PSU rail, defence stocks rally up to 77% in 1 month. Will Budget be about Modi stocks?
capex agenda and retain focus on fiscal discipline, PSU stocks from the stable of railways and defence are leading the bull run with up to 77% return in just one month.
A pre-Budget rally has taken most of these PSU stocks to fresh all-time high levels even as purists find the valuations to be quite bizarre when compared to their fundamentals. The current leg of the bull run has been largely led by Modi stocks — being used to denote scrips related to capex and infrastructure-linked sectors.
If the higher-than-budgeted dividend from the RBI is used for increasing expenditure, capex growth could increase to 21% year-on-year (YoY), according to estimates by Goldman Sachs.
In the final Budget for FY25 to be presented on July 23, SBI expects capital expenditure which was budgeted at Rs 11.1 lakh crore in the interim Budget to increase to Rs 11.8 lakh crore.
Depending on how big the Budget numbers turn out to be, capex boost can reignite a fresh bull run in Modi stocks.
In the last month, shares of Mazagon Dock Shipbuilders are up over 77%, followed by a 51% upside seen in multibagger rail stock RVNL. Similarly, Cochin Shipyard, HUDCO, RCF, NBCC, BEML and IRCON are up at least 30% during the period.
The capex of Indian Railways is estimated to have grown at an impressive 18% CAGR over FY15–24. The total railway capex over FY15–25E is likely to be 4.1x the previous decade i.e. FY05–15. The cumulative railway capex over FY20–24E is projected to be 90% higher than the previous five-year period i.e. FY15–19, according
