India may boost FY25 capex by 8-10% amid surging revenues and record RBI surplus, says Market Kaleidoscope report

In response to higher-than-expected tax revenue and a record surplus transfer from the Reserve Bank of India (RBI), the Indian government is considering an 8-10% increase in capital expenditure (capex) for the fiscal year 2025, according to Pantomath Group's quarterly report, "Market Kaleidoscope: Quarterly Market Insights."

This adjustment could raise the capex from the previously allocated Rs 11.11 lakh crore, aiming to bolster infrastructure and economic growth. This fiscal boost comes as India reaches a historic financial milestone. The total market capitalization of all stocks listed on the Bombay Stock Exchange (BSE) briefly surpassed $5 trillion for the first time, placing India among global giants such as the US, China, Japan, and Hong Kong.

India's primary market is set for a dynamic period, with 55 companies planning to raise over Rs 68,000 crore through Initial Public Offerings (IPOs). The first half of FY2025 has already seen 35 mainboard IPOs, collectively raising around Rs 32,000 crore with an average subscription rate of 61 times.

The Indian market maintained a positive outlook in the first quarter of FY2025, driven by strong Q4FY24 earnings, favorable economic data, and positive global cues. Despite early June volatility following the 2024 Lok Sabha election results, market sentiment improved with the BJP securing 272 seats and a total of 292 seats for the NDA with allied support.

This political stability under Prime Minister Narendra Modi's leadership is expected to promote long-term economic growth, with a focus on infrastructure, electric mobility, startup support, power distribution, digital privacy, and healthcare initiatives. Corporate India's performance in the March quarter of FY2024 met expectations, showing double-digit growth in net profit and single-digit revenue increases.

Non-lending companies experienced moderate operating margin expansion due to favorable commodity prices and cost controls. The peaking interest rates and continuity of government policies are anticipated to support healthy corporate growth in FY2025.

Growth to continue

The government's push for increased ethanol production targets a 20% blending by 2026, benefiting ethanol-heavy sugar companies and promoting biofuel goals. The real estate market is projected to grow significantly, requiring Rs 14 lakh crore in debt financing from 2024 to 2026. This growth will positively impact the banking and financial sectors.

Major telecom operators have raised tariffs post-election, potentially improving sector financials and paving the way for sector re-rating. Major cement players are expanding through acquisitions, with an expected 6-7% compounded growth and market dominance by the top five players by March 2025.

FMCG Companies expect recovery in rural business due to factors like a normal monsoon, robust crop yields, and government measures, maintaining robust rural demand. The potential roll-out of the FAME 3 Scheme to support electric vehicle sales is anticipated, with a budgetary allocation of around Rs 10,000 crore.

Sectors such as auto, cement, defence, railways, consumer durables, energy, and banking are expected to outperform. Lagging sectors like IT and specialty chemicals offer value-buying opportunities at lower levels.

The structural bull market for Indian equity is supported by strong domestic fundamentals and government reforms, with a positive medium- to long-term market outlook. Globally, the US market showed resilience, except for the Dow Jones. The Federal Reserve maintained interest rates at 5.25-5.50%, awaiting inflation to move towards the 2% target before considering rate cuts.

The US GDP grew at 1.4% annually in Q1 2024, with mixed economic indicators highlighting both strengths and challenges. The Indian IPO market has seen significant growth, with a surge in companies seeking to list shares and a rise in capital raised. The first half of 2025 saw strong retail investor participation, reflecting confidence in India's growth prospects.

Mahavir Lunawat, Managing Director, Pantomath Capital Advisors Private Limited, said, "Favourable market conditions, high liquidity, a conducive growth environment with stable interest rates, and benign inflation have facilitated a boom in the IPO market. The IPO market will experience a stronger pull post-budget. India is set to become the new equity funding frontier for global corporations."

He further added. "We are on the brink of sustained, long-term momentum in the IPO market, with this year potentially becoming the best for IPOs. India's solid macroeconomic environment and promising growth prospects create an ideal backdrop for this vibrant IPO market. Additionally, there is robust participation from both domestic institutional investors and retail investors."

With the Indian government's potential capex increase and the robust primary market activity, the Indian economy is poised for sustained growth. The upcoming period is expected to see heightened market activity, further IPOs, and economic stability, creating a conducive environment for investment and development.