Infra welcomes government efforts, stocks surge: UR Asso

UR Associates has come out with its report on infrastructure sector. According to the research firm, infrastructure sector could benefit if the Reserve Bank of India cuts interest rates as per expectation in the coming monetary policy.

Infrastructure sector welcomes government efforts, stocks gaining strength:

The Central Government’s initiatives to bolster India’s reeling infrastructure has been well appreciated by the investors as the stocks of infrastructure companies gained on optimism for government action. Infrastructure related stocks surged after the finance minister said that India will allow insurance companies to invest in projects, which may help meet big funding requirements in the sector. Also, Ministry of Road Transport & Highways has approved a plan to set up a corporation that will administer and construct expressways in the country, as per a top ministry official. The proposal, cleared by the minister about a month ago, is likely to go to the cabinet for approval. This proposed body, to be called the National Expressway and Connectivity Corporation (NECC), will function under the Ministry of Road Transport & Highways if approved by the cabinet. Unlike the National Highways Authority of India (NHAI), a statutory body created by an act of Parliament and responsible for the development of highways, NECC will function as a public sector undertaking.

A Reuter’s poll suggests that the domestic mutual funds have responded to the Government’s initiatives and are switching their stock holdings in favour of infrastructure and related sectors. The Reuters poll on asset allocation showed the investors favoured infrastructure or related stocks for the next three months. The sector could also benefit if the Reserve Bank of India cuts interest rates as per expectation in the coming monetary policy.

The Central Government had set up a High Level Committee headed by HDFC Chairman Deepak Parekh to make recommendations relating to policy initiatives that would enable the requisite flow of investment in infrastructure during the 12th Plan. To attract big ticket investment in the infrastructure sector, the committee in its interim report advised government to speed up land acquisition and environment clearances and bring reforms in tax structures. The Government accepted the recommendations relating to reduction in withholding tax and continuation and doubling of tax-free infrastructure bonds during 2012-13. The committee took note of the projections of investment made by the Planning Commission and discussed the policy measures that would be necessary for creating an enabling environment for the investment projections to fructify. The committee gave sector wise suggestions aimed to attract Rs 51,464 bn funding for infrastructure sector during the 12th Five Year Plan (2012-17).

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