Capital Goods Stocks Dip as FY25 Capex Target Falls Short of Expectations

Stocks Fall as FY25 Spending Target Falls Short of Expectations, Raising Concerns About Growth.

Capital goods stocks experienced a decline of approximately 2 per cent following the Union Budget 2025-26 announcement, which revealed a revised capital expenditure (capex) target of Rs 10.18 lakh crore for FY25. This figure fell short of market expectations, triggering a sell-off in related stocks.

Among the affected companies, Mazagaon Docks, Larsen & Toubro (L&T), and Thermax saw their shares trading lower by 1-2 per cent around noon.  Mazagon Dock specifically experienced a more significant drop of over 4.75 per cent by late afternoon, reaching Rs 2,379.70.

The government's revised capex figure represents a slight increase from the previous fiscal year's Rs 11.11 lakh crore, reaching Rs 11.2 lakh crore for FY26. However, this increase failed to meet the hopes of industry experts who anticipated a more substantial allocation of around Rs 11.5 lakh crore.  These experts believed a larger capex boost was necessary to stimulate growth in sectors like road construction, railways, renewable energy, power transmission, defense, and emerging infrastructure such as data centers, particularly in light of the recent GDP growth slowdown.

Despite the capex disappointment, the Finance Minister announced measures aimed at boosting exports, including the removal of seven tariff rates, leaving only eight remaining (including zero rates).  Additionally, the government plans to launch an "investment index friendliness of states" in 2025. 

The budget also outlined the Revised Estimate of total receipts other than borrowings at Rs 31.47 lakh crore, with net tax receipts accounting for Rs 25.57 lakh crore. The Revised Estimate of total expenditure stands at Rs 47.16 lakh crore.

Disclaimer: The article is for informational purposes only and not investment advice.