Budget 2025: Full Steam Ahead For Manufacturing, Railways With Capex Boost, Says Sanjeev Hota

The previous year had started with an optimistic budget for capital expenditure. But the capex was watered down by the general elections and other major spends. Capex saw a significant slowdown in the recent past, with the numbers expected to stand at Rs 9.4 lakh crore by the end of this year.

"I believe going into financial year 2026, capex outlay may not increase on an absolute basis, but the spend will improve significantly," said Sanjeev Hota, head of research at Mirae Asset Sharekhan.

There are a few sectors and themes that are set to go big with incoming support of increased capex. One of these sectors is manufacturing, and Hota is confident this is a big theme that will play out.

"In government capex, around 50% goes to roads and railways. So, you see good allocation coming in for the railways this time," said Hota. The spotlight is on these sectors as allocation is expected to be higher than last year.

"The government is going to give a higher target. Railway budget may be to the tune of Rs 2.8 lakh crore to Rs 2.9 lakh crore as compared to Rs 2.6 lakh crore in financial year 2025," he added.

Railways, manufacturing, industrials and capital goods along with other big names like L&T and CG Power are set to see a boost, according to Hota. His picks include L&T, NTPC Green, HCL and BEL along with others.

"In the long-term, combination of both government and private capex will come into play," he said.

With the underwhelming spend in the previous year, the spending is set to expand.

"Going into financial year 2026, because of the low base effect, earnings will look good compared to 2025. The government will definitely put in thrust and focus into reviving the economy. This is because of the moderation that we have seen in financial year 2025.

There are expectations around both sectors and private capex, according to Hota. The budget is a tool the government has got and the expectation is that the government will put money into incentive capex and private capex, which will come with RBI support, he said.

"We have seen that in the run-up to the budget itself, the government has announced liquidity to incentivise manufacturing," he added.

Though these sectors are expected to see an uptick in growth in the long term, volatility and correction are to be expected in the short term.

"We are going through the same cycle that we have seen during 2018-19. Usually the mid and small cap run lasts 18 months at best, then it goes through this correction cycle. There is nothing different this time either," he said.

"The mid and small cap are still trading at a premium to the historical average. This is not the right time to buy the dips," he noted.