Infra stocks fall on 'modest' capital spending hike in Budget 2025

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Indian infrastructure stocks declined in a special trading session on Saturday, with sector bellwether Larsen & Toubro leading losses 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 was last down 1.1 per cent. L&T's shares fell nearly 5 per cent, marking their sharpest one-day fall in more than 3 months.

The Indian government said it will spend a record Rs 11.21 trillion ($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.

IRB Infrastructure Developers, which constructs highways, fell as much as 4 per cent.

"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 companies making cement, a key beneficiary of government spending, also fell on worries that of a slow demand recovery.

Shares of UltraTech, the country's largest cement maker by capacity, fell as much as 6 per cent before paring some losses, and was last down 2 per cent.

Rival Adani Group's Ambuja Cements fell 2 per cent, although ACC recouped nearly all losses and was last down 0.5 per cent. Shree Cement and Dalmia Bharat declined about 2 per cent each.

Top cement executives had recently 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.

India is the world's second-largest cement producer, and the domestic industry is expected to grow 4 per cent-5 per cent in fiscal year 2025, significantly slower than the 8 per cent and 12 per cent growth seen in 2022 and 2023, data from ratings agency Crisil showed.