India's Capex Revival: Defence & Capital Goods Set to Soar

India's capital expenditure is experiencing an early yet credible upcycle, with market strategists forecasting substantial benefits for investment-linked sectors in the coming two to three years. Factors such as improving macroeconomic conditions, supportive policies, and rising private and household investments are fueling this broad-based recovery. Defence manufacturing, in particular, is a strong beneficiary due to higher budgetary allocations and a focus on domestic production.

Capital goods companies are projected to achieve exceptional earnings growth, driven by a concurrent rise in new orders and high operating leverage. Even moderate revenue increases are expected to lead to significant profit expansion. The industrial and electronics manufacturing services sectors are also set to gain, benefiting from both domestic capital spending and global supply chain diversification as multinational firms increasingly look to India.

A crucial shift observed is the progressive return of private investment, which is vital for infrastructure developers, construction firms, and engineering companies focused on sectors like roads, railways, and power. Concurrently, revitalized housing demand, spurred by lower interest rates and improved affordability, is boosting real estate developers and building material providers.