Budget 2025: Enhanced allocation, scope of PLI will bring these sectors, stocks in limelight

Budget 2025: Enhanced allocation, scope of PLI will bring these sectors, stocks in limelight

As the Union Budget 2025 approaches, investors and industry experts are hoping that the government would enhance the allocation and even the scope in terms of sectors supported through the Production-Linked Incentive (PLI) scheme.

A recent note by ICRA highlighted that the government may increase the allocation for the PLI scheme in FY26, with potential extensions to other labour-intensive sectors to boost domestic manufacturing and address credit flow issues.

Data shows that the fund utilisation was less than 10 percent of the Rs 1.97 lakh crore that has been allocated since inception until the end of CY24. This is pushing the ministries to focus on more targeted interventions based on market demand, rather than applying the same PLI framework across all sectors.

Meanwhile, the upcoming Budget is expected to prioritise fiscal stability and tax reforms while spurring private investments with a recent note by HDFC Securities stating that domestic cyclicals are likely to make a comeback in 2HCY25. The broking firm considers financials, consumer discretionary and healthcare to be among the favourable sectors. Nifty has tumbled 9% in the past four months and investors will be looking for positive cues from Budget 2025.

Key sectors & stocks to watch out for PLI benefits in Budget 2025

Renewable Energy & Solar

The renewable energy sector saw a huge jump in budget allocation for FY25, reaching Rs 19,100 crore -- up from Rs 7,848 crore in the previous year. There is anticipation of further PLI expansions, especially in upstream solar components like polysilicon and wafers in Budget 2025. As Shekhar Singal, Managing Director of Eastman Auto and Power, points out, expanding the domestic solar component manufacturing capabilities is essential for reducing reliance on imports and making India a global competitor.

CleanMax is targeting a 1 GW annual capacity expansion, with 70% of the new projects being solar. Adani Solar plans to ramp up its integrated solar cell and module production capacity to 10 GW by mid-2026, cementing its position as a significant player in the Indian solar market.

Premier Energies, Suzlon and Waaree Energies are among other stocks to watch out for in the renewables sector.

Electronics & Semiconductor Manufacturing

The electronics sector, particularly mobile manufacturing, continues to thrive. In FY24, India saw a 17% YoY increase in smartphone exports. Apple’s contract manufacturers -- Foxconn, Wistron, and Pegatron -- have contributed significantly to this growth. SBI expects increased investments in electronics, with exports expected to surpass Rs 1.5 lakh crore in FY25 under the continued momentum towards a target of Rs 1.5 lakh crore in mobile exports.

Amit Goel, Co-Founder & Chief Global Strategist, Pace 360, recommends Dixon Technologies, Havells India and Bharat Electronics Ltd as some of the key stocks to watch out.

“These stocks reflect high-quality opportunities in the EMS and related sectors, offering long-term growth potential aligned with India’s PLI-driven manufacturing expansion. At somewhat lower valuations, they provide a compelling case for investors looking to position themselves ahead of Budget 2025’s transformative reforms,” he says.

Pharmaceuticals & Healthcare

India’s pharmaceutical sector has grown by 9% YoY, reaching $54 billion in FY24. Sudarshan Jain, Secretary-General of the Indian Pharmaceutical Alliance, advocates for more R&D funding, noting that at least 10% of the National Research Fund should be allocated to life sciences. Incidentally, India is the world’s largest exporter of generic medicines, and the continued push for local production of APIs will further strengthen reliability and reduce dependence on China.

Recently, Nomura reiterated “Buy” on Dr. Reddy’s Laboratories with a March 2026 target price of Rs 1,575 while adding that a correction in the stock in the near term presents a buying opportunity from a 12-24-month perspective.

Prabhudas Liladhar Capital recommends “Accumulate” for Torrent Pharmaceuticals with a target price of Rs 3750 . JM Financials is also observing Sun Pharma as a potential stock now that it is recouping its Q3FY25 performance losses.

Automobiles & Electric Vehicles (EVs)

The Indian automotive sector is projected to receive Rs 25,938 crore in PLI incentives over the next five years, with significant emphasis on electric vehicles. Although Sharekhan’s 2025 outlook reveals automobile sector is expected to sustain single-digit revenue growth while EBITDA margins might contract, the EV Sector still stands to gain compared to the other segments.

According to Nomura, EV penetration is expected to rise to 4% for passenger vehicles and 7.6% for two-wheelers by FY26. The PLI scheme is likely to boost localisation of e-axle production & printed circuit boards (PCBs) used in MCU/BMS.

Maruti Suzuki’s global-scale EV ambition brings in new Japanese component makers to India and expands the opportunity for local component makers. For Tata Technologies, its auto vertical (accounting for 84% and 83% in 2Q) of revenue was down 1.2 percent QoQ and 2.6 percent YoY for Q3FY25.

Several brokerages recommend buying Tata Technologies stock, with JM Financial particularly bullish, suggesting a "buy" rating and a target price around Rs 1,150, citing the company's promising growth potential within the automotive technology sector

Textiles sector

India’s textile industry is valued at approximately $140-145 billion, with exports showing a rebound in FY25. The PLI scheme for textiles, especially for technical textiles and the MMF segment, is likely to further drive the sector’s development. Experts believe that the China+1 strategy will continue to benefit India’s textile exporters, making stocks in this sector to watch out for.

"Aligned with the government's vision of inclusive economic growth, the scheme will likely prioritize job creation, with sectors like leather, garments, and handicrafts emerging as critical candidates for PLI support due to their significant employment generation potential," says Devarsh Vakil, Head of Prime Research at HDFC Securities Ltd. Companies like Vardhman Textiles and KPR Mill are expected to see further growth as India targets $20 billion in textile exports by 2025.

Raw materials prices in India are much higher than global rates since Indian companies deal with QCOs (quality control orders) on MMF (man-made fibres) and yarn. These non-tariff barriers restrict the free flow of raw materials. Rajeev Gupta, CEO, RSWM Ltd suggests the Centre should liberalise import policies as well as reconsider the PLI scheme applying only to synthetic fibre. “To support textile and garment firms, the PLI must apply to the entire industry, which will incentivise greater investments. The government must reinstate the Technology Upgradation Fund Scheme, which offered subsidies for new machinery but was discontinued earlier,” he said.

Steel sector

India’s steel consumption rose by 13.66 percent in H1FY25, driven by government infrastructure spending. CareEdge Ratings suggests that Budget 2025 will focus on anti-dumping duties to protect domestic steel manufacturers and that the PLI scheme will likely be extended to other steel products.

Companies like Tata Steel, JSW Steel, and Steel Authority of India Limited (SAIL) are expected to benefit from the increased demand, while measures like safeguard duties to protect domestic manufacturers from cheaper imports will be crucial.

Power Sector

Moneycontrol had earlier reported about the Centre’s plan to launch a production-linked incentive (PLI) scheme by the end of the current financial year to promote the manufacturing of transmission equipment. India imports most of its power transmission equipment, including transformers, circuit breakers and switchgears, and as demand outpaces supply across the world, prices have shot up.

The government plans to add 80 GW of thermal capacity by 2032 to meet the growing power demand. Out of the 80 GW, NTPC will invest in 25 GW. Axis Securities and Elara Capital recommend a “Buy” on the stock with a target price of Rs 390 (revised from Rs 450) and Rs 462 (revised from Rs 497), respectively. Meanwhile, Axis Securities further recommends to closely watch JSW Energy, NLC India and Tata Power.