 4.3% of the country’s GDP, the highest it has ever been. Budget spending on defense also increased by 13%, which could calm investors. However, this growth in defense depends on how quickly projects get delivered.
Despite the weak stock performance recently, CLSA recommends buying shares in companies like L&T, HAL, NCC, and JKIL, as they are likely to recover significantly in 2025 when more orders come in.
Additionally, another brokerage firm, Motilal Oswal, recommends being careful in the capital goods sector. They suggest focusing on companies less affected by slower government spending. They have downgraded some stocks but remain positive on areas such as power, defense, and electronics, highlighting that L&T, ABB, and Cummins are great options for investments.
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