Road construction stocks decline as highway capex remains unchanged

Of the total allocation, the National Highways Authority of India (NHAI) was granted Rs 1.87 lakh crore, marking a 10 percent increase from Rs 1.68 lakh crore in FY25.

Shares of road construction companies fell after the government announced unchanged capital expenditure for highways in the first full budget.

NCC fell 6 percent, IRB Infra lost 2 percent, PNC Infratech fell 3.7 percent, Dilip Buildcon declined 4 percent, and MEP Infrastructure dropped 2 percent.

"Road stocks tumbled because investors were expecting a stronger push for infrastructure development in the Budget 2025-26, such as higher allocations, fresh policy incentives, or new financing mechanisms", experts said.

The Ministry of Road Transport and Highways (MoRTH) received an allocation of Rs 2.72 lakh crore for FY26, largely unchanged from the previous year. Despite this, the funds will aid in the development of more highways and expressways amid rising interest rates and land acquisition costs.

Of the total allocation, the National Highways Authority of India (NHAI) was granted Rs 1.87 lakh crore, marking a 10 percent increase from Rs 1.68 lakh crore in FY25. However, the budget does not provide for any new borrowings by the highway developer for the next financial year.

Overall, the budget set capital expenditure at Rs 11.2 lakh crore for FY26, lower than the Rs 11.5 lakh crore allocated in FY25. Experts suggest that the government’s focus on infrastructure and capex appears to be weakening, possibly due to political compulsions and freebie-driven policies.