PSU rail, defence stocks rally up to 77% in 1 month. Will Budget be about Modi stocks?
Dalal Street anticipates Finance Minister Nirmala Sitharaman to maintain the capex agenda and fiscal discipline. PSU stocks in railways and defence sectors lead with up to 77% returns in a month. Pre-Budget optimism propels PSU stocks to record highs, despite concerns over stretched valuations. The rally is driven by 'Modi stocks,' linked to capex and infrastructure sectors.
With Dalal Street expecting Finance Minister Nirmala Sitharaman to continue with the agenda and retain focus on fiscal discipline, from the stable of railways and defence are leading the bull run with up to 77% return in just one month.A pre-Budget rally has taken most of these PSU stocks to fresh all-time high levels even as purists find the valuations to be quite bizarre when compared to their fundamentals. The current leg of the bull run has been largely led by - being used to denote scrips related to capex and infrastructure-linked sectors.
If the higher-than-budgeted dividend from the RBI is used for increasing expenditure, capex growth could increase to 21% year-on-year (YoY), according to estimates by Goldman Sachs.
In the final for FY25 to be presented on July 23, expects capital expenditure which was budgeted at Rs 11.1 lakh crore in the interim Budget to increase to Rs 11.8 lakh crore.
Depending on how big the Budget numbers turn out to be, capex boost can reignite a fresh bull run in Modi stocks.
In the last month, shares of are up over 77%, followed by a 51% upside seen in multibagger rail stock . Similarly, , , RCF, , and IRCON are up at least 30% during the period.
The capex of Indian Railways is estimated to have grown at an impressive 18% CAGR over FY15–24. The total railway capex over FY15–25E is likely to be 4.1x the previous decade i.e. FY05–15. The cumulative railway capex over FY20–24E is projected to be 90% higher than the previous five-year period i.e. FY15–19, according to estimates by Nuvama.
"Capital expenditure in the railways sector is expected to increase by 76% over the next five years, reaching Rs 2.55 lakh crore. Plans include prioritizing dedicated tracks for coal and mineral transportation, improving port connectivity, and addressing congestion issues to bolster efficiency and capacity," says Amit Goel of Pace 360.
The Budget is anticipated to maintain a strong emphasis on infrastructure development, particularly in roadways, highways, and tunnels. A projected compound annual growth rate (CAGR) of 11.4% in capital expenditure from 2021 to 2026 underscores the government's commitment to enhancing transportation networks and connectivity, he said.
The Budget may see increased support for the lower-income categories and agricultural sectors. Markets will focus on the Budgetary allocations towards key ministries and governments policy focus on infrastructure, manufacturing, defence, railway, power etc, says Mihir Vora, Chief Investment Officer, TRUST Mutual Fund.
Policy continuity despite the BJP failing to get a full majority on its own is a big draw for investors.
“There could be some positive announcements on allocations towards rural economy. Also, there is a possibility of tax benefits for the lower income brackets. Focus on capital expenditure is also expected to continue with increasing central expenditure, persuading state-level capex and also incentivising private capex. Overall, we are likely to see policy continuity,” Nimesh Chandan, CIO, Bajaj Finserv Asset Management.
(Data: Ritesh Presswala)
Source: Stocks-Markets-Economic Times
