Railway, defence, infra stocks suffer on subdued capex spend in Budget 2025

Capex-linked stocks were the worst hit on Budget day as well, weighed down by the lower-than-expected capital expenditure targets.

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26 Aug, 2025 12:21

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Shares of capex-linked companies--primarily those involved in railway, defence and infra sectors continued to see selling pressure on February 3. Investors were disappointed with the subdued capex spend announced by the finance minister in the 2025 budget.

Railway stocks like Titagarh Wagons, RITES, Texmaco Rail, RVNL, Ircon International, and Jupiter Wagons slumped up to 8 percent. Defence stocks charted a similar trajectory, with shares of Bharat Dynamics, Garden Reach Shipbuilders, Hindustan Aeronautics, and Bharat Electronics also tanking as much as 8 percent in trade. Infra names including IRB Infra, L&T, HG Infra, KNR Construction, Afcons Infra, GR Infra and NCC lost up to 9 percent.

The revised capex projection for FY25 has been reduced to Rs 10.18 lakh crore, down from the initially allocated Rs 11 lakh crore. For FY26, the allocation was slightly raised to Rs 11.2 lakh crore, still falling short of the industry's expectation of Rs 11.5 lakh crore.

Market experts expressed disappointment over the muted capex growth, particularly in the context of a slowing GDP. Investors had hoped for stronger investments in sectors like roads, railways, renewables, power transmission, defence, and modern infrastructure.

"The modest increase in capex falls short of expectations. The government's previous infrastructure focus seems to be taking a backseat to political pressures and populist policies," commented Apurva Sheth, Head of Market Perspective & Research at Samco Securities.

"The market was expecting a higher outlay of Rs 13-14 lakh crore, which remains under-delivered and is a minor negative for capital goods and infrastructure sectors," Incred Equities stated in its report.

Since most of these capex-linked companies are dependent on government projects to support their earnings growth, muted state spending is likely to weigh down on the sentiment for these players going ahead.