Industrials Poised For Next Upcycle, Says Jefferies, Backs Power And Defence Plays — Check Stock Picks
Jefferies points out that India’s push for indigenous defence manufacturing since 2014 has started yielding visible results.
India’s capital-expenditure cycle is showing fresh strength, and Jefferies believes the industrials theme could stay in focus despite a soft start to 2025.
The brokerage notes that while industrial stocks opened 2025 on a weak footing, sentiment turned after the Union Budget signalled moderating — not declining — capex growth. As companies delivered better-than-expected earnings, several names retraced or surpassed their 2024 highs. Jefferies now expects infra and industrial capex to clock 10% CAGR over FY26E–29, compared with around 6% in FY24–26.
Power transmission & distribution and defence are expected to remain key pillars of this cycle. The brokerage’s top picks include Siemens Energy, Hindustan Aeronautics, Hitachi Energy, Larsen & Toubro, and KEI Industries.
According to Jefferies, the FY26 Union Budget pegged government capex growth at 10% YoY, defying expectations of flat-to-negative growth. Even if capex were to decline 14% annually during the last five months of FY26, the full-year target would still be achievable.
Roads, railways and defence are already tracking ahead of budget estimates, while power sector capex — led by transmission and generation — is seen rising 19% YoY in FY27E.
Jefferies says Siemens Energy, Hitachi Energy, Cummins and KEI are strong plays on the power-capex and data-centre themes. It estimates power capex to rise 2.4x to $290 billion in FY26–30 versus FY21–25.
Transmission project awards surged to Rs 1.6 lakh crore in FY25 from Rs 39,500 crore in FY24. Power Grid, for instance, expects its capex to climb 1.6x to Rs 45,000 crore in FY28 from Rs 28,000 crore in FY26. Tight supply conditions in equipment are expected to keep pricing favourable for players such as Siemens Energy and Hitachi Energy, while over 30% of KEI’s revenue already comes from transmission cables.
Data centre investments also support genset demand, where Cummins remains a dominant supplier.
Jefferies points out that India’s push for indigenous defence manufacturing since 2014 has started yielding visible results, with locally produced equipment playing a key role during the India–Pakistan conflict (Operation Sindoor) in May 2025.
Overall, the brokerage believes the mix of policy support, power-sector investment, defence self-reliance and data-centre expansion could keep the industrials story in motion through FY26 and beyond.
