According to a new research by global broking Jefferies, capital spending in India has increased significantly, and this trend is projected to continue in the coming months as numerous sectors see robust increases.
Mahesh Nandurkar, Jefferies’ head of research and managing director, predicts that capital expenditure growth will stay strong in February and March.
This is consistent with the government’s updated budget expectations, showing a continuous drive for infrastructure and industrial development.
“These are on expected lines but the fact that it’s happening, gives confidence,” says Nandurkar.
He noted that next year’s estimates, by around 10%, might be lower if there is a revenue shortfall, which he believes is likely.
“A lot will depend on whether the government kind of upfronts the capex and if it continues,” Nandurkar said.
The national government’s capital expenditure increased by 51% year on year in January 2025, demonstrating its commitment to improving the country’s infrastructure.
The government’s emphasis on railway and road projects has aided tremendous progress, with approximately 83-87 percent of the fiscal year 2025 revised estimates now accomplished for these sectors.
Nandurkar suggested a more measured approach. The market is concerned about private capex.
“I believe that private capex is already happening in sectors like cement, steel, hospital and real estate,” he told reporters.
The government’s commitment to capital expenditure remains strong, with transfers to states increasing by almost 60%.
This financial support is projected to speed state-level infrastructure projects, improving overall economic growth.
Jefferies also noted that certain sectors had great growth potential. One of them was metal stocks, which showed good momentum in the sector.
The firm also noted that the Asian steel spread is still 20% below its long-term average, indicating possibility for additional increase.
Additionally, Indian steel prices have climbed by 5% from their December lows, indicating a resurgence in the sector.
Jefferies also indicated that any prospective safeguard duty on steel might provide additional support to prices, improving margins and increasing valuations for metal companies.
With strengthening fundamentals and favourable market circumstances, the metal sector is projected to maintain its excellent performance in the coming months, according to the broking business.
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