The equity trading has been dominated by a gush of buying support following the Union Budget for FY 2022. The benchmark Nifty 50 edged up impressively as stock brokers in India mostly came up with a positive assessment of the budget and upgraded their estimates of local financial markets. The strong response given by the investors to the budget and the unwavering focus of the government on creating a robust infrastructure that will boost the economy and will cater to the needs of a young and vibrant demography.
The Finance Minister stated in her latest budget speech that Budget proposals for 2021-2022 rest on 6 pillars. These include Health and Wellbeing, Physical & Financial Capital, and Infrastructure, Inclusive Development for Aspirational India, Reinvigorating Human Capital, Innovation and R&D and Minimum Government and Maximum Governance. This indicates that infrastructure building will see overwhelming support in coming years and will likely shape this sector as an enticing theme for stock market investments over the decade. For using this narrative to your advantage and fine tuning equity investments in tune with long term financial goals, it is important to look for quality investment advisory services. Infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for propelling India’s overall development and enjoys intense focus from Government for initiating policies that would ensure time-bound creation of world class infrastructure in the country. Infrastructure sector broadly includes power, bridges, dams, roads, and other rural and urban infrastructure development projects.
Given the strong demographic profile of India, infrastructure development of all kinds has been key focus area for policymakers in recent years. The equity markets have also been pricing in these rapid and overwhelming changes in physical infrastructure as the Nifty Infrastructure index has nearly doubled over last five years. The just announced budget stated that for a $5 trillion economy, manufacturing sector has to grow in double digits on a sustained basis. To achieve all of the above, Performance Linked Incentives or PLI schemes to create manufacturing global champions for an AtmaNirbhar Bharat have been announced for 13 key sectors. For this, the government has committed nearly Rs 1.97 lakh crores, over 5 years starting FY 2021-22.
The Reserve Bank of India (RBI) noted in a recent update that the progress made on physical infrastructure in the country in the last five years needs to be viewed as no less than a dynamic shift. Both public and private investment would be key to financing infrastructure investments. Road construction, the primary mode of transportation in India, has increased from 17 kms per day in 2015-16 to close to about 29 kms per day in the last two years. India is the third largest domestic market for civil aviation in the world with 142 airports. On airport connectivity, India ranked 4th among 141 countries in the Global Competitiveness Report, 2019 of the World Economic Forum.
In telecommunication, the overall tele-density (number of telephone connections per 100 persons) in India at end of February 2020 was 87.7%. Growth of internet and broadband penetration in India has increased at a rapid pace. Total broadband connections rose almost ten times – from 610 lakh in 2014 to 6811 lakh in February 2020. India is now the global leader in monthly data consumption. The cost of data has also declined to one of the lowest globally, enabling affordable internet access for millions of citizens.
However, the infrastructure gap remains large. According to estimates of NITI Aayog, the country would need around US $4.5 trillion for investment in infrastructure by 2030. This indicates that more and more investments will continue to pour in the sector in coming years, largely benefitting players in linked industries like power, construction, heavy machinery, real estate, ports, shipping, railways, telecom etc.
The stock market trading is always forward looking as share prices try to price in the changes in economic environment and corporate earnings well in advance. This has been reflected in the sustained surge in local equities too as the benchmark indices hit fresh highs just as the economy started showing signs of a recovery. Markets bottomed out even as the Covid-19 turned from bad to worse. The mega Rs 20 lakh crore stimulus package to support lockdown-battered economy provided a judicious mix with keen focus on domestic manufacturing. The package works out to roughly 10%of the GDP and will go a long way in shaping up the infrastructure development in the country over a long term. India continues to see solid interest from international investors in the infrastructure sector and local equity markets will certainly factor in these changes in coming time. The government of India has projected an investment of Rs 100 lakh crores in the Infra sector over the next decade which is also expected to revive growth and employment. The strong backward-forward linkages of the infrastructure sector will ensure that the economic recovery holds ground. According to Census 2011, India’s urban population was 37.7 crores, which is projected to grow to about 60 crores by 2030. Infra will turn out be the all-pervasive theme for the share markets given this backdrop.
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