Investors place bets on roadbuilders in hope of boost in infra spending

Sitharaman outlined $1.5 trillion in infrastructure investment last month, of which federal and state govts will contribute at least 75%

Investors are piling into shares of Indian roadbuilders, betting that Saturday’s federal Budget will contain measures to spur investment in infrastructure.
 
A custom Bloomberg index of nine roadbuilders is up 8.9 per cent this month, versus the 0.1% per cent drop in the main S&P BSE Sensex index. The gauge includes IRB Infrastructure Developers, Sadbhav Engineering and KNR Constructions, some of which struggled in 2019 as national elections caused the government to defer spending.

The rally is being led by belief that Finance Minister Nirmala Sitharaman will need to do more to revive economic growth from the lowest since 2008. She outlined $1.5 trillion in infrastructure investment last month, of which federal and state governments will contribute at least 75 per cent.
 

“Last year, the Budget was very pro-farmer and there was not much for the infrastructure sector,” said Ankita Shah, a Mumbai-based analyst at Elara Securities India . “The sector has started to pick up only recently with the expectation that with the National Infrastructure Pipeline in place, there could be proper visibility on funding in the Budget.” India’s road sector has been facing headwinds after the National Highways Authority of India slowed its pace of awarding contracts due to a pile up of debt and delays in land acquisition. India awarded 3,211 kilometers of contracts in the first eight months of the financial year, just a third of its 10,000 kilometer full-year target, official data shows.
 
Even so, the order pipeline from the NHAI is robust at 700 billion rupees ($14 billion), indicating that awarding will pick up pace in the current quarter, Alok Deora, an analyst at YES Securities, wrote earlier this month. Around 2,000 kms of road projects are up for grabs, with another 6,000 kms coming up in the year starting April 1, according to Deora. Brickwork Ratings predicts policy makers will opt to widen the Budget deficit and raise spending on infrastructure by about 30 per cent for FY21.