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The upcoming Union Budget 2026 is expected to be a key trigger for the industrial sector, with higher government allocation likely to support a recovery in domestic ordering, particularly for infrastructure and capital goods companies, according to a report by HDFC Securities Institutional Research.
The report highlighted that road awards by the National Highways Authority of India (NHAI) have remained subdued so far in FY26, raising expectations that the Budget could provide additional support to revive project awarding. It stated, "We believe the upcoming budget could provide increased allocation considering the weak awards in FY26". In the first nine months of FY26, road awards stood at 1,951 km, sharply lower than 7,538 km in FY25, while construction activity also slowed to 4,621 km till November 2025 compared with 10,660 km in the previous year. Despite the weak awarding trend, the bidding pipeline remains intact, with projects being finalised on schedule. NHAI has also taken steps to strengthen bidding norms and raise entry barriers to discourage non-serious bidders. In addition, the report mentioned that the working capital releases under the Jal Jeevan Mission have started, with a sharper pick-up expected from Q4FY26, which should ease liquidity pressures for EPC players. The report noted that awarding activity in other segments, such as private real estate, mining and urban infrastructure, has picked up during 9MFY26. It expects NHAI ordering to be back-ended in FY26, with total awards estimated at around Rs 500 billion. Against this backdrop, EPC companies are increasingly diversifying into non-road segments such as solar power, battery energy storage systems, transmission projects, railways and river interlinking to sustain growth. Private capital expenditure is expected to remain selective, with investments likely to focus on high-growth areas including renewables, transmission, data centres and semiconductors. In the capital goods segment, the report said a broad-based recovery in private capex is still awaited, but transmission and distribution remain a strong pillar. High-voltage direct current projects are expected to see robust ordering, supported by a pipeline of about Rs 0.8 trillion over the next two years, while demand for battery storage systems is likely to stay strong. Overall, the report said EPC valuations are at cyclical lows, and any Budget-led revival in ordering could support earnings recovery and a re-rating of the industrial sector. (ANI)
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