Now for execution of shares of infra companies after boosting higher capital expenditure

Shares of Larsen & Toubro Ltd (L&T) closed 4.5% higher on the NSE. L&T is often seen as a proxy for the country’s infrastructure development as government orders account for the majority of its total order book.

“Year-on-year (YoY) growth in capex outlay spending (Budget Estimate vs Revised Estimate) is positive for the (infrastructure and contractors) sector, including L&T,” analysts at Jefferies India said in the budget flash report. ” on 1 February.

Another beneficiary is the cement sector, where infra-spending is the second largest contributor to the industry’s overall demand. Small wonder, UltraTech Cement Ltd., Ambuja Cements Ltd., and Shree Cement Ltd., among others, gained over 4.5% each on the NSE.

Similar optimism was seen in shares of road construction companies, which rose intraday on the NSE after Finance Minister Nirmala Sitharaman announced that it aims to expand the national highway network to 25,000 km in FY13. .

Prima facie, investors have appreciated the budget announcements related to capital expenditure. But, analysts say, the details of this capex plan may not be as exciting as it sounds.

“Of the total capex basket, infrastructure capex (which has a higher multiplier effect on the economy) is projected to be relatively low at 11% in the coming fiscal, with gross budgetary support rising sharply to 30%. Within the overall infrastructure, the railways, renewable energy and water sectors have seen the highest growth. Roads will see a marginal growth of 0.8% in the next financial year over FY 2022RE,” said Isha Choudhary, Director, CRISIL Research. It should be noted that infrastructure capital expenditure includes roads, railways, airports, ports, Includes housing, electricity, new and renewable energy, water and rural development.

Some market experts also said that the road development plan appears ambitious given the government’s poor track record in this regard.

Another potential beneficiary would be KEC International, according to Arafat Sayyed, senior research analyst at Reliance Securities Ltd. “But,” he adds, “now, what matters is how much of it (capex) actually translates into an uptick in the order book. … Shares of these companies have responded positively, but for these stocks, The increase in income for the purpose depends on the execution of the said declarations.”

Meanwhile, some economists are hopeful that the government’s flagship National Infrastructure Pipeline (NIP) project may now start to make a meaningful impact on the country’s infrastructure investment landscape, with an emphasis on infrastructure-led capital expenditure. According to Capital Economics, the NIP looked impressive on paper, but the lack of funding risks curtailing its impact on long-term growth prospects.