Historically, infrastructure has remained a budget favourite, and expectations this year point towards another meaningful push that could set the tone for stocks linked to roads, railways, construction, and cement.
Market expectations currently center on a 10-15% increase in capital expenditure, reinforcing the long-term intent outlined in the National Infrastructure Pipeline. Roads, railways, urban infrastructure, and housing are expected to remain priority areas, even as fiscal consolidation stays on the agenda. In addition, targeted policy support for aviation, space infrastructure, and real estate could broaden opportunities across the sector.
Analysts believe such measures may improve credit flow to infrastructure-linked MSMEs, accelerate project execution through digital processes, and support order inflows for engineering and construction companies.
Recent policy discussions have strengthened this narrative, with proposals around higher allocations for aviation infrastructure, possible classification of space as critical infrastructure, and continued emphasis on public-private partnerships. If budget 2026 delivers along these lines, infrastructure stocks—many of which are trading well below recent highs—could see renewed investor interest once sentiment stabilizes.
Technical and fundamental assessment
From a stock-specific and technical perspective, several infrastructure names are currently in corrective or consolidation phases, reflecting broader market caution ahead of the budget event.
IRB Infrastructure Developers Ltd has seen a sharp correction on the weekly chart, declining from the ₹77 zone to trade around the ₹40 level. Technically, the stock remains weak in the near term, but the ₹44 area has emerged as a crucial level to watch. A sustained move above this zone could open the door for a meaningful bounce-back. From a fundamentals standpoint, the stock is trading at around 1.16 times its book value, which appears reasonable for a road developer at this stage of the cycle.
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Encouragingly, debtor days have improved sharply from 48 to 16, indicating improved working capital efficiency. However, a low interest coverage ratio remains a key balance-sheet concern and could continue to cap upside unless operating performance improves.
Larsen & Toubro Ltda bellwether for capital goods and construction activity, continues to be in a broader uptrend on the weekly chart despite the recent dip from the ₹4,188 zone to around ₹3,780. Momentum indicators remain supportive, with MACD staying positive and ADX near 28, indicating healthy trend strength. From a technical standpoint, the recent correction appears more like a retracement within a larger uptrend rather than a structural breakdown.
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Fundamentally, the company continues to maintain a healthy dividend payout ratio of around 33%, while its valuation at a P/E of roughly 32 appears reasonable given its execution track record and strong order book. The long-term structure remains constructive as long as the stock holds above the ₹3,400 region.
In the railway space, Rail Vikas Nigam Ltd (RVNL) has undergone a deep correction from the ₹650 zone to around ₹322 levels. On the weekly chart, the stock is now trading close to a major support band near ₹290, which is an important level from a medium-term perspective. If this zone holds, the stock could see a recovery of 15–20% over time, particularly if budget allocations for railway modernization and project execution surprise on the upside.
Fundamentally, RVNL has delivered a strong median sales growth of 25.8% over the past ten years, although growth over the last five years has been relatively muted at 6.52%. Investors should also note that recent earnings include a sizeable contribution from other income, which slightly dilutes the quality of reported profitability.
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Within the cement space, UltraTech Cement Ltd continues to show technical resilience on the weekly chart. Momentum indicators remain supportive, with MACD around 31 and RSI close to 60, signaling a clear underlying uptrend. With the stock currently trading near ₹12,353, the chart structure suggests scope for further upside towards the ₹14,000 zone over the medium term, provided broader market conditions remain stable.
On the fundamentals side, the company maintains a healthy dividend payout ratio of about 29.4%, reflecting strong cash generation. However, the stock is trading at nearly five times its book value, which is a valuation risk investors should be mindful of, especially if cost pressures or demand slowdowns emerge.
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What to watch for
While the infrastructure pack is witnessing short-term technical pressure and consolidation ahead of the budget 2026, the medium- to long-term narrative remains intact. Markets are likely to stay cautious in the run-up to the budget, but a clear capex-driven growth signal could trigger selective buying, particularly in stocks that show early signs of reversal on the charts. Price action around key support and resistance levels, volume expansion post-budget, and momentum indicators such as RSI and MACD will be critical in confirming any sustained up-move.
As always, the sector’s trajectory will also depend on broader factors such as global commodity prices, interest-rate expectations, and the government’s ability to balance growth priorities with fiscal discipline. With infrastructure firmly embedded in India’s long-term growth story, the budget 2026 has the potential to once again set the tone for the sector in the months ahead.
Ankush Bajaj is a SEBI-registered research analyst. His registration number is INH000010441.
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