Indian infra stocks fall on 'modest' capital spending hike in budget (updated)

ACC

01/02/2025 09:43

(Rewrites throughout)
    By Hritam Mukherjee
       Feb 1 (Reuters) - Indian infrastructure stocks declined
in a special trading session on Saturday, with sector bellwether
Larsen & Toubro  LART.NS  leading losses as investors were
disappointed by the 'modest' hike in capital spending announced
in the annual budget.
    The infrastructure index  .NIFTYINFR  reversed gains
following the budget presentation, and was last down 1.1%. L&T's
shares fell nearly 5%, marking their sharpest one-day fall in
more than 3 months.
    The Indian government said it will spend a record 11.21
trillion rupees ($129.54 billion) on infrastructure in the
upcoming financial year that begins on April 1.
    "The capex outlay for fiscal year 2026.. looks modest
compared to raises made in FY25 and FY24 budget, and misses
market expectations slightly," said Amit Anwani, research
analyst at Prabhudas Lilladher.
    IRB Infrastructure Developers  IRBI.NS , which constructs
highways, fell as much as 4%.
    "With corporate balance sheets fairly strong, (the)
government wants private sector to step up on capex," the
company's Chairman Virendra D. Mhaiskar said.
    Shares of companies making cement, a key beneficiary of
government spending, also fell on worries that of a slow demand
recovery.
    Shares of UltraTech  ULTC.NS , the country's largest cement
maker by capacity, fell as much as 6% before paring some losses,
and was last down 2%.
    Rival Adani Group's Ambuja Cements  ABUJ.NS  fell 2%,
although ACC  ACC.NS  recouped nearly all losses and was last
down 0.5%. Shree Cement  SHCM.NS  and Dalmia Bharat  DALB.NS 
declined about 2% each.
    Top cement executives had recently flagged that government
spending hasn't picked up substantially since the national
elections in 2024, with volumes growing sluggishly in the third
quarter nearly across the board.
    India is the world's second-largest cement producer, and the
domestic industry is expected to grow 4%-5% in fiscal year 2025,
significantly slower than the 8% and 12% growth seen in 2022 and
2023, data from ratings agency Crisil showed.

 (Reporting by Hritam Mukherjee in Bengaluru; Additional
reporting by Yagnoseni Das; Editing by Varun H K)
 ((Hritam.Mukherjee@thomsonreuters.com; X: @MukherjeeHritam;))