Budget 2025 Blues: Railway, Defence, and Infra Stocks Plunge Amid Disappointing Capex Allocation

Budget 2025’s Capex Cut Sparks Market Sell-Off

The stock market reacted negatively to the lower-than-anticipated capital expenditure (capex) targets announced in the 2025 Union Budget. Investors were left disappointed as the government revised its FY25 capex spending to ₹10.18 lakh crore, down from the initially allocated ₹11 lakh crore. Although the FY26 capex was increased to ₹11.2 lakh crore, it remained below the ₹11.5 lakh crore anticipated by the industry.

This subdued capex outlook led to a sharp correction in railway, defence, and infrastructure stocks, with major players witnessing a steep decline of up to 9%. The market’s reaction reflects concerns that the government’s focus is shifting away from long-term infrastructure growth towards short-term consumption policies, impacting companies that rely heavily on government contracts.

Sector-Wise Market Impact

1) Railway Stocks Take a Hit

Railway-linked stocks, which had previously benefited from aggressive capex spending, saw a sharp sell-off. Key players faced heavy losses:

• Titagarh Wagons, RITES, Texmaco Rail, RVNL, Ircon International, and Jupiter Wagons tanked up to 8% during the session.

2) Defence Sector in Decline

Defence stocks, which were expecting a significant boost from government allocations, also tumbled amid lower-than-expected investment:

• Bharat Dynamics, Garden Reach Shipbuilders, Hindustan Aeronautics, and Bharat Electronics fell by as much as 8%.

3) Infra Stocks Under Pressure

Infrastructure companies, especially those dependent on public sector projects, faced one of the steepest declines:

• IRB Infra, L&T, HG Infra, KNR Construction, Afcons Infra, GR Infra, and NCC witnessed losses of up to 9%.

Expert Reactions: Disappointment Over Capex Growth

Market analysts expressed strong disappointment over the muted capex growth, especially given India’s slowing GDP and the need for sustained infrastructure development.

• Apurva Sheth, Head of Market Perspective & Research at Samco Securities, stated,
  “The modest increase in capex falls short of expectations. The government’s previous infrastructure push now seems to be taking a backseat due to political pressures and populist measures.”

• Incred Equities highlighted the market’s expectations were far from met:
  “The market was hoping for a capex allocation of ₹13-14 lakh crore, which remains under-delivered. This is a negative signal for capital goods and infrastructure sectors.”

With capex-linked companies heavily dependent on government spending for earnings growth, the muted investment outlook is expected to impact sentiment and stock performance in the coming months.

The Road Ahead: What’s Next for Capex-Driven Sectors?

While the broader market remains hopeful for private sector participation in infrastructure projects, lower government capex spending will likely result in continued volatility for railway, defence, and infra stocks. Investors should remain cautious, keeping an eye on any policy revisions or mid-year stimulus measures that could revive sentiment.

For now, subdued capex spending appears to be a headwind for these critical sectors, as market participants adjust their expectations in light of the government's shifting priorities.