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From the capital market perspective, we believe that policy continuity along with fiscal prudence in the upcoming Union Budget will be key triggers, especially considering the recent slowdown in the Indian economy and corporate earnings. A 10-12% growth is capex, a fiscal deficit target of around 4.5% for FY26, and measures aimed at reviving the private sector capex would set a positive tone for markets. We expect the finance minister to simplify tax structures and raise tax exemption limits to boost consumption in the economy, especially the urban side which has recently shown signs of a slowdown. Though we do not expect the government to foot a steep subsidy bill, we anticipate target measures for the agriculture sector aimed at boosting productivity. We do not anticipate any changes to the STCG, LTCG, and STT which again should be taken in a positive stride by market participants.
 

Budget Expectations for Real Estate, Cement, Railways & Infrastructure Sectors  

Real Estate: Our sense is that the rising cost of raw materials, increasing land cost and outdated definition of affordable homes especially for metros are the major predicaments which are making developers shy away from the affordable housing segment. A revision to the affordable housing bracket in terms of size and price based on specific city dynamics is crucial for reviving fortunes of the segment. Additionally, we believe that incentives on the taxation front for homebuyers, subsidies to developers and industry status to the segment would be important triggers. We expect the upcoming budget to unveil measures, especially simplified regulations and some incentives, to attract foreign investments into the commercial real estate sector. With the aim to stimulate demand across all segments of housing, the government may look to raise the deduction limit for home loan interest from the current level of Rs. 2 lakh per year. From a budget perspective, we remain positive across the real estate value chain and Oberoi Realty, PNB Housing, and AAVAS Financiers remain our top picks.
 
Cement: There are optimistic expectations regarding the prioritization of infrastructure spending, which is anticipated to significantly benefit the cement segment. Government allocation towards infrastructure projects is expected to increase, with capex anticipated to rise by about 10-12% from ?11.11 lakh crores in the FY25 budget. Substantial funding is anticipated under schemes such as the National Infrastructure Pipeline (NIP) and Pradhan Mantri Gati Shakti, with approximately ?1.8 lakh crore likely to be allocated for logistics and infrastructure projects under the PM Gati Shakti initiative. Furthermore, investment in projects under the Bharatmala Pariyojana is expected, with an additional 25,000 kilometers of highways likely to be announced. The implementation of the National Monetization Pipeline is projected to strengthen public-private partnerships, providing a robust framework for infrastructure development.  Additionally, there have been proposals to reduce the GST on cement from the current 28% to make housing more affordable. These measures are expected to drive substantial growth in urban infrastructure and affordable housing, contributing to the overall development of the country’s infrastructure and economy. From a budget perspective, the outlook for the cement sector remains positive, with Ultratech, Ambuja, and ACC identified as our top picks.

Railways: We anticipate the government to boost the railway sector budget, with an anticipated 15-18% increase in allocation for this segment. In the 2024-25 budget, Rs. 2,62,200 crores were allocated to the railway sector, emphasizing passenger safety with the implementation of the Kavach anti-collision system and infrastructure development. As part of this initiative, the Ministry of Railways plans to equip 10,000 train engines with armor protection systems and additionally operate on 5,000-5,500 kilometers of track annually over the next two years. The government is also integrating AI into operations like ticketing and monitoring track condition to improve efficiency and safety. The introduction of new Vande Bharat and Amrit Bharat trains is expected, alongside an expansion of the Amrit Bharat Station Yojana, a scheme aimed at modernizing 1,275 railway stations with enhanced passenger amenities and contemporary designs. The Namo Bharat Corridor in Delhi represents a significant leap forward, helping to reduce congestion and pollution. To further enhance railway infrastructure, the budget is likely to include new orders for rolling stock, freight coaches, and wheels. Additionally, the government’s push towards the Make in India initiative could create new opportunities for railway equipment manufacturers. From a budget perspective, the outlook for the railway sector remains positive, with RVNL, BEML, and IRFC identified as top picks.

Road/Construction: The government is likely to increase the budget allocation for the Ministry of Road Transport and Highways (MoRTH) by 5- 6%. This increase is expected to boost private investments in highway projects, particularly those awarded under the build-operate-transfer (BoT) toll model, with 20-25% of projects anticipated to follow this model. Additionally, the allocation will support MoRTH in accelerating highway construction and reducing the high debt levels of the National Highways Authority of India (NHAI). For FY26, MoRTH may set a target of constructing and awarding 12,000-13,000 kilometers of national highways to sustain the pace of development in subsequent years. A significant focus will also be placed on rural road development, with a proposed 10% increase in funding under the Pradhan Mantri Gram Sadak Yojana (PMGSY). The fourth phase of PMGSY aims to construct 62,500 kilometers of rural roads over five years, connecting 25,000 habitations. Furthermore, dedicated funds for road safety may be allocated, with plans to enhance safety measures across national and rural road networks. From a budget perspective, the outlook for the road/construction sector remains positive, with L&T, KNR Construction and Ashoka Buildcon identified as our top picks.