Infrastructure Sector Is It Reaching For The Skies?

With the upcoming Lok Sabha elections looming, many of us may be feeling the urge to invest in infrastructure stocks, hoping for a favourable impact on investments if a strong political mandate ensues. Mandar Wagh delves into the government's emphasis on infrastructural development, future growth triggers and the critical factor of fundamentals that must be taken into consideration before investing

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With the Lok Sabha elections drawing near, the market will now be closely monitoring the unfolding developments. The current government is sure of securing a majority, and if this goal isn't met, experts foresee a potential market correction. Conversely, a strong mandate favouring the current government would likely demonstrate market resilience, especially since Prime Minister Narendra Modi has pledged significant reforms within the first 100 days of a new government.

There have been talks suggesting that government-focused sectors like infrastructure, railway, power and renewable energy stand to gain significantly if the current government regains power. Consequently, stocks within these sectors are expected to outperform due to government backing and ongoing investor confidence. Buying activity has already been observed in these stocks, as evidenced by rallies seen over the past month in infrastructure sector stocks.

However, there are concerns about a potential market bubble, particularly in mid-cap and small-cap segments. Additionally, the aforementioned sectors present a challenge due to inflated valuations resulting from significant share price hikes. The sustainability of the rally prompts a crucial question. Delving into the fundamentals of these companies will provide insights that can help address this question and bolster confidence in their future performance. Further, analysing government initiatives and identifying growth triggers for the future will offer valuable perspectives on the trajectory of these stocks.

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