Top Sectors to Watch During Election 2024: Infrastructure, Railways, and Defense

As India gears up for the 18th Lok Sabha elections spanning from 19th April to 1st June 2024, Prime Minister Modi’s address at the India Today Conclave 2024 resonated with a vision of progress and development. Emphasizing key pillars such as government schemes, startups, digital revolution, women empowerment, and ‘Mission 2047’, PM Modi articulated a roadmap for India’s future. Central to his vision were the pivotal sectors of infrastructure, railways, and defense, which he outlined as cornerstones for India’s growth trajectory over the next five years.

PM Modi’s assertion that the forthcoming years will usher in a new era of stability, capability, and strength for India underscores the importance of these sectors in shaping the nation’s destiny. With a focus on building a ‘Viksit Bharat’ and positioning India as the world’s third-largest economy, PM Modi set the stage for an exploration of the transformative potential of the infrastructure, railway, and defense sectors. In this article, we delve into the key developments and opportunities within these sectors, elucidating their significance in driving India’s journey towards progress and prosperity.

Infrastructure Sector and Stocks to Watch

The infrastructure sector in India is poised for significant growth, driven by improved execution and a surge in new order inflows. In the first 11 months of FY24, the construction of national highways saw a remarkable uptick, with 9,088 km being constructed, representing a year-on-year growth of 13%. Notably, the National Highway Authority of India (NHAI) independently constructed 6,644 km of roads, marking a substantial 20% increase compared to the previous year. Despite this progress, the government’s target of building 13,000 km of roads for FY24 was not fully met, mainly due to stringent policy guidelines and cost overruns in Bharatmala Phase I.

However, the outlook remains optimistic, with robust order book positions and improved order inflows witnessed during the quarter. Toll collections through FASTag have shown robust performance, reaching Rs 41,900 crore between April and November 2023, marking a 14% increase year-on-year. NHAI’s monetization receipts hit a record high of Rs 40,000 crore in FY24, reflecting the potential for asset monetization in the infrastructure sector.

Looking ahead, the pace of project awarding is expected to gain momentum in FY25, with a robust pipeline of tenders projected to accelerate NHAI’s awarding pace. Projects under the government’s flagship program, Bharatmala Pariyojana, along with higher budgetary allocations and the National Infrastructure Pipeline, are expected to drive further growth in road construction. Infrastructure companies such as Larsen and Toubro Ltd, PNC Infratech Ltd, J Kumar Infra projects Ltd, Ashoka Buildcon Ltd, and IRB Infrastructure Ltd are poised to benefit from these developments.

Railway Sector and Stocks to Watch

The railway sector in India is poised for transformational growth, with the finance minister proposing a substantial capital expenditure of Rs 2.55 lakh crore for Indian Railways in FY 2024. This proposal includes the introduction of three new railway corridors strategically selected under the PM Gati Shakti initiative to enhance multimodal connectivity and streamline operations. These corridors aim to boost efficiency while reducing overall costs.

The Rail ministry has set ambitious targets to bring about significant changes in both the passenger and freight segments. In its 100-day action plan, the ministry aims to roll out Vande Bharat Sleeper trains, Vande Bharat metro trains, and two dozen Vande Bharat trains running across India. Additionally, plans are underway to shift more than 40% of freight trains from regular routes to dedicated freight corridors.

Investments in rail infrastructure are substantial, with Rs 50 lakh crore earmarked for the sector by 2030. The government’s decision to allow 100% Foreign Direct Investment (FDI) in the railway sector further underscores its commitment to driving growth and modernization in this space. Moreover, Indian Railways is on track for 100% electrification of its broad-gauge network, with Rs 6,500 crore allocated in FY25 for this purpose.

The sector’s focus on electrification aims not only to reduce carbon emissions but also to enhance operational efficiency. With 95% of the broad-gauge network already electrified, the shift towards green railways is well underway, with a target of zero carbon emissions by 2030.

To prioritize passenger safety and convenience, plans are in place to refurbish 40,000 bogies to meet Vande Bharat standards. This initiative is expected to have a significant impact on various sectors, driving growth and creating opportunities for investors.

Specific stocks poised to benefit from this plan in the railway sector include Indian Railway Finance Corporation Ltd (IRFC), Jupiter Wagons Ltd, Titagarh Rail Systems Ltd, IRCON International Ltd, Rail Vikas Nigam Ltd (RVNL), and RailTel Corporation of India Ltd. These companies are well-positioned to capitalize on the sector’s growth trajectory and offer promising investment opportunities in India’s burgeoning railway infrastructure landscape.

Defense Sector and Stocks to Watch

India’s defense sector is experiencing significant growth driven by global geopolitical tensions and the country’s increasing focus on self-reliance. With a projected 2x growth in domestic defense spending from FY24E to FY30E, domestic defense companies are poised for substantial order flow and revenue growth. The government’s emphasis on building country-to-country relations to promote exports further augments this growth trajectory. Notably, India’s defense exports have risen 16x from FY17 to FY24E, reaching Rs 25,000 crore, with expectations to rise to Rs 58,000 crore by FY30E.

India’s strategic positioning as the third-largest military spender globally, coupled with a defense budget accounting for 2.2% of the country’s total GDP, underscores the industry’s robust potential. The government’s plans to spend Rs 10.8 lakh crore during FY24 – FY30 for fleet modernization across all armed services are driving this growth. Lingering tensions in the neighbourhood, particularly with China and Pakistan, continue to propel India’s defense industry forward.

To bolster defense manufacturing and address national security concerns, India has embarked on initiatives such as ‘Atmanirbhar Bharat’ and ‘Make in India.’ Favorable policies, including increased requirements for indigenized content and technology transfer, along with relaxed FDI limits, have created a conducive environment for defense companies.

Stocks poised to benefit from this growth momentum include Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL), Mazagon Docks Ltd, Astra Microwave Products Ltd, Solar Industries Ltd and Data Patterns India Ltd. These companies are well-positioned to capitalize on the burgeoning defense opportunities, both domestically and through exports, as India continues to strengthen its defense ecosystem and reduce reliance on imports.

Conclusion

In conclusion, as India embarks on the journey towards the 18th Lok Sabha elections, the spotlight shines brightly on the infrastructure, railways, and defense sectors. Prime Minister Modi’s vision for a developed India, coupled with substantial investments and policy initiatives, underscores the pivotal role these sectors play in shaping the nation’s future. With promising prospects for growth and innovation, investors and stakeholders alike have ample opportunities to participate in India’s progress story. From the expansion of road networks to the modernization of railways and the strengthening of defense capabilities, each sector presents unique avenues for investment and contribution to the nation’s development. As we move forward, it is imperative to harness the momentum generated by these sectors and work towards realizing the vision of a prosperous and resilient India.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.