Synopsis
A significant rise in capital expenditure in India is anticipated, driven by strong investments across various sectors. Jefferies' report highlights the government's focus on infrastructure and the potential for growth in metal stocks.Key Takeaways
- Capital expenditure in India is increasing significantly.
- Strong investments are seen across multiple sectors.
- Government's commitment to infrastructure remains strong.
- Private capital expenditure is active in areas like cement and steel.
- Metal stocks show promising growth potential.
Mumbai, March 10 (NationPress) There has been a remarkable uptick in capital expenditure in India, with expectations of sustained growth in the upcoming months as various sectors are experiencing robust investments, according to a recent analysis by global brokerage firm Jefferies.
Mahesh Nandurkar, the head of research and managing director at Jefferies, forecasts that capital expenditure growth will continue to be strong in February and March.
This trend is in line with the government's updated budget estimates, indicating a persistent focus on infrastructure and industrial advancement.
"These developments are anticipated, but the reality of their occurrence instills confidence," remarked Nandurkar.
He noted that next year's figures could drop by around 10 percent if there is a revenue shortfall, which he believes is probable.
“A lot will hinge on whether the government prioritizes upfront capital expenditure and its continuity," Nandurkar commented.
The central government's capital expenditure surged by 51 percent year-on-year in January 2025, showcasing its dedication to enhancing the nation's infrastructure.
The government's emphasis on railways and road projects has led to significant advancements, with approximately 83-87 percent of the revised estimates for the financial year 2025 already realized in these domains.
Nandurkar suggested a more calculated approach is necessary, as the market remains cautious regarding private capital expenditure.
“I am convinced that private capital expenditure is actively taking place in sectors such as cement, steel, hospitals, and real estate," he added.
The government's commitment to capital expenditure remains unwavering, with transfers to states increasing by about 60 percent.
This financial backing is anticipated to further propel infrastructure projects at the state level, thereby enhancing overall economic growth.
Jefferies also emphasized significant growth prospects in vital sectors. One highlighted area was metal stocks, indicating strong momentum in the sector.
The brokerage pointed out that the Asian steel spread is currently 20 percent below its long-term average, allowing for potential expansion.
Moreover, Indian steel prices have risen by 5 percent from their December lows, indicating a recovery in the sector.
Jefferies further noted that any prospective safeguard duty on steel could provide additional support to prices, enhancing profit margins and valuations for metal companies.
With improving fundamentals and favorable market conditions, the metal sector is poised to maintain its strong performance in the upcoming months, as stated by the brokerage.
