Why railway, defense, infra stocks are down 9% today
What's the story
The 2025 budget announcement has sent capex-linked stocks, especially those related to the railway, defense and infrastructure sectors, tumbling.
Shares of Titagarh Wagons, RITES, Texmaco Rail, RVNL, Ircon International and Jupiter Wagons fell by as much as 8%.
Defense stocks like Bharat Dynamics, Garden Reach Shipbuilders, Hindustan Aeronautics and Bharat Electronics saw a similar decline.
Infrastructure-related stocks weren't spared either. Companies such as IRB Infra, L&T, HG Infra, KNR Construction, Afcons Infra, GR Infra and NCC lost up to 9%.
Budget details
Revised capex projection for FY25 falls short of expectations
The revised capex projection for FY25 has been reduced to ₹10.18 lakh crore, down from the initially allocated ₹11 lakh crore.
For FY26, the allocation was marginally raised to ₹11.2 lakh crore but still remained below the industry's expectation of ₹11.5 lakh crore.
This has disappointed market experts amid muted capex growth in a slowing GDP.
Expert opinions
Market experts express disappointment over capex growth
Apurva Sheth, Head of Market Perspective & Research at Samco Securities, said, "The government's previous infrastructure focus seems to be taking a backseat to political pressures and populist policies."
Incred Equities also observed in its report, "The market was expecting a higher outlay of ₹13-14 lakh crore, which remains under-delivered and is a minor negative for capital goods and infrastructure sectors."
Future implications
Muted state spending may impact capex-linked companies
Capex-linked companies, which depend largely on government projects for their earnings growth, could be challenged by muted state spending. This could further dampen the sentiment for these players going forward.
However, despite the overall disappointment, certain sectors witnessed favorable allocations in the budget. Defense capital expenditure was hiked by 12% to ₹1.8-1.92 lakh crore, reinforcing India's focus on military modernization.
Sector growth
Railways and energy transition sectors receive budget boost
The railways sector also got a 6% capex hike to ₹2.5 lakh crore, albeit lower than market expectations.
The energy transition sector got a strong push with plans to achieve 100 GW of nuclear energy capacity by 2047.
An additional borrowing of 0.5% of Gross State Domestic Product (GSDP) for states was announced to drive power sector reforms, along with ₹20,000 crore nuclear energy mission for R&D funding.