There has been a mixed response to the BUDGET-11 with respect to various sectors but there is one which is certainly on a rise after a considerable boost from the Indian Govt. Stocks in this space have reacted positively adding to their value day by day after a lackadaisical performance last year.
The boost from the Indian Govt included following points->
->Budget 2011 allocated Rs2.14 lakh crore towards the infrastructure sector—a sum as high as that was last seen in 2006.
->Social infrastructure schemes like Bharat Nirman also saw allocations higher by 20%.
->The foreign institutional investor limit for investment in infrastructure corporate bonds was hiked to $40 billion
->Tax-free infrastructure bonds of Rs30,000 crore were also announced.
The biggest worries in this sector were related to slowing of orders and delay in execution of project. But the government has hinted at special schemes for developers bidding for projects in economically unviable regions. It has also been indicated that developers may get guaranteed return projects in areas where the build-operate-transfer model is not viable.
The National Highways Authority of India (NHAI) is expected to start awarding some large road projects in the coming weeks; it is expected to award road contracts for 7000km in FY2012. The government also seems to be expediting awarding of projects because its own finances are in better shape after healthy tax collections and higher than estimated disinvestment receipts. Minister of State, Road transport and Highways, Jitin Prasad, in a recent TV interview stated that the government is looking at speeding up awarding of projects via NHAI.
My Take-> Institutions reduced their holding considerably last year in infrastructure stocks after getting bruised. But a case is building now that these stocks may have bottomed out and are still under owned. Several fund managers have indicated at bottom fishing in this sector and in February this year IDFC Mutual Fund raised fresh money particularly to be deployed in the infrastructure space. The long-term investors could look at select stocks this year for outperformance. Stocks like IRB Infrastructure Developers, IL & FS Transportation Networks, IVRCL Infrastructure and Projects, and Larsen and Toubro are some of the stocks investors could pick on dips. Thank You!
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