Shares of core sector companies are under selling pressure on government's announcement of a lower-than-expected capital expenditure target for FY26, signalling an intent that Centre wants private capex to step up further.
The budget allocated Rs 11.2 lakh crore for capital expenditure for FY26 is lower than the Rs 11.5 lakh crore allocation of FY25. Experts told Moneycontrol the government's focus on infrastructure and capex may be diminishing due to political compulsions and freebie-driven policies.
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The stock market has likely reacted negatively to this, with key infrastructure stocks declining. Mazagon Dock fell 1 percent, L&T lost 1.2 percent, Thermax dropped 1 percent, BHEL declined 0.5 percent, IRFC slipped 2 percent, and RVNL dipped 0.4 percent, soon after the Budget speech.
Cement stocks also slipped, with Mangalam Cement dropping 2.4 percent, while Nuvoco Vistas, Jaiprakash Associates, Star Cement, Ramco Cement, NCL Industries, and Ultratech Cement all lost over 1 percent each. Railway stocks followed suit, with Texmaco Rail falling 5 percent and Titagarh Wagon fell 3 percent at around 12:40pm.
Defence stocks too were under pressure as the defence budget — accounting for 12% of total government expenditure — was not explicitly mentioned in the speech by FM Sitharaman. Shares of Paras Defence fell 5.4 percent, Bharat Dynamics declined 3.5 percent, Krishna Defence dropped 1.8 percent, and Astra Microwave slipped 0.9 percent.
Despite the disappointment, Finance Minister Nirmala Sitharaman announced a Rs 1.5 lakh crore interest-free allocation for infrastructure spending in states and a Rs 1 lakh crore allocation for urban development. Additionally, a new asset monetization plan worth Rs 10 lakh crore was introduced to fund infrastructure projects and government finances, with a strong emphasis on improving infrastructure quality.
However, concerns persist as government continues to miss the disinvestment target. The budget also proposed introducing the Jan Vishwas Bill 2.0 to decriminalize over 100 provisions in the Income Tax Act. Furthermore, a high-level committee will be established to review regulatory reforms across all non-financial sectors, with recommendations expected within a year.
Industry insiders had anticipated a capex allocation increase to Rs 11.5 lakh crore, in light of the slow GDP growth.
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