The upcoming 2024 general elections in India have major implications for infrastructure, capital goods and construction sector stocks in the country.
The infrastructure and housing segments are key areas that will likely see policy action and initiatives to support economic growth in the run-up to elections.
Infrastructure Spending Push The ruling BJP is expected to increase infrastructure spending substantially in 2023-24, the final full-year budget before elections. Highways, railways, urban housing and amenities, rural roads, airports and water infrastructure could all see additional allocations to create employment and visibility.
Construction and engineering major L&T, cement stocks like Ultratech and Shree Cement, metals companies like Tata Steel and Hindalco and capital goods firms BHEL, Siemens, ABB could benefit from higher public spending on infrastructure. Stocks related to roads, highways, metro rails, airports, water and sanitation will be in focus.
Affordable Housing Focus Affordable housing is a politically important socio-economic issue. The government is likely to expand credit subsidies, interest deductions and other incentives to boost affordable urban housing. Stocks of players like DLF, Oberoi Realty, Sobha with major affordable housing projects could benefit.
Access to cheap housing helps create a positive wealth effect for lower-income groups who form a key voter base. Housing construction also has a multiplier effect on cement, steel, bricks and skilled jobs.
Financial Sector Liquidity Banks and NBFCs may see regulatory relaxations to maintain sufficient liquidity to support housing credit, MSME loans and infrastructure financing. SBI, HDFC Bank, ICICI Bank, Axis Bank, IDBI Bank could benefit. More liquidity will also facilitate capital goods production.
Rural Infrastructure Push There will likely be special emphasis on roads, electricity access, digitisation, irrigation and agricultural infrastructure in rural areas ahead of elections. Two-wheeler stocks like Hero MotoCorp, rural focused banks like Bank of Baroda, engineering firms like BHEL and Powergrid will be in focus due to rural spending.
Policy Reforms To attract long-term foreign capital for infrastructure, the government may announce simplification of land and environmental approvals for roads, mines, factories. Relaxed FDI in construction, privatisation of ports, airports and rail infrastructure may be considered. This would boost the overall infrastructure and capital goods space.
Macroeconomic Stability The government is expected to maintain its emphasis on fiscal discipline and monetary stability heading into elections. This will help control inflation and currency volatility, helping keep raw material costs stable for capital goods and construction companies.
Risks However, the global slowdown poses downside risks to exports and investment growth. A poor monsoon could also dampen rural demand. Any populist measures that widen the fiscal deficit to offer pre-poll sops could stoke inflation and interest rates, negatively impacting stocks.
In short, infrastructure and housing segments could see an election-driven boost in 2023-24. Execution and reform risks remain, but India’s long-term infrastructure gap makes this space an attractive pre-election investment theme.