Take a fresh look at your lifestyle.

Infrastructure sector takes the cake, yet again, with capex  bounty

0

Mumbai: A higher-than-expected budgetary capital expenditure outlay was more than welcome. After all, the Centre’s capex spend has been holding the fort as a meaningful revival in private capex is missing so far.

Finance minister Nirmala Sitharaman proposed FY24 capex outlay at a whopping 10 trillion, up 33%, and 3.3% of the GDP. This is the third straight year of a rise in capex outlay.

“We were expecting a 30% year-on-year increase in capex outlay, so it has exceeded that. The increased emphasis on first and last mile connectivity, green growth and urban infrastructure development bodes well for the sector’s long-term growth. Execution is the key now,” said Suresh Subudhi, global leader for infrastructure practice at BCG.

The record proposed allocation of 2.4 trillion for the Indian Railways was another highlight. Further, in a bid to give urban infrastructure in tier-2 and tier-3 cities a fillip and make cities more sustainable, an annual allocation of 10,000 crore under the Urban Infrastructure Development Fund was proposed.

It should be noted that investments in the infrastructure sector tend to have a multiplier impact on economic growth and job creation across adjacent sectors. Among capital goods stocks, sector bellwether Larsen & Toubro, ABB India, Thermax and Siemens are seen as potential beneficiaries. The Nifty Infrastructure index and the S&P BSE Capital Goods index rose around 1% and 1.8%, during the day, respectively on Wednesday. In a positive rub-off effect, shares of select companies in the cement and real estate sectors also rose.

“Overall, the allocations made towards the railways and roads segment in Budget 2023 were strong; however, allocation to the defence sector came as a negative surprise and could weigh on the stock, in the near-term,” said Nilesh Bhaiya, consumer durables & capital goods analyst at BNP Paribas Securities India. The defence budget was increased to 5.94 trillion for FY24 from last year’s allocation of 5.25 trillion.

While the Centre’s commitment to boost the infrastructure sector does boost investors’ confidence, an immediate impact on the earnings outlook of companies in these sectors is unlikely, he added.

“In the capital goods sector, we feel there is a lot of exuberance in many stocks, but in the coming quarters, growth would be flat in terms of order inflows,” he cautioned.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint.
Download The Mint News App to get Daily Market Updates.

More
Less

For all the latest Business News Click Here

Denial of responsibility! FAECO is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – at loginhelponline@gmail.com The content will be deleted within 24 hours.

Read original article here

Leave A Reply

Your email address will not be published.