Published on : Mar 02, 2015
Construction and infrastructure shares of all related companies gained steam in trading after an announcement by the government that they had increased spending in the sector.
The Indian government will raise their investments in the infrastructure by nearly Rs 700 billion. They have also made plans to initiate a national infrastructure investment fund. They also plan to create road projects with tax free infrastructure bonds and irrigation and rail projects and build more roads.
Motilal Oswal said that the budget turned out to be positive for the utilities and infrastructure sector. There will now be greater focus on distribution reforms and accelerating investments in all the different verticals in infrastructure. These include railways, roads, and ports that will be the key highlights. Although there is still some need of accuracy in the implementation details on infrastructure frameworks, there is a clear intent on performing a revival of utilities and infrastructure sectors.
There has been a 75 per cent rise in roads according to CLSA. There has also been a rise in rails of 33 per cent and the PSU capex rose 25 per cent. Both were cornerstones in the Indian 2016 budget.
There is also a large contribution to the National Investment and Infrastructure fund, according to the brokerage, along with tax free bonds for the sectors of irrigation, railways, and roads. There is also a change in PPP formats to lower traffic risks along with 4.5 x 4GW UMPP projects that were positive with a plug and play execution within the infrastructure sector.
The brokerage also said that there will be a buy on L&T, Adani Port and the SEZ, along with Adani Enterprises and IRB Infrastructure.