INFRASTRUCTURE SECTOR IN SPOTLIGHT AFTER BUDGET 2021

After Finance Minister Nirmala Sitharaman presented the Union Budget 2021 on February 1 and revised the expenditure target, the infrastructure funds took the spotlight.

Government proposed 5.54 lakhs towards infrastructure for FY 2021- 2022 and the shares of construction and infrastructure stocks jumped on February 1. The Nifty Infrastructure index also rose by 5%.

Infrastructure funds have offered 34.82% returns in past 6 months. Over the last one year, returns from this category have stood at 11.94%.

A higher budgetary allocation proposed by the government is a scope for growth to infrastructure sector. Huge jump is seen in Shares of engineering and construction major Larsen and Toubro Ltd which touched a new 52-week high, ending the day 8.5% higher after budget 2021.

The proposal to set up a DFI (Development Finance Institution) with a capital of Rs. 20,000 crore is a welcome move by government. It will be a boon for projects struggling for funding. With the proposed bill targeting a lending portfolio of Rs. 5 lakh crore in 3 years, if runs well DFI will go a long way in boosting infrastructure.

After all, this may be a supporting pillar towards GDP growth. The worst of the economic crisis caused due to COVID-19 is behind us and we can see clear signs of economic recovery. However, the path to full recovery will be long and may be bumpy.

So from the investment perspective the infrastructure funds have taken very well to this budget and may enable ample growth.

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