Budget 2021 brings infra sector back in focus; bet on these 20 stocks to reap the gains

The Union Budget 2021 seems to have brought the infrastructure back to investors' focus as the stocks from this space have been witnessing traction since February 1.

On the Budget day on February 1, the S&P BSE India Infrastructure Index jumped almost 6 percent; on the following day, it logged a gain of nearly 3 percent.

On February 3, the index rose about 3 percent in intraday trade to hit its 52-week high level of 204.5.

In her Union Budget 2021 speech, Finance Minister Nirmala Sitharaman announced a National Bank for Financing Development (NaBFID) to help in the process of infrastructure financing in the country.

Besides, a sharp increase of 34.5 percent YoY in budgeted estimates towards CAPEX spending from Rs 4.12 lakh crore to Rs 5.54 lakh crore for 2021‐22 is also a big positive for the sector.

"The intent, it seems, is clearly to propel growth within our spluttering economy by unleashing the Capex cycle and leveraging the multiplier effect of investing into the infrastructure sector," said Sandeep Upadhyay – MD – Infrastructure Advisory, Centrum Capital.

"The staggering increase in allocations to railways, roads, and urban infrastructure segments beats the market expectations. Both NHAI and PGCIL are highly rated and very relevant platforms to monetise assets through the InVIT model which could be a trendsetter for others to churn their investments."

Rohit Gadia, CIO, CapitalVia Global Research pointed out with the announcement of Rs 5.5 lakh crore of capital expenditure and new highway connectivity projects (nearly 7,700 km), the infra sector along with the allied sectors are in focus.

"This Budget is positive for the entire engineering and construction space. It will not only create better connectivity but will add to job creation. Increased consumption and infrastructure spending would have a positive impact on collateral sectors like tourism and hospitality. Better connectivity would be of great help to logistic service providers also," he said.

Analysts point out that the move is positive for companies that deal in the construction sector as it would lead to higher road awarding and construction.

Not only construction, but cement manufacturers will also be a top beneficiary of the government's focus on the infrastructure sector.

"Major investment in roads and highways, healthcare infra, affordable housing and construction of new metro lines will spur demand for cement which will benefit all cement companies particularly who are operating in South and East India as major highways construction are planned in these two regions," said brokerage firm Axis Securities.

"Government to award 8,500 km of road work by next financial year. This will also benefit all infra companies simultaneously," the brokerage firm added.

Below are 20 stocks from the construction and cement space that may benefit from the Budget 2021 announcements.

Top infra stocks: Larsen & Toubro, KNR Constructions, NCC, GMR Infra, PNC Infra, Sadbhav Engineering, REC, HG Infra Engineering, Anubhav Infrastructure and MEP Infrastructure Developers.

Top cement stocks: UltraTechCement, Shree Cements, ACC, Ambuja Cements, Ramco Cements, India Cements, J. K. Cement, HeidelbergCement India, Star Cement and JK Lakshmi Cement.

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