Multibagger PSU stocks from defence and railways are in focus following the Union Budget 2024, as the overall capex target has been moderate and below Street expectations, with no major change compared with the interim Budget.
Avoid adding to positions in overbought themes like defense, railways, and select PSUs, and use any recovery to reduce exposure in loss-making trades, said Ajit Mishra, SVP, Research, Religare Broking.
In the case of railways, the capital allocation stood at Rs 2.55 lakh crore for FY25 against revised estimate of Rs 2.4 lakh crore for FY24. The physical targets, however, were hiked for electric locomotives, coaches, and wagons. Antique Stock Broking said the Budgetary support announced was negative for Ircon International Ltd, RITES Ltd and RVNL as it was expecting a higher capital outlay. High speed rail capital outlay at Rs 21000 crore is positive for L&T and Ircon International, it said.
The major allocation has been earmarked for rolling stocks, new lines, doubling and track renewals and electrification; totaling Rs 1.3 lakh crore, which should aid order pipeline, said HDFC Institutional Equities. The domestic brokearge sees the announcements net positive for Hitachi Energy, KEC International Ltd, Larsen & Toubro (L&T), Siemens Ltd, RVNL Ltd, RITES Ltd, KPIL IRCON International Ltd, BEML Ltd, Titagarh Rail, Texmaco, other EPC companies etc.
"Outlays for the railway and road sectors are up just 2 per cent and 3 per cent, respectively, compared with FY24 (RE). Indian Railways has sharpened focus on rolling stock procurement with higher targets for FY25E now versus the Interim Budget for wagons (38,000 now compared with 26,000 earlier), electric locomotives (1600 against 1200) and coaches (8405 against 7748 earlier)," Nuvama said.
In the case of defence, the allocation at Rs 1.8 lakh crore is an increase of 8.6 per cent against Rs 1.67 lakh crore over FY24 revised estimates, it was the same as FY25 interim Budget estimate. HDFC Institutional Equities said the order pipeline will be strong as major allocation has been in Navy fleets, aircrafts and aeroengines. It is seen positive for L&T, Bharat Dynamics (BDL), Bharat Electronics Ltd (BEL), Hindustan Aeronautics Ltd (HAL), Mazagon Dock Shipbuilders Ltd, Garden Reach (GRSE) and Cochin Shipyard, etc.
MOFSL said the Budget announcements were neutral for defence sector.