The Union Budget 2025, as dissected by Nuvama Institutional Equities in a fresh market analysis, has left investors grappling with a sense of unfulfilled anticipation, particularly in the realm of infrastructure capital expenditure. While overall capex has edged up by approximately 11% over the revised FY25 projections and merely 5% against the original FY25 budgeted estimates, the numbers failed to ignite enthusiasm.
A silver lining, however, emerged within the railway segment, where rolling stock allocations shone amidst an otherwise muted landscape. The FY26 budgetary provisions for metro rail expanded robustly—boasting a 35% surge over FY25’s initial budgetary figures and a 19% increase relative to the revised estimates. In contrast, allocations for roads and broader railway infrastructure have stagnated on a year-on-year basis. Water and affordable housing allocations exhibited sluggish momentum, and notably, the ‘Smart City’ initiative received no financial backing in the 2025 budget, a development flagged by Nuvama as a significant drawback.
The brokerage underscored the disparity in sectoral focus, lamenting that tepid capex growth spells a challenging environment for firms operating within road infrastructure and water management. Conversely, the continued financial commitment toward railway rolling stock is poised to favor players like Titagarh Wagons and Texmaco Rail, offering them a strategic advantage in an otherwise subdued capital outlay environment.
Drilling deeper into specifics, the FY26 allocation for railway rolling stock witnessed a 13% year-on-year uplift compared to the FY25 budget estimate. However, expenditure on civil construction projects—encompassing track doubling, gauge conversions, and new line establishments—remained stagnant. The Indian Railways’ intent to bolster its passenger coach acquisitions signals the potential floating of additional Vande Bharat tenders, while wagon procurement persists at an aggressive pace, reinforcing optimism for select industry stakeholders.
Despite these bright spots, Nuvama’s analysis conveys a broader sense of disappointment, noting that this marks the second successive year of underwhelming capex expansion. The FY25 revised expenditure reflected a mere 5% uptick over FY24’s figures, and the FY26 estimate follows suit with another modest 5% rise over FY25’s budgeted figures.
While the increased allocations for metro rail and the AMRUT scheme offer a glimmer of positivity, the restrained spending on roads, railways, water infrastructure, urban development, and affordable housing casts a shadow over the long-term trajectory of India’s infrastructure ambitions. Given this backdrop, asset monetization is expected to emerge as a pivotal mechanism to bridge investment gaps and drive sustainable infrastructure development.
Railway rolling stock companies have already experienced a significant stock market correction, primarily driven by apprehensions surrounding rail capex allocations. The budgetary shortfall may inflict further volatility on these stocks, Nuvama cautioned. However, the brokerage reiterated its preference for companies with robust balance sheets and strategic diversification—such as NCC Ltd—arguing that such firms are better positioned to capitalize on emerging opportunities despite the challenging fiscal environment.