Budget stocks: 25 companies whose fortunes are closely linked with the Budget

Jefferies highlights low investor expectations for L&T, suggesting potential upside on guidance delivery. L&T’s robust infrastructure orders position it for substantial growth. While for UltraTech, the anticipated 10-12 percent rise in capex, driven by initiatives like the National Infrastructure Pipeline (NIP), Pradhan Mantri Gati Shakti, and Bharatmala Pariyojana, will boost infrastructure development and affordable housing. The proposed GST reduction on cement further supports growth in the sector.

Road and Construction; Stocks to Watch: KNR Construction, Ashoka Buildcon

The government is expected to raise the allocation for the Ministry of Road Transport and Highways (MoRTH) by 5-6 percent. This is expected to spur private investments in highway projects, particularly those under the Build-Operate-Transfer (BoT) model. Focus will also be on rural road development with increased funding for the Pradhan Mantri Gram Sadak Yojana (PMGSY), including a 10 percent increase in funding for the fourth phase. For FY26, MoRTH aims to construct and award 12,000-13,000 kilometers of national highways.

Both KNR Construction and Ashoka Buildcon are poised to benefit from MoRTH’s ambitious plans. These stocks are already seeing strong returns, but potential delays due to land acquisition and regulatory issues could affect short-term performance.

Power; Stocks to Watch: Siemens, Thermax

The power sector has been facing short-term demand slowdowns but remains a key focus for the government. Allocations to the Ministry of Power saw a 16 percent increase in FY25 (Rs 20,502 crore), and similar budgetary support is expected in FY26, especially for renewable energy initiatives.

Siemens stands to benefit from a burgeoning transmission pipeline, with expectations of a significant revenue boost. Jefferies views the tripling of the transmission bid pipeline over the past two years to significantly boost Siemens' revenues.

Thermax, focusing on clean energy and industrial power, is also poised for growth, driven by increasing investments in infrastructure and a shift towards sustainable energy. Jefferies noted that infrastructure and industrial capex are projected to grow at a CAGR of 13 per cent from FY24-27, compared to 6 per cent between FY11-20. The firm is also likely to benefit from its transition into a company focused on clean energy.

Defence; Stocks to Watch: HAL, BEL

The Ministry of Defence has designated 2025 as the 'Year of Reforms,' with an emphasis on modernisation and indigenisation. The defence budget is expected to focus heavily on capital expenditure, especially for electronics, vehicles, and aircraft, which will benefit companies in the defence manufacturing sector. Jefferies projects defence spending to grow at a 7-8 percent CAGR from FY24 to FY30, with a $100-120 billion domestic opportunity over 5-6 years, implying a 13 percent industry CAGR during the same period.

Hindustan Aeronautics Ltd (HAL) reported 50-52 percent YoY order growth in FY24 (~Rs 40,000 crore) and targets Rs 60,000+ crore in FY25. JV agreements with global players like GE, position it as a top defence OEM. Jefferies projects a 20 percent EPS CAGR over five years, driven by indigenisation. Bharat Electronics Limited has nearly 60 percent share. In the overall defence market, the company has consistently improved its revenue market share over the last four years, reaching 12.8 percent in FY24.

Railways; Stocks to Watch: RVNL, BEML, IRFC

The railway sector is poised for a significant budget boost, with expectations of a 15-18 percent increase in allocations. The government is focusing on augmenting capacity, enhancing rolling stock, and modernizing infrastructure, including investments in Vande Bharat trains. Moneycontrol has earlier reported that the government may allocate Rs 2.9-3 lakh crore as gross budgetary support (GBS) for Indian Railways in 2025-26.

An upgrade of 40,000 bogies and expanding the Kavach ATCS system across 10,000 kms is underway. AI integration in ticketing and track monitoring will improve efficiency and ‘Make in India’ will create new opportunities.

Real Estate; Stocks to Watch: Oberoi Realty, PNB Housing, AAVAS Financiers

The real estate sector is grappling with rising raw material costs and outdated definitions of affordable housing. A revision of criteria for affordable housing and incentives such as tax breaks, subsidies, and industry status could provide much-needed relief to developers. Streamlining regulations and simplifying the approval process could spur foreign investments in the commercial real estate space.

Stocks like PNB Housing and AAVAS Financiers are likely to benefit from policy support, especially if affordable housing criteria are revised to better reflect the rising cost of land and materials. Additionally, a possible reintroduction of the Credit-Linked Subsidy Scheme (CLSS) under PMAY could further stimulate demand in this segment.

Consumption; Stocks to Watch: HUL, ITC, Dabur, Marico, Emami

The government is likely to introduce tax measures aimed at boosting disposable incomes, such as an increase in the standard deduction and higher tax exemption limits. A reduction in excise duty on fuel could further reduce inflationary pressures, enhancing consumer spending.

Consumption stocks have had a rough ride with stocks like HUL and ITC down 22% and 16% from 52-week highs amid a slowdown in urban consumption. Despite challenges such as inflation and higher input costs, FMCG stocks are poised to benefit from any fiscal policies aimed at boosting consumption. CLSA is of the view that if the government priorities change towards more welfare, affordable consumption side of things, then it is the beaten down staples sector that will stand to benefit.

Renewables; Stocks to Watch (Green Energy): Waaree Energies, Inox Wind, NTPC Green; (Solar Energy): Adani Solar, Borosil Renewables, Sterling & Wilson

The government’s push for renewable energy has seen India add significant capacity in 2024 as it added nearly 15 GW of capacity between April and November 2024 - doubling the 7.54 GW added during the same period in the previous year. India has set a 2030 target of 500 GW of renewable energy, complemented by initiatives like PM-KUSUM and green hydrogen programs. The installed non-fossil fuel capacity is at 214 GW, representing a 14 percent year-on-year growth.

Meanwhile, India’s solar sector is also witnessing robust growth, with a strong emphasis on increasing rooftop solar capacity, driven by initiatives like the PM Surya Ghar Yojana. The government is also working to enhance the National Solar Portal to improve project execution efficiency and is exploring battery energy storage systems (BESS) to optimise grid management. A new mandate requiring solar cells to be sourced only from manufacturers listed in the approved list of models and manufacturers (ALMM) starting June 2026 is expected to streamline the sector.