Capex cycle a multi-year theme? Keep an eye on these 13 stocks

After false starts in the last decade, India’s long-awaited capex cycle has been picking up pace now amid 1,700 government projects under implementation and capex plans of hundreds of private companies.

“While to an extent the government capex growth would remain a function of tax collections (FY23 expected to be strong), we believe private sector capex is on a cusp of pick-up, aided by the confluence of multiple enablers such as deleveraged corporate balance sheets and healthy profitability, a well-capitalized banking system with NPA cycle over, rising domestic demand as well as mid-cycle capacity utilization, and interest rates,” HDFC Securities said in a report.

The domestic brokerage listed 13 stocks to play the multi-year theme. Financials –

and , capital goods/infra – L&T, , Cummins, and GR Infra and capacity expansion-led volume growth – , , , , , , and .

Corporate Radar

After lagging behind government capex during FY20-22, analysts said that private capex will now outpace public spending due to increasing capex across multiple sectors (cement, metals, power, autos, chemicals and PLI-led capex).

Private sector investment in metals (Rs 1.4 lakh crore) is expected to lead the way from FY22 to FY24, followed by power, telecom, cement, and oil and gas.

In the cement sector, which is also closely linked to the capex theme,

, , Dalmia Bharat, and Ambuja Cement account for 56 per cent of the capex being done in the industry. In metals, the flag bearers of capex are , , and , HDFC Securities said.

The government’s capex program is spread across roads, railways, defence, and power, which will provide long-term visibility, and welfare schemes such as affordable housing, Jal Jeevan, Smart Cities, Swachh Bharat 2, which will drive capex for the next four to five years.

However, any slowdown in tax collections would be a key downside risk to the planned capex programs across sectors in the country, analysts from HDFC Securities said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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