BofA Constructive On Financials, Real Estate, REITs, Autos — Here's Why

BofA remains constructive on financials, real estate, REITs and autos because of these are rate-sensitive and part of the domestic cyclicals story. On a defensive front, the global brokerage prefers exposure to hospitals, telecom, and regulated power utilities.

Despite capital expenditure surging in the first half of the current financial year more than the previous two years, there is lower in the physical infrastructure level. Capex grew 40% on year in the first half of the financial year 2026, compared to 37% and 49% year-on-year growth in first halves of financial years 2025 and 2024, BofA said.

However, after adjusting the capex spends towards communication, food, and public distribution, the capex in infrastructure is 26% year-on-year, BofA said.

Most of the capex growth is also because of a low base on election-induced slowdown last year. The infrastructure capex growth on a two-year grew at CAGR 6%, which is modest, according BofA.

BofA noted a substantial government push towards growing the shipbuilding sector within India as the recent package of Rs 69,700 crore package. The money is to incentivise shipbuilding, reduce the cost of debt project in the sector and expand the capacity.

Capex growth in roads, railways, and housing have peaked out, according BofA. Together, the capex growth was 14% year-on-year in the first half of 2026, which translates to 3% in two-year CAGR and basis full-year budget spends implies a 17% decline for the second half of financial year 2026.

The Government may keep focus in a few strategic areas like defense, sub-segments of railways and shipbuildings. In contrast, state-capex reliant sectors like state highways, metros, and water infrastructure and power distribution are likely to face delays on budget constraints, the global brokerage said.

BofA remained underweight on capex-linked sectors like industrial, cement, steel, and globally-exposed themes like metals and IT, BofA said.