By Hritam Mukherjee
(Reuters) -Indian infrastructure and cement stocks declined in a special trading session on Saturday, as investors were disappointed by the ‘modest’ hike in capital spending announced in the annual budget.
The infrastructure index reversed gains following the budget presentation, and closed 1% lower. Sector bellwether Larsen & Toubro (L&T) ended 3.4% lower, its sharpest one-day fall in more than 3 months.
The Indian government said it will spend a record 11.21 trillion rupees ($129.54 billion) on infrastructure in the upcoming financial year that begins on April 1.
“The capex outlay for fiscal year 2026.. looks modest compared to raises made in FY25 and FY24 budget, and misses market expectations slightly,” said Amit Anwani, research analyst at Prabhudas Lilladher.
“The budget proposals seem to focus a lot on consumption this time around… but the negative surprise has come from the shift of focus on government capex in infrastructure development,” said Mirae Asset Sharekhan’s Gaurav Dua.
IRB Infrastructure Developers, which constructs highways, declined 3%.
“With corporate balance sheets fairly strong, (the) government wants private sector to step up on capex,” the company’s Chairman Virendra D. Mhaiskar said.
Shares of cement makers, which are key beneficiaries of government spending, fell on worries that of a slow demand recovery.
UltraTech, the country’s largest cement maker by capacity, fell as much as 6% before ending 2% lower.
Ambuja Cements and Dalmia Bharat fell 2% each, while Shree Cement dropped 3%.
Top cement executives have flagged that government spending hasn’t picked up substantially since the national elections in 2024, with volumes growing sluggishly in the third quarter nearly across the board.
Cement demand is likely to log single-digit percentage growth in fiscal year 2026, India Ratings and Research said.
India is the world’s second-largest cement producer, and the domestic industry is expected to grow 4%-5% in fiscal year 2025, significantly slower than the 8% and 12% growth seen in 2022 and 2023, data from ratings agency Crisil showed.
(Reporting by Hritam Mukherjee in Bengaluru; Additional reporting by Yagnoseni Das; Editing by Varun H K)
