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Informist, Friday, Dec. 5, 2025

MUMBAI – Shares of capital goods companies are expected to continue their downward journey on concerns over a slowdown in the government's capital expenditure. Additionally, capital spending by private players is also yet to pick up momentum, which is expected to weigh on the fundamentals of these stocks, analysts said. They believe the valuations of capital goods companies have been above average and expect limited upside in these stocks.

In its monetary policy review Friday, the Reserve Bank of India's Monetary Policy Committee said the domestic growth remains resilient with the September quarter GDP growth coming at sharply higher than expected 8.2%, supported by income tax cuts, front-loaded government capex, and reduction in goods and services tax rates.

While GST cuts may support consumption, sluggish exports and slower government spending could weigh on capex, analysts said. This underscores the need for continued policy support. However, even if the government takes measures to support growth, analysts said they will not be enough for a substantial increase in demand.

Continued government spending and capital outlays under modernisation programs, and the early utilisation of about 50% of the year's capital budget by mid-year, suggest momentum is already on, Nirmal Bang Equities said in a report. The central government's capital expenditure rose 32% on year to INR 6.18 trillion in Apr-Oct, accounting for 55.1% of the whole year's target.

However, BofA said the growth in capex for central and state governments is likely to slow, given limited fiscal room. BofA projects a 13% capex growth in 2025-26 (Apr-Mar) and 10% in FY27, driven by the central government's focus on select strategic areas such as defence and shipbuilding, along with strong capex investments in energy transition-related sectors by private sector and public sector companies.

The brokerage sees higher state subsidies dragging down overall capex growth. "Besides, amidst slowing tax revenue growth and rising welfare spends, the government's ability to stimulate capex could remain limited. Thus, we remain underweight on industrial sectors except those exposed to defence, shipbuilding and power transmission and distribution capex," BofA said.

The BSE Capital Goods index has declined for three consecutive weeks. The index has fallen 2.3% on week to 67647.37 points on Friday.

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Following are the resistance and support levels for the stocks for next week as per calculations by Informist based on their prices on the National Stock Exchange:

End

Reported by Simran Rede

Edited by Saji George Titus

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