The unveiling of Budget 2025 has sent shockwaves through the stock market, particularly impacting railway, defence, and infrastructure stocks. The government's lower-than-expected capital expenditure (capex) targets for FY25 and FY26 have triggered significant sell-offs, leaving investors concerned about future growth prospects in these critical sectors.
Market Performance: Capex-Linked Stocks Take a Hit
Capex-linked stocks bore the brunt of investor disappointment on Budget day, with a noticeable downturn across multiple sectors:
- Railway Stocks: Titagarh Wagons, RITES, Texmaco Rail, RVNL, Ircon International, and Jupiter Wagons experienced declines of up to 8%.
- Defence Stocks: Bharat Dynamics, Hindustan Aeronautics, and Bharat Electronics plummeted as much as 8%.
- Infrastructure Stocks: IRB Infra, L&T, HG Infra, KNR Construction, Afcons Infra, GR Infra, and NCC suffered losses reaching up to 9%.
This broad-based sell-off underscores the market's sensitivity to government spending, especially in sectors heavily reliant on public projects.
What Triggered the Sell-Off?
Investors were caught off guard by the revised capex projections:
- FY25 Capex: Reduced to Rs 10.18 lakh crore, down from the previously allocated Rs 11 lakh crore.
- FY26 Capex: Slightly increased to Rs 11.2 lakh crore, yet falling short of the Rs 11.5 lakh crore anticipated by industry experts.
The muted capex growth signals a strategic shift in the government's priorities, seemingly favouring consumption-driven policies over infrastructure development. This shift is particularly concerning amid a slowing GDP.
Broader Market Sentiment:
Market participants had anticipated a more aggressive capex outlay, in the range of Rs 13-14 lakh crore, to sustain infrastructure momentum. The shortfall has fueled concerns about the government shifting focus from long-term growth to short-term political gains.
Summary: Navigating the Road Ahead
The Budget 2025 announcement has clearly rattled investor confidence in capex-linked sectors. While the government's revised capex strategy might align with broader fiscal goals, it introduces near-term uncertainties for railway, defence, and infrastructure companies. Investors will keenly watch for policy updates and potential mid-year revisions that could restore optimism in these crucial sectors.
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