Investors pile into Indian roadbuilders’ shares

By Bloomberg,

Investors are piling into shares of Indian roadbuilders, betting that Saturday’s federal budget will contain measures to spur investment in infrastructure.

A custom Bloomberg index of nine roadbuilders is up 8.9% this month, versus the 0.1% drop in the main S&P BSE Sensex index. The gauge includes IRB Infrastructure Developers Ltd., Sadbhav Engineering Ltd. and KNR Constructions Ltd., some of which struggled in 2019 as national elections caused the government to defer spending.

The rally is being led by the belief that Finance Minister Nirmala Sitharaman will need to do more to revive economic growth from the lowest since 2008. She outlined $1.5 trillion in infrastructure investment last month, of which federal and state governments will contribute at least 75%.

“Last year the budget was very pro-farmer and there was not much for the infrastructure sector,” said Ankita Shah, a Mumbai-based analyst at Elara Securities India Pvt. “The sector has started to pick up only recently with the expectation that with the National Infrastructure Pipeline in place, there could be proper visibility on funding in the budget.”

India’s road sector has been facing headwinds after the National Highways Authority of India slowed its p ace of awarding contracts due to a pile-up of debt and delays in land acquisition. India awarded 3,211 kilometers of contracts in the first eight months of the financial year, just a third of its 10,000-kilometers full-year target, official data shows.

Even so, the order pipeline from the NHAI is robust at 700 billion rupees ($14 billion), indicating that awarding will pick up pace in the current quarter, Alok Deora, an analyst at Yes Securities Ltd., wrote earlier this month. Around 2,000 kilometers of road projects are up for grabs, with another 6,000 kilometers coming up in the year starting April 1, according to Deora.

Brickwork Ratings predicts policymakers will opt to widen budget deficit and raise spending on infrastructure by about 30% for the year starting April 1.